Execution Copy

AMENDED AND RESTATED FINANCING AGREEMENT

Amended and Restated Financing Agreement, dated as of January 28, 2008, by and among Frederick’s of Hollywood Group Inc., a New York corporation (“Group”), FOH Holdings, Inc., a Delaware corporation (the “Parent”), Frederick’s of Hollywood, Inc., a Delaware corporation (“Frederick’s”), Frederick’s of Hollywood Stores, Inc., a Nevada corporation (“Stores”), Hollywood Mail Order, LLC, a Nevada limited liability company (“Mail Order” and together with Group, the Parent, Frederick’s and Stores, individually, a “Borrower”, and collectively, the “Borrowers”), the financial institutions from time to time party hereto (individually a “Lender” and collectively, the ”Lenders”) and Wells Fargo Retail Finance II, LLC (as successor to Wells Fargo Retail Finance,
LLC), a Delaware limited liability company, as arranger and agent for the Lenders (in such capacity, the “Agent”). 

RECITALS

WHEREAS, the Borrowers (other than Group), the Agent and certain other financial institutions are parties to a certain Financing Agreement, dated as of January 7, 2003 (as so amended, the “Existing Agreement”);

WHEREAS, the Parent as sole stockholder and sole member of Frederick’s, Stores and Mail Order, as applicable, has entered into an Agreement and Plan of Merger and Reorganization, dated as of December 18, 2006 (the “Acquisition Agreement”), with Group and Fred Merger Corp., a Delaware corporation and wholly-owned Subsidiary of Group (“Fred”),  pursuant to which Fred shall merge with and into the Parent (the “Merger”), with the Parent surviving such merger and becoming a wholly-owned Subsidiary of Group; and

WHEREAS, contemporaneously with the consummation of the Merger, the Lenders, the Borrowers and the Agent are willing to amend and restate the Existing Agreement on the terms and subject to the conditions set forth herein, including the addition of Group as a borrower thereunder.

NOW, THEREFORE, in consideration of the premises and the covenants and agreements contained herein, the receipt and adequacy of which are hereby acknowledged, the Borrowers, the Lenders and the Agent hereby agree as follows:

ARTICLE I

DEFINITIONS; CERTAIN TERMS

SECTION 1.01. Definitions. As used in this Agreement, the following terms shall have the respective meanings indicated below, such meanings to be applicable equally to both the singular and plural forms of such terms:

“Account Debtor” means each debtor, customer or obligor in any way obligated on or in connection with any Account Receivable or any Credit Card Account. 

“Account Receivable” means any and all rights of the Borrowers to payment for goods sold and services rendered, including accounts, general intangibles and any and all such 

 

 

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rights evidenced by chattel paper, instruments or documents, whether due or to become due and whether or not earned by performance, and whether now or hereafter acquired or arising in the future and any proceeds arising therefrom or relating thereto, but excluding all Credit Card Accounts.

“ACH Transactions” means any cash management or related services (including the Automated Clearing House processing of electronic funds transfers through the direct Federal Reserve Fedline system) provided by Wells Fargo or its Affiliates for the account of Administrative Borrower or its Subsidiaries.

“Acquisition” means the Acquisition by Group of all of the Capital Stock of the Parent pursuant to the terms of the Acquisition Agreement.

“Acquisition Agreement” has the meaning set forth in the Recitals.

“Acquisition Documents” has the meaning set forth in Section 6.01(ff).

“Action” has the meaning specified therefor in Section 12.12.

“Administrative Borrower” means Group. 

“Affiliate” means, as to any Person, any other Person that directly or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, such Person. For purposes of this definition, “control” of a Person means the power, directly or indirectly, either to (i) vote 10% or more of the Capital Stock having ordinary voting power for the election of directors of such Person or (ii) direct or cause the direction of the management and policies of such Person whether by contract or otherwise. Notwithstanding anything herein to the contrary, in no event shall the Agent or any Lender be considered an “Affiliate” of any Loan Party. 

“Agent” has the meaning specified therefor in the Recitals. 

“Agent’s Account” means an account at a bank designated by the Agent from time to time as the account into which the Borrowers shall make all payments to the Agent for the benefit of the Lenders and into which the Lenders shall make all payments to the Agent under this Agreement and the other Loan Documents; unless and until the Agent notifies Administrative Borrower and the Lenders to the contrary, the Agent’s Account shall be that certain deposit account bearing account number 323-266193 and maintained by the Agent with JPMorgan Chase Bank in New York, New York.

“Agent Advances” has the meaning specified therefor in Section 10.08(a). 

“Agreement” means this Financing Agreement, including all amendments, modifications and supplements and any exhibits or schedules to any of the foregoing, and shall refer to the Agreement as the same may be in effect at the time such reference becomes operative.

“Applicable Import L/C Margin” means three quarters of one percent (0.75%). 

“Applicable Standby L/C Margin” means one and one half percent (1.50%).

 

 

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“Applicable Margin” means with respect to all outstanding Revolving Loans maintained as (i) Base Rate Loans, a rate equal to one-quarter of one percent (0.25%) per annum, and (ii) LIBOR Rate Loans, a rate equal to one and one-half percent (1.50%) per annum.

“Assignment and Acceptance” means an assignment and acceptance entered into by an assigning Lender and an assignee, and accepted by the Agent, in accordance with Section 12.07 hereof and substantially in the form of Exhibit F hereto. 

“Authorized Officer” means, as to any Person, any officer or other employee of such Person.

“Availability” means, at any time, the amount by which (i) the lesser of (A) the Borrowing Base and (B) the Total Revolving Credit Commitment, exceeds the sum of (x) the aggregate outstanding principal amount of Revolving Loans plus (y) Letter of Credit Obligations.

“Availability Reserves” means such reserves as the Agent from time to time determines in the Agent’s Permitted Discretion as being appropriate to reflect the impediments to the Agent’s and the Lenders’ ability to realize upon the Collateral. Without limiting the generality of the foregoing, Availability Reserves may include, without limitation, reserves based on the following:

(a) rent (i) based upon past due rent for any leased store location, and/or (ii) based upon one month’s rent for any leased store location in a Landlord Lien State or in a One Turn State for which an acceptable Collateral Access Agreement has not been received by the Agent (irrespective of whether any rent is currently due), in each case in an amount to be determined by the Agent in its Permitted Discretion;

(b) fifty percent (50%) of the amount of in store customer deposits, merchandise credits and gift certificates;

(c) payables (based upon payables which are past due normal trade terms);

(d) frequent shopper programs;

(e) layaway and customer deposits;

(f) unpaid taxes and other governmental charges, including ad valorem, personal property, and other taxes which may have priority over the security interests of the Agent and the Lenders in the Collateral; and

(g) held or post-dated checks.

“Bailee Agreement” means an agreement substantially in the form of Exhibit D hereto (completed in form and substance reasonably satisfactory to the Agent in its Permitted Discretion), or similar agreement in form and substance satisfactory to Agent in its Permitted Discretion, duly executed and delivered by the applicable Customs Broker, bailee, warehouseman, or similar party, as the case may be, and Borrower.

 

 

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“Bank Product Agreements” means those certain cash management service agreements entered into from time to time by Administrative Borrower or its Subsidiaries in connection with any of the Bank Products.

“Bank Product Obligations” means all obligations, liabilities, contingent reimbursement obligations, fees, and expenses owing by Administrative Borrower or its Subsidiaries to Wells Fargo or its Affiliates pursuant to or evidenced by the Bank Product Agreements and irrespective of whether for the payment of money, whether direct or indirect, absolute or contingent, due or to become due, now existing or hereafter arising, and including all such amounts that a Borrower is obligated to reimburse to the Agent or any member of the Lender Group as a result of the Agent or such member of the Lender Group purchasing participations or executing indemnities or reimbursement obligations with respect to the Bank Products provided to Administrative Borrower or its Subsidiaries pursuant to the Bank Product Agreements.

“Bank Product Reserve” means, as of any date of determination, the amount of reserves, not to exceed $5,000,000, that the Agent has established (based upon Wells Fargo’s or its Affiliate’s reasonable determination of the credit exposure in respect of then extant Bank Products) for Bank Products then provided or outstanding. 

“Bank Products” means any service or facility extended to Administrative Borrower or its Subsidiaries (at the request of any such Person) by Wells Fargo or any Affiliate of Wells Fargo including:  (a) credit cards, (b) credit card processing services, (c) debit cards, (d) purchase cards, (e) ACH Transactions, (f) cash management, including controlled disbursement, accounts or services or (g) Hedge Agreements.

“Bankruptcy Code” means Title 11 of the United States Code. 

“Base LIBOR Rate” means the rate per annum, determined by the Agent in accordance with its customary procedures, and utilizing such electronic or other quotation sources as it considers appropriate (rounded upwards, if necessary, to the next 1/16%), on the basis of the rates at which Dollar deposits are offered to major banks in the London interbank market on or about 11:00 a.m. (Boston, Massachusetts time) two (2) Business Days prior to the commencement of the applicable Interest Period, for a term and in amounts comparable to the Interest Period and amount of the LIBOR Rate Loan requested by Administrative Borrower in accordance with this Agreement, which determination shall be conclusive in the absence of manifest error.

“Base Rate” means the rate of interest announced within Wells Fargo at its principal office in San Francisco as its “prime rate”, with the understanding that the “prime rate” is one of Wells Fargo’s base rates (not necessarily the lowest of such rates) and serves as the basis upon which effective rates of interest are calculated for those loans making reference thereto and is evidenced by the recording thereof after its announcement in such internal publication or publications as Wells Fargo may designate.

“Base Rate Loan” means each portion of a Revolving Loan that bears interest at a rate determined by reference to the Base Rate.

 

 

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“Blocked Person” has the meaning specified therefor in Section 7.02(u).

“Board” means the Board of Governors of the Federal Reserve System of the United States. 

“Borrower” and “Borrowers” have the meanings specified therefor in the preamble hereto.

“Borrowing Base” means, at any time, the difference between:

(i) the sum of 

(A) Ninety percent (90%) of the Eligible Credit Card Accounts at such time,

(B) Ninety percent (90%) of the Eligible Wal-Mart Account Receivables at such time,

(C) Eighty five percent (85%) of the Other Eligible Account Receivables at such time,

(D) One hundred percent (100%) of the Cost on the Borrowers’ Eligible Warehouse Liquid Inventory, provided that at no time shall the amount attributable to Eligible In Transit Inventory pursuant to paragraphs (D, (E) and (F), exceed $15,000,000 in the aggregate,

(E)  Ninety percent (90%) of the then current Net Retail Liquidation Value of Eligible Retail Inventory, provided that at no time shall the amount attributable to Eligible In Transit Inventory pursuant to paragraphs (D, (E) and (F), exceed $15,000,000 in the aggregate, and

(F) The lesser of (x) sixty percent (60%) of Eligible Wholesale Inventory, which shall include inventory supported by documentary Letters of Credit (in such form as acceptable to the Agent in its sole discretion), or (y) eighty five percent (85%) of the then current Net Retail Liquidation Value of Eligible Wholesale Inventory, which shall include inventory supported by documentary Letters of Credit (in such form as acceptable to the Agent in its sole discretion), provided that at no time shall the amount attributable to Eligible In Transit Inventory pursuant to paragraphs (D, (E) and (F), exceed $15,000,000 in the aggregate,

(ii) minus, the sum of (A) Required Minimum Availability Reserve, (B) Availability Reserves and (C) without duplication, such other Reserves as the Agent may deem appropriate in the exercise of its reasonable business judgment based upon the lending practices of the Agent, which may include, without limitation reserves for freight and duty with respect to outstanding Letters of Credit; provided that the Agent shall have the right to have the Inventory reappraised by an independent appraiser selected by the Agent from time to time for the purpose of redetermining the advance rates of the Eligible Inventory and, as a result, the Borrowing Base.

“Borrowing Base Certificate” means a certificate (in the form of Exhibit J hereto, as such form may be revised from time to time by the Agent), signed by the chief operating officer or chief financial officer of the Borrowers and setting forth the calculation of the 

 

 

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Borrowing Base, together with separate calculations showing the Borrower’s Inventory, Eligible Warehouse Liquid Inventory, Eligible Retail Inventory, Eligible Wholesale Inventory and Eligible In Transit Inventory, in compliance with Section 7.01(a).

“Business Day” means any day other than a Saturday, Sunday or other day on which commercial banks in Los Angeles, California and New York, New York are authorized or required to close, except that, if a determination of a Business Day shall relate to a LIBOR Rate Loan, the term “Business Day” also shall exclude any day on which banks are closed for dealings in Dollar deposits in the London interbank market.

“Capital Expenditures” means, with respect to any Person for any period, the sum of (i) the aggregate of all expenditures by such Person and its Subsidiaries during such period that in accordance with GAAP are or should be included in “property, plant and equipment” or similar fixed asset account on its balance sheet, whether such expenditures are paid in cash or financed and including all Capitalized Lease Obligations paid or payable during such period, and (ii) to the extent not covered by clause (i) above, the aggregate of all expenditures by such Person and its Subsidiaries to acquire by purchase or otherwise the business or fixed assets of, or the Capital Stock of, any other Person, minus, with
regard to the equipment that is purchased by such Person and its Subsidiaries simultaneously with the trade-in of existing equipment, fixed assets or improvements, the credit granted by the seller of such equipment for the trade-in of such equipment, fixed assets or improvements. 

“Capital Guideline” means any law, rule, regulation, policy, guideline or directive (whether or not having the force of law and whether or not the failure to comply therewith would be unlawful) (i) regarding capital adequacy, capital ratios, capital requirements, the calculation of a bank’s capital or similar matters, or (ii) affecting the amount of capital required to be obtained or maintained by the Lenders any Person controlling any Lender, or the L/C Issuer or the manner in which the Lenders, any Person controlling any Lender or the L/C Issuer allocate capital to any of their contingent liabilities (including letters of credit), advances, acceptances, commitments, assets or liabilities. 

“Capitalized Lease” means, with respect to any Person, any lease of real or personal property by such Person as lessee which is required under GAAP to be capitalized on the balance sheet of such Person. 

“Capitalized Lease Obligations” means, with respect to any Person, obligations of such Person and its Subsidiaries under Capitalized Leases, and, for purposes hereof, the amount of any such obligation shall be the capitalized amount thereof determined in accordance with GAAP. 

“Capital Stock” means (i) with respect to any Person that is a corporation, any and all shares, interests, participations or other equivalents (however designated and whether or not voting) of corporate stock, and (ii) with respect to any Person that is not a corporation, any and all partnership, membership or other equity interests of such Person. 

“Cash Management Account” has the meaning specified therefor in Section 2.07(a).

 

 

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“Cash Management Agreements” means those certain cash management service agreements, each in form and substance satisfactory to the Agent and each of which is among Administrative Borrower, the Agent, and one of the Cash Management Banks.

“Cash Management Bank” has the meaning specified therefor in Section 2.07(a).

“Catalog Publishing Contract” means the Printing Agreement, dated as of April 7, 1998, by and between Mail Order and Quebecor Printing (USA) Corp., a Delaware corporation, as such agreement may be amended, modified, extended or renewed from time to time.

“Change in Law” means (a) the adoption of any law, rule or regulation after the date of this Agreement, (b) any change in any law, rule or regulation or in the interpretation or application thereof by any Governmental Authority after the date of this Agreement or (c) compliance by any Lender or the L/C Issuer (or, for purposes of Section 2.13(b), by any lending office of such Lender or L/C/ Issuer or by such Lender’s or L/C Issuer’s holding company, if any) with any request, guideline or directive (whether or not having the force of law) of any Governmental Authority made or issued after the date of this Agreement.

“Change of Control” means each occurrence of any of the following: 

(a) Permitted Holders fail to own and control, directly or indirectly, 51%, or more, of the Capital Stock of Group having the right to vote for the election of members of the Board of Directors of Group; 

(b) the acquisition, directly or indirectly, by any person or group (within the meaning of Section 13(d) and 14(d) of the Exchange Act), other than Permitted Holders, of beneficial ownership (as defined in Rule 13d-3 under the Exchange Act) of more than 30% of the Capital Stock of Group having the right to vote for the election of members of the Board of Directors of Group;

(c) during any period of two consecutive years, individuals who at the beginning of such period constituted the Board of Directors of Group (together with any new directors whose election by such Board of Directors or whose nomination for election by the shareholders of Group was approved by a vote of at least a majority the directors of Group then still in office who were either directors at the beginning of such period, or whose election or nomination for election was previously approved) cease for any reason to constitute a majority of the Board of Directors of Group;

(d) the Parent shall cease to have, directly or indirectly through one or more Loan Parties, beneficial ownership (as defined in Rule 13d-3 under the Exchange Act) of 100% of the aggregate voting power of the Capital Stock of each Borrower (other than Group) and each Guarantor, free and clear of all Liens (other than Liens in favor of the Agent);

(e) Group shall cease to have, directly or indirectly through one or more Loan Parties, beneficial ownership (as defined in Rule 13d-3 under the Exchange Act) of 100% of the aggregate voting power of the Capital Stock of the Parent, free and clear of all Liens (other than Liens in favor of the Agent); 

 

 

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(f) (i) Group consolidates with or merges into another entity or conveys, transfers or leases all or substantially all of its property and assets to any Person, or (ii) any Borrower consolidates with or merges into another entity or conveys, transfers or leases all or substantially all of its property and assets to another Person, or (iii) any entity consolidates with or merges into any other Loan Party unless the Parent has beneficial ownership of one hundred percent (100%) of the aggregate voting power of all Capital Stock of the resulting, surviving or transferee entity; or

“Closing Fee” has the meaning specified therefor in Section 2.06(a).

“Collateral” means all of the Property and assets and all interests therein and proceeds thereof now owned or hereafter acquired by any Person upon which a Lien is granted or purported to be granted by such Person as security for all or any part of the Obligations.

“Collateral Access Agreement” means a landlord waiver agreement of any lessor in possession of, having a Lien upon, or having rights or interests in the Borrowers’ or their Subsidiaries’ books and records or Property, pursuant to which such lessor releases or subordinates such Lien to the Lien of the Agent, in form and substance satisfactory to the Agent.

“Collections” means all cash, checks, credit card slips or receipts, notes, instruments, and other items of payment (including insurance proceeds, proceeds of cash sales, rental proceeds, and tax refunds) of the Borrowers.

“Commitment Increase” has the meaning specified therefor in Section 2.01(c).

“Commitment Increase Date” has the meaning specified therefor in Section 2.01(c).

“Compliance Certificate” means a certificate substantially in the form of Exhibit I, delivered by the chief financial officer of Group to the Agent.

“Consulting Agreement”  means the Consulting Agreement, dated as of the Effective Date, between Performance Enhancement Partners LLC and Group.

“Consulting Fees” means all fees, costs, expenses and other amounts payable by the Loan Parties under the Consulting Agreement, as in effect on the Effective Date.

“Contingent Obligation” means, with respect to any Person, any obligation of such Person guaranteeing any Indebtedness, leases, dividends or other obligations (“primary obligations”) of any other Person (the ”primary obligor”) in any manner, whether directly or indirectly, including, without limitation, (i) the direct or indirect guaranty, endorsement (other than for collection or deposit in the ordinary course of business), co-making, discounting with recourse or sale with recourse by such Person of the obligation of a primary obligor, (ii) the obligation to make take-or-pay or similar payments, if required, regardless of nonperformance by any other party or parties to an agreement, (iii) any obligation of such Person, whether or not contingent, (A) to purchase
any such primary obligation or any property constituting direct or indirect security therefor, (B) to advance or supply funds (1) for the purchase or payment of any such primary obligation or (2) to maintain working capital or equity capital of the primary obligor or otherwise to 

 

 

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maintain the net worth or solvency of the primary obligor, (C) to purchase property, assets, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation or (D) otherwise to assure or hold harmless the holder of such primary obligation against loss in respect thereof; provided, however, that the term “Contingent Obligation” shall not include any products warranties extended in the ordinary course of business. The amount of any Contingent Obligation shall be deemed to be an amount equal to the stated or determinable amount of the primary obligation with respect to which such Contingent Obligation is
made (or, if less, the maximum amount of such primary obligation for which such Person may be liable pursuant to the terms of the instrument evidencing such Contingent Obligation) or, if not stated or determinable, the maximum reasonably anticipated liability with respect thereto (assuming such Person is required to perform thereunder), as determined by such Person in good faith.

“Contractual Obligation” means, as to any Person, any agreement, contract or instrument (or any provisions thereof) to which such Person is a party or by which it or any of its Property is bound.

“Contra Customer” means any customer or other Person with whom the Borrower has a contract or agreement of any kind requiring the Borrower to make payments to such Person (including an account payable) and in respect of whom there is also an Eligible Account Receivable.

“Control Agreement” means an agreement, in form and substance reasonably satisfactory to the Agent, executed and delivered by the applicable Borrower, the Agent, and the applicable securities intermediary or bank, which agreement is sufficient to give the Agent “control” over the subject Securities Account, DDA or Investment Property as provided in the Uniform Commercial Code.

“Cost” means the calculated cost of purchases, as determined from invoices received by the Borrowers, the Borrowers’ purchase journals or stock ledgers, based upon the Borrowers’ accounting practices, known to the Agent, which practices are in effect as of the Effective Date. “Cost” does not include any inventory capitalization costs inclusive of advertising or freight, but may include other charges used in the Borrowers’ determination of the cost of goods sold and bringing goods to market, all within Agent’s Permitted Discretion and in accordance with GAAP.

“Credit Card Accounts” means any and all rights of the Borrowers to payment for  goods sold and services rendered via credit card, including accounts, general intangibles and any and all such rights evidenced by chattel paper, instruments or documents, whether due or to become due and whether or not earned by performance, and whether now or hereafter acquired or arising in the future and any proceeds arising therefrom or relating thereto.

“Credit Card Agreements” means those certain credit card receipts agreements, each in form and substance reasonably satisfactory to Agent and each of which is among Agent, the applicable Borrower and one of the Borrowers’ Credit Card Processors.

 

 

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“Credit Card Bank Depository Account Agreement” means a credit card depository account agreement, substantially in the form of Exhibit L, or otherwise in form and substance reasonably satisfactory to Agent, among Agent, the applicable Borrower and the applicable Borrower’s Credit Card Processor.

“Credit Card Processor” means any Person which acts as a credit card clearinghouse or processor of credit card payments accepted by any Borrower.

“Customs Broker” means each Existing Customs Broker/Freight Forwarder or other Person selected by the Borrowers after the Effective Date to perform port of entry services, accept and process Inventory imported by any Borrower, or similar services, acceptable to Agent in its Permitted Discretion, in each case, which has executed and delivered a Bailee Agreement.

“DDA” means any checking or other “deposit account” (as such term is defined from time to time in the Uniform Commercial Code) maintained by any Borrower.

“Default” means an event which, with the giving of notice or the lapse of time or both, would constitute an Event of Default.

“Derivatives” means any interest rate, foreign currency, commodity or equity swap, collar, cap, floor or forward rate agreement, or other agreement or arrangement designed to protect against fluctuations in interest rates or currency, commodity or equity values (including, without limitation, any option with respect to any of the foregoing and any combination of the foregoing agreements or arrangements), and any confirmation executed in connection with any such agreement or arrangement.

“Disposition” means any transaction, or series of related transactions, pursuant to which any Loan Party or any of its Subsidiaries sells, assigns, transfers or otherwise disposes of any property or assets (whether now owned or hereafter acquired) to any other Person, in each case whether or not the consideration therefor consists of cash, securities or other assets owned by the acquiring Person, excluding any sales of Inventory in the ordinary course of business on ordinary business terms or sales.

“Distribution Center Lease” means (i) the lease agreement, dated as of September 25, 1998, between Ryan Companies US, Inc., a Minnesota corporation, as landlord, and Frederick’s, as tenant, with respect to the distribution center of Frederick’s located in Phoenix, Arizona, and (ii) the lease contract, dated as of November 29, 2000, between Pearl River County, Mississippi, as landlord, and Group, as tenant, as such leases may be amended, modified, extended or renewed from time to time.1

“Dollar,” “Dollars” and the symbol “$” each means lawful money of the United States of America.

“Domestic Subsidiary” means each Subsidiary of a Borrower that is not a Foreign Subsidiary.

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  	1
	We agree that the MI lease would be picked up by Material Contracts, but prefer to include it here for purposes of consistency. 





 

 

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“Effective Date” means the date, on or before January 29, 2008, on which all of the conditions precedent set forth in Section 5.01 are satisfied and the initial Revolving Loans are made or the initial Letter of Credit is issued.

“Eligible Accounts Receivable”  An Account Receivable of any Borrower which:

(a) is not unpaid more than one hundred and twenty (120) days after invoice date and is not more than sixty (60) days past due under the original terms of sale;

(b) arose in the ordinary course of the Borrower’s business as a result of either (i) services which have been performed for the Account Debtor or (ii) the absolute sale of goods which have been shipped to the Account Debtor (and not a bill-and-hold, guaranteed sale, sale-or-return, sale-on-assignment, sale-on-appraisal, consignment or other repurchase or return basis);

(c) is the legal, valid and binding obligation of the Account Debtor thereunder, is assignable, is owned by the Borrower free and clear of all Liens (except in favor of the Agent) and is subject to a valid, perfected first security interest of the Agent (and, if the Account Debtor is the United States of America or any agency or instrumentality thereof, the Borrower’s right to payment has been assigned to the Agent in compliance with the Assignment of Claims Act of 1940, as amended) and is not evidenced by a promissory note or other instrument;

(d) has not been reduced and is not subject to reduction, as against the Borrower or its agents, by any offset, counterclaim, adjustment, credit, allowance or other defense, and for which there has been no request for credit or adjustments with respect thereto; 

(e) as to which there is no (and no basis for any) return, rejection, loss or damage of or to the goods giving rise thereto;

 (f) is not difficult to collect or uncollectible for any reason, including, without limitation, as a result of return, rejection, repossession, loss of or damage to the merchandise giving rise thereto, a merchandise or other dispute, any bankruptcy, insolvency, adverse credit rating or other financial difficulty of the Account Debtor, or any impediment to the assertion of a claim or commencement of an action against the Account Debtor (including as a consequence of a failure of the Borrower to be qualified or licensed in any jurisdiction where such qualification or licensing is required), all as reasonably determined by the Agent in its sole discretion;

(f) is not owing from any Affiliate of the Borrower;

(g) is owing from an Account Debtor located in the United States;

(h) is not owing from a Person (other than Wal-Mart) who is the Account Debtor on more than fifty percent (50%) of all Eligible Accounts Receivable (other than Eligible Wal-Mart Accounts Receivable), but only to the extent the Eligible Accounts Receivable of such Account Debtor exceed fifty percent (50%) of all Eligible Accounts Receivable (other than Eligible Wal-Mart Accounts Receivable);

(i) if owing from any Contra Customer, will be eligible only to the extent it exceeds the amount of the Borrower’s accounts payable to such Contra Customer; and

 

 

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(j) has not been designated by the Agent in its sole discretion by notice to the Borrower as unacceptable for any reason.

“Eligible Credit Card Accounts” means Credit Card Accounts owed to the Borrowers from a Credit Card Processor which has provided a Credit Card Bank Depository Account Agreement, arising from purchase by the Borrowers’ retail customers on credit cards, to the extent deemed eligible by Agent in its Permitted Discretion, and without in any way limiting the foregoing excluding any Credit Card Account which has not been collected within four (4) Business Days of origination.

“Eligible In-Transit Inventory” means those items of Eligible Inventory of the Borrowers not in a location set forth on Schedule 1.01(B) or Schedule 1.01(E) or in transit among such locations, but as to which (a) the purchase price for the Inventory was the subject of a Qualified Import Letter of Credit or prepaid in cash by wire transfer, (b) such Inventory currently is in transit (whether by vessel, air, or land) from a location outside of the continental United States to a location set forth on Schedule 1.01(B) or Schedule 1.01(E), (c) title to such Inventory has passed to the applicable Borrower, (d) such Inventory is insured against types of loss, damage, hazards, and risks, and in amounts, satisfactory to the Agent in its Permitted Discretion, (e) such Inventory either (1) is
the subject of a negotiable bill of lading (x) that is consigned to the L/C Issuer (either directly or by means of endorsements), (y) that was issued by the carrier respecting the subject Inventory, and (z) that either is (I) in the possession of the Agent or a Customs Broker (in each case, in the State of California), or (II) the subject of a telefacsimile copy that the Agent has received from the L/C Issuer which issued the related Letter of Credit and as to which the Agent also has received a confirmation from such L/C Issuer that such document is in-transit by air-courier to the Agent or a Customs Broker (in each case, in the State of California); or (2) is the subject of a negotiable cargo receipt and is not the subject of a bill of lading (other than a negotiable bill of lading consigned to, and in the possession of, a consolidator or the Agent, or their respective agents) and such negotiable cargo receipt is (x) consigned to the L/C Issuer (either directly or by
means of endorsements), (y) that was issued by a consolidator respecting the subject Inventory, (z) that either is (I) in the possession of the Agent or a Customs Broker (in each case in the State of California), or (II) the subject of a telefacsimile copy that the Agent has received from the L/C Issuer which issued the related Letter of Credit and as to which Agent also has received a confirmation from such L/C Issuer that such document is in-transit by air-courier to the Agent or a Customs Broker (in each case, in the State of California), (f) Administrative Borrower has provided a certificate to the Agent that certifies that, to the best knowledge of the Borrowers, such Inventory meets all of the Borrowers’ representations and warranties contained in the Loan Documents concerning Eligible Inventory, that the Borrowers know of no reason why such Inventory would not be accepted by the applicable Borrower when it arrives in California, and that the shipment as evidenced
by the documents conforms to the related order documents, and (g) the related Letter of Credit has been drawn upon in full and the L/C Issuer has honored such drawing and the Agent has honored its obligations to the L/C Issuer under the applicable Qualified Import Letter of Credit. 

“Eligible Inventory” means, without duplication, Inventory of the Borrowers located at one of the locations set forth on Schedule 1.01(B) or Schedule 1.01(E) or Eligible In-Transit Inventory, consisting of first quality finished goods held for sale in the ordinary course of the Borrowers’ business that complies with each of the representations and warranties respecting 

 

 

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Eligible Inventory made by the Borrowers in the Loan Documents, and that is not excluded as ineligible by virtue of the one or more of the criteria set forth below; provided, however, that such criteria may be fixed and revised from time to time by the Agent in the Agent’s Permitted Discretion to address the results of any audit or appraisal performed by the Agent from time to time after the date hereof. In determining the amount to be so included, Inventory shall be valued at Cost on a basis consistent with the Borrowers’ historical accounting practices. In addition, Eligible Inventory shall include such items of the Borrowers’ Inventory as Administrative Borrower shall request and that the Agent, within its Permitted
Discretion, approves in advance. An item of Inventory shall not be included in Eligible Inventory if:

(a) a Borrower does not have good, valid, and marketable title thereto;

(b) it is not located at one of the locations in the United States set forth on Schedule 1.01(B) or Schedule 1.01(E) or in transit from one such location to another such location (other than Eligible In-Transit Inventory);

(c) it is not subject to a valid and perfected first priority Lien in favor of the Agent;

(d) it consists of goods returned or rejected by a Borrower’s customers;

(e) it consists of goods that are obsolete or slow moving, restrictive or custom items, work-in-process, raw materials, or goods that constitute spare parts, packaging and shipping materials, supplies used or consumed in a Borrower’s business, bill and hold goods, defective goods, “seconds,” or Inventory acquired on consignment; or

(f) it consists of piece goods, damaged goods, stolen goods, or goods stored for supervision by relevant customs agencies.

“Eligible Retail Inventory” means Eligible Inventory to be sold to consumers in Frederick’s retail store locations, via the Website or through the catalog.

“Eligible Wal-Mart Accounts Receivable” means all Eligible Accounts Receivable under which Wal-Mart is the Account Debtor.

“Eligible Warehouse Liquid Inventory” means Eligible Wholesale Inventory that will be shipped within thirty (30) days, thus giving rise to Eligible Accounts Receivable.

“Eligible Wholesale Inventory” means Eligible Inventory to be sold to wholesale or retail merchants in goods of that kind, other than Eligible Warehouse Liquid Inventory; provided that no Inventory shall be deemed to be Eligible Wholesale Inventory until an appraisal to the satisfaction of the Agent in its Permitted Discretion has been performed. 

“Employee Plan” means an employee benefit plan (other than a Multiemployer Plan) covered by Title IV of ERISA and maintained (or was maintained at any time during the six (6) calendar years preceding the date of any borrowing hereunder) for employees of any Borrowers or any of its ERISA Affiliates.

 

 

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“Environmental Actions” means any complaint, summons, citation, notice, directive, order, claim, litigation, investigation, judicial or administrative proceeding, judgment, letter or other communication from any Governmental Authority involving violations of Environmental Laws or Releases of Hazardous Materials (i) from any assets, properties owned or operated by, or businesses of any Loan Party or any of its Subsidiaries or any predecessor in interest; or (ii) onto any facilities which received Hazardous Materials generated by any Loan Party or any of its Subsidiaries or any predecessor in interest.

“Environmental Laws” means the Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C. § 9601, et seq.), the Hazardous Materials Transportation Act (49 U.S.C. § 1801, et seq.), the Resource Conservation and Recovery Act (42 U.S.C. § 6901, et seq.), the Federal Clean Water Act
(33 U.S.C. § 1251 et seq.), the Clean Air Act (42 U.S.C. § 7401 et seq.), the Toxic Substances Control Act (15 U.S.C. § 2601 et seq.) and the Occupational Safety and Health Act (29 U.S.C. § 651 et seq.), as such laws may be amended or otherwise modified from time to time, and any other present or future
federal, state, local or foreign statute, ordinance, rule, regulation, order, judgment, decree, permit, license or other binding determination of any Governmental Authority imposing liability or establishing standards of conduct for protection of the environment.

“Environmental Liabilities and Costs” means all liabilities, monetary obligations, Remedial Actions, losses, damages, punitive damages, consequential damages, treble damages, costs and expenses (including all reasonable fees, disbursements and expenses of counsel, experts and consultants and costs of investigations and feasibility studies), fines, penalties, sanctions and interest incurred as a result of any claim or demand by any Governmental Authority or any third party, and which relate to any environmental condition or a Release of Hazardous Materials from or onto (i) any property presently or formerly owned or operated by any Loan Party or any of its Subsidiaries or (ii) any facility which received Hazardous Materials generated by any Loan Party or any of its Subsidiaries.

“Environmental Lien” means any Lien in favor of any Governmental Authority for Environmental Liabilities and Costs.

“Equity Incentive Plan” means (x) the Parent’s 2002 Employee Equity Incentive Plan and (y) Group’s 2000 Performance Equity Plan, 1994 Incentive Stock Option Plan and 1988 Non-Qualified Stock Option Plan, all of which shall be in form and substance satisfactory to the Agent.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended, and any successor statute of similar import, and regulations thereunder, in each case as in effect from time to time. References to sections of ERISA shall be construed also to refer to any successor sections.

“ERISA Affiliate” means, with respect to any Person, any trade or business (whether or not incorporated) which is a member of a group of which such Person is a member and which would be deemed to be a “controlled group” within the meaning of Sections 414(b), (c), (m) and (o) of the Internal Revenue Code.

 

 

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“Event of Default” means any of the events set forth in Section 9.01.

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“Excluded Taxes” means, with respect to the Agent, any Lender or the L/C Issuer, (a) taxes imposed on (or measured by) its net income by the United States of America or by the jurisdiction (or any political subdivision thereof) under the laws of which such recipient is organized or in which its principal office is located or, in the case of any Lender or the L/C Issuer, the jurisdiction (or any political subdivision thereof) in which its applicable lending office is located, (b) any branch profits taxes imposed by the United States of America pursuant to Section 884 of the Internal Revenue Code, or (c) any tax imposed on payments made by a Lender or the Agent to its members or partners.

“Executive Officer” means the chairman, president, chief executive officer or chief financial officer of Group or any other officer of Group performing such functions.

“Existing Agreement” has the meaning set forth in the Recitals.

“Existing Customs Broker/Freight Forwarder” means Import Commodity, The Irwin Brown Company, Richard Murray & Co., Barthco International, Allied Transport Systems USA Inc., Baltrans Logistics, Inc., Dimerco Express (USA) Corp., Fashion Forward Worldwide Corporation and Vizion Logistics.

“Existing Guarantor” means Fredericks.com, Inc., a Nevada corporation.

“Existing Pledge Agreement” means that certain Pledge Agreement dated January 7, 2003, made by the Borrowers (other than Group) and the Existing Guarantor in favor of the Agent (as the same may be amended, restated or otherwise modified from time to time).

“Existing Security Agreement” means that certain Security Agreement dated January 7, 2003, made by the Borrowers (other than Group) and the Existing Guarantor in favor of the Agent (as the same may be amended, restated or otherwise modified from time to time).

“Federal Funds Rate” means, for any period, a fluctuating interest rate per annum equal for each day during such period of the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for such day on such transactions received by the Agent from three Federal funds brokers of recognized standing selected by it.

“Fiscal Year” means the fiscal year of Group and its Subsidiaries ending on the last Saturday of July of each year.

“Flagship Store Lease” means the lease agreement, dated as of March 3, 2000, between 6622 Hollywood Partners, LLC, a California limited liability company (as successor-in-interest to Jeff Greene), as landlord, and Frederick’s, as tenant, with respect to the flagship retail 

 

 

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store of Stores located in Los Angeles, California, as such lease agreement may be amended, modified, extended or renewed from time to time.

“Foreign Lender” means any Lender that is organized under a jurisdiction other than the United States of America, a State thereof and/or the District of Columbia.

“Foreign Subsidiary” means any Subsidiary of a Borrower that is organized under the law of a jurisdiction other than the United States or any state or Governmental Authority thereof.

“Funding Losses” has the meaning set forth in Section 2.04(f)(ii).

“GAAP” means generally accepted accounting principles in effect from time to time in the United States, applied on a consistent basis.

“Governmental Authority” means any nation or government, any Federal, state, city, town, municipality, county, local or other political subdivision thereof or thereto and any department, commission, board, bureau, instrumentality, agency or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government.

“Group” has the meaning specified therefor in the preamble hereto.

“Guarantor” means (i) each Subsidiary of Group listed on Schedule 1.01(A) hereto and (ii) each other Person which guarantees all or any part of the Obligations.

“Guaranty” means a guaranty substantially in the form of Exhibit B, made by a Guarantor in favor of the Agent for the benefit of the Lenders, in which such Guarantor guaranties the payment of all or any part of the Obligations, pursuant to Section 7.01(c) or otherwise.

“Hazardous Materials” means (a) any element, compound or chemical that is defined, listed or otherwise classified as a contaminant, pollutant, toxic pollutant, toxic or hazardous substances, extremely hazardous substance or chemical, hazardous waste, special waste, or solid waste under Environmental Laws; (b) petroleum and its refined products; (c) polychlorinated biphenyls; and (d) any asbestos and asbestos-containing materials.

“Hedge Agreement” means any and all transactions, agreements, or documents now existing or hereafter entered into between Administrative Borrower or its Subsidiaries and Wells Fargo or its Affiliates, which provide for an interest rate, credit, commodity or equity swap, cap, floor, collar, forward foreign exchange transaction, currency swap, cross currency rate swap, currency option, or any combination of, or option with respect to, these or similar transactions, for the purpose of hedging Administrative Borrower’s or its Subsidiaries’ exposure to fluctuations in interest or exchange rates, loan, credit exchange, security or currency valuations or commodity prices.

“Import Letter of Credit” means a documentary Letter of Credit issued to support the purchase by any Borrower of Inventory that provides that all draws thereunder require 

 

 

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presentation of customary documentation (including, if applicable, commercial invoices, packing lists, certificate of origin, bill of lading, an airway bill, customs clearance documents, quota statement, certificate, beneficiaries statement and bill of exchange, bills of lading, dock warrants, dock receipts, warehouse receipts or other documents of title), in form and substance satisfactory to the Agent and reflecting passage to such Borrower of title to Inventory conforming to such Borrower’s contract with the seller thereof.

“Indebtedness” means, without duplication, with respect to any Person, (i) all indebtedness of such Person for borrowed money; (ii) all obligations of such Person for the deferred purchase price of property or services (other than trade payables, payables to vendors or other account payables incurred in the ordinary course of such Person’s business and not past due for more than 90 days after the date such payable was created); (iii) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments or upon which interest payments are customarily made; (iv) all obligations and liabilities of such Person created or arising under any conditional sales or other title retention agreement with respect to property used and/or acquired by such
Person, even though the rights and remedies of the lessor, seller and/or lender thereunder are limited to repossession or sale of such property; (v) all Capitalized Lease Obligations of such Person; (vi) all obligations and liabilities, contingent or otherwise, of such Person, in respect of letters of credit, acceptances and similar facilities; (vii) all obligations and liabilities, calculated on a basis reasonably satisfactory to the Agent and in accordance with accepted practice, of such Person under Derivatives; (viii) all Contingent Obligations; (ix) liabilities incurred under Title IV of ERISA with respect to any plan (other than a Multiemployer Plan) covered by Title IV of ERISA and maintained for employees of such Person or any of its ERISA Affiliates; (x) withdrawal liability incurred under ERISA by such Person or any of its ERISA Affiliates to any Multiemployer Plan; (xi) all other items which, in accordance with GAAP, would be included as
liabilities on the liability side of the balance sheet of such Person; and (xii) all obligations referred to in clauses (i) through (x) of this definition of another Person secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) a Lien upon property owned by such Person, even though such Person has not assumed or become liable for the payment of such Indebtedness. The Indebtedness of any Person shall include the Indebtedness of any partnership of or joint venture in which such Person is a general partner or a joint venturer.

“Indemnified Matters” has the meaning specified therefor in Section 12.17. 

“Indemnified Taxes” means all Taxes other than Excluded Taxes.

“Indemnitees” has the meaning specified therefor in Section 12.17.

“Insolvency Proceeding” means any proceeding commenced by or against any Person under any provision of the Bankruptcy Code or under any other state or federal bankruptcy or insolvency law, assignments for the benefit of creditors, formal or informal moratoria, compositions, extensions generally with creditors, or proceedings seeking reorganization, arrangement, or other similar relief.

“Interest Period” means, with respect to each LIBOR Rate Loan, a period commencing on the date of the making of, conversion to, or continuation of such LIBOR Rate 

 

 

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Loan and ending 1, 2, 3, or 6 months thereafter; provided, however, that (a) if any Interest Period would end on a day that is not a Business Day, such Interest Period shall be extended (subject to clauses (c)-(e) below) to the next succeeding Business Day, (b) interest shall accrue at the applicable rate based upon the LIBOR Rate from and including the first day of each Interest Period to, but excluding, the day on which any Interest Period expires, (c) any Interest Period that would end on a day that is not a Business Day shall be extended to the next succeeding Business Day unless such Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Business Day, (d) with respect to an
Interest Period that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period), the Interest Period shall end on the last Business Day of the calendar month that is 1, 2, 3, or 6 months after the date on which the Interest Period began, as applicable, and (e) the Borrowers (or Administrative Borrower on behalf thereof) may not elect an Interest Period which will end after the Maturity Date.

“Internal Revenue Code” means the Internal Revenue Code of 1986, as amended (or any successor statute thereto), and the regulations thereunder.

“Inventory” means, with respect to any Person, all goods and merchandise of such Person, including, without limitation, all raw materials, work-in-process, packaging, supplies, materials and finished goods of every nature used or usable in connection with the shipping, storing, advertising or sale of such goods and merchandise, whether now owned or hereafter acquired, and all such other property the sale or other disposition of which would give rise to an Account Receivable, Credit Card Account or cash.

“Inventory Reserves” means such reserves as may be established from time to time by the Agent in the Agent’s Permitted Discretion with respect to the determination of the saleability, at retail, of the Eligible Inventory or which reflect such other factors as affect the current retail or market value of the Eligible Inventory. Without limiting the generality of the foregoing, Inventory Reserves may include, without limitation, reserves based on the following:

(a) obsolescence (determined based upon Inventory on hand beyond a given number of days), other than ordinary course obsolescence calculated in accordance with the Borrowers’ prior practices;

(b) seasonality;

(c) shrinkage;

(d) imbalance and over/short discrepancies;

(e) returns to vendors and damaged warehouse inventory;

(f) test SKUs;

(g) change in Inventory character, composition or mix;

(h) markdowns (both permanent and point of sale);

 

 

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(i) retail markons or markups inconsistent with (i) prior period practice and performance, (ii) current business plans, or (iii) advertising calendar and planned advertising events; and

(j) the relationship between the amount expended for Inventory purchases and the cost of goods sold.

“Investment” means, with respect to any Person, any investment by such Person in any other Person (including Affiliates) in the form of loans, guarantees, advances, or capital contributions (excluding (a) commission, travel, and similar advances to officers and employees of such Person made in the ordinary course of business, and (b) bona fide Accounts Receivable arising in the ordinary course of business consistent with past practices), purchases or other acquisitions for consideration of Indebtedness or Capital Stock, and any other items that are or would be classified as investments on a balance sheet prepared in accordance with GAAP.

“Landlord Lien State” means any state or other jurisdiction under whose statutory or common law the rights of landlord to or in assets of that landlord’s tenant, for unpaid rent, may be senior to a perfected security interest in such assets.

“L/C Issuer” means Wells Fargo or such other bank as the Agent may select in its sole and absolute discretion.

“L/C Sublimit” means that portion of the Total Revolving Credit Commitment equal to $15,000,000.

“Lease” means any lease of real property to which any Loan Party is a party as lessor or lessee.

“Lease Payments” means all obligations of a lessee under a lease of any retail store or other property where any Inventory of a Borrower is or will be sold, including with respect to any period under any such lease, the aggregate amounts payable by such lessee to or on behalf of the lessor for such period, including, without limitation, rent, common area maintenance fees, property taxes, insurance, interest, amortized charges and any other amounts such lessee is required to pay to or on behalf of the lessor pursuant to such lease.  Whenever it is necessary to determine the amount of Lease Payments for any period with respect to which any of the rentals under the relevant lease are not definitely determinable by the terms of such lease, all such rentals will be estimated in a reasonable
amount for such period.

“Lender” has the meaning specified therefor in the preamble hereto.

“Lender Group” means, individually and collectively, each of the Lenders (including the L/C Lender) and the Agent.

“Letter of Credit” means an Import Letter of Credit or a Standby Letter of Credit.

“Letter of Credit Application” has the meaning specified therefor in Section 2.01A(a).

 

 

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“Letter of Credit Fee” has the meaning specified therefor in Section 2.03A(b). 

“Letter of Credit Guaranty” means one or more participations, indemnities, agreements to reimburse or guaranties by the Agent or a Lender in favor of the L/C Issuer purchasing a participation in, indemnifying or guaranteeing the Borrowers’ obligations to the L/C Issuer under a participation agreement, indemnity agreement, reimbursement agreement, Letter of Credit Application or other like document in respect of any Letters of Credit.

“Letter of Credit Obligations” means, at any time and without duplication, the sum of (i) the Reimbursement Obligations at such time, plus (ii) (A) the aggregate maximum amount available for drawing under the Letters of Credit outstanding at such time, plus (iii) all amounts for which the Agent or a Lender may be liable to the L/C Issuer pursuant to any Letter of Credit Guaranty.

“LIBOR Deadline” has the meaning set forth in Section 2.04(f)(i).

“LIBOR Notice” means a written notice in the form of Exhibit N.

“LIBOR Option” has the meaning specified therefor in Section 2.04(e).

“LIBOR Rate” means, for each Interest Period for each LIBOR Rate Loan, the rate per annum determined by the Agent in good faith (rounded upwards, if necessary, to the next one sixteenth of one percent (1/16%)) by dividing (a) the Base LIBOR Rate for such Interest Period, by (b) one hundred percent (100%) minus the Reserve Percentage. The LIBOR Rate shall be adjusted on and as of the effective day of any change in the Reserve Percentage.

“LIBOR Rate Loan” means each portion of the Revolving Loan that bears interest at a rate determined by reference to the LIBOR Rate.

“Lien” means any mortgage, deed of trust, pledge, lien (statutory or otherwise), security interest, charge or other encumbrance or security or preferential arrangement of any nature, including, without limitation, any conditional sale or title retention arrangement, any Capitalized Lease and any assignment, deposit arrangement or financing lease intended as, or having the effect of, security.

“Loan Account” means an account maintained hereunder by the Agent on its books of account, and with respect to the Borrowers, in which the Borrowers will be charged with all Revolving Loans made to, and all other Obligations incurred by, the Borrowers.

“Loan Documents” means this Agreement, the Bank Product Agreements, the Revolving Credit Notes, the Pledge Agreements, the Security Agreements, the Mortgages, the Subordination Agreement, the Guaranties, the Cash Management Agreements, the Letter of Credit Applications, the UCC Filing Authorization Letter, the Ratification and Reaffirmation Agreement and all other agreements, instruments, and other documents executed and delivered pursuant hereto or thereto or otherwise evidencing or securing any Revolving Loan, Letter of Credit Obligation or other Obligation.

“Loan Parties” means the Borrowers and the Guarantors.

 

 

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“Loan Servicing Fee” has the meaning specified therefor in Section 2.06(c).

“Loss Proceeds” means, with respect to a Person, the proceeds received by such Person and its Subsidiaries due to damage to, or loss, destruction or condemnation of, any Property or assets of such Person or any of its Subsidiaries.

“Material Adverse Effect” means a material adverse effect on any of (i) the operations, business, any material assets or properties, condition (financial or otherwise) or prospects, of the Loan Parties taken as a whole, including, without limitation, any material adverse deviation at any time from the Plan Projections (as updated by the business plans delivered to the Agent pursuant to Section 7.01(b)(iii)), (ii) the ability of any Loan Party to perform any of its material obligations under any Loan Document to which it is a party, (iii) the legality, validity or enforceability of this Agreement or any other Loan Document, (iv) the rights and remedies of the Agent and the Lenders under any Loan Document, or (v) the validity, perfection or priority of a Lien in
favor of the Agent for the benefit of the Lenders on any of the Collateral.

“Material Contract” means (i) the Catalog Publishing Contract, the Flagship Store Lease, the Distribution Center Lease and any Subordinated Loan Document, (ii) with respect to any Person, (x) each contract or agreement to which such Person or any of its Subsidiaries is a party involving aggregate consideration payable to or by such Person or such Subsidiary of $250,000 or more in any calendar year (other than purchase orders in the ordinary course of the business of such Person or such Subsidiary and other than contracts that by their terms may be terminated by such Person or Subsidiary in the ordinary course of its business upon less than 60 days’ notice without penalty or premium) and (y) all other contracts or agreements material to the business, operations, condition
(financial or otherwise), performance or properties of a Borrower or of the Loan Parties taken as a whole; and (iii) the Acquisition Documents.

“Maturity Date” means January 28, 2012, or such earlier date on which the Revolving Loans shall become due and payable, in whole, in accordance with the terms of this Agreement and the other Loan Documents.

“Mortgage” means each mortgage, deed of trust, deed to secure debt, or other similar instrument, in form and substance satisfactory to the Agent, made by any Loan Party in favor of the Agent for the benefit of the Lenders, securing the Obligations and delivered to the Agent pursuant to Section 7.01(c) and Section 7.01(u).

“Multiemployer Plan” means a “multiemployer plan” as defined in Section 4001(a)(3) of ERISA for which any Borrower or any ERISA Affiliate has contributed to, or has been obligated to contribute to, at any time during the preceding six (6) years.

“Net Cash Proceeds” means, (i) with respect to any Disposition by any Person, the amount of cash received (directly or indirectly) from time to time (whether as initial consideration or through the payment of deferred consideration) by or on behalf of such Person or any of its Subsidiaries or Affiliates, in connection therewith after deducting therefrom only (A) any Indebtedness secured by any Lien permitted by Section 7.02(b) on any asset (other than Indebtedness assumed by the purchaser of such asset) which is required to be, and is, repaid in 

 

 

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connection with such Disposition (other than Indebtedness under this Agreement), (B) reasonable expenses related thereto reasonably incurred by such Person or such Affiliate in connection therewith, (C) transfer taxes paid by such Person or such Affiliate in connection therewith, and (D) net income taxes to be paid in connection with such Disposition (after taking into account any tax credits or deductions and any tax sharing arrangements) and (ii) with respect to the sale or issuance by any Person of any of its Capital Stock, the aggregate amount of cash received (directly or indirectly) from time to time (whether as initial consideration or through the payment of deferred consideration) by or on behalf of such Person or any of its Subsidiaries or Affiliates in connection therewith after deducting therefrom only reasonable brokerage commissions, underwriting fees and
discounts, legal fees and similar fees and commissions.

“Net Financing Proceeds” the cash (other than Net Cash Proceeds) received by Group or any of its Subsidiaries, directly or indirectly, from any financing transaction of whatever kind or nature, including from any incurrence of Indebtedness, any mortgage or pledge of an asset or interest therein (including a transaction which is the substantial equivalent of a mortgage or pledge), from the sale of tax benefits, from a lease to a third party and a pledge of the lease payments due thereunder to secure Indebtedness, from a joint venture agreement, from an exchange of assets and a sale of the assets received in such exchange, or any other similar arrangement or technique whereby such Person or any of its Subsidiaries obtain cash in respect of an asset.

“Net Retail Liquidation Value” means, with respect to any Inventory, the amount of the Cost of such Inventory that is estimated to be recoverable in an orderly liquidation of such Inventory, as determined from time to time by a qualified appraisal company selected by the Agent.

“Notice of Borrowing” has the meaning specified therefor in Section 2.02(a).

“Obligations” means (a) (i) the obligations of each Borrower to pay, as and when due and payable (by scheduled maturity, required prepayment, acceleration, demand or otherwise), all amounts from time to time owing by it in respect of the Loan Documents, whether for principal, interest (including any interest that, but for the provisions of the Bankruptcy Code, would have accrued), Letter of Credit Obligations, fees (including any fees that, but for the provisions of the Bankruptcy Code, would have accrued), indemnification payments, expense reimbursements (including any expense reimbursements that, but for the provisions of the Bankruptcy Code, would have accrued), or otherwise, and (ii) the obligations of each Borrower and each other Loan Party to perform or observe all of its
obligations from time to time existing under the Loan Documents, and (b) all Bank Product Obligations. Any reference in this Agreement or in the Loan Documents to the Obligations shall include all amendments, changes, extensions, modifications, renewals, replacements, substitutions, and supplements, thereto and thereof, as applicable, both prior and subsequent to any Insolvency Proceeding. 

“One Turn State” means any state or other jurisdiction under whose statutory or common law the relative priority of the rights of a landlord in assets of that landlord’s tenant, for unpaid rent, vis-à-vis the rights of the holder of a perfected security interest therein is dependent upon whether such security interest arose prior or subsequent to the subject asset’s coming onto the demised premises.

 

 

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“Operating Lease Obligations” means all obligations for the payment of rent for any real or personal property under leases or agreements to lease, other than Capitalized Lease Obligations. 

“Other Eligible Accounts Receivable” means all Eligible Accounts Receivable, other than for Eligible Wal-Mart Accounts Receivable.

“Other Taxes” means any and all present or future transfer, stamp, documentary, excise, property or other similar taxes, charges or levies arising from any payment made hereunder or from the execution, delivery or enforcement of, or otherwise with respect to, this Agreement or any other Loan Document.

“Overadvance Amount” has the meaning specified therefor in Section 2.05(c)(i).

“Parent” has the meaning specified therefor in the preamble hereto.

“Participant” means a commercial bank, financial institution, or other Person not an Affiliate of a Lender, to which a Lender sells participating interests in its Obligations and the other rights and interests of that Lender hereunder and under the other Loan Documents subject to the terms and conditions of this Agreement and the other Loan Documents.

“Patriot Act” has the meaning set forth in Section 12.23.

“PBGC” means the Pension Benefit Guaranty Corporation or any successor thereto.

“Permitted Discretion” means a determination made in good faith and in the exercise of reasonable (from the perspective of a secured asset-based lender) business judgment.

“Permitted Holder” means the shareholders of Group as of the Effective Date set forth in Schedule 1.01(D), and any Affiliate of any such Person. 

“Permitted Indebtedness” means:

(a) any Indebtedness owing to the Agent and the Lenders under this Agreement and the other Loan Documents;

(b) the Subordinated Indebtedness; 

(c) any Indebtedness permitted under Section 7.02(f); 

(d) Bank Products and Derivatives, in each case to the extent allowed by the Agent in its Permitted Discretion;

(e) Indebtedness constituting purchase money obligations for fixed or capital assets, provided, however, that the aggregate amount of all such Indebtedness at any one time outstanding shall not exceed $500,000; and

 

 

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(f) refinancing of Indebtedness referred to in clauses (b) and (e) so long as:  (A) the terms and conditions of such refinancing (taken as a whole) are not, in the Agent’s Permitted Discretion, materially more onerous to the Loan Parties and their Subsidiaries taken as a whole than the terms and conditions of the Indebtedness being refinanced, (B) such refinancing does not result in an increase in the principal amount of the Indebtedness so refinanced, (C) such refinancing does not result in a shortening of the average weighted maturity of the Indebtedness so refinanced, (D) if the Indebtedness that is refinanced was subordinated in right of payment to any of the Obligations, then the terms and conditions of the refinancing must include subordination terms and conditions that are at least as favorable to the Lenders as those that were applicable to the refinanced
Indebtedness, and (E) the refinancing is non-recourse to any Loan Party other than any Loan Party which was obligated with respect to the Indebtedness that was refinanced.

“Permitted Investments” means (i) marketable direct obligations issued or unconditionally guaranteed by the United States Government or issued by any agency thereof and backed by the full faith and credit of the United States, in each case maturing within six (6) months from the date of acquisition thereof; (ii) commercial paper, maturing not more than two hundred and seventy (270) days after the date of issue rated P-1 by Moody’s or A-1 by Standard & Poor’s; (iii) certificates of deposit maturing not more than two hundred and seventy (270) days after the date of issue, issued by commercial banking institutions and money market or demand deposit accounts maintained at commercial banking institutions, each of which is a member of the Federal Reserve
System and has a combined capital and surplus and undivided profits of not less than $500,000,000; (iv) repurchase agreements having maturities of not more than ninety (90) days from the date of acquisition which are entered into with major money center banks included in the commercial banking institutions described in clause (iii) above and which are secured by readily marketable direct obligations of the Government of the United States of America or any agency thereof, (v) money market accounts maintained with mutual funds having assets in excess of $2,500,000,000, and (vi) tax exempt securities rated A or better by Moody’s or A+ or better by Standard & Poor’s.

“Permitted Liens” means:

(a) Liens securing the Obligations;

(b) Liens for taxes, assessments and governmental charges the payment of which is not required under Section 7.01(d); 

(c) Liens imposed by law, such as carriers’, warehousemen’s, mechanics’, materialmen’s and other similar Liens arising in the ordinary course of business and securing obligations (other than Indebtedness for borrowed money), and which Liens either (i) are for sums not yet delinquent, or (ii) are being contested in good faith by proper proceedings which stay the imposition of any penalty, fine or Lien resulting from the non-payment thereof and with respect to which adequate reserves have been set aside for the payment thereof;

(d) Liens existing on the Effective Date, as set forth on Schedule 7.02(b), but not the extension of coverage thereof to other Property;

 

 

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(e) deposits and pledges securing (i) obligations incurred in respect of workers’ compensation, unemployment insurance or other forms of governmental insurance or benefits, (ii) the performance of bids, tenders, leases, contracts, including those for utilities (other than for the payment of money) and statutory obligations or (iii) obligations on surety or appeal bonds, but only to the extent such deposits or pledges are incurred or otherwise arise in the ordinary course of business and secure obligations not past due; 

(f) easements, zoning restrictions and similar encumbrances on real property and minor irregularities in the title thereto that do not (i) secure obligations for the payment of money or (ii) materially impair the value of such property or its use by any Loan Party or any of its Subsidiaries in the normal conduct of such Person’s business; 

(g) Liens existing in connection with the Subordinated Indebtedness, provided that such Liens shall be subordinated to the Lenders’ and Agent’s Liens pursuant to the Subordination Agreement; and

(h) Liens securing Indebtedness permitted under clause (e) of the definition of Indebtedness; provided that (i) such Liens do not at any time encumber any Property other than the Property financed by such Indebtedness, accessions thereto and the proceeds and the products thereof, (ii) the Indebtedness secured thereby does not exceed the cost of the Property being acquired (including fees and expenses relating to the acquisition thereof) on the date of acquisition, and (iii) with respect to capitalized leases, such Liens do not at any time extend to or cover any assets (except for accessions to such assets) other than the assets subject to such capitalized leases.

“Permitted Priority Liens” means all Permitted Liens other than any Permitted Liens on Inventory, Accounts Receivable, the trademarks of the Borrowers or any proceeds of the foregoing. 

“Person” means an individual, corporation, limited liability company, partnership, association, joint-stock company, trust, unincorporated organization, joint venture or Governmental Authority.

“Plan Projections” means Group’s forecasted (a) balance sheets, (b) profit and loss statements, and (c) cash flow statements attached hereto as Exhibit O.

“Pledge Agreement” means (i) the Existing Pledge Agreement and (ii) each other pledge agreement made by any Loan Party in favor of the Agent for the benefit of the Lenders, substantially in the form of Exhibit G hereto.

“Post-Default Rate” means a rate of interest per annum equal to the rate of interest otherwise in effect from time to time pursuant to the terms of this Agreement plus two percent (2%).

“Preferred Equity Interests” means 3,629,325 shares of Series A 7.5% Convertible Preferred Stock of Group issued to the Subordinated Lenders on the Effective Date.

 

 

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“Projections” means Group’s forecasted (a) balance sheets, (b) profit and loss statements, and (c) cash flow statements, all prepared on a consistent basis with Group’s historical financial statements, together with appropriate supporting details and a statement of underlying assumptions.

“Property” means any right or interest in or to property of any kind whatsoever, whether real, personal or mixed and whether tangible or intangible.

“Pro Rata Share” means the percentage obtained by dividing (i) such Lender’s Revolving Credit Commitment, by (ii) the Total Revolving Credit Commitment, provided, that, if the Revolving Credit Commitments have been reduced to zero, the numerator shall be the aggregate unpaid principal amount of such Lender’s Revolving Loans (including the Agent Advances) and its interest in the Letter of Credit Obligations and the denominator shall be the aggregate unpaid principal amount of all of the Revolving Loans (including the Agent Advances) and Letter of Credit Obligations. 

“Public Offering” means any offering of Capital Stock by Group to the public pursuant to an effective registration statement under the Securities Act of 1933, as amended.

“Qualified Import Letter of Credit” means an Import Letter of Credit that (a) is issued to facilitate the purchase by the applicable Borrower of Eligible Inventory, (b) is in form and substance acceptable to the Agent, (c) has an expiry date no more than forty five (45) days after its date of issuance, and (d) is issued in connection with a Letter of Credit Guaranty by the L/C Issuer and is only drawable by the beneficiary thereof by the presentation of, among other documents, either (i) a negotiable bill of lading that is consigned to the Agent (either directly or by means of endorsements) and that was issued by the carrier respecting the subject Eligible Inventory, or (ii) a negotiable cargo receipt that is consigned to the Agent (either directly or by means of endorsements) and
that was issued by a consolidator respecting the subject Eligible Inventory; provided, however, that, in the latter case, no bill of lading shall have been issued by the carrier (other than a bill of lading consigned to the consolidator or to the Agent).

“Ratification and Reaffirmation Agreement” means the Ratification and Reaffirmation Agreement, dated as of even date herewith, by the Borrowers (other than Group) and the Existing Guarantor in favor of the Agent, as the same may be amended, restated or otherwise modified from time to time.

“Register” has the meaning specified therefor in Section 12.07(b)(ii)

“Regulation T”, “Regulation U” and “Regulation X” mean, respectively, Regulations T, U and X of the Board or any successor, as the same may be amended or supplemented from time to time.

“Reimbursement Obligations” means the obligation of the Borrowers to reimburse the Agent and the Lenders for amounts payable by the Agent or the Lenders under a Letter of Credit Guaranty in respect of any drawing made under any Letter of Credit, together with interest thereon as provided in Section 2.04.

 

 

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“Release” means any spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, seeping, migrating, dumping or disposing of any Hazardous Material (including the abandonment or discarding of barrels, containers and other closed receptacles containing any Hazardous Material) into the indoor or outdoor environment, including ambient air, soil, surface or ground water.

“Remedial Action” means all actions taken to (i) clean up, remove, remediate, contain, treat, monitor, assess, evaluate or in any other way address Hazardous Materials in the indoor or outdoor environment; (ii) prevent or minimize a Release or threatened Release of Hazardous Materials so they do not migrate or endanger or threaten to endanger public health or welfare or the indoor or outdoor environment; (iii) perform pre-remedial studies and investigations and post-remedial operation and maintenance activities; or (iv) any other actions authorized by 42 U.S.C. § 9601.

“Reportable Event” means an event described in Section 4043 of ERISA (other than an event for which notice is automatically waived under the PBGC regulations or is otherwise not subject to the provision for thirty (30) day notice to the PBGC under the regulations promulgated under such Section).

“Required Lenders” means, at any time (i) the Agent and (ii) Lenders whose Pro Rata Shares aggregate at least fifty percent (50%) of the Total Revolving Credit Commitment, or, if the Total Revolving Credit Commitments has been terminated irrevocably, at least fifty percent (50%) of the Obligations (other than Bank Product Obligations).

“Required Minimum Availability Reserve” means an amount equal to seven and one half percent (7.5%) of the Total Revolving Credit Commitment as in effect from time to time (including without limitation, after giving effect to any Commitment Increase).

“Reserves” means all (if any) Availability Reserves, Inventory Reserves, Bank Product Reserves, and any other reserves which may be established in accordance with this Agreement by the Agent.

“Reserve Percentage” means, on any day, for any Lender, the maximum percentage prescribed by the Board (or any successor Governmental Authority) for determining the reserve requirements (including any basic, supplemental, marginal, or emergency reserves) that are in effect on such date with respect to Eurocurrency funding (currently referred to as “Eurocurrency liabilities”) of that Lender, but so long as such Lender is not required or directed under applicable regulations to maintain such reserves, the Reserve Percentage shall be zero.

“Revolving Credit Commitment” means, with respect to each Lender, the commitment of such Lender to make Revolving Loans to the Borrowers after the Effective Date, in the amount set forth opposite such Lender’s name in Schedule 1.01(C) hereto, as such amount may be terminated or reduced from time to time in accordance with the terms of this Agreement.

“Revolving Credit Note” means a promissory note of the Borrowers, substantially in the form of Exhibit A, made jointly and severally payable to the order of a Lender, evidencing the Indebtedness resulting from the making by such Lender to the Borrowers of Revolving Loans and delivered to such Lender pursuant to Article V, as such promissory note may be amended,

 

 

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supplemented, restated, modified or extended from time to time, and any promissory note or notes issued in exchange or replacement therefor. 

“Revolving Loan” means a loan made by a Lender to the Borrowers pursuant to Section 2.01(a).

“SEC” means the Securities and Exchange Commission or any other similar or successor agency of the Federal government administering the Securities Act.

“Securities Account” means a “securities account” as such term is defined from time to time in the Uniform Commercial Code.

“Securities Act” means the Securities Act of 1933, as amended, or any similar Federal statute, and the rules and regulations of the SEC thereunder, all as the same shall be in effect at the time.

“Security Agreement” means the Existing Security Agreement and any other Security Agreement made by a Loan Party in favor of the Agent for the benefit of the Lenders, each of which shall be substantially in the form of Exhibit H hereto.

“Settlement Period” has the meaning specified therefor in Section 2.02(d)(i) hereof.

“Standby Letter of Credit” means a Letter of Credit other than an Import Letter of Credit.

“Subordinated Indebtedness” means the Subordinated Obligations under and as defined in the Amended and Restated Subordinated Agreement, which have been expressly subordinated in right of payment to all Indebtedness of the Loan Parties under the Loan Documents pursuant to the Subordination Agreement and shall be on terms and conditions satisfactory to the Lenders.

“Subordinated Lenders” means the lenders under the Subordinated Loan Agreement and their successors, and any assigns of the Subordinated Indebtedness.

“Subordinated Loan Agreement” means the Amended and Restated Tranche A/B and Tranche C Term Loan Agreement, dated as of June 30, 2005, by and between the Parent, Frederick’s, Stores, Mail Order and the Subordinated Lenders, as amended by Amendment No. 1, dated July 20, 2005, Amendment No. 2, dated November 23, 2005, and the Subordinated Loan Agreement Amendment.

“Subordinated Loan Agreement Amendment” means Amendment No. 3 to Tranche A/B and Tranche C Term Loan Agreement, dated as of the Effective Date, by and among Frederick’s, Parent, Stores Mail Order and the Subordinated Creditors.

“Subordinated Loan Documents” means the Subordinated Loan Agreement, the Preferred Equity Interests, and anything executed in connection with the foregoing and each other document executed or issued in connection with the Subordinated Indebtedness.

 

 

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“Subordination Agreement” means the Amended and Restated Intercreditor and Subordination Agreement, dated as of the Effective Date, by and among the Loan Parties, the Agent and the Subordinated Lenders.

“Subsidiary” means, with respect to any Person at any date, any corporation, limited or general partnership, limited liability company, trust, association or other entity (i) the accounts of which would be consolidated with those of such Person in such Person’s consolidated financial statements if such financial statements were prepared in accordance with GAAP or (ii) of which more than fifty percent (50%) of (A) the outstanding Capital Stock having (in the absence of contingencies) ordinary voting power to elect a majority of the board of directors of such corporation, (B) the interest in the capital or profits of such partnership or limited liability company or (C) the beneficial interest in such trust or estate is, at the time of determination, owned or
controlled directly or indirectly through one or more intermediaries, by such Person. 

“Taxes” means any and all present or future taxes, levies, imposts, duties, deductions, charges, fees, restrictions, conditions or withholdings imposed, levied, collected, withheld or assessed by any Governmental Authority.

“Termination Event” means (i) a Reportable Event with respect to any Employee Plan, (ii) any event that causes any Borrower or any of its ERISA Affiliates to incur liability under Section 409, 502(i), 502(l), 515, 4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or Section 4971 or 4975 of the Internal Revenue Code, (iii) the filing of a notice of intent to terminate an Employee Plan or the treatment of an Employee Plan amendment as a termination under Section 4041 of ERISA, (iv) the institution of proceedings by the PBGC to terminate an Employee Plan, (v) the imposition of a Lien under Section 4068 of ERISA or Section 412(n) of the Internal Revenue Code or (vi) any other event or condition which might constitute grounds under Section 4042
of ERISA for the termination of, or the appointment of a trustee to administer, any Employee Plan.

“Title Insurance Policy” means the mortgagee’s loan policy, together with all endorsements made from time to time thereto, issued by or on behalf of a title insurance company satisfactory in form and substance to the Agent, insuring the Lien created by a Mortgage in an amount and on terms satisfactory to the Agent, delivered to the Agent pursuant to Section 7.01(c) or Section 7.01(u) hereof.

“Total Revolving Credit Commitment” means the sum of the amounts of the Lenders’ Revolving Credit Commitments set forth in Schedule 1.01(C) hereto.

“Uniform Commercial Code” means the Uniform Commercial Code, as in effect from time to time in New York.

“Unused Line Fee” has the meaning specified therefor in Section 2.06(b).

“Wal-Mart” means Wal-Mart Stores, Inc.

“WARN” has the meaning specified therefor in Section 6.01(i).

 

 

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“Website” means that certain web site currently accessible through the universal resource locator www.fredericks.com, as may be modified from time to time by the Borrowers.

“Wells Fargo” means Wells Fargo Bank, National Association, a national banking association.

“Wells Fargo Retail” means Wells Fargo Retail Finance, LLC, a Delaware limited liability company. 

SECTION 1.02. Terms Generally. The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words “include”, “includes” and “including” shall be deemed to be followed by the phrase “without limitation”. The word “will” shall be construed to have the same meaning and effect as the word “shall”. Unless the context requires otherwise, (a) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or
otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein), (b) any reference herein to any Person shall be construed to include such Person’s successors and assigns, (c) the words “herein”, “hereof” and “hereunder”, and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, (d) all references herein to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, this Agreement and (e) the words “asset” and “property” shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights. References in this Agreement to “determination” by the Agent include good faith estimates by the Agent (in the case of
quantitative determinations) and good faith beliefs by the Agent (in the case of qualitative determinations).

SECTION 1.03. Accounting and Other Terms. Unless otherwise expressly provided herein, each accounting term used herein shall have the meaning given it under GAAP; provided, however, that if there occurs after the date of this Agreement any change in GAAP that affects in any respect the calculation of any financial covenant contained, the Agent (in its sole discretion) and Administrative Borrower shall negotiate amendments to the provisions of this Agreement that relate to the calculation of such covenant with the intent of having the respective positions of the Lenders and the Borrowers after such change in GAAP conform as nearly as possible to their respective positions as of the date of this Agreement and, until any such amendments have been agreed upon, such financial
covenant shall be calculated as if no such change in GAAP has occurred. All terms used in this Agreement which are defined in Article 8 or Article 9 of the Uniform Commercial Code in effect in the State of New York on the date hereof and which are not otherwise defined herein shall have the same meanings herein as set forth therein.

SECTION 1.04. Time References. Unless otherwise indicated herein, all references to time of day refer to Eastern Standard Time, as in effect in Boston, Massachusetts on such day. For purposes of the computation of a period of time from a specified date to a later 

 

 

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specified date, the word “from” means “from and including” and the words “to” and “until” each means “to but excluding”; provided, however, that with respect to a computation of fees or interest payable to the Agent, any Lender or the L/C Issuer, such period shall in any event consist of at least one full day.

ARTICLE II

THE LOANS

SECTION 2.01. Revolving Credit Commitments.

(a) Subject to the terms and conditions and relying upon the representations and warranties herein set forth, each Lender severally agrees to make Revolving Loans to the Borrowers at any time and from time to time from the Effective Date to the Maturity Date, or until the earlier reduction of its Revolving Credit Commitment to zero in accordance with the terms hereof, in an aggregate principal amount of Revolving Loans at any time outstanding not to exceed the amount of such Lender’s Revolving Credit Commitment.

(b) Notwithstanding the foregoing, the aggregate principal amount of Revolving Loans outstanding at any time to the Borrowers shall not exceed Availability. The Revolving Credit Commitment of each Lender and the Total Revolving Credit Commitment shall automatically and permanently be reduced to zero on the Maturity Date. Within the foregoing limits, the Borrowers may borrow, repay and reborrow, on or after the Effective Date and prior to the Maturity Date, subject to the terms, provisions and limitations set forth herein.

(c) The Administrative Borrower may request that the Total Revolving Credit Commitment (initially, $25,000,000) be increased (and that each Lender’s Revolving Credit Commitment be increased ratably) at any time on, or subsequent to, the date hereof (the “Commitment Increase Date”), by up to $25,000,000, in multiples of $5,000,000 (each, a “Commitment Increase”), to a maximum Total Revolving Credit Commitment of $50,000,000, subject to the terms and conditions in this clause (c). The Commitment Increase shall become effective upon the Commitment Increase Date if (i) the following shall be true and correct on and as of the Commitment Increase Date:  (A) the representations and warranties contained in Article VI hereof and in each other Loan Document, certificate or other writing delivered to the Agent, the Lenders or the L/C
Issuer pursuant hereto or thereto on or prior to the Commitment Increase Date that are subject to materiality or Material Adverse Effect qualifications shall be true and correct in all respects and the representations and warranties contained in Article VI hereof and in each other Loan Document, certificate or other writing delivered to the Agent, the Lenders or the L/C Issuer pursuant hereto or thereto that are not subject to materiality or Material Adverse Effect qualifications shall be true and correct in all material respects, in each case, as of the Commitment Increase Date as though made on and as of such date (except to the extent that such representations and warranties relate solely to an earlier date) and (B) no Default or Event of Default shall have occurred and be continuing on the Commitment Increase Date or would result from the Commitment Increase under this Agreement or the other Loan Documents, and (ii) the Agent shall have received, no more than ten Business
Days and no less than three Business Days prior to the Commitment Increase Date, the following: (A) a certificate of an Authorized Officer of Group , certifying as to clauses (A) and (B) of subsection (i) above, and (B) any and all 

 

 

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agreements, instruments and other documents reasonably requested by the Agent in connection with the Commitment Increase, each in form and substance reasonably satisfactory to the Agent; and (iii) on or prior to the Commitment Increase Date, the Borrowers shall have paid the Agent, for the ratable benefit of the Lenders, a fee equal to 25 basis points (0.25%) of the amount of such Commitment Increase. The Agent shall be authorized to charge the Loan Account with such fee on or at any time after the Commitment Increase Date.

SECTION 2.02. Making the Loans. (a)  The Administrative Borrower shall give the Agent prior telephone notice (immediately confirmed in writing, in substantially the form of Exhibit C hereto (a “Notice of Borrowing”), not later than 1:00 p.m. (Boston, Massachusetts time) on the Business Day of the proposed Revolving Loan. Such Notice of Borrowing shall be irrevocable and shall specify (i) the principal amount of the proposed Revolving Loan and (ii) the proposed borrowing date, which must be a Business Day. The Agent and the Lenders may act without liability upon the basis of written, telecopied, telephonic, or email notice believed by the Agent in good faith to be from Administrative Borrower (or from any Authorized Officer thereof designated in writing purportedly from Administrative Borrower to the Agent). The Borrowers hereby waive the right to dispute the Agent’s record of the terms of any such telephonic Notice of Borrowing. The Agent and each Lender shall be entitled to rely conclusively on any Authorized Officer’s authority to request a Revolving Loan on behalf of the Borrowers until the Agent receives written notice to the contrary. The Agent and the Lenders shall have no duty to verify the authenticity of the signature appearing on any written Notice of Borrowing. 

(b) Each Notice of Borrowing pursuant to this Section 2.02 shall be irrevocable and the Borrowers shall be bound to make a borrowing in accordance with such Notice of Borrowing. 

(c)  (i) Except as otherwise provided in this subsection 2.02(c), all Revolving Loans shall be made by the Lenders simultaneously and proportionately to their Pro Rata Shares of the Total Revolving Credit Commitment, it being understood that no Lender shall be responsible for any default by any other Lender in that other Lender’s obligations to make a Revolving Loan requested hereunder, nor shall the Revolving Credit Commitment of any Lender be increased or decreased as a result of the default by any other Lender in that other Lender’s obligation to make a Revolving Loan requested hereunder, and each Lender shall be obligated to make the Revolving Loans required to be made by it by the terms of this Agreement regardless of the failure by any other Lender.

(ii) Notwithstanding any other provision of this Agreement, and in order to reduce the number of fund transfers among the Borrowers, the Agent and the Lenders, the Borrowers, the Agent and the Lenders agree that the Agent may (but shall not be obligated to), and the Borrowers and the Lenders hereby irrevocably authorize the Agent to, fund, on behalf of the Lenders, Revolving Loans pursuant to Section 2.01, subject to the procedures for settlement set forth in subsection 2.02(d); provided, however, that (a) the Agent shall in no event fund such Revolving Loans if the Agent shall have received written notice from the Required Lenders on the Business Day prior to the day of the proposed Revolving Loan that one or
more of the conditions precedent contained in Section 5.02 will not be satisfied on the day of the proposed Revolving Loan, and (b) the Agent shall not otherwise be required to determine that, or

 

 

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take notice whether, the conditions precedent in Section 5.02 have been satisfied. If Administrative Borrower gives a Notice of Borrowing requesting a Revolving Loan and the Agent elects not to fund such Revolving Loan on behalf of the Lenders, then promptly after receipt of the Notice of Borrowing requesting such Revolving Loan, the Agent shall notify each Lender of the specifics of the requested Revolving Loan and that it will not fund the requested Revolving Loan on behalf of the Lenders. If the Agent notifies the Lenders that it will not fund a requested Revolving Loan on behalf of the Lenders, each Lender shall make its Pro Rata Share of the Revolving Loan available to the Agent, in immediately available funds, to the Agent’s Account no later than 11:00 a.m. (Boston, Massachusetts time) (provided that the Agent requests payment from such Lender not later than 1:00 p.m.
(Boston, Massachusetts time) on the Business Day immediately preceding the date of the proposed Revolving Credit Loan) on the date of the proposed Revolving Loan. The Agent will make the proceeds of such Revolving Loans available to the Borrowers on the day of the proposed Revolving Loan by causing an amount, in immediately available funds, equal to the proceeds of all such Revolving Loans received by the Agent in the Agent’s Account or the amount funded by the Agent on behalf of the Lenders to be sent in accordance with Administrative Borrower’s instructions. 

(iii) If the Agent has notified the Lenders that the Agent, on behalf of the Lenders, will fund a particular Revolving Loan pursuant to subsection 2.02(c)(ii), the Agent may assume that such Lender has made such amount available to the Agent on such day and the Agent, in its sole discretion, may, but shall not be obligated to, cause a corresponding amount to be made available to the Borrowers on such day. If the Agent makes such corresponding amount available to the Borrowers and such corresponding amount is not in fact made available to the Agent by such Lender, the Agent shall be entitled to recover such corresponding amount on demand from such Lender together with interest thereon, for each day from the date such payment was due until the date such amount is paid to the Agent, at the Federal Funds Rate for three Business Days and thereafter at the Base Rate. During the
period in which such Lender has not paid such corresponding amount to the Agent, notwithstanding anything to the contrary contained in this Agreement or any other Loan Document, the amount so advanced by the Agent to the Borrowers shall, for all purposes hereof, be a Revolving Loan made by the Agent for its own account. Upon any such failure by a Lender to pay the Agent, the Agent shall promptly thereafter notify Administrative Borrower of such failure and the Borrowers shall immediately pay such corresponding amount to the Agent for its own account.

(iv) Nothing in this subsection 2.02(c) shall be deemed to relieve any Lender from its obligations to fulfill its Revolving Credit Commitment hereunder or to prejudice any rights that the Agent or the Borrowers may have against any Lender as a result of any default by such Lender hereunder.

(d) (i) With respect to all periods for which the Agent has funded Revolving Loans pursuant to subsection 2.02(c), on a weekly basis, or such shorter period as the Agent may from time to time select (any such week or shorter period being herein called a “Settlement Period”), the Agent shall notify each Lender of the unpaid principal amount of the Revolving Loans outstanding as of the last day of each such Settlement Period. In the event that such amount is greater than the unpaid principal amount of the Revolving Loans outstanding on the last day of the Settlement Period immediately preceding such Settlement Period (or, if there has been no preceding Settlement Period, the amount of the Revolving Loans made on the date

 

 

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of such Lender’s initial funding), each Lender shall promptly (and in any event not later than 11:00 a.m. (Boston, Massachusetts time) if the Agent requests payment from such Lender not later than 1:00 p.m. (Boston, Massachusetts time) on the immediately preceding Business Day) make available to the Agent its Pro Rata Share of the difference in immediately available funds. In the event that such amount is less than such unpaid principal amount, the Agent shall promptly pay over to each Lender its Pro Rata Share of the difference in immediately available funds. In addition, if the Agent shall so request at any time when a Default or an Event of Default shall have occurred and be continuing, or any other event shall have occurred as a result of which the Agent shall determine that it is desirable to present claims against the Borrowers for repayment, each Lender shall promptly
remit to the Agent or, as the case may be, the Agent shall promptly remit to each Lender, sufficient funds to adjust the interests of the Lenders in the then outstanding Revolving Loans to such an extent that, after giving effect to such adjustment, each Lender’s interest in the then outstanding Revolving Loans will be equal to its Pro Rata Share thereof. The obligations of the Agent and each Lender under this subsection 2.02(d) shall be absolute and unconditional. Each Lender shall only be entitled to receive interest on its Pro Rata Share of the Revolving Loans which have been funded by such Lender.

(ii) In the event that any Lender fails to make any payment required to be made by it pursuant to subsection 2.02(d)(i), the Agent shall be entitled to recover such corresponding amount on demand from such Lender together with interest thereon, for each day from the date such payment was due until the date such amount is paid to the Agent, at the Federal Funds Rate for three Business Days and thereafter at the Base Rate. During the period in which such Lender has not paid such corresponding amount to the Agent, notwithstanding anything to the contrary contained in this Agreement or any other Loan Document, the amount so advanced by the Agent to the Borrowers shall, for all purposes hereof, be a Revolving Loan made by the Agent for its own account. Upon any such failure by a Lender to pay the Agent, the Agent shall promptly thereafter notify Administrative Borrower of such
failure and the Borrowers shall immediately pay such corresponding amount to the Agent for its own account. Nothing in this subsection 2.02(d)(ii) shall be deemed to relieve any Lender from its obligation to fulfill its Revolving Credit Commitment hereunder or to prejudice any rights that the Agent or the Borrowers may have against any Lender as a result of any default by such Lender hereunder.

SECTION 2.03. Revolving Credit Notes; Repayment of Loans. (a) All Revolving Loans made by a Lender to the Borrowers shall be evidenced by a single Revolving Credit Note, duly executed on behalf of the Borrowers, dated the Effective Date, and delivered to and made jointly and severally payable to the order of such Lender in a principal amount equal to the maximum amount of such Lender’s Revolving Credit Commitment.

(b) Unless otherwise required to be sooner paid pursuant to the provisions of this Agreement, the outstanding principal of all Revolving Loans shall be due and payable on the Maturity Date.

SECTION 2.04. Interest.

(a) Revolving Loans. At the option of Administrative Borrower and, in the case of the LIBOR Option, subject to paragraphs (e) through (f) of this Section 2.04, each Revolving Loan shall bear interest on the principal amount thereof from time to time 

 

 

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outstanding, from the date of such Loan until such principal amount becomes due, at a rate per annum equal to (i) (A) the Base Rate minus (B) the Applicable Margin for Base Rate Loans or (ii) the sum of (A) the LIBOR Rate plus (B) the Applicable Margin for LIBOR Rate Loans. 

(b) Default Interest. To the extent permitted by law, upon the occurrence and during the continuance of an Event of Default, the principal of, and all accrued and unpaid interest on, all Revolving Loans and all fees, indemnities, outstanding Reimbursement Obligations or any other Obligations (except for undrawn Letters of Credit and except for Bank Product Obligations) of the Borrowers under this Agreement, the Revolving Notes and other Loan Documents shall bear interest, from the date such Event of Default occurred until such Event of Default is cured or waived in writing in accordance herewith, at a rate per annum equal at all times to the Post-Default Rate. 

(c) Interest Payment. Subject to paragraphs (e) through (f) of this Section 2.04, interest on each Revolving Loan shall be payable monthly, in arrears, on the first day of each month, commencing on the first day of the month following the month in which such Revolving Loan is made and at maturity (whether upon demand, by acceleration or otherwise). Interest at the Post-Default Rate shall be payable monthly, in arrears, on the first day of each month and at maturity (whether upon demand, by acceleration or otherwise). The Borrowers hereby authorize the Agent to, and the Agent may, from time to time, charge the Loan Account pursuant to Section 4.02 with the amount of any interest payment due hereunder.

(d) General. All interest shall be computed on the basis of a year of 360 days for the actual number of days, including the first day but excluding the last day, elapsed.

(e) LIBOR Option; Interest and Interest Payment Dates. In lieu of having interest charged at the rate based upon the Base Rate, the Borrowers shall have the option (the “LIBOR Option”) to have interest on all or a portion of the Revolving Loans be charged at the LIBOR Rate. Interest on LIBOR Rate Loans shall be payable on the earliest of (i) the last day of the Interest Period applicable thereto (provided for Interest Period of six (6) months, interest shall be payable ninety (90) days after first day of such Interest Period and on the last day of such Interest Period), (ii) the occurrence of an Event of Default in consequence of which the Required Lenders or the Agent on behalf thereof elect to
accelerate the maturity of the Obligations, or (iii) termination of this Agreement pursuant to the terms hereof. On the last day of each applicable Interest Period, unless Administrative Borrower properly has exercised the LIBOR Option with respect thereto, the interest rate applicable to such LIBOR Rate Loan automatically shall convert to the rate of interest then applicable to Base Rate Loans hereunder. At any time that an Event of Default has occurred and is continuing, the Borrowers no longer shall have the option to request that the Revolving Loans bear interest at the LIBOR Rate and the Agent shall have the right to convert the interest rate on all outstanding LIBOR Rate Loans to the rate then applicable to Base Rate Loans hereunder on the last day of the respective Interest Periods.

(f) LIBOR Election.

(i) Administrative Borrower may, at any time and from time to time, so long as no Event of Default has occurred and is continuing, elect to exercise the LIBOR 

 

 

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Option by notifying the Agent prior to 11:00 a.m. (Boston, Massachusetts time) at least three (3) Business Days prior to the commencement of the proposed Interest Period (the “LIBOR Deadline”). Notice of Administrative Borrower’s election of the LIBOR Option for a permitted portion of the Revolving Loans and an Interest Period pursuant to this Section shall be made by delivery to the Agent of a LIBOR Notice received by the Agent before the LIBOR Deadline, or by telephonic notice received by the Agent before the LIBOR Deadline (to be confirmed by delivery to the Agent of a LIBOR Notice received by the Agent prior to 5:00 p.m. (Boston, Massachusetts time) on the same day. Promptly upon its receipt of each such LIBOR Notice, the Agent shall provide a copy thereof to each of the Lenders having a Revolving Credit Commitment.

(ii) Each LIBOR Notice shall be irrevocable and binding on the Borrowers. In connection with each LIBOR Rate Loan, each Borrower shall indemnify, defend, and hold the Agent and the Lenders harmless against any loss, cost, or expense incurred by the Agent or any Lender as a result of (a) the payment of any principal of any LIBOR Rate Loan other than on the last day of an Interest Period applicable thereto (including as a result of an Event of Default), (b) the conversion of any LIBOR Rate Loan other than on the last day of the Interest Period applicable thereto, or (c) the failure to borrow, convert, continue or prepay any LIBOR Rate Loan on the date specified in any LIBOR Notice delivered pursuant hereto (such losses, costs, and expenses, collectively, “Funding Losses”). Funding Losses shall, with respect to the Agent or any Lender, be deemed to equal the amount
determined by Agent or such Lender in good faith to be the excess, if any, of (i) the amount of interest that would have accrued on the principal amount of such LIBOR Rate Loan had such event not occurred, at the LIBOR Rate that would have been applicable thereto, for the period from the date of such event to the last day of the then current Interest Period therefor (or, in the case of a failure to borrow, convert or continue, for the period that would have been the Interest Period therefor), minus (ii) the amount of interest that would accrue on such principal amount for such period at the interest rate which Agent or such Lender would be offered were it to be offered, at the commencement of such period, Dollar deposits of a comparable amount and period in the London interbank market. A certificate of Agent or a Lender delivered to Administrative Borrower setting forth any amount or amounts that Agent or
such Lender is entitled to receive pursuant to this Section shall be conclusive absent manifest error.

(iii) The Borrowers shall have not more than five (5) LIBOR Rate Loans in effect at any given time. The Borrowers only may exercise the LIBOR Option for LIBOR Rate Loans of at least $1,000,000 and integral multiples of $500,000 in excess thereof. 

(g) Prepayments. The Borrowers may prepay LIBOR Rate Loans at any time; provided, however, that in the event that LIBOR Rate Loans are prepaid on any date that is not the last day of the Interest Period applicable thereto, including as a result of any prepayment required pursuant to the terms hereof or for any other reason, including early termination of the term of this Agreement or acceleration of the Obligations pursuant to the terms hereof, each Borrower shall indemnify, defend, and hold the Agent and the Lenders and their Participants harmless against any and all Funding Losses in accordance with Section 2.04(f)(ii) hereof.

 

 

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(h) Special Provisions Applicable to LIBOR Rate.

(i) The LIBOR Rate may be adjusted by the Agent with respect to any Lender on a prospective basis to take into account any additional or increased costs to such Lender of maintaining or obtaining any eurodollar deposits or increased costs due to changes in applicable law occurring subsequent to the commencement of the then applicable Interest Period, including changes in tax laws (except changes of general applicability in corporate income tax laws) and changes in the reserve requirements imposed by the Board (or any successor), excluding the Reserve Percentage, which additional or increased costs would increase the cost of funding loans bearing interest at the LIBOR Rate. In any such event, the affected Lender shall give Administrative Borrower and the Agent notice of such a determination and adjustment and the Agent promptly shall transmit the notice to each other Lender
and, upon its receipt of the notice from the affected Lender, Administrative Borrower may, by notice to such affected Lender (y) require such Lender to furnish to Administrative Borrower a statement setting forth the basis for adjusting such LIBOR Rate and the method for determining the amount of such adjustment, or (z) repay the LIBOR Rate Loans with respect to which such adjustment is made (together with any amounts due under clause (f)(ii) above).

(ii) In the event that any change in market conditions or any law, regulation, treaty, or directive, or any change therein or in the interpretation of application thereof, shall at any time after the date hereof, in the reasonable opinion of any Lender, make it unlawful or impractical for such Lender to fund or maintain LIBOR Rate Loans or to continue such funding or maintaining, or to determine or charge interest rates at the LIBOR Rate, such Lender shall give notice of such changed circumstances to the Agent and Administrative Borrower and the Agent promptly shall transmit the notice to each other Lender and (y) in the case of any LIBOR Rate Loans of such Lender that are outstanding, the date specified in such Lender’s notice shall be deemed to be the last day of the Interest Period of such LIBOR Rate Loans, and interest upon the LIBOR Rate Loans of such Lender
thereafter shall accrue interest at the rate then applicable to Base Rate Loans, and (z) the Borrowers shall not be entitled to elect the LIBOR Option until such Lender determines that it would no longer be unlawful or impractical to do so.

(i) No Requirement of Matched Funding. Anything to the contrary contained herein notwithstanding, neither the Agent, nor any Lender, nor any of their Participants, is required actually to acquire eurodollar deposits to fund or otherwise match fund any Obligation as to which interest accrues at the LIBOR Rate. The provisions of this Section shall apply as if each Lender or its Participants had match funded any Obligation as to which interest is accruing at the LIBOR Rate by acquiring eurodollar deposits for each Interest Period in the amount of the LIBOR Rate Loans.

SECTION 2.05. Reduction of Commitment; Prepayment of Revolving Loans.

(a) Reduction of Revolving Credit Commitments. The Total Revolving Credit Commitment shall terminate at 5:00 p.m. (Boston, Massachusetts time) on the Maturity Date. The Borrowers may reduce from time to time the Total Revolving Credit Commitment (but in no event shall the Total Revolving Credit Commitment be less than $25,000,000), without premium or penalty except as such forth in the last sentence of this subsection, to an amount not less than the sum of (A) the aggregate unpaid principal amount of all Revolving

 

 

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Loans then outstanding, (B) the aggregate principal amount of all Revolving Loans not yet made as to which a Notice of Borrowing has been given by Administrative Borrower under Section 2.02, (C) the Letter of Credit Obligations at such time and (D) the stated amount of all Letters of Credit not yet issued as to which a request has been made and not withdrawn. Each such reduction shall be in an amount which is an integral multiple of $1,000,000 (unless the Total Revolving Credit Commitment in effect immediately prior to such reduction is less than $1,000,000), shall be made by providing not less than three Business Days’ prior written notice to the Agent and shall be irrevocable. Once reduced the Total Revolving Credit Commitment may not be increased. Each such reduction of the Total Revolving Credit Commitment shall reduce the Revolving Credit Commitment of
each Lender proportionately in accordance with its Pro Rata Share thereof. 

(b) Optional Prepayment. The Borrowers may prepay without penalty or premium (other than Funding Losses associated with the prepayment of a LIBOR Rate Loan other than on the last day of the Interest Period in effect with respect thereto) the principal of any Revolving Loan, in whole or in part.

(c) Mandatory Prepayment. 

(i) Borrowing Base. The Borrowers will immediately prepay the Revolving Loans at any time when the sum of (x) the principal amount of Revolving Loans plus (y) the Letter of Credit Obligations exceeds Availability (the amount of such excess, the “Overadvance Amount”), in an amount equal to the Overadvance Amount, or, if the principal amount of Revolving Loans is less than the Overadvance Amount, prepay the Revolving Loans in full, and provide cash collateral to the Agent in an amount equal to the amount by which the Overadvance Amount exceeds the aggregate principal amount of such Revolving Loans.

(ii) Funds in the Agent’s Account. The Agent shall on each Business Day apply all funds transferred to or deposited in the Agent’s Account to the payment, in whole or in part, of the outstanding Revolving Loans.

(iii) Dispositions; Casualty Events. Immediately upon any Disposition by any Borrower or any Loan Party pursuant to Section 7.02(d)(ii), the Borrowers shall prepay the outstanding principal of the Revolving Loans in an amount equal to one hundred percent (100%) of the Net Cash Proceeds received by the Borrowers or any such Loan Party in connection with such Disposition. Upon the loss, destruction or taking by condemnation of any Collateral, the Borrowers shall prepay the outstanding principal of the Revolving Loans in an amount equal to one hundred percent (100%) of the Loss Proceeds received by any Loan Party in connection therewith, net of any reasonable expenses incurred in collecting such Loss Proceeds; provided, that, such prepayment shall not be required if, but only if, each of the following conditions are fully satisfied in a manner acceptable to the Agent (in its Permitted Discretion):  (A) no Default or Event of Default has occurred or would result from such loss, destruction or taking, would result from the receipt of such Loss Proceeds or would result from the proposed use or disbursement of such Loss Proceeds, (B) one hundred percent (100%) of such Loss Proceeds are immediately deposited into a separate deposit account selected by the Agent, which deposit account shall be subject to a Control Agreement, over which the Agent shall have full dominion and control and a perfected, first priority security interest, (C) the Agent receives from 

 

 

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Administrative Borrower a certificate within two (2) months after the Loan Party’s receipt of such Loss Proceeds, stating that all or part of such Loss Proceeds shall be used to replace the assets or property lost, destroyed or taken, in accordance with this Section and the other terms and conditions of this Agreement within twelve months after the receipt of such Loss Proceeds (which certificate shall set forth an estimate of the Loss Proceeds to be so expended and reasonably identify the assets to be purchased with such Loss Proceeds), and (D) Administrative Borrower delivers to the Agent within twelve months after receipt of such Loss Proceeds receipts and such other evidence as the Agent may require in connection with the acquisition of the assets and property so identified (whereupon, subject to the satisfaction of the other conditions set forth in this paragraph,
the Agent shall disburse such Loss Proceeds in connection with replacing the assets or property of such Loan Party lost, destroyed or taken by such Loan Party within twelve months after the receipt of such Loss Proceeds). If all or any portion of such Loss Proceeds are not used in accordance with clause (D) of the preceding sentence within the twelve month period set forth therein or any Event of Default exists and is continuing, the Agent shall apply such unused Loss Proceeds to prepay the Revolving Loans in accordance with this subsection. The provisions of this subsection (iii) shall not be deemed to be implied consent to any such issuance, incurrence or sale otherwise prohibited by the terms and conditions of this Agreement. 

(iv) Equity. Unless otherwise agreed to by the Required Lenders in writing, upon the sale or issuance by any Loan Party or any of its Subsidiaries of any shares of its Capital Stock (other than to another Loan Party or pursuant to a Public Offering), the Borrowers shall prepay the outstanding amount of the Revolving Loans in an amount equal to one hundred percent (100%) of the Net Cash Proceeds received by such Person in connection therewith. The provisions of this subsection (iv) shall not be deemed to be implied consent to any such issuance, incurrence or sale otherwise prohibited by the terms and conditions of this Agreement.

(d) Cumulative Prepayments. Except as otherwise expressly provided in this Section 2.05, payments with respect to any subsection of this Section 2.05 are in addition to payments made or required to be made under any other subsection of this Section 2.05. 

SECTION 2.06. Fees.

(a) Closing Fee. The Borrowers shall pay to the Agent for the account of the Lenders in accordance with their Pro Rata Shares a non-refundable closing fee (the “Closing Fee”) equal to $19,375 which shall be fully earned and payable on the Effective Date.

(b) Unused Line Fee. From and after the Effective Date and until the Maturity Date, the Borrowers shall pay to the Agent for the account of the Lenders in accordance with their Pro Rata Shares an unused line fee (the “Unused Line Fee”), which shall accrue at the rate per annum of one quarter of one percent (0.25%) on the excess, if any, of the Total Revolving Credit Commitment over the sum of the average principal amount of Revolving Loans and Letter of Credit Obligations outstanding from time to time and shall be payable monthly in arrears on the first day of each month commencing February 1, 2008.

(c) Loan Servicing Fee. From and after the Effective Date and until the Maturity Date, the Borrowers shall pay to the Agent a non-refundable loan servicing fee (the “Loan Servicing Fee”) equal to $2,000 each month (prorated for any partial month), which 

 

 

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fee shall be fully earned on the first day of each month (or in the case of January 2008 on the Effective Date) and payable monthly in arrears thereafter on the first day of each calendar month (beginning with the first day of the calendar month following the Effective Date); provided however, the Loan Services Fee for partial months shall be prorated proportionate to such truncation.

SECTION 2.07. Cash Management.

(a) The Borrowers shall (i) establish and maintain cash management services of a type and on terms satisfactory to the Agent at one or more of the banks set forth on Schedule 2.07(a) (each a “Cash Management Bank”), and shall request in writing and otherwise take such reasonable steps to ensure that all of its Credit Card Processors and other Account Debtors forward payment of the amounts owed by them directly to one of such Cash Management Banks, and (ii) deposit or cause to be deposited promptly, and in any event no later than the first Business Day after the date of receipt thereof, all Collections (including those sent directly by Account Debtors to a Cash Management Bank) into one of the DDAs set forth on Schedule 2.07(a) (a “Cash Management Account”) at one of the Cash Management Banks. If, notwithstanding the provisions of this Section 2.07, any
Borrower receives or otherwise has dominion over or control of any Collections, such Borrower shall hold such Collections in trust for the Agent and shall not commingle such Collections with any of the Borrowers’ other funds or deposit such Collections in any account of the Borrowers except as instructed by the Agent.

(b) The Borrowers shall establish and maintain Cash Management Agreements with the Agent and each Cash Management Bank. Each such Cash Management Agreement shall be a Control Agreement and provide, among other things, that (i) upon notice from the Agent, the Cash Management Bank will comply with instructions of the Agent directing the disposition of funds in the Cash Management Account without further consent by the Borrowers, (ii) the Cash Management Bank has no rights of setoff or recoupment or any other claim against the applicable Cash Management Account, other than for payment of its service fees and other charges directly related to the administration of such Cash Management Account and for returned checks or other items of payment, and (iii) it immediately will forward by daily sweep all amounts in the applicable Cash Management Account to the Agent’s Account. 

(c) The Borrowers shall establish and maintain Credit Card Agreements with the Agent and each Credit Card Processor. Each such Credit Card Agreement shall provide, among other things, that each such Credit Card Processor shall transfer all proceeds of credit card charges for sales by the Borrowers received by it (or other amounts payable by such Credit Card Processor) into a designated Cash Management Account on a daily basis. The Borrowers shall not attempt to change any direction or designation set forth in the Credit Card Agreements regarding payment of charges without the prior written consent of the Agent, which consent, so long as such change shall be limited to directing such Credit Card Processor to transfer proceeds of credit card charge sales payment to a different Cash Management Account, shall not be unreasonably withheld.

(d) So long as no Default or Event of Default has occurred and is continuing, Administrative Borrower may amend Schedule 2.07(a) to add or replace a Cash Management Bank or Cash Management Account; provided, however, that (i) such prospective Cash 

 

 

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Management Bank shall be satisfactory to the Agent and the Agent shall have consented in writing in advance to the opening of such Cash Management Account with the prospective Cash Management Bank, and (ii) prior to the time of the opening of such Cash Management Account, the Borrowers and such prospective Cash Management Bank shall have executed and delivered to the Agent a Cash Management Agreement. The Borrowers shall close any of their Cash Management Accounts (and establish replacement cash management accounts in accordance with the foregoing sentence) promptly and in any event within thirty (30) days of notice from the Agent that the creditworthiness of any Cash Management Bank is no longer acceptable in the Agent’s reasonable judgment, or as promptly as practicable and in any event within sixty (60) days of notice from the Agent that the operating performance, funds transfer, or
availability procedures or performance of the Cash Management Bank with respect to Cash Management Accounts or the Agent’s liability under any Cash Management Agreement with such Cash Management Bank is no longer acceptable in the Agent’s reasonable judgment.

(e) The Cash Management Accounts shall be cash collateral accounts, with all cash, checks and similar items of payment in such accounts securing payment of the Obligations, and in which the Borrowers are hereby deemed to have granted a Lien on each Cash Management Account to the Agent.

(f) Crediting Payments. The receipt of any payment item by the Agent (whether from transfers to the Agent by the Cash Management Banks pursuant to the Cash Management Agreements or otherwise) shall not be considered a payment on account unless such payment item is a wire transfer of immediately available federal funds made to the Agent’s Account or unless and until such payment item is honored when presented for payment. Should any payment item not be honored when presented for payment, then the Borrowers shall be deemed not to have made such payment and interest shall be calculated accordingly. Anything to the contrary contained herein notwithstanding, any payment item shall be deemed received by the Agent only if it is received into the Agent’s Account on a Business Day on or before 2:00
p.m. (Boston, Massachusetts time). If any payment item is received into the Agent’s Account on a non-Business Day or after 2:00 p.m. (Boston, Massachusetts time) on a Business Day, it shall be deemed to have been received by the Agent as of the opening of business on the immediately following Business Day. 

SECTION 2.08. Taxes.

(a) All payments made by the Borrowers hereunder, under the Revolving Notes or under any other Loan Document shall be made without set-off, counterclaim, deduction or other defense. All such payments shall be made free and clear of and without deduction for any Indemnified Taxes or Other Taxes. If the Borrowers shall be required by law to deduct or to withhold any Indemnified Taxes from or in respect of any amount payable hereunder,

(i) the amount so payable shall be increased to the extent necessary so that after making all required deductions and withholdings (including Taxes on amounts payable to the Lenders, the Agent or the L/C Issuer pursuant to this sentence) the Lenders, the Agent and the L/C Issuer receive an amount equal to the sum they would have received had no such deductions or withholdings been made,

 

 

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(ii) the Borrowers shall make such deductions or withholdings, and 

(iii) the Borrowers shall pay the full amount deducted or withheld to the relevant taxation authority in accordance with applicable law. Whenever any Indemnified Taxes or Other Taxes are payable by the Borrowers, as promptly as possible thereafter, Administrative Borrower shall send the Lenders, the L/C Issuer and the Agent an official receipt (or, if an official receipt is not available, such other documentation as shall be reasonably satisfactory to the Lenders, the L/C Issuer or the Agent, as the case may be) showing payment. 

(b) The Borrowers shall pay and hereby agree to indemnify and hold the Lenders, the Agent and the L/C Issuer harmless from and against all Indemnified Taxes and Other Taxes (including, without limitation, any Taxes or Other Taxes imposed by any jurisdiction on amounts payable under this Section 2.08) paid by any Lender or the L/C Issuer and any liability (including penalties, interest and expenses for nonpayment, late payment or otherwise) arising therefrom or with respect thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or legally asserted. This indemnification shall be paid within 30 days from the date on which such Lender or such L/C Issuer makes written demand which demand shall identify the nature and amount of Indemnified Taxes or Other Taxes for which indemnification is being sought and the basis of the claim.

(c) Each Foreign Lender hereby agrees that:

(i) it shall, no later than the Effective Date (or, in the case of a Foreign Lender which becomes a party hereto pursuant to Section 12.07 hereof after the Effective Date, the date upon which such Foreign Lender becomes a party hereto) and thereafter, upon the designation of a new or additional lending office or within thirty (30) days after receipt of a reasonable request of the Agent or Administrative Borrower therefor, deliver to the Agent and Administrative Borrower either (A) two (2) complete and signed copies of either U.S. Internal Revenue Service Form W-8BEN or W-8ECI, in each case indicating that such Foreign Lender is on the date of delivery thereof entitled to receive payments of interest hereunder free from withholding of United States Federal income tax or (B) in the case of a Foreign Lender that is entitled to claim exemption from withholding of United States
Federal income tax under Section 871(h) or Section 881(c) of the Internal Revenue Code, (x) a certificate to the effect that such Foreign Lender is not a “bank” within the meaning of Section 881(c)(3)(A) of the Internal Revenue Code, is not a “10 percent shareholder” of any Borrower within the meaning of Section 881(c)(3)(B) and Section 871(h)(3)(B) of the Internal Revenue Code and is not a controlled foreign corporation receiving interest from a related person within the meaning of Section 881(c)(3)(C) of the Internal Revenue Code and (y) two (2) complete and signed copies of U.S. Internal Revenue Service Form W-8BEN; and

(ii) it shall, promptly upon Administrative Borrower’s reasonable request to that effect, deliver to Administrative Borrower such other forms or similar documentation such Foreign Lender is legally able to deliver as may be required from time to time by any applicable law, treaty, rule or regulation in order to establish such Lender’s tax status for withholding purposes.

 

 

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(d) If the Borrowers fail to perform their obligations under this Section 2.08, the Borrowers shall indemnify the Lenders and the L/C Issuer for any taxes, interest or penalties that may become payable as a result of any such failure.

(e) Each Lender that is organized under the laws of the United States or any state or other political subdivision thereof shall, on or prior to the Effective Date (or, in the case of a Lender that becomes a party hereto pursuant to Section 12.07 hereof after the Effective Date, the date upon which such Lender becomes a party hereto) deliver to Administrative Borrower (with a copy to the Agent) a properly completed IRS Form W-9 or successor form as will permit such payments to be made without withholding.

(f) No Borrower shall be required to pay any additional amount to any Lender or the L/C Issuer under Section 2.08(a) or to indemnify any Lender or the L/C Issuer under Section 2.08(b) in respect of any United States Federal withholding tax if such withholding tax would have not been imposed but for the failure of such Lender or the L/C Issuer to comply with Section 2.08(c) or 2.08(e), (i) unless such Lender or the L/C Issuer is unable to comply with either such Section as a result in whole or in part of a Change in Law or (ii) in the case of a Foreign Lender that becomes a Lender after the Effective Date, to the extent the rate of such withholding tax imposed on such Foreign Lender does not exceed the rate of such withholding tax that was imposed on the Lender that assigned its interest to such Foreign Lender.

(g) If a Borrower is required to pay additional amounts to or for the account of any Lender pursuant to this Section 2.08, then such Lender will agree to use reasonable efforts to change the jurisdiction of its applicable lending office so as to eliminate or reduce any such additional payment which may thereafter accrue; provided, however, that such Lender shall not be required to make any such change unless (i) such Lender shall have determined in its sole discretion such change is not disadvantageous to such Lender and (ii) the Borrower shall have agreed to pay all costs incurred by such Lender in connection with such change.

SECTION 2.09. Early Termination by Borrowers. The Borrowers may terminate this Agreement at any time prior to the Maturity Date by providing the Agent and the Lenders with not less than ninety (90) days prior written notice thereof and by paying the Obligations in full on (or prior to) such termination date, at which time the rights and obligations of the parties hereto shall terminate, except for any rights or obligations of the Borrowers or the Loan Parties which expressly survive payment in full of the Obligations and termination of the Revolving Credit Commitments; provided if any Letters of Credit have been issued and are outstanding on the date of such termination the Borrowers shall have
paid L/C Issuer an amount equal to one hundred and four percent (104%) of the aggregate maximum amount available for drawing under such outstanding Letters of Credit to be held by L/C Issuer as cash collateral for the application toward the Reimbursement Obligations or provided indemnification agreements or back-stop letters of credit, in form and substance reasonably satisfactory to the Agent, from a commercial bank or other financial institution acceptable to the Agent in its absolute discretion for any Letter of Credit Obligations with respect to such Letters of Credit; provided further if any Bank Products are then provided the Borrowers shall have paid the Agent such cash collateral, therefor as the Agent may then request in its Permitted
Discretion. Notwithstanding the foregoing, prior to the Maturity Date and Borrowers accepting any firm offer, term sheet or commitment (each, a “Third Party Offer”) for the refinancing of the Obligations and/or the

 

 

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 Subordinated Indebtedness, the Borrowers shall notify the Agent of the Third Party Offer in writing (including all material terms of the Third Party Offer). Lenders shall have not less than ten (10) calendar days after receipt of such notice (the “Lenders’ Offer Period”) to make an offer (a “Lenders Offer”) to provide similar financing in the place of such Person upon substantially the same terms and conditions (or terms more favorable to the Borrowers) as set forth in the Third Party Offer. The parties acknowledge and agree that the Lenders shall not have any obligation to submit a Lenders’ Offer. If the Lenders’ make a Lenders’ Offer, the Borrowers shall be obligated to accept the Lenders’ Offer and shall enter into the transactions contemplated thereby within forty-five (45) calendar days (or such additional time as agreed to by the Lenders in
writing) following acceptance of the Lenders’ Offer. Neither Lenders’ submission of a Lenders’ Offer, nor election to decline to make a Lenders’ Offer, shall be construed as a waiver of any of the terms, covenants or conditions of any of the Loan Documents. If the Lenders do not exercise their right to make a Lenders’ Offer prior to expiration of the Lenders’ Offer Period and the refinancing on the terms set forth in the Third Party Offer or with the Person providing the Third Party Offer (the “Third Party Refinancing”) is not consummated during the ninety (90) calendar day period following the expiration of the Lenders’ Offer Period, the Borrowers shall not be permitted to consummate the Third Party Refinancing without again complying with this Section 2.09.

ARTICLE IIA

LETTERS OF CREDIT

SECTION 2.01A. Letter of Credit Guaranty.

(a) In order to assist the Borrowers in establishing or opening Letters of Credit, which shall not have expiration dates that exceed two hundred and seventy (270) days from the date of issuance, with the L/C Issuer, the Borrowers have requested the Agent and/or one or more of the Lenders to join in the applications for such Letters of Credit, and/or guarantee payment or performance of such Letters of Credit and any drafts thereunder through the issuance of a Letter of Credit Guaranty, thereby lending the Agent’s and/or such Lender’s credit to that of the Borrowers, and the Agent and/or one or more Lenders have agreed to do so. These arrangements shall be coordinated by the Agent subject to the terms and conditions set forth below. The Agent and the Lenders shall not be required to be the issuer of any Letter of Credit. The Borrowers will be the account party for
application for a Letter of Credit, which shall be substantially in the form of Exhibit K hereto or on a computer transmission system approved by the Agent and the L/C Issuer or such other written form or computer transmission system as may from time to time be approved by the L/C Issuer and the Agent, and shall be duly completed in a manner reasonably acceptable to the Agent, together with such other certificates, agreements, documents and other papers and information as the L/C Issuer or the Agent may reasonably request (the ”Letter of Credit Application”). In the event of any conflict between the terms of the Letter of Credit Application and this Agreement, for purposes of this Agreement, the terms of this Agreement shall control.

(b) The aggregate Letter of Credit Obligations shall not exceed the lower of (i) the difference between (A) the Total Revolving Credit Commitment and (B) the aggregate principal amount of Revolving Loans then outstanding and (ii) the L/C Sublimit. In addition, the 

 

 

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Letter of Credit Obligations shall not exceed the difference between (A) the Borrowing Base and (B) the aggregate principal amount of the Revolving Loans then outstanding. The terms and conditions of all Letters of Credit and all changes or modifications thereof consented to by any of the Borrowers and the L/C Issuer shall in all respects be subject to the prior approval of the Agent in the reasonable exercise of its sole and absolute discretion, provided, however, that (i) no Letter of Credit shall have an expiry date later than thirty days prior to the Maturity Date unless on or prior to thirty days prior to the Maturity Date such Letter of Credit shall be cash collateralized in an amount equal to one hundred and four percent (104%) of the face amount of such Letter of Credit or the Borrowers shall have
provided the Agent and the Lenders with an indemnification or back-stop letter of credit, in form and substance satisfactory to the Agent in its absolute discretion, from a commercial bank or other financial institution acceptable to the Agent for any Letter of Credit Obligations with respect to such Letters of Credit, and (ii) the Letters of Credit and all documentation in connection therewith shall be in form and substance reasonably satisfactory to the Agent and the L/C Issuer.

(c) The Agent shall have the right, without notice to the Borrowers, to charge the Loan Account with the amount of any and all indebtedness, liabilities and obligations of any kind (including indemnification for breakage costs, capital adequacy and reserve requirement charges) incurred by the Agent or the Lenders under the Letter of Credit Guaranty or incurred by an L/C Issuer with respect to a Letter of Credit at the earlier of (i) payment by the Agent or the Lenders under the Letter of Credit Guaranty or (ii) the occurrence of an Event of Default. Any amount charged to the Loan Account shall be deemed a Revolving Loan hereunder made by the Lenders to the Borrowers, funded by the Agent on behalf of the Lenders and subject to Section 2.02 of this Agreement. Any charges, fees, commissions, costs and expenses charged to the Agent for the Borrower’s account
by the L/C Issuer in connection with or arising out of Letters of Credit or transactions relating thereto will be charged to the Loan Account in full when charged to or paid by the Agent and, when charged, shall be conclusive on the Borrowers absent manifest error. Each of the Lenders and the Borrowers agree that the Agent shall have the right to make such charges regardless of whether any Event of Default or Default shall have occurred and be continuing or whether any of the conditions precedent in Section 5.02 have been satisfied.

(d) The Borrowers absolutely, unconditionally and irrevocably indemnify the Agent and each Lender and holds the Agent and each Lender harmless from any and all loss, claim or liability incurred by the Agent or any Lender arising from any transactions or occurrences relating to Letters of Credit, any drafts or acceptances thereunder, the Collateral relating thereto, and all Obligations in respect thereof, including any such loss or claim due to any action taken by the L/C Issuer, other than for any such loss, claim or liability arising out of the gross negligence or willful misconduct of the L/C Issuer, the Agent or any Lender as determined by a final judgment of a court of competent jurisdiction. The Borrowers further agree to jointly and severally hold the Agent and each Lender harmless from any errors or omission, negligence or misconduct by the L/C Issuer. The
Borrowers’ absolute, unconditional and irrevocable obligations to the Agent, the L/C Issuer and each Lender with respect to Letters of Credit hereunder shall not be modified or diminished for any reason or in any manner whatsoever, other than as a result of the Agent’s, the L/C Issuer’s or such Lender’s gross negligence or willful misconduct as determined by a final judgment of a court of competent jurisdiction. The Borrowers agree that any charges incurred by the Agent or the L/C Issuer for the Borrowers’ account hereunder may be charged to the Loan Account.

 

 

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(e) Upon any payments made to the L/C Issuer under the Letter of Credit Guaranty, the Agent or the Lenders, as the case may be, shall, without prejudice to its rights under this Agreement (including that such unreimbursed amounts shall constitute Revolving Loans hereunder), acquire by subrogation, any rights, remedies, duties or obligations granted or undertaken by the Borrowers in favor of the L/C Issuer in any application for Letters of Credit, any standing agreement relating to Letters of Credit or otherwise, all of which shall be deemed to have been granted to the Agent and the Lenders and apply in all respects to the Agent and the Lenders and shall be in addition to any rights, remedies, duties or obligations contained herein.

SECTION 2.02A. Participations.

(a) Purchase of Participations. Immediately upon issuance by the L/C Issuer of any Letter of Credit pursuant to this Agreement, each Lender shall be deemed to have irrevocably and unconditionally purchased and received from the Agent, without recourse or warranty, an undivided interest and participation, to the extent of such Lender’s Pro Rata Share, in all obligations of the Agent in such Letter of Credit (including, without limitation, all Reimbursement Obligations of the Borrowers with respect thereto pursuant to the Letter of Credit Guaranty or otherwise).

(b) Sharing of Payments. In the event that the Agent makes any payment in respect of the Letter of Credit Guaranty and the Borrowers shall not have repaid such amount to the Agent, the Agent shall charge the Loan Account in the amount of the Reimbursement Obligation, in accordance with Sections 2.01A(c) and 4.02 of this Agreement.

(c) Obligations Irrevocable. The obligations of a Lender to make payments to the Agent for the account of the Agent, the Lenders or the L/C Issuer with respect to a Letter of Credit shall be irrevocable, without any qualification or exception whatsoever and shall be made in accordance with the terms and conditions of this Agreement under all circumstances, including, without limitation, any of the following circumstances:

(i) any lack of validity or enforceability of this Agreement or any of the other Loan Documents;

(ii) the existence of any claim, setoff, defense or other right which the Borrowers may have at any time against a beneficiary named in such Letter of Credit or any transferee of such Letter of Credit (or any Person for whom any such transferee may be acting), the Agent, any Lender, or any other Person, whether in connection with this Agreement, such Letter of Credit, the transactions contemplated herein or any unrelated transactions (including any underlying transactions between the Borrowers or any other party and the beneficiary named in such Letter of Credit);

(iii) any draft, certificate or any other document presented under such Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect;

(iv) the surrender or impairment of any security for the performance or observance of any of the terms of any of the Loan Documents;

 

 

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(v) any failure by the Agent to provide any notices required pursuant to this Agreement relating to such Letter of Credit;

(vi) any payment by the L/C Issuer under such Letter of Credit against presentation of a draft or certificate which does not comply with the terms of such Letter of Credit; or 

(vii) the occurrence of any Default or Event of Default.

SECTION 2.03A. Letters of Credit. 

(a) Request for Issuance. 

(i) Subject to the terms and conditions of this Agreement (including, without limitation, Section 2.02A(b)), Agent agrees to assist the Borrowers in obtaining the issuance of Letters of Credit for the account of the Borrowers. To request the issuance of a Letter of Credit or Letter of Credit Guaranty (or the amendment, renewal, or extension of an outstanding Letter of Credit or Letter of Credit Guaranty), an Authorized Officer of Administrative Borrower shall hand deliver or telecopy (or transmit by electronic communication, if arrangements for doing so have been approved by the Agent) to the L/C Issuer and Agent (reasonably in advance of the requested date of issuance, amendment, renewal, or extension) a Letter of Credit Application, together with any necessary related documents, requesting the issuance of a Letter of Credit or Letter of Credit Guaranty, or identifying the
Letter of Credit or Letter of Credit Guaranty to be amended, renewed, or extended, the date of issuance, amendment, renewal, or extension, the date on which such Letter of Credit or Letter of Credit Guaranty is to expire, the amount of such Letter of Credit or Letter of Credit Guaranty, the name and address of the beneficiary thereof, and such other information as shall be necessary to prepare, amend, renew, or extend such Letter of Credit or Letter of Credit Guaranty. If requested by the Agent or the L/C Issuer, the Borrowers also shall be an applicant under the Letter of Credit Application with respect to any Letter of Credit that is to be the subject of a Letter of Credit Guaranty. 

(ii) The Borrowers and the Lender Group acknowledge and agree that the letters of credit described in Schedule 2.03A(a)(ii) hereto have previously been issued by the L/C Issuer for the account of the Borrowers pursuant to the Existing Agreement, and shall be treated as Letters of Credit for all purposes of this Agreement. Each Letter of Credit shall be in form and substance acceptable to the Agent and the L/C Issuer (in the exercise of their Permitted Discretion), including the requirement that the amounts payable thereunder must be payable in Dollars. If the Agent is obligated to advance funds under a Letter of Credit Guaranty or the L/C Issuer is obligated to pay under a Letter of Credit, all Reimbursement Obligations arising therefrom shall immediately and automatically be deemed to be a Revolving Loan hereunder and, thereafter, shall bear interest at the rate then
applicable to Revolving Loans that are Base Rate Loans under Section 2.04. To the extent the Reimbursement Obligations are deemed to be a Revolving Loan hereunder, the Borrowers’ obligation to repay such Reimbursement Obligations shall be discharged and replaced by the resulting Revolving Loan. Promptly following receipt by the Agent of any payment from the Borrowers pursuant to this paragraph, the Agent shall apply such payment to the Reimbursement Obligations paid by itself or, to the 

 

 

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extent that Lenders have made payments pursuant to Section 2.02A to reimburse the Agent, then to such Lenders and the L/C Issuer as their interest may appear.

(iii) The Agent shall not provide support, pursuant to the Letter of Credit Guaranty, if the Agent shall have received written notice from the Required Lenders on the Business Day immediately preceding the proposed issuance date for such Letter of Credit that one or more of the conditions precedent in Section 5.02 will not have been satisfied on such date, and the Agent shall otherwise be required to determine that, or take notice whether, the conditions precedent set forth in Section 5.02 have been satisfied.

(b) Qualified Import Letters of Credit. Each Borrower acknowledges and agrees that certain of the Qualified Import Letters of Credit may provide for the presentation of time drafts (other than bankers acceptances) to the L/C Issuer. If the L/C Issuer accepts such a time draft that is presented under a Letter of Credit, it is acknowledged and agreed that (i) the Letter of Credit will require the Agent to reimburse the L/C Issuer for amounts paid on account of such time draft on or after the maturity date thereof, (ii) the pricing provisions hereof (including Section 2.03A(c)) shall continue to apply, until payment of such time draft on or after the maturity date thereof, as if the Letter of Credit were still outstanding, and (iii) on the date on which the Agent makes payment to the L/C Issuer of the
amounts paid on account of such time draft, the Borrowers immediately shall reimburse such amount to the Agent and such amount shall constitute Reimbursement Obligations hereunder.

(c) Letter of Credit Fees. (i) The Borrowers shall pay the Agent (for the ratable benefit of the Lenders with a Revolving Credit Commitment, subject to any letter agreement between the Agent and the individual Lenders), a Letter of Credit fee (in addition to the charges, commissions, fees, and costs set forth in paragraph (ii) of this paragraph (c)) which shall accrue at a per annum rate (x) in the case of standby Letters of Credit, equal to the average daily undrawn amount of all outstanding standby Letters of Credit times the Applicable Standby L/C Margin and (y) in the case of Import Letters of Credit, equal to the average daily undrawn amount of all outstanding Import Letters of Credit times the Applicable Import L/C Margin, provided that upon the occurrence and during the continuance of an Event of Default, the Applicable Standby L/C Margin and the Applicable Import L/C Margin shall be automatically and immediately increased by two percent (2%).

(ii) L/C Issuer and the Agent Charges. Any and all charges, commissions, fees, and costs incurred by the Agent and the L/C Issuer relating to Letters of Credit and Letter of Credit Guaranties shall be payable pursuant to Section 12.04 of this Agreement and immediately shall be reimbursable by the Borrowers to the Agent. The Borrowers shall pay to the Agent the standard charges, commissions, fees and costs assessed by the L/C Issuer in connection with the issuance, administration, amendment, extension, renewal, payment or cancellation of Letters of Credit.

(iii) Charges to the Loan Account. The Borrowers hereby authorize the Agent to, and the Agent may, from time to time, charge the Loan Account pursuant to Sections 2.01A(c) and 4.02 of this Agreement with the amount of any Letter of Credit fees or charges due under this Section 2.03A. 

 

 

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(d) Authority. Each Borrower hereby authorizes and directs the L/C Issuer to deliver to the Agent all instruments, documents, and other writings and property received by the L/C Issuer pursuant to such Letter of Credit and to accept and rely upon the Agent’s instructions with respect to all matters arising in connection with such Letter of Credit and the related Letter of Credit Application.

ARTICLE III

[Intentionally Omitted]

ARTICLE IV

FEES, PAYMENTS AND OTHER COMPENSATION

SECTION 4.01. [Reserved]. 

SECTION 4.02. Payments; Computations and Statements. (a)  The Borrowers will make each payment under the Revolving Loans not later than 1:00 a.m. (Boston, Massachusetts time) on the day when due, in lawful money of the United States of America and in immediately available funds, to the Agent at the Agent’s Account. All payments (including all amounts received in the Agent’s Account from any Cash Management Bank) received by the Agent after 1:00 p.m. (Boston, Massachusetts time) on any Business Day will be credited to the Loan Account on the next succeeding Business Day. All payments shall be made by the Borrowers without defense, set-off or counterclaim to the Agent and the Lenders. Except as provided in Section 2.02, after receipt, the Agent will promptly thereafter cause to
be distributed like funds relating to the payment of principal ratably to the Lenders in accordance with their Pro Rata Shares and like funds relating to the payment of any other amount payable to any Lender to such Lender, in each case to be applied in accordance with the terms of this Agreement, provided that the Agent will cause to be distributed all interest and fees received from or for the account of the Borrowers not less than once each month and in any event promptly after receipt thereof. The Lenders and the Borrowers hereby authorize the Agent to, and the Agent may, from time to time, charge the Loan Account of the Borrowers with any amount due and payable by the Borrowers under any Loan Document (including any amounts due and payable to Wells Fargo or its Affiliates in respect of Bank Products up to the amount of the then extant Bank Product Reserve). Each of the Lenders and the Borrowers agree that the Agent shall have the right to make such charges whether or not any
Event of Default or Default shall have occurred and be continuing or whether any of the conditions precedent in Section 5.02 have been satisfied. Any amount charged to the Loan Account of the Borrowers shall be deemed a Revolving Loan hereunder made by the Lenders to the Borrowers, funded by the Agent on behalf of the Lenders and subject to Section 2.02 of this Agreement. The Lenders and the Borrowers confirm that any charges which the Agent may so make to the Loan Account of the Borrowers as herein provided will be made as an accommodation to the Borrowers and solely at the Agent’s discretion. Whenever any payment to be made under any such Loan Document shall be stated to be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day and such extension of time shall in such case be included in the computation of interest or fees, as the case may be. All computations of fees shall be made by the Agent on the basis of a year of
three hundred and sixty (360) days for the actual number of days (including the first day 

 

 

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but excluding the last day) occurring in the period for which such fees are payable. Each determination by the Agent of an interest rate or fees hereunder shall be presumptive evidence of such rates and fees for all purposes in the absence of manifest error.

(b) The Agent shall provide Administrative Borrower, promptly after the end of each calendar month, a summary statement (in the form from time to time used by the Agent) of the opening and closing daily balances in the Loan Account of the Borrowers during such month, the amounts and dates on all Revolving Loans made to the Borrowers during such month, the amounts and dates of all payments on account of the Revolving Loans to the Borrowers during such month and the Revolving Loans to which such payments were applied, the amount of interest accrued on the Revolving Loans to the Borrowers during such month, any Letters of Credit issued by the L/C Issuer for the account of the Borrowers during such month, specifying the face amount thereof, the amount of charges to such Loan Account and/or Revolving Loans made to the Borrowers during such month to reimburse the Lenders for drawings
made under Letters of Credit, and the amount and nature of any charges to such Loan Account made during such month on account of fees, commissions, expenses and other Obligations (except for Bank Product Obligations). All entries on any such statement shall, thirty (30) days after the same is sent, be presumed to be correct absent manifest error.

SECTION 4.03. Sharing of Payments, Etc. Except as provided in Section 2.02 hereof, if any Lender shall obtain any payment (whether voluntary, involuntary, through the exercise of any right of set-off, or otherwise) on account of any Obligation in excess of its ratable share of payments on account of similar obligations obtained by all the Lenders, such Lender shall forthwith purchase from the other Lenders such participations in such similar obligations held by them as shall be necessary to cause such purchasing Lender to share the excess payment ratably with each of them; provided, however, that if all or any
portion of such excess payment is thereafter recovered from such purchasing Lender, such purchase from each Lender shall be rescinded and such Lender shall repay to the purchasing Lender the purchase price to the extent of such recovery together with an amount equal to such Lender’s ratable share (according to the proportion of (i) the amount of such Lender’s required repayment to (ii) the total amount so recovered from the purchasing Lender) of any interest or other amount paid by the purchasing Lender in respect of the total amount so recovered. The Borrowers agree that any Lender so purchasing a participation from another Lender pursuant to this Section 4.03 may, to the fullest extent permitted by law, exercise all its rights (including the Lender’s right of set-off) with respect to such participation as fully as if such Lender were the direct creditor of the Borrowers in the amount of such participation.

SECTION 4.04. Apportionment of Payments. (a)  Subject to Section 2.02 hereof and to any written agreement among the Agent and the Lenders, all payments of principal and interest in respect of outstanding Revolving Loans, all payments of fees (other than the fees set forth in Sections 2.06 hereof to the extent set forth in a written agreement among the Agent and the Lenders and the audit and collateral monitoring fee provided for in Section 4.01) and all other payments in respect of any other Obligations (other than Bank Product Obligations), shall be allocated by the Agent among such of the Lenders as are entitled thereto, in proportion to their respective Pro Rata Shares or otherwise as provided herein or, in respect of payments not made on account of
Revolving Loans or Letter of Credit Obligations, as designated by the Person making payment when the payment is made.

 

 

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(b) After the occurrence and during the continuance of an Event of Default, the Agent may, and upon the direction of the Required Lenders shall, apply all payments in respect of any Obligations and all proceeds of the Collateral, subject to the provisions of this Agreement (i) first, to pay the Obligations in respect of any fees, expense reimbursements, indemnities and other amounts then due to the Agent or the L/C Issuer until paid in full; (ii) second, to pay the Obligations in respect of any fees and indemnities then due to the Lenders until paid in full; (iii) third, ratably to pay interest due in respect of the Revolving Loans and
Agent Advances until paid in full; (iv) fourth, at the Agent’s election (which election will not be made if such payment would result in the amount owed by the Borrowers hereunder to exceed the Borrowing Base), to pay amounts then due and owing by the Loan Parties or their Subsidiaries in respect of all Bank Products, until paid in full; (v) fifth, to pay principal of Agent Advances until paid in full; (vi) sixth, ratably to pay principal of the Revolving Loans and the Letter of Credit Obligations (or to the extent such Obligations are contingent, to provide cash collateral in respect of such Obligations) until paid in full; (vii) seventh, to the Agent, to be
held by the Agent, for the benefit Wells Fargo or its Affiliates, as applicable, as cash collateral in an amount up to the amount of the Bank Product Reserve established prior to the occurrence of, and not in contemplation of, the subject Event of Default until the Loan Parties and their Subsidiaries’ obligations in respect of the then extant Bank Products have been paid in full or the cash collateral amount has been exhausted; (viii) eighth, to the ratable payment of all other Obligations (including Bank Product Obligations) then due and payable; and (ix) ninth, to the Borrowers or such other Person entitled thereto under applicable law.

SECTION 4.05. Increased Costs and Reduced Return.

(a) If any Lender or the L/C Issuer shall have determined, after the Effective Date, that the adoption or implementation of, or any change in, any law, rule, treaty or regulation, or any policy, guideline or directive of, or any change in the interpretation or administration thereof by, any court, central bank or other administrative or Governmental Authority, or compliance by the L/C Issuer or any Lender or any Person controlling any such Lender or the L/C Issuer with any directive of or guideline from any central bank or other Governmental Authority or the introduction of or change in any accounting principles applicable to the L/C Issuer, any Lender, or any Person controlling any such Lender or the L/C Issuer (in each case, whether or not having the force of law), shall (i) impose, modify or deem applicable any reserve, special deposit or similar requirement against any
Revolving Loan, Letter of Credit or against assets of or held by, or deposits with or for the account of, or credit extended by, the L/C Issuer or any Lender, or any Person controlling any such Lender or the L/C Issuer or (ii) impose on the L/C Issuer or any Lender or any Person controlling any such Lender or the L/C Issuer or any other condition regarding this Agreement or any Revolving Loan or Letter of Credit, and the result of any event referred to in clauses (i) or (ii) above shall be to increase the cost to the L/C Issuer or any Lender of making any Revolving Loan, issuing, guaranteeing or participating in any Letter of Credit, or agreeing to make any Revolving Loan or issue, guaranty or participate in any Letter of Credit, or to reduce any amount received or receivable by the L/C Issuer or any Lender hereunder, then, no later than 30 days following demand by the L/C Issuer or such Lender, the Borrowers shall pay to the L/C Issuer or such Lender such additional amounts as
will compensate the L/C Issuer or such Lender for such increased costs or reductions in amount.

 

 

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(b) If any Lender or the L/C Issuer shall have determined, after the Effective Date, that any Capital Guideline or adoption or implementation of, or any change in, any Capital Guideline by the Governmental Authority charged with the interpretation or administration thereof, or compliance by the L/C Issuer, any Lender or any Person controlling such L/C Issuer or any Lender with any Capital Guideline or with any request or directive of any such Governmental Authority with respect to any Capital Guideline, or the implementation of, or any change in, any applicable accounting principles (in each case, whether or not having the force of law), either (i) affects or would affect the amount of capital required or expected to be maintained by the L/C Issuer, any Lender or any Person controlling such L/C Issuer or any Lender, and the L/C Issuer or any Lender determines that the
amount of such capital is increased as a direct or indirect consequence of any Revolving Loans made or maintained, Letters of Credit issued or any guaranty or participation with respect thereto, or the L/C Issuer’s, any Lender’s or any such other controlling Person’s other obligations hereunder, or (ii) has or would have the effect of reducing the rate of return on the L/C Issuer’s, any Lender’s or any such other controlling Person’s capital to a level below that which such L/C Issuer, such Lender or such controlling Person could have achieved but for such circumstances as a consequence of any Revolving Loans made or maintained, Letters of Credit issued, or any guaranty or participation with respect thereto or any agreement to make Revolving Loans, to issue Letters of Credit or such L/C Issuer’s, such Lender’s or such other controlling Person’s other obligations hereunder (in each case, taking into consideration such L/C Issuer’s, such
Lender’s or such other controlling Person’s policies with respect to capital adequacy), then, no later than 30 days following demand by the L/C Issuer or any Lender, the Borrowers shall pay to the L/C Issuer or such Lender from time to time such additional amounts as will compensate the L/C Issuer or such Lender for such cost of maintaining such increased capital or such reduction in the rate of return on L/C Issuer’s, such Lender’s or such other controlling Person’s capital.

(c) All amounts payable under this Section 4.05 shall bear interest from the date that is ten days after the date of demand by the L/C Issuer or a Lender until payment in full to the L/C Issuer or such Lender at the Base Rate. A certificate of the L/C Issuer or any Lender claiming compensation under this Section 4.05 specifying the event herein above described and the nature of such event shall be submitted by the L/C Issuer or such Lender to Administrative Borrower, setting forth the additional amount due and an explanation of the calculation thereof and the L/C Issuer’s or such Lender’s reasons for invoking the provisions of this Section 4.05, and shall be presumptive evidence of such additional amounts absent manifest error.

SECTION 4.06. Joint and Several Liability of the Borrowers.

(a) Notwithstanding anything in this Agreement or any other Loan Document to the contrary, each of the Borrowers hereby accepts joint and several liability hereunder and under the other Loan Documents in consideration of the financial accommodations to be provided by the Agent and the Lenders under this Agreement and the other Loan Documents, for the mutual benefit, directly and indirectly, of each of the Borrowers and in consideration of the undertakings of the other Borrower to accept joint and several liability for the Obligations. Each of the Borrowers, jointly and severally, hereby irrevocably and unconditionally accepts, not merely as a surety but also as a co-debtor, joint and several liability with the other Borrowers, with respect to the payment and performance of all of the Obligations (including, without limitation, any Obligations arising under this Section 4.06), it
being the intention of the parties 

 

 

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hereto that all the Obligations shall be the joint and several obligations of each of the Borrowers without preferences or distinction among them. If and to the extent that any of the Borrowers shall fail to make any payment with respect to any of the Obligations as and when due or to perform any of the Obligations in accordance with the terms thereof, then in each such event the other Borrowers will make such payment with respect to, or perform, such Obligation. Subject to the terms and conditions hereof, the Obligations of each of the Borrowers under the provisions of this Section 4.06 constitute the absolute and unconditional, full recourse Obligations of each of the Borrowers enforceable against each such Person to the full extent of its properties and assets, irrespective of the validity, regularity or enforceability of this Agreement, the other Loan Documents or any other circumstances whatsoever.

(b) The provisions of this Section 4.06 are made for the benefit of the Agent, the Lenders and their successors and assigns, and may be enforced by them from time to time against any or all of the Borrowers as often as occasion therefor may arise and without requirement on the part of the Agent, the Lenders or such successors or assigns first to marshal any of its or their claims or to exercise any of its or their rights against any of the other Borrowers or to exhaust any remedies available to it or them against any of the other Borrowers or to resort to any other source or means of obtaining payment of any of the Obligations hereunder or to elect any other remedy. The provisions of this Section 4.06 shall remain in effect until all of the Obligations shall have been paid in full or otherwise fully satisfied.

(c) Each of the Borrowers hereby agrees that it will not enforce any of its rights of contribution or subrogation against the other Borrowers with respect to any liability incurred by it hereunder or under any of the other Loan Documents, any payments made by it to the Agent or the Lenders with respect to any of the Obligations or any Collateral until such time as all of the Obligations (other than unasserted contingent indemnification Obligations) have been paid in full in cash. Any claim which any Borrower may have against any other Borrower with respect to any payments to the Agent or the Lenders hereunder or under any other Loan Documents are hereby expressly made subordinate and junior in right of payment, without limitation as to any increases in the Obligations arising hereunder or thereunder, to the prior payment in full in cash of the Obligations.

ARTICLE V

CONDITIONS TO LOANS

SECTION 5.01. Conditions Precedent to Effectiveness. This Agreement shall become effective as of the Business Day (the “Effective Date”) when each of the following conditions precedent shall have been satisfied in a manner satisfactory to the Agent:

(a) Payment of Fees, Etc. The Borrowers shall have paid on or before the date of this Agreement all fees, costs, expenses and taxes then payable pursuant to Sections 2.06 and 12.04.

(b) Representations and Warranties; No Event of Default. The following statements shall be true and correct:  (i) the representations and warranties contained in Article VI and in each other Loan Document, certificate or other writing delivered to the Agent, 

 

 

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the Lenders, or the L/C Issuer pursuant hereto or thereto on or prior to the Effective Date are true and correct on and as of the Effective Date as though made on and as of such date (except to the extent that such representations and warranties relate solely to an earlier date) and (ii) no Default or Event of Default shall have occurred and be continuing on the Effective Date or would result from this Agreement or the other Loan Documents becoming effective in accordance with its or their respective terms.

(c) Legality. The making of the initial Revolving Loans or the issuance of any Letters of Credit shall not contravene any law, rule or regulation applicable to the Agent, the Lenders, or the L/C Issuer. 

(d) Delivery of Documents. The Agent shall have received on or before the Effective Date the following, each in form and substance satisfactory to the Agent and, unless indicated otherwise, dated the Effective Date:

(i) a Revolving Credit Note payable to the order of each Lender with a Revolving Credit Commitment, duly executed by the Borrowers;

(ii) a Pledge Agreement and Security Agreement, duly executed by Group, together with the original stock certificates representing all of the common stock of the Parent, accompanied by undated stock powers executed in blank and other proper instruments of assignment;

(iii) the Subordination Agreement and , duly executed by the Borrowers and the Subordinated Lenders; 

(iv) the Ratification and Reaffirmation Agreement, duly executed by the Borrowers (other than Group) and the Existing Guarantor;

(v) a copy of the resolutions of each Loan Party, certified as of the Effective Date by an Authorized Officer thereof, authorizing (A) the borrowings hereunder and the transactions contemplated by the Loan Documents to which such Loan Party is or will be a party, and (B) the execution, delivery and performance by such Loan Party of each Loan Document and the execution and delivery of the other documents to be delivered by such Person in connection herewith and therewith;

(vi) a certificate of an Authorized Officer of each Loan Party, certifying the names and true signatures of the representatives of such Loan Party authorized to sign each Loan Document to which such Loan Party is or will be a party and the other documents to be executed and delivered by such Loan Party in connection herewith and therewith, together with evidence of the incumbency of such authorized officers;

(vii) a certificate of the appropriate official(s) of the state of organization and each state of foreign qualification of each Loan Party certifying as to the subsistence in good standing of, and the payment of taxes by, such Loan Party in such states, together with confirmation by telephone or telegram (where available) on the Effective Date from such official(s) as to such matters;

 

 

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(viii) a true and complete copy of the charter, certificate of formation, certificate of limited partnership or other publicly filed organizational document of each Loan Party, certified as of a date not more than thirty (30) days prior to the Effective Date by an appropriate official of the state of organization of such Loan Party;

(ix) a copy of the charter and by-laws, limited liability company agreement, operating agreement, agreement of limited partnership or other organizational document of each Loan Party, together with all amendments thereto, certified as of the Effective Date by an Authorized Officer of such Loan Party;

(x) an opinion of Graubard Miller, counsel to the Loan Parties, as to such matters as the Agent may reasonably request; 

(xi) a certificate of an Authorized Officer of each Loan Party, certifying as to the matters set forth in subsection (b) of this Section 5.01;

(xii) a certificate of an Authorized Officer of Group , certifying the names and true signatures of the persons that are authorized to provide Notices of Borrowings, Letters of Credit Applications and all other notices under this Agreement and the other Loan Documents;

(xiii) certified copies of request for copies of information on Form UCC-1, listing all effective financing statements which name as debtor any Loan Party and which are filed in the offices specified by the Agent, together with copies of such financing statements, none of which, except as otherwise agreed in writing by the Agent, shall cover any of the Collateral and the results of searches for any tax Lien and judgment Lien filed against such Person or its property, which results, except as otherwise agreed to in writing by the Agent, shall not show any such Liens;

(xiv) a certificate of the chief financial officer of each Loan Party with respect to the matters set forth in Section 6.01(t) hereto, which certificate shall be in form and substance satisfactory to the Agent; 

(xv) evidence of the insurance coverage required by Section 7.01(h) and such other insurance coverage with respect to the business and operations of the Loan Parties as the Agent may reasonably request, in each case, where requested by the Agent, with such endorsements as to the named insureds or loss payees thereunder as the Agent may request and providing that such policy may be terminated or canceled (by the insurer or the insured thereunder) only upon 30 days’ prior written notice to the Agent and each such named insured or loss payee, together with evidence of the payment of all premiums due in respect thereof for such period as the Agent may request; and

(xvi) such other agreements, instruments, approvals, opinions and other documents, each satisfactory to the Agent in form and substance, as the Agent may reasonably request.

(e) Material Adverse Change. The Agent shall have determined, in its sole judgment exercised reasonably and after giving effect to the Acquisition Documents and the

 

 

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transactions contemplated hereby and by the other Loan Documents, that no material adverse change shall have occurred in the business, operations, condition (financial or otherwise), properties or prospects of any Loan Party since July 30, 2007.

(f) Subordinated Loan Agreement. The Agent shall have received evidence that the Subordinated Loan Agreement has been amended, in form and substance reasonably satisfactory to the Agent, to (i) defer maturity of the Subordinated Indebtedness until July 28, 2012 and (ii) reflect the conversion of the Tranche A/B Term Loans described therein into the Preferred Equity Interests, pursuant to the Subordinated Loan Agreement Amendment. 

(g) [Reserved].

(h) [Reserved].

(i) Cash Management System. The cash management system of Group and its Subsidiaries shall be satisfactory to the Agent determined by the Agent in good faith.

(j) Financial Projections. The Agent shall have received the Plan Projections and the financial projections described in Section 6.01(g)(iii) hereof, which Plan Projections and projections must be in form and substance satisfactory to the Agent determined by the Agent in good faith. 

(k) Due Diligence. The Agent shall have completed its financial and legal due diligence with respect to each Loan Party and the Collateral and the results thereof shall be acceptable to the Agent, in its sole and absolute discretion exercised in good faith. 

(l) Proceedings; Receipt of Documents. All proceedings in connection with the making of the initial Revolving Loans or the issuance of the initial Letter of Credit and the other transactions contemplated by this Agreement and the other Loan Documents, and all documents incidental hereto and thereto, shall be reasonably satisfactory to the Agent and its counsel, and the Agent and such counsel shall have received all such information and such counterpart originals or certified or other copies of such documents as the Agent or such counsel may reasonably request.

(m) Acquisition Documents. Evidence of consummation of the Acquisition contemplated by the Acquisition Agreement (with no waiver of the terms or conditions thereof without the prior written consent of the Agent).

SECTION 5.02. Conditions Precedent to all Revolving Loans and Letters of Credit. The obligation of the Agent or any Lender to make any Revolving Loan or of the Agent to assist the Borrowers in establishing or opening any Letter of Credit is subject to the fulfillment, in a manner reasonably satisfactory to the Agent, of each of the following conditions precedent:

(a) Payment of Fees, Etc. The Borrowers shall have paid all fees, costs, expenses and taxes then payable by the Borrowers pursuant to this Agreement and the other Loan Documents, including, without limitation, Sections 2.06 and 12.04 hereof.

 

 

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(b) Representations and Warranties; No Event of Default. The following statements shall be true and correct, and the submission by Administrative Borrower to the Agent of a Notice of Borrowing with respect to each such Revolving Loan, and the Borrowers’ acceptance of the proceeds of such Revolving Loan, or the submission by the Borrowers of a Letter of Credit Application with respect to a Letter of Credit, and the issuance of such Letter of Credit, shall each be deemed to be a representation and warranty by the Borrowers on the date of such Revolving Loan or the date of issuance of Letter of Credit that:  (i) the representations and warranties contained in Article VI and in each other Loan Document, certificate or other writing delivered to the Agent, the Lenders or the L/C Issuer
pursuant hereto or thereto on or prior to the date of such Revolving Loan or Letter of Credit that are subject to materiality or Material Adverse Effect qualifications shall be true and correct in all respects and the representations and warranties contained in Article VI hereof and in each other Loan Document, certificate or other writing delivered to the Agent, the Lenders or the L/C Issuer pursuant hereto or thereto that are not subject to materiality or Material Adverse Effect qualifications shall be true and correct in all material respects, in each case, on and as of such date as though made on and as of such date (except to the extent that such representations and warranties relate solely to an earlier date), (ii) at the time of and after giving effect to the making of such Revolving Loan and the application of proceeds thereof or at the time of issuance of such Letter of Credit, no Default
or Event of Default has occurred and is continuing or would result from the making of the Revolving Loan to be made, or the issuance of such Letter of Credit to be issued, on such date and (iii) the conditions set forth in this Section 5.02 have been satisfied as of the date of such request.

(c) Borrowing Base Certificate. The Agent shall have received the most recent Borrowing Base Certificate (together with all supporting documentation) required by Section 7.01(a). 

(d) Legality. The making of such Revolving Loan or the issuance of such Letter of Credit shall not contravene any law, rule or regulation applicable to the Agent, the Lenders, or the L/C Issuer.

(e) Notices. The Agent shall have received (i) a Notice of Borrowing pursuant to Section 2.02 hereof or (ii) a Letter of Credit Application pursuant to Section 2.03A hereof.

(f) Delivery of Documents. The Agent shall have received such other agreements, instruments, approvals, opinions and other documents, each reasonably satisfactory to the Agent in form and substance, as the Agent may reasonably request.

(g) Proceedings; Receipt of Documents. All proceedings in connection with the making of such Revolving Loan or the issuance of such Letter of Credit and the other transactions contemplated by this Agreement and the other Loan Documents, and all documents incidental hereto and thereto, shall be reasonably satisfactory to the Agent and its counsel, and the Agent and such counsel shall have received all such information and such counterpart originals or certified or other copies of such documents, in form and substance reasonably satisfactory to the Agent, as the Agent or such counsel may reasonably request.

 

 

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ARTICLE VI

REPRESENTATIONS AND WARRANTIES

SECTION 6.01. Representations and Warranties. Each Borrower hereby represents and warrants to the Agent and the Lenders and the L/C Issuer as follows:

(a) Organization, Good Standing, Etc. Each Loan Party (i) is a corporation, limited liability company or limited partnership duly organized, validly existing and in good standing under the laws of the state of its organization, (ii) has all requisite power and authority to conduct its business as now conducted and as presently contemplated and, in the case of the Borrowers, to make the borrowings hereunder, and to execute and deliver each Loan Document to which it is a party, and to consummate the transactions contemplated thereby, and (iii) is duly authorized or qualified to do business and is in good standing in each jurisdiction in which the character of the properties owned or leased by it or in which the transaction of its business makes such qualification necessary except where the failure
to be qualified or in good standing could not reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect.

(b) Authorization, Etc. The execution, delivery and performance by each Loan Party of each Loan Document to which it is or will be a party, (i) have been duly authorized by all necessary action, (ii) do not and will not contravene its charter or by-laws, its limited liability company or operating agreement or its certificate of partnership or partnership agreement, as applicable, any applicable law, any Material Contract or any agreement, instrument or other document evidencing, governing or securing any Indebtedness of such Loan Party, (iii) do not and will not contravene any other agreement, instrument or document binding on or otherwise affecting it or any of its properties, to the extent the obligation thereunder is material or to the extent such contravention (either individually or in the
aggregate) could reasonably be expected to have a Material Adverse Effect, (iv) do not and will not result in or require the creation of any Lien (other than pursuant to any Loan Document) upon or with respect to any of its properties, and (v) do not and will not result in any suspension, revocation, impairment, forfeiture or non-renewal of any permit, license, authorization or approval applicable to its operations or any of its properties, except where such suspension, revocation, impairment, forfeiture or non-renewal could not reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect.

(c) Governmental Approvals. No authorization or approval or other action by, and no notice to or filing with, any Governmental Authority is required in connection with the due execution, delivery and performance by any Loan Party of any Loan Document to which it is or will be a party.

(d) Execution and Binding Effect. Each of the Loan Documents required to be executed and delivered on or prior to the date hereof has been duly and validly executed and delivered by each of the Loan Parties which is a party thereto and constitute legal, valid and binding obligations of each of the Loan Parties which is a party thereto enforceable in accordance with the terms hereof or thereof. Each Loan Document that is not required to be executed and delivered by any Loan Party prior to the Effective Date, when executed and 

 

 

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delivered, will be validly executed and delivered by the Loan Party thereto, and will constitute legal, valid and binding obligations of the Loan Party thereto, enforceable in accordance with the terms thereof.

(e) Subsidiaries. Schedule 6.01(e) is a complete and correct description of the name, jurisdiction of incorporation and ownership of the outstanding Capital Stock of such Subsidiaries of Group in existence on the date hereof. All of the issued and outstanding Capital Stock of such Subsidiaries has been validly issued and are fully paid and nonassessable, and the holders thereof are not entitled to any preemptive, first refusal or other similar rights. Except as indicated on such Schedule, all such Capital Stock is owned by Group or one or more of its wholly-owned Subsidiaries, free and clear of all Liens.

(f) Litigation; Commercial Tort Claims. Except as set forth in Schedule 6.01(f), (i) there is no pending or, to the knowledge of any Loan Party, threatened action, suit or proceeding affecting any Loan Party before any court or other Governmental Authority or any arbitrator that (A) either individually or in the aggregate could reasonably be expected to have a Material Adverse Effect or (B) relates to this Agreement, the Revolving Notes or any other Loan Document or any transaction contemplated hereby or thereby and (ii) as of the Effective Date, none of the Loan Parties holds any commercial tort claim for more than $50,000 in respect of which a claim has been filed in a court of law or a written notice by an attorney has been given to a potential defendant.

(g) Financial Condition.

(i) Since June 30, 2007 no event or development has occurred that has had or could, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

(ii) Group has heretofore furnished to the Lenders a schedule of projected cash receipts, cash disbursements and monthly cash flows of Group and its Subsidiaries prepared on a monthly basis through July 26, 2008. Such projections are believed by Group at the time furnished to be reasonable, have been prepared on a reasonable basis and in good faith by Group, and have been based on assumptions believed by Group to be reasonable at the time made and upon the best information then reasonably available to Group, and Group is not aware of any facts or information that would lead it to believe that such projections, as so updated, are incorrect or misleading in any material respect.

(iii) Group has heretofore furnished to the Lenders the Plan Projections, which include projected monthly balance sheets, income statements and statements of cash flows of Group and its Subsidiaries for the forthcoming year following the Effective Date, month by month. Such projections, as so updated, are believed by Group at the time furnished to be reasonable, have been prepared on a reasonable basis and in good faith by Group, and have been based on assumptions believed by Group to be reasonable at the time made and upon the best information then reasonably available to Group, and Group is not aware of any facts or information that would lead it to believe that such projections, as so updated, are incorrect or misleading in any material respect.

 

 

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(h) Compliance with Law, Etc. No Loan Party is in violation of (i) its organizational documents, (ii) any law, rule, regulation, judgment or order of any Governmental Authority applicable to it or any of its material property or assets, or (iii) any term of any agreement or instrument (including, without limitation, any Material Contract) binding on or otherwise affecting it or any of its properties, except in the case of clauses (ii) or (iii), where such violation could not reasonably be expected to have a Material Adverse Effect (either individually or in the aggregate).

(i) ERISA. Except as set forth on Schedule 6.01(i), (i) each Employee Plan is in substantial compliance with ERISA and the Internal Revenue Code, (ii) no Termination Event has occurred nor is reasonably expected to occur with respect to any Employee Plan, (iii) the most recent annual report (Form 5500 Series) with respect to each Employee Plan, including any required Schedule B (Actuarial Information) thereto, copies of which have been filed with the Internal Revenue Service and delivered to the Agent, is complete and correct and fairly presents the funding status of such Employee Plan, and since the date of such report there has been no material adverse change in such funding status, (iv) no Employee Plan had an accumulated or waived funding deficiency or permitted decreases
which would create a deficiency in its funding standard account or has applied for an extension of any amortization period within the meaning of Section 412 of the Internal Revenue Code at any time during the previous sixty (60) months, and (v) no Lien imposed under the Internal Revenue Code or ERISA exists or is likely to arise on account of any Employee Plan within the meaning of Section 412 of the Internal Revenue Code at any time during the previous sixty (60) months. Except as set forth on Schedule 6.01(i), none of the Loan Parties or any of their ERISA Affiliates have incurred any withdrawal liability under ERISA with respect to any Multiemployer Plan, or are aware of any facts indicating that the Loan Parties or any of their ERISA Affiliates may in the future incur any such withdrawal liability. Except as set forth on Schedule 6.01(i), there is no claim against any employee benefit plan (as defined in Section 3.(3) of ERISA) sponsored or maintained by any
Loan Party (except routine individual claims for benefits) that could reasonably be expected to have a Material Adverse Effect. Except as required by Section 4980B of the Internal Revenue Code or Section 601 of ERISA, none of the Loan Parties or any of their ERISA Affiliates maintains an employee welfare benefit plan (as defined in Section 3(1) of ERISA) which provides health or welfare benefits (through the purchase of insurance or otherwise) for any retired or former employee of any Loan Party or any of its ERISA Affiliates or coverage after a participant’s termination of employment. None of the Loan Parties or any of their ERISA Affiliates has incurred any liability or obligation under the Worker Adjustment and Retraining Notification Act (“WARN”) or similar state law, which remains unpaid or unsatisfied. The hours worked and payments made to employees of any Loan Party have not been in violation of the Fair Labor Standards Act or any other applicable legal
requirements. All material payments due from any Loan Party on account of wages and employee health and welfare insurance and other benefits have been paid or accrued as a liability on the books of such Loan Party. No Loan Party or ERISA Affiliate has engaged in a prohibited transaction, as defined in Section 4975 of the IRC, in connection with any Plan, which would subject any Loan Party to a material tax on prohibited transactions imposed by Section 4975 of the Internal Revenue Code. 

(j) Taxes, Etc. All Federal, state and local tax returns and other reports required by applicable law to be filed by any Loan Party have been filed, or extensions have been obtained, and all taxes, assessments and other governmental charges imposed upon any Loan 

 

 

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Party or any property of any Loan Party and which have become due and payable on or prior to the date hereof have been paid, except to the extent contested in good faith by proper proceedings which stay the imposition of any penalty, fine or Lien resulting from the non-payment thereof and with respect to which adequate reserves have been set aside for the payment thereof.

(k) Regulation U. None of the Loan Parties is nor will be engaged in the business of extending credit for the purpose of purchasing or carrying margin stock (within the meaning of Regulations T, U or X), and no proceeds of any Revolving Loan will be used to purchase or carry any margin stock or to extend credit to others for the purpose of purchasing or carrying any margin stock. 

(l) Nature of Business. None of the Loan Parties is engaged in any business other than developing, producing and selling specialty apparel and related products.

(m) Adverse Agreements, Etc. None of the Loan Parties is subject to any charter, limited liability company agreement, partnership agreement or other corporate, partnership or limited liability company restriction or any judgment, order, regulation, ruling or other requirement of a court or other Governmental Authority, which has, or in the future could reasonably be expected to have, a Material Adverse Effect.

(n) Permits, Etc. Each Loan Party has, and is in compliance with, all material permits, licenses, authorizations, approvals, entitlements and accreditations required for such Person lawfully to own, lease, manage or operate, or to acquire, each business currently owned, leased, managed or operated, or to be acquired, by such Person, except where the failure to have any of the foregoing or the lack of compliance therewith, either individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect. No condition exists or event has occurred which, in itself or with the giving of notice or lapse of time or both, would result in the suspension, revocation, impairment, forfeiture or non-renewal of any such permit, license, authorization, approval, entitlement or
accreditation, and there is no claim that any thereof is not in full force and effect, except where such suspension, revocation, impairment, forfeiture or non-renewal, either individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect.

(o) Properties. (i)  Each Loan Party has good and marketable title to, or valid leasehold interests in, all property and assets material to its business, free and clear of all Liens except Permitted Liens. The properties are in good working order and condition, ordinary wear and tear excepted.

(ii) Schedule 6.01(o) sets forth a complete and accurate list as of the Effective Date, of the location, by state and street address, of all real property owned or leased by each Loan Party. As of the Effective Date, each Loan Party has valid leasehold interests in the Leases described on Schedule 6.01(o) to which it is a party. Schedule 6.01(o) sets forth with respect to each such Lease, the commencement date, termination date, renewal options (if any) and annual base rents. Each such Lease is valid and enforceable in accordance with its terms in all material respects and is in full force and effect. No consent or approval of any landlord or other third party in connection with any material Lease is necessary for any Loan Party to enter

 

 

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into and execute the Loan Documents to which it is a party, except as set forth on Schedule 6.01(o). To the best knowledge of any Loan Party, no Loan Party is in default of its obligations thereunder, and no Loan Party (or any other party to any such Lease) has at any time received any notice of default which remains uncured under any such material Lease and, as of the Effective Date, no event has occurred which, with the giving of notice or the passage of time or both, would constitute a default by a Loan Party under any such material Lease.

(iii) Each Loan Party acknowledges that Lender has established as of the date hereof and will maintain an Availability Reserve that shall include (A) reserves for unpaid rent, and (B) reserves for each of the Borrowers’ locations in a Landlord Lien State or in a One Turn State for which a consent, waiver and subordination, in form and substance satisfactory to the Agent, has not been received (it being understood that no Loan Party makes any representation or warranty (I) about the sufficiency of such Availability Reserve nor (II) as to which states constitute Landlord Lien States or One Turn States). Such Availability Reserve shall be reduced, but only if no Event of Default has theretofore occurred, upon the furnishing to the Lender of a consent, waiver and subordination (in form satisfactory to the Lender) by the landlord for the subject location. Without duplication of
any Availability Reserve described in this Section 6.01(o)(iii), the Lender may establish an Availability Reserve for unpaid rent at any location. 

(p) Full Disclosure. Each Loan Party has disclosed to the Agent all agreements, instruments and corporate or other restrictions to which it is subject, and all other matters known to it, that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. None of the other reports, financial statements, certificates or other written information furnished by or on behalf of any Loan Party to the Agent in connection with the negotiation of this Agreement or delivered hereunder (as modified or supplemented by other information so furnished) contains any material misstatement of fact or omits to state any material fact necessary to make the statements therein, in the light of the circumstances under which it was made, not misleading; provided that, with respect to projected financial information, each Loan Party represents only that such information was prepared in good faith based upon assumptions believed to be reasonable at the time (it being recognized by the Lenders that such projections as to future events are not to be viewed as facts and that actual results during the period or periods covered by any such projections may differ from the projected results). There is no contingent liability or fact known to such Loan Party that could reasonably be expected to have a Material Adverse Effect which has not been set forth in a footnote included in the financial statements or a schedule hereto. 

(q) Environmental Matters. Except as set forth on Schedule 6.01(q), (i) the operations of each Loan Party are in compliance in all material respects with Environmental Laws; (ii) there has been no Release at any of the properties owned or operated by any Loan Party or a predecessor in interest, or at any disposal or treatment facility which received Hazardous Materials generated by any Loan Party or any predecessor in interest which, either individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect; (iii) no Environmental Action has been asserted against any Loan Party or any predecessor in interest nor does any Loan Party have knowledge or notice of any threatened or pending Environmental Action against any Loan Party or any predecessor in interest
which, either individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect; 

 

 

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(iv) no Environmental Actions have been asserted against any facilities that may have received Hazardous Materials generated by any Loan Party or any predecessor in interest which, either individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect; (v) no property now or formerly owned or operated by a Loan Party has been used as a treatment or disposal site for any Hazardous Material; (vi) no Loan Party has failed to report to the proper Governmental Authority any Release which is required to be so reported by any Environmental Laws which, either individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect; (vii) each Loan Party holds all licenses, permits and approvals required under any Environmental Laws in connection with the operation of the business carried on by it, except for such licenses, permits
and approvals as to which a Loan Party’s failure to maintain or comply with, either individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect; and (viii) no Loan Party has received any notification pursuant to any Environmental Laws that (A) any work, repairs, construction or Capital Expenditures are required to be made as a condition of continued compliance with any Environmental Laws, or any license, permit or approval issued pursuant thereto or (B) any license, permit or approval referred to above is about to be reviewed, made, subject to limitations or conditions, revoked, withdrawn or terminated, in each case, except as, either individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect.

(r) Insurance. Each Loan Party keeps its property adequately insured and maintains (i) insurance to such extent and against such risks, including fire, as is customary with companies in the same or similar businesses, (ii) workmen’s compensation insurance in the amount required by applicable law, (iii) public liability insurance, which shall include product liability insurance, in the amount customary with companies in the same or similar business against claims for personal injury or death on properties owned, occupied or controlled by it, and (iv) such other insurance as may be required by law or as may be reasonably required by the Agent (including, without limitation, against larceny, embezzlement or other criminal misappropriation). Schedule 6.01(r) sets forth a list
of all insurance maintained by each Loan Party on the Effective Date.

(s) Use of Proceeds. The proceeds of the Revolving Loans shall be used solely (i) for general corporate purposes that are consistent with the Borrowers’ business plan (including, without limitation, the financing of working capital and Capital Expenditures), and (ii) to fund Capital Expenditure requirements to include new store openings.

(t) Sufficient Capital. After giving effect to the transactions contemplated by this Agreement and before and after giving effect to each Revolving Loan and the incurrence of any Letter of Credit Obligation:  (i) no Loan Party nor any of its Subsidiaries expects that final judgments against any Loan Party or any of its Subsidiaries in actions for money damages with respect to pending or, to its knowledge, threatened litigation will be rendered at a time when, or in an amount such that, such Loan Party will be unable to satisfy any such judgments promptly in accordance with their terms (taking into account the maximum reasonable amount of such judgments in any such actions and the earliest reasonable time at which such judgments might be rendered and the cash available to each Loan Party or any of its
Subsidiaries, after taking into account all other payments on or in respect of Indebtedness and insurance proceeds (including their Contingent Obligations)); (ii) no Loan Party or any of its Subsidiaries has incurred or will incur Indebtedness beyond its ability to pay such Indebtedness as such Indebtedness matures

 

 

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(taking into account the timing and amounts of cash to be received by such Loan Party or any of its Subsidiaries from any source, and of amounts to be payable on or in respect of Indebtedness of such Loan Party or any of its Subsidiaries and the amounts referred to in the preceding clause (i)); (iii) each Loan Party anticipates that such Loan Party and each of its respective Subsidiaries, after taking into account all other anticipated uses of the cash of such Loan Party or any of its Subsidiaries, shall be able to pay all amounts on or in respect of Indebtedness of such Loan Party or any of its Subsidiaries when such amounts are required to be paid; and (iv) each Loan Party and each of its respective Subsidiaries will have sufficient capital with which to conduct its present and presently proposed business and the property of such Loan Party and each of its respective Subsidiaries does not
constitute unreasonably small capital with which to conduct its present or proposed business.

(u) Location of Bank Accounts. Schedule 6.01(u) sets forth a complete and accurate list as of the Effective Date of all deposit, checking and other bank accounts, all securities and other accounts maintained with any broker dealer and all other similar accounts maintained by each Loan Party, together with a description thereof (i.e., the bank or broker dealer at which such deposit or other account is maintained and the account number and the purpose thereof).

(v) Intellectual Property. Each Loan Party owns or licenses or otherwise has the right to use all licenses, permits, trademarks, trademark applications, patents, patent applications, service marks, trade names, copyrights, copyright applications, franchises, authorizations and other intellectual property rights that are necessary for the operations of its businesses, without infringement upon or conflict with the rights of any other Person with respect thereto, except for such infringements and conflicts which, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect. Set forth on Schedule 6.01(v) is a complete and accurate list as of the Effective Date of all trademarks, trademark applications, trade names, material licenses, permits, patents, patent
applications, service marks, copyrights, copyright applications, franchises, authorizations and other intellectual property rights of each Loan Party. No slogan or other advertising device, product, process, method, substance, part or other material now employed, or now contemplated to be employed, by any Loan Party infringes upon or conflicts with any rights owned by any other Person, and no claim or litigation regarding any of the foregoing is pending or threatened, except for such infringements and conflicts which could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. To the best knowledge of each Loan Party, no patent, invention, device, application, principle or any statute, law, rule, regulation, standard or code is pending or proposed, which, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.

(w) Material Contracts. Set forth on Schedule 6.01(w) is a complete and accurate list as of the Effective Date of all Material Contracts (other than Loan Documents) of each Loan Party, showing the parties and subject matter thereof and amendments and modifications thereto. Each such Material Contract (i) is in full force and effect and is binding upon and enforceable against each Loan Party that is a party thereto and, to the best knowledge of such Loan Party, all other parties thereto in accordance with its terms, (ii) has not been otherwise amended or modified, (iii) is not in default due to the action of any Loan Party or (iv) to the best knowledge of

 

 

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any Loan Party, is not in default due to the action of any other party thereto, except to the extent any such default could not reasonably be expected to have a Material Adverse Effect.

(x) Holding Company and Investment Company Acts. None of the Loan Parties is (i) a ”holding company” or a “subsidiary company” of a “holding company” or an “affiliate” of a ”holding company”, as such terms are defined in the Public Utility Holding Company Act of 1935, as amended, or (ii) an “investment company” or an “affiliated person” or “promoter” of, or ”principal underwriter” of or for, an “investment company”, as such terms are defined in the Investment Company Act of 1940, as amended.

(y) Employee and Labor Matters. (i)  There is (A) no unfair labor practice complaint pending or, to the best knowledge of any Loan Party, threatened against any Loan Party before any Governmental Authority and no grievance or arbitration proceeding pending or threatened against any Loan Party which arises out of or under any collective bargaining agreement, (B) no strike, labor dispute, slowdown, stoppage or similar action or grievance pending or threatened against any Loan Party and (C) to the best knowledge of any Loan Party, no union representation question existing with respect to the employees of any Loan Party and no union organizing activity taking place with respect to any of the employees of any of them.

(z) Name; Jurisdiction of Organization; Organizational ID Number; Chief Place of Business; Chief Executive Office; FEIN. Schedule 6.01(z) sets forth a complete and accurate list as of the date hereof of (i) the exact legal name of each Loan Party, (ii) the jurisdiction of organization of each Loan Party, (iii) the organizational identification number of each Loan Party (or indicates that such Loan Party has no organizational identification number), (iv) each place of business of each Loan Party, (v) the chief executive office of each Loan Party and (vi) the federal employer identification number of each Loan Party.

(aa) [Reserved].

(bb) Security Interests. Each Security Agreement creates in favor of the Agent, for the benefit of the Lenders, a legal, valid and enforceable security interest in the Collateral secured thereby. No further recordings or filings are or will be required in connection with the creation, perfection or enforcement of such security interests and Liens with respect to Collateral that may be perfected by the filing of financing statements and recordings in the United States Patent and Trademark Office and the United States Copyright Office, other than (i) the filing of continuation statements in accordance with applicable law, and (ii) the recording of the Collateral Assignments for Security pursuant to each Security Agreement in the United States Patent and Trademark Office and the United States
Copyright Office, as applicable, with respect to after-acquired U.S. patent and trademark applications and registrations and U.S. copyrights.

(cc) Representations and Warranties in Documents; No Default. All representations and warranties set forth in this Agreement and the other Loan Documents are true and correct in all respects at the time as of which such representations were made and on the Effective Date (except to the extent that such representations and warranties relate solely to an earlier date). No Event of Default has occurred and is continuing and no condition exists which constitutes a Default or an Event of Default under or with respect to the Loan Documents or

 

 

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which constitutes a default or an event of default under or with respect to the Acquisition Documents.

(dd) Credit Card Processors. Schedule 6.01(dd) sets forth a complete list of all Credit Card Processors, which includes any “instant credit” providers and any other arrangements to which any of the Borrowers is a party with respect to the payment to the Borrowers of the proceeds of all credit card charges for sales by the Borrowers.

(ee) Schedules. All of the information which is required to be scheduled to this Agreement is set forth on the Schedules attached hereto, is correct and accurate in all material respects and does not omit to state any information material thereto.

(ff) Acquisition. The Acquisition, Merger and other transactions described in the Acquisition Agreement and the documents relating thereto (collectively, with the Acquisition Agreement, the “Acquisition Documents”) have been effected in compliance in all material respects with all applicable Laws and otherwise in accordance with all material provisions of the Acquisition Documents and all conditions of the transactions described in the Acquisition Documents have been satisfied in full or waived (after receiving the consent of the Agent with respect to any waiver that is adverse to the Lenders in any material respect). To the knowledge of the Borrowers, all material consents and approvals of
any Governmental Agency and all material consents and approvals of any other Person necessary to effectuate the transactions described in the Acquisition Documents have been obtained.

ARTICLE VII

COVENANTS

SECTION 7.01. Affirmative Covenants. So long as any principal of or interest on any Revolving Loan, Reimbursement Obligation, Letter of Credit Obligation or any other Obligation (whether or not due), other than unasserted contingent indemnity Obligations, shall remain unpaid or any Lender shall have any Revolving Credit Commitment hereunder, the Loan Parties will, unless the Required Lenders shall otherwise consent in writing:

(a) Collateral Reporting. Provide the Agent (and if so requested by the Agent, with copies for each Lender) with the documents set forth on Schedule 7.01(a) in accordance with the delivery schedule set forth thereon. Any Borrowing Base Certificate furnished pursuant to this subsection shall be effective from and including the date such Borrowing Base Certificate is duly received by the Agent but not including the date on which a subsequent Borrowing Base Certificate is received by the Agent, unless the Agent disputes the eligibility of any property for inclusion in the calculation of the Borrowing Base or the valuation thereof by notice of such dispute to the Borrowers, and in the event of any dispute about the eligibility of any property for inclusion in the calculation of the Borrowing Base or the
valuation thereof, the Agent’s good faith judgment shall control. 

(b) Financial Statements, Reports, Certificates. Deliver to the Agent, with copies to each Lender:

 

 

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(i) as soon as available, but in any event within forty-five (45) days after the end of each month during each of Group’s Fiscal Years:

(A) a company prepared consolidated balance sheet, income statement, and statement of cash flow covering Group’s and its Subsidiaries’ operations during the previous month;

(B) a certificate signed by the chief financial officer of Group to the effect that:

(1) the financial statements delivered hereunder have been prepared in accordance with GAAP (except for the lack of footnotes and being subject to year-end audit adjustments) and fairly present in all material respects the financial condition of Group and its Subsidiaries,

(2) the representations and warranties of the Borrowers contained in this Agreement and the other Loan Documents are true and correct in all material respects on and as of the date of such certificate, as though made on and as of such date (except to the extent that any such representations and warranties expressly relate solely to an earlier date, in which case such representations and warranties were true and correct in all material respects on such earlier date), and

(3) there does not exist any condition or event that constitutes a Default or Event of Default (or, to the extent of any non-compliance, describing such non-compliance as to which he or she may have knowledge and what action the Borrowers have taken, are taking, or propose to take with respect thereto); 

(ii) as soon as available, but in any event within ninety (90) days after the end of each of Group’s fiscal years:

(A) financial statements of Group and its Subsidiaries for each such fiscal year, audited by independent certified public accountants reasonably acceptable to Agent and certified, without any qualifications, by such accountants to have been prepared in accordance with GAAP (such audited financial statements to include a balance sheet, income statement, and statement of cash flow and, if prepared, such accountants’ letter to management);

(iii) as soon as available, but in any event within thirty (30) days prior to the start of each of Group’s fiscal years, copies of the Borrowers’ business plan, in form and substance (including as to scope and underlying assumptions) satisfactory to the Agent, in its Permitted Discretion, for the forthcoming year, month by month, certified by the chief financial officer of Group as being such officer’s good faith best estimate of the financial performance of Group and its Subsidiaries during the period covered thereby (it being understood that (A) such information will be prepared by Group in good faith based upon assumptions believed to be reasonable at the time and based upon the best information then reasonably available to Group, and (B) Agent may in its Permitted Discretion, but shall not be under any obligation to, revise financial covenants set forth in
Section 7.02 as a result of its review of such business plans and/or create or expand Reserves).

 

 

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(iv) if and when filed by any Loan Party:

(A) Form 10-Q quarterly reports, Form 10-K annual reports, and Form 8-K current reports, 

(B) any other filings made by any Loan Party with the SEC,

(C) copies of the federal income tax returns of each Borrower, and any amendments thereto, filed with the Internal Revenue Service, and 

(D) any other written information that is provided by Group to the holders of its Capital Stock (as such) generally;

(v) if and when filed by any Borrower and as requested by Agent, evidence of payment satisfactory to the Agent (in its Permitted Discretion) of applicable excise taxes in each jurisdiction in (A) which any Borrower conducts business or is required to pay any such excise tax, (B) where any Borrower’s failure to pay any such applicable excise tax would result in a Lien on the properties or assets of any Borrower, or (C) where any Borrower’s failure to pay any such applicable excise tax, either individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect;

(vi) no less than two times a week, a report on the Borrowers’ Eligible Credit Card Accounts, in form and substance reasonably satisfactory to the Agent;

(vii) promptly after submission to any Government Authority unless prohibited by applicable law, all documents and information furnished to such Government Authority in connection with any investigation of any Loan Party other than routine inquiries by such Governmental Authority;

(viii) as soon as possible, and in any event within three days after the occurrence of an Event of Default or Default or the occurrence of any event or development that could reasonably be expected to have a Material Adverse Effect, the written statement of an Authorized Officer setting forth the details of such Event of Default, Default, other event or Material Adverse Effect and the action which Group and its Subsidiaries propose to take with respect thereto;

(ix) (A) as soon as possible and in any event (1) within ten (10) days after any Loan Party or any ERISA Affiliate thereof knows or has reason to know that any Termination Event described in clause (i) of the definition of Termination Event with respect to any Employee Plan has occurred, (2) within ten (10) days after any Borrower or any ERISA Affiliate thereof knows or has reason to know that any other Termination Event with respect to any Employee Plan has occurred, or (3) within ten (10) days after any Loan Party or any ERISA Affiliate thereof knows or has reason to know that an accumulated funding deficiency has been incurred or an application has been made to the Secretary of the Treasury for a waiver or modification of the minimum funding standard (including installment payments) or an extension of any amortization period under Section 412 of the Internal Revenue Code
with respect to an Employee Plan, a statement of an Authorized Officer setting forth the details of such occurrence and the action, if any, which such Loan Party or such ERISA Affiliate proposes to take with

 

 

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respect thereto, (B) promptly and in any event within three days after receipt thereof by any Loan Party or any ERISA Affiliate thereof from the PBGC, copies of each notice received by any Loan Party or any ERISA Affiliate thereof of the PBGC’s intention to terminate any Plan or to have a trustee appointed to administer any Plan, (C) promptly and in any event within ten (10) days after the filing thereof with the Internal Revenue Service if requested by the Agent, copies of each Schedule B (Actuarial Information) to the annual report (Form 5500 Series) with respect to each Employee Plan and Multiemployer Plan, (D) promptly and in any event within ten (10) days after any Loan Party or any ERISA Affiliate thereof knows or has reason to know that a required installment within the meaning of Section 412 of the Internal Revenue Code has not been made when due with respect to an Employee Plan,
(E) promptly and in any event within three days after receipt thereof by any Loan Party or any ERISA Affiliate thereof from a sponsor of a Multiemployer Plan or from the PBGC, a copy of each notice received by any Loan Party or any ERISA Affiliate thereof concerning the imposition or amount of withdrawal liability under Section 4202 of ERISA or indicating that such Multiemployer Plan may enter reorganization status under Section 4241 of ERISA, and (F) promptly and in any event within ten (10) days after any Loan Party or any ERISA Affiliate thereof send notice of a plant closing or mass layoff (as defined in WARN) to employees, copies of each such notice sent by such Loan Party or such ERISA Affiliate thereof;

(x) promptly after the commencement thereof but in any event not later than 5 days after service of process with respect thereto on, or the obtaining of knowledge thereof by, any Loan Party, notice of each action, suit or proceeding before any court or other Governmental Authority or other regulatory body or any arbitrator which, if adversely determined, could reasonably be expected to have a Material Adverse Effect;

(xi) [Reserved].

(xii) promptly after the sending or filing thereof, copies of all statements, reports and other information Group or any other Loan Party sends to any holders of its Indebtedness or its securities or files with the SEC or any national (domestic or foreign) securities exchange, provided that the Loan Party may redact confidential information contained in any such statement, report or other information if it provides a summary of the nature of the information redacted to the Agent;

(xiii) promptly upon receipt thereof, copies of all financial reports including, without limitation, management letters), if any, submitted to any Loan Party by its auditors in connection with any annual or interim audit of the books thereof; and

(xiv) promptly upon request, such other information concerning the condition or operations, financial or otherwise, of any Loan Party as the Agent may from time to time may reasonably request.

In addition to the financial statements referred to in clauses (i) and (ii) above, the Borrowers agree to deliver financial statements prepared on both a consolidated and consolidating basis. The Borrowers agree that, upon prior notice if no Default or Event of Default exists and without any notice if any Default or Event of Default exists, their independent certified public accountants are authorized to communicate with the Agent and to release to the Agent whatever

 

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financial information concerning the Borrowers that the Agent reasonably may request. Each Borrower waives the right to assert a confidential relationship, if any, it may have with any accounting firm or service bureau in connection with any information requested by the Agent pursuant to or in accordance with this Agreement, and agrees that the Agent may contact directly any such accounting firm or service bureau in order to obtain such information.

(c) Additional Guaranties and Collateral Security. Cause each Domestic Subsidiary of any Loan Party to execute and deliver to the Agent promptly, and in any event within three days after the formation, acquisition or change in status thereof (A) a Guaranty guaranteeing the Obligations, (B) a Security Agreement, (C) if such Domestic Subsidiary has any Subsidiaries, a Pledge Agreement, together with (x) certificates evidencing all of the Capital Stock pledged thereunder, (y) undated stock powers executed in blank with signature guaranteed, and (z) such opinion of counsel and such approving certificate of such Subsidiary as the Agent may request (in its Permitted Discretion), (D) one or more Mortgages creating on the real property owned by such Subsidiary in fee simple
a perfected, first priority Lien (subject to Permitted Liens) on such real property, a Title Insurance Policy covering such real property, a current ALTA survey thereof and a surveyor’s certificate, each in form and substance reasonably satisfactory to the Agent, together with such other agreements, instruments and documents as the Agent may reasonably require, and (E) such other agreements, instruments, approvals, legal opinions or other documents reasonably requested by the Agent in order to create, perfect, establish the first priority (subject to Permitted Liens) of or otherwise protect any Lien purported to be covered by any such security agreement, Pledge Agreement or Mortgage or otherwise to effect the intent that such Subsidiary shall become bound by all of the terms, covenants and agreements contained in the Loan Documents and that all property and assets of such Subsidiary shall become Collateral for the Obligations.

(d) Compliance with Laws, Etc. Comply, and cause each of their Subsidiaries to comply, in all material respects with all applicable laws, rules, regulations and orders (including, without limitation, all Environmental Laws, and the Acquisition Documents), such compliance to include, without limitation, (i) paying before the same become delinquent all taxes, assessments and governmental charges or levies imposed upon it or upon its income or profits or upon any of its properties, and (ii) paying all lawful claims which if unpaid might become a Lien or charge upon any of its properties, except, with respect to all covenants in this Section 7.01(d), to the extent contested in good faith by proper proceedings which stay the imposition of any penalty, fine or Lien resulting from the non-payment
thereof and with respect to which adequate reserves have been set aside for the payment thereof.

(e) Preservation of Existence, Etc. Except to the extent permitted by Section 7.02(d)(ii) and except as disclosed in writing to the Agent prior to the Effective Date, maintain and preserve, and cause each of their Subsidiaries to maintain and preserve, their existence, rights and privileges, and become or remain duly qualified and in good standing in each jurisdiction in which the character of the properties owned or leased by them or in which the transaction of their business makes such qualification necessary, except to the extent that the failure to remain so qualified and in good standing could not reasonably be expected to result in a Material Adverse Effect.

 

 

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(f) Keeping of Records and Books of Account. Keep, and cause each of their Subsidiaries to keep, adequate records and books of account, with complete entries made in accordance with GAAP.

(g) Inspection Rights. Permit, and cause each of their Subsidiaries to permit, the Agent or representatives thereof at any time and from time to time during normal business hours, in the absence of a continuing Event of Default upon reasonable notice and if an Event of Default exists without notice, and at the expense of the Borrowers, to examine and make copies of and abstracts from their records and books of account, to visit and inspect their properties, to verify materials, leases, notes, accounts receivable, deposit accounts and other assets of the Loan Parties and their Subsidiaries, to conduct audits, physical counts, valuations, appraisals, environmental assessments or examinations and to discuss their affairs, finances and accounts with any of the directors, officers, managerial employees,
independent accountants or other representatives thereof. The Borrowers agree to pay the reasonable fees, cost and expenses of such audits, counts, valuations, appraisals, assessments or examinations; provided however, the Agent shall have the right to conduct two (2) field examinations and two (2) inventory appraisals per year with respect to Eligible Retail Inventory and two (2) field examinations and one (1) inventory appraisal per year with respect to Eligible Wholesale Inventory, at the Borrowers’ sole expense, provided further, upon the occurrence and during a continuing Event of Default, the Borrowers shall be obligated to pay for an unlimited number of field examinations and inventory appraisals.

(h) Maintenance of Properties, Etc. Maintain and preserve, and cause each of their Subsidiaries to maintain and preserve, all of their properties which are necessary or useful in the proper conduct of their business in good working order and condition, ordinary wear and tear excepted, and comply, and cause each of their Subsidiaries to comply, at all times with the material provisions of all leases to which each of them is a party as lessee or under which each of them occupies property, so as to prevent any loss or forfeiture thereof or thereunder, in each case, other than sales of property otherwise permitted by the terms of this Agreement.

(i) Maintenance of Insurance. Maintain, and cause each of their Subsidiaries to maintain, insurance with responsible and reputable insurance companies or associations (including, without limitation, comprehensive general liability, hazard, rent and business interruption insurance) with respect to their properties (including all real properties leased or owned by them) and business, in such amounts and covering such risks as is required by any Governmental Authority having jurisdiction with respect thereto or as is carried generally in accordance with sound business practice by companies in similar businesses similarly situated and in any event in amount, adequacy and scope reasonably satisfactory to the Agent. All policies covering the Collateral are to be made payable to the Agent for the benefit of
the Lenders, as its interests may appear, in case of loss, under a standard non-contributory “lender” or “secured party” clause and are to contain such other provisions as the Agent may reasonably require to fully protect the Lenders’ interest in the Collateral and to any payments to be made under such policies. All certificates of insurance are to be delivered to the Agent and the policies are to be premium prepaid, with the loss payable and additional insured endorsement in favor of the Agent and such other Persons as the Agent may designate from time to time, and shall provide for not less than 30 days’ prior written notice to the Agent of the exercise of any right of cancellation. If the Loan Parties or any of their Subsidiaries fail to maintain such insurance, the

 

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Agent may arrange for such insurance, but at the Borrowers’ expense and without any responsibility on the Agent’s part for obtaining the insurance, the solvency of the insurance companies, the adequacy of the coverage, or the collection of claims. Upon the occurrence of an Event of Default that is continuing, the Agent shall have the sole right, in the name of the Lenders, the Loan Parties and their Subsidiaries, to file claims under any insurance policies, to receive, receipt and give acquittance for any payments that may be payable thereunder, and to execute any and all endorsements, receipts, releases, assignments, reassignments or other documents that may be necessary to effect the collection, compromise or settlement of any claims under any such insurance policies. 

(j) Obtaining of Permits, Etc. Obtain, maintain and preserve, and cause each of their Subsidiaries to obtain, maintain and preserve, all permits, licenses, authorizations, approvals, entitlements and accreditations which are necessary or useful in the proper conduct of its business and become or remain, and cause each of their Subsidiaries to become or remain, duly qualified and in good standing in each jurisdiction in which the character of the properties owned or leased by it or in which the transaction of its business makes such qualification necessary, except where all such failures to comply with this Section 7.01(j) could not reasonably be expected to have a Material Adverse Effect.

(k) Environmental. (i)  Keep any property either owned or operated by them or any of their Subsidiaries free of any Environmental Liens; (ii) comply, and cause their Subsidiaries to comply, in all material respects with Environmental Laws and provide to the Agent documentation of such compliance which the Agent reasonably requests; (iii) immediately notify the Agent of any Release of a Hazardous Material in excess of any reportable quantity from or onto property owned or operated by the Loan Parties or any of their Subsidiaries and take any Remedial Actions required to abate said Release; (iv) promptly provide the Agent with written notice within 10 days of the receipt of any of the following:  (A) notice that an Environmental Lien has been filed against any property of
any Loan Party or any of its Subsidiaries; (B) commencement of any Environmental Action or notice that an Environmental Action will be filed against any Loan Party or any of its Subsidiaries; and (C) notice of a violation, citation or other administrative order which could not reasonably be expected to have a Material Adverse Effect and (v) defend, indemnify and hold harmless the Agent and the Lenders and their transferees, and their respective employees, agents, officers and directors, from and against any claims, demands, penalties, fines, liabilities, settlements, damages, costs or expenses (including, without limitation, attorney and consultant fees, investigation and laboratory fees, court costs and litigation expenses) arising out of (A) the presence, disposal, release or threatened release of any Hazardous Materials on any property at any time owned or operated by any Loan Party or any of its Subsidiaries (or its respective predecessors in interest or
title), (B) any personal injury (including wrongful death) or property damage (real or personal) arising out of or related to such Hazardous Materials, (C) any investigation, lawsuit brought or threatened, settlement reached or government order relating to such Hazardous Materials and/or (D) any violation of any Environmental Law at or relating to or arising in connection with any property owned or operated by any Loan Party or any of their Subsidiaries.

(l) Further Assurances. Take such action and execute, acknowledge and deliver, and cause each of their Subsidiaries to take such action and execute, acknowledge and deliver, at their sole cost and expense, such agreements, instruments or other documents as the

 

 

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Agent may reasonably require from time to time in order (i) to carry out more effectively the purposes of this Agreement and the other Loan Documents, (ii) to subject to valid and perfected first priority Liens (subject to Permitted Liens) any of the Collateral or any other property of the Guarantors and their Subsidiaries, (iii) to establish and maintain the validity and effectiveness of any of the Loan Documents and the validity, perfection and priority of the Liens intended to be created thereby, (iv) to file financing statements or otherwise perfect its Lien under applicable nonbankruptcy law and (v) to better assure, convey, grant, assign, transfer and confirm unto the Agent the rights now or hereafter intended to be granted to the Agent, the Lenders and the L/C Issuer under this Agreement or any other Loan Document. In furtherance of the foregoing, to the maximum
extent permitted by applicable law, each Loan Party (i) authorizes the Agent to execute any such agreements, instruments or other documents in such Loan Party’s name and to file such agreements, instruments or other documents in any appropriate filing office, (ii) authorizes the Agent to file any financing statement required hereunder or under any other Loan Document, and any continuation statement or amendment with respect thereto, in any appropriate filing office without the signature of such Loan Party, and (iii) ratifies the filing of any financing statement, and any continuation statement or amendment with respect thereto, filed without the signature of such Loan Party prior to the date hereof.

(m) Change in Collateral; Collateral Records. (i)  Give the Agent not less than fifteen (15) days’ prior written notice of any change in the location of any Collateral (excluding such changes that are in the ordinary course of business but including, without limitation, the execution and delivery of any lease of real property), other than to locations set forth on Schedule 1.01(B) and Schedule 1.01(E) and with respect to which the Agent has fully perfected its Liens thereon, (ii) advise the Agent promptly, in sufficient detail, of any material adverse change relating to the type, quantity or quality of the Collateral or the Lien granted thereon and (iii) execute and deliver and cause each of their Subsidiaries to execute and deliver, to the Agent for the benefit of the Lenders from
time to time, solely for the Agent’s convenience in maintaining a record of Collateral, such written statements and schedules as the Agent may reasonably require, designating, identifying or describing the Collateral. 

(n) Subordination. Cause all Indebtedness and other obligations now or hereafter owed by it to any of its Affiliates to be subordinated in right of payment and security to the Indebtedness and other Obligations owing to the Agent and the Lenders in accordance with a subordination agreement in form and substance satisfactory to the Agent.

(o) Guarantor Reports. Cause each Guarantor to deliver its annual financial statements at the time when Group provides its audited financial statements to the Agent and copies of all federal income tax returns as soon as the same are available and in any event no later than 30 days after the same are required to be filed by law.

(p) Fiscal Year. Cause the Fiscal Year of Group and its Subsidiaries to end on the last Saturday in July of each calendar year unless the Agent consents to a change in such Fiscal Year (and appropriate related changes to this Agreement), and cause the Fiscal Year of each  Subsidiary to be the same as that of Group.

(q) Borrowing Base. Maintain all Revolving Loans and Letter of Credit Obligations in compliance with then current Borrowing Base.

 

 

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(r) Sales Tax Escrow Account. Maintain a separate escrow account for sales taxes and shall deposit into such account such amounts as are sufficient to pay all required sales taxes.

(s) Returns. Account for returns of inventory and customer credits and record the effects thereof on the general ledger on the same basis and in accordance with the usual customary practices of the applicable Borrower, as they exist at the time of the execution and delivery of this Agreement. 

(t) Immediate Notice to the Agent.

(i) The Administrative Borrower shall provide the Agent with written notice promptly upon the occurrence of any of the following events, which written notice shall state with reasonable particularity the facts and circumstances of the event for which such notice is being given: 

(A) any change in any of the Executive Officers;

(B) the completion of any physical count of all or a material portion of the Borrowers’ Inventory (together with a copy of the results thereof certified by Administrative Borrower);

(C) any cessation by the Borrowers of their making payment to its creditors generally as the Borrowers’ debts become due;

(D) any failure by the Borrowers to pay rent at any of the Borrowers’ locations, which failure continues for more than fifteen (15) days following the last day on which such rent was payable without more than a minimal adverse effect on the Borrowers; or

(E) any intention on the part of any Borrower to discharge the Borrowers’ present independent accountants or any withdrawal or resignation by such independent accountants from their acting in such capacity; and

(ii) Administrative Borrower shall add the Agent as an addressee on all mailing lists maintained by or for the Borrowers.

(u) Real Property. Each Borrower which acquires real property on or after the Effective Date shall upon request deliver to the Agent promptly after the acquisition of such real property, one or more Mortgages creating on such real property in fee simple a perfected, first priority Lien (subject to Permitted Liens) on such real property, a Title Insurance Policy covering such real property, a current ALTA survey thereof and a surveyor’s certificate, each in form and substance satisfactory to the Agent, together with such other agreements, instruments and documents as the Agent may reasonably require, and such other agreements, instruments, approvals, legal opinions or other documents reasonably requested by the Agent in order to create, perfect, establish the first priority of (subject to
Permitted Liens) or otherwise protect any Lien purported to be covered by any such Mortgage.

 

 

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(v) Post-Effective Date Obligations. The Borrowers shall perform the obligations set forth on Schedule 7.01(v) within the time periods designated therein.

SECTION 7.02. Negative Covenants. So long as any principal of or interest on any Revolving Loan, Letter of Credit Obligation or any other Obligation, whether or not due (other than any unasserted contingent indemnity Obligation), shall remain unpaid or any Lender shall have any Commitment hereunder, the Loan Parties shall not, unless the Required Lenders shall otherwise consent in writing:

(a) Lien Priority; Payment of Claims.

(i) Any time suffer to exist any Lien on the Collateral having a priority equal or superior to the Lien in favor of the Lenders in respect of the Collateral except for Permitted Priority Liens.

(b) Liens, Etc. Create, incur, assume or suffer to exist, or permit any of their Subsidiaries to create, incur, assume or suffer to exist any Lien upon or with respect to any of their properties, whether now owned or hereafter acquired, to file or suffer to exist under the Uniform Commercial Code or any similar law or statute of any jurisdiction, a financing statement (or the equivalent thereof) that names any Loan Party or any of its Subsidiaries as debtor, to sign or suffer to exist any security agreement authorizing any secured party thereunder to file such financing statement (or the equivalent thereof), to sell any of its property or assets subject to an understanding or agreement, contingent or otherwise, to repurchase such property or assets (including sales of accounts receivable) with
recourse to any Loan Party or any of its Subsidiaries or assign or otherwise transfer, or permit any of its Subsidiaries to assign or otherwise transfer, any account or other right to receive income, other than Permitted Liens.

(c) Indebtedness. Create, incur, assume, guarantee or suffer to exist, or otherwise become or remain liable with respect to, or permit any of their Subsidiaries to create, incur, assume, guarantee or suffer to exist or otherwise become or remain liable with respect to, any Indebtedness other than Permitted Indebtedness.

(d) Fundamental Changes. Wind-up, liquidate or dissolve (or permit or suffer any thereof) or merge, consolidate or amalgamate with any Person, convey, sell, lease or sublease, transfer or otherwise dispose of, whether in one transaction or a series of related transactions, all or any part of their business, property or assets, whether now owned or hereafter acquired, or (agree to do any of the foregoing) or purchase or otherwise acquire, whether in one transaction or a series of related transactions, all or substantially all of the assets of any Person (or any division thereof) (or agree to do any of the foregoing), or permit any of their Subsidiaries to do any of the foregoing; provided, however, that

(i) (A) Group and Frederick’s may consummate the Merger (which shall not be deemed to constitute a Change of Control with respect to any Person); (B) any Borrower may be merged into or may consolidate with another Borrower, (C) any Guarantor may be merged into or may consolidate with another Guarantor or (D) any wholly-owned Subsidiary of any Loan Party (other than the Borrowers or the Guarantors) may be merged into such Loan Party or another such wholly-owned Subsidiary of such Loan Party, or may

 

 

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consolidate with another such wholly-owned Subsidiary of such Loan Party, so long as (w) no other provision of this Agreement would be violated thereby, (x) such Loan Party gives the Agent at least 60 days’ prior written notice of such merger or consolidation, (y) no Default or Event of Default shall have occurred and be continuing either before or after giving effect to such transaction, and (z) the Lenders’ rights in any Collateral, including, without limitation, the existence, perfection and priority of any Lien thereon, are not adversely affected by such merger or consolidation;

(ii) any of the Loan Parties and their Subsidiaries may (A) sell Inventory in the ordinary course of business, (B) dispose of obsolete or worn-out equipment in the ordinary course of business, (C) dispose of Inventory in the ordinary course of business, (D) dispose of Inventory for cash in connection with store closings and lease expirations, provided that (w) no store of any of the Loan Parties may be closed other than (1) as specifically set forth in the Borrowers’ business plan or (2) with the prior written consent of the Agent, (x) the cash proceeds of Inventory sold in connection with any such store closing or expiration of lease shall not be less than 80% of the aggregate book value of such Inventory, (y) the Borrowers must hire a third party liquidator reasonably satisfactory to the Agent dispose of Inventory in connection with any such store closing or lease
expiration and (z) such cash shall immediately be applied in accordance with Section 2.05(c)(iii), and (E) sell or otherwise dispose of other property or assets for cash in an aggregate amount not less than the fair market value of such property or assets, provided that (x) the greater of the fair market value of all such property and assets and the cash received from all such sales and dispositions in any Fiscal Year shall in no event exceed $100,000 and (y) such cash shall immediately be applied in accordance with Section 2.05(c)(iii).

(e) Change in Nature of Business. Make, or permit any of their Subsidiaries to make, any change in the nature of its business as carried on at the date hereof. In the case of the Parent, engage in any business activities other than (i) ownership of the Capital Stock of the Borrowers other than Group and activities thereto, (ii) activities incidental to the maintenance of its corporate existence and (iii) performance of its obligations under the related transaction documents to which it is a party. 

(f) Loans, Advances, Investments, Etc. Make or commit or agree to make any Investment, or permit any of its Subsidiaries to do any of the foregoing, except for:  (i) Investments existing on the date hereof, as set forth on Schedule 7.02(f) hereto, but not any increase in the amount thereof as set forth in such Schedule or any other modification of the terms thereof, (ii) temporary loans and advances by any Loan Party to another Loan Party, made in the ordinary course of business, (iii) Permitted Investments held in Cash Management Accounts and up to $200,000 in the aggregate in Securities Accounts and DDAs not subject to a Control Agreement, (iv) Investments by any Loan Party in any other Loan Party provided that if such Investment is in form of Indebtedness (other than temporary
loans or advances permitted pursuant to clause (ii)) such Investment shall be subordinate to the Obligations on terms satisfactory to the Agent in its Permitted Discretion and (v) Investments by any Loan Party in any Subsidiary that is not a Loan Party in an aggregate amount not to exceed $500,000 at any one time outstanding. 

(g) Lease Obligations. Create, incur or suffer to exist, or permit any of their Subsidiaries to create, incur or suffer to exist, any obligations as lessee (i) for the payment of rent

 

 

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for any real or personal property in connection with any sale and leaseback transaction, or (ii) for the payment of rent for any real or personal property under leases or agreements to lease other than (A) Capitalized Lease Obligations which would not cause the aggregate amount of all obligations under Capitalized Leases entered into after the Effective Date owing by the Loan Parties and their Subsidiaries in any Fiscal Year to exceed $500,000, and (B) Operating Lease Obligations which would not result in the occurrence of an Event of Default.

(h) [Reserved].

(i) Restricted Payments. (i) Declare or pay any dividend or other distribution, direct or indirect, on account of any Capital Stock of any Loan Party or any of its Subsidiaries (other than dividends or distributions paid solely in common stock of Group or, to the extent permitted pursuant to the Restated Certificate of Incorporation of Group as in effect on the Effective Date, dividends or distributions paid solely in Series A 7.5% Convertible Preferred Stock so long as such Series A 7.5% Convertible Preferred Stock constitutes Subordinated Indebtedness), now or hereafter outstanding, (ii) make any repurchase, redemption, retirement, defeasance, sinking fund or similar payment, purchase or other acquisition for value, direct or indirect, of any Capital Stock of any Loan Party or any direct or indirect
parent of any Loan Party, now or hereafter outstanding, (iii) make any payment to retire, or to obtain the surrender of, any outstanding warrants, options or other rights for the purchase or acquisition of shares of any class of Capital Stock of any Loan Party, now or hereafter outstanding, (iv) return any of capital to any shareholders or other equity holders of any Loan Party or any of its Subsidiaries, or make any other distribution of property, assets, shares of Capital Stock, warrants, rights, options, obligations or securities thereto as such, (v) pay any management fees or any other fees or expenses (including the reimbursement thereof by any Loan Party or any of its Subsidiaries) pursuant to any management, consulting or other services agreement to any of the shareholders or other equity holders of any Loan Party or any of its Subsidiaries or other Affiliates, or to any other Subsidiaries or Affiliates of any Loan Party, provided that this Section 7.02(i) shall not prohibit payments not to exceed $100,000 per year to each member of the Board of Directors of Group and (E) so long as no Default or Event of Default has then occurred and is continuing at the time of any such payment, $400,000 in any calendar year, for Consulting Fees; or (vi) pay or prepay any Indebtedness in respect of the Subordinated Loan Agreement except to the extent such payment is then permitted pursuant to the terms of the Subordination Agreement.

(j) Federal Reserve Regulations. Permit any Loan or the proceeds of any Loan under this Agreement to be used for any purpose that would cause such Loans to be margin loans under the provisions of Regulation T, U or X of the Board.

(k) Transactions with Affiliates. Enter into, renew, extend or be a party to, or permit any of their Subsidiaries to enter into, renew, extend or be a party to any transaction or series of related transactions (including, without limitation, the purchase, sale, lease, transfer or exchange of property or assets of any kind or the rendering of services of any kind) with any Affiliate, except (i) in the ordinary course of business in an aggregate amount less than five hundred thousand dollars ($500,000) in a manner and to an extent consistent with past practice and necessary or desirable for the prudent operation of its business, for fair consideration and on terms no less favorable to the Loan Parties or such Subsidiaries than would be obtainable in a comparable arm’s length transaction with a
Person that is not an Affiliate thereof,

 

 

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(ii) transactions among the Loan Parties, (iii) the Subordinated Loan Agreement and transactions related thereto (subject to the terms and conditions of the Subordination Agreement) and (iv) the Consulting Agreement. 

(l) Limitations on Dividends and Other Payment Restrictions Affecting Subsidiaries. Create or otherwise cause, incur, assume, suffer or permit to exist or become effective any consensual encumbrance or restriction of any kind on the ability of any Subsidiary of any Loan Party (i) to pay dividends or to make any other distribution on any shares of Capital Stock of such Subsidiary owned by any Loan Party or any of its Subsidiaries, (ii) to pay or prepay or to subordinate any Indebtedness owed to any Loan Party or any of its Subsidiaries, (iii) to make loans or advances to any Loan Party or any of its Subsidiaries or (iv) to transfer any of its property or assets to any Loan Party or any of its Subsidiaries, or permit any of its Subsidiaries to do any of the
foregoing; provided, however, that nothing in any of clauses (i) through (iv) of this Section 7.02(l) shall prohibit or restrict compliance with:

(A) this Agreement and the other Loan Documents;

(B) any agreements in effect on the date of this Agreement and described on Schedule 7.02(l);

(C) any applicable law, rule or regulation (including, without limitation, applicable currency control laws and applicable state corporate statutes restricting the payment of dividends in certain circumstances);

(D) in the case of clause (iv) any agreement setting forth customary restrictions on the subletting, assignment or transfer of any property or asset that is a lease, license, conveyance or contract of similar property or assets; 

(E) in the case of clause (iv) any agreement, instrument or other document evidencing a Permitted Lien from restricting on customary terms the transfer of any property or assets subject thereto; or

(F) the Subordinated Loan Documents and the transactions contemplated thereby (subject to the terms and conditions of the Subordination Agreement).

(m) Limitation on Issuance of Capital Stock. Except for Group, issue or sell or enter into any agreement or arrangement for the issuance and sale of (other than, to the extent permitted pursuant to Section 7.02(f), to another Loan Party), or permit any of its Subsidiaries to issue or sell or enter into any agreement or arrangement for the issuance and sale of, any shares of its Capital Stock, any securities convertible into or exchangeable for its Capital Stock or any warrants. 

(n) Modifications of Indebtedness, Organizational Documents and Certain Other Agreements; Etc. (i) Amend, modify or otherwise change (or permit the amendment, modification or other change in any manner of) any of the provisions of (A) any of the Subordinated Loan Documents, or (B) any agreement, instrument or document evidencing or governing any of the other Indebtedness of Group or its Subsidiaries or any instrument or agreement (including, without limitation, any purchase agreement, indenture, loan agreement or

 

 

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security agreement) relating to any such Indebtedness if such amendment, modification or change would shorten the final maturity or average life to maturity of, or require any payment to be made earlier than the date originally scheduled on, such Indebtedness, would increase the interest rate applicable to such Indebtedness, would change the subordination provision, if any, of such Indebtedness, or would otherwise be adverse to the Lenders in any respect, (ii) except for the Obligations and except as otherwise expressly provided in Section 2.05(c)(iv), make any voluntary or optional payment, prepayment, redemption, defeasance, sinking fund payment or other acquisition for value of any of its or its Subsidiaries’ Indebtedness (including, without limitation, by way of depositing money or securities with the trustee therefor before the date required for the purpose of paying any portion
of such Indebtedness when due), or refund, refinance, replace or exchange any other Indebtedness for any such Indebtedness (except to the extent such Indebtedness is otherwise expressly permitted by the definition of “Permitted Indebtedness”), or make any payment, prepayment, redemption, defeasance, sinking fund payment or repurchase of any outstanding Indebtedness as a result of any asset sale, change of control, issuance and sale of debt or equity securities or similar event, or give any notice with respect to any of the foregoing, (iii) except as otherwise permitted amend, modify or otherwise change its name, jurisdiction of organization, organizational identification number or FEIN unless the Agent shall have been provided with not less than thirty (30) days prior written notice thereof, (iv) amend, modify or otherwise change its certificate of incorporation or bylaws (or other similar
organizational documents), including, without limitation, by the filing or modification of any certificate of designation, or any agreement or arrangement entered into by it, with respect to any of its Capital Stock (including any shareholders’ agreement), or enter into any new agreement with respect to any of its Capital Stock, except any such amendments, modifications or changes or any such new agreements or arrangements pursuant to this clause (iv) that either individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect, or (v) permit the Acquisition Documents or the Consulting Agreement to be amended or modified in any way which could reasonably be expected to adversely affect the interests of the Lenders without the prior written consent of the Lenders. 

(o) Investment Company Act of 1940. Engage in any business, enter into any transaction, use any securities or take any other action or permit any of its Subsidiaries to do any of the foregoing, that would cause it or any of its Subsidiaries to become subject to the registration requirements of the Investment Company Act of 1940, as amended, by virtue of being an “investment company” or a company “controlled” by an “investment company” not entitled to an exemption within the meaning of such Act.

(p) ERISA. (i) Engage, or permit any ERISA Affiliate to engage, in any transaction described in Section 4069 of ERISA; (ii) engage, or permit any ERISA Affiliate to engage, in any prohibited transaction described in Section 406 of ERISA or 4975 of the Internal Revenue Code for which a statutory or class exemption is not available or a private exemption has not previously been obtained from the U.S. Department of Labor; (iii) adopt or permit any ERISA Affiliate to adopt any employee welfare benefit plan within the meaning of Section 3(1) of ERISA which provides benefits to employees after termination of employment other than as required by Section 601 of ERISA or Section 4980B of the Internal Revenue Code; (iv) fail to make any contribution or payment to any Multiemployer Plan
which it or any ERISA Affiliate may be required to make under any agreement relating to such Multiemployer Plan, or any law pertaining thereto; (v) fail, or permit any ERISA Affiliate to fail, to pay any required installment

 

 

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or any other payment required under Section 412 of the Internal Revenue Code on or before the due date for such installment or other payment.

(q) Environmental. Permit the use, handling, generation, storage, treatment, release or disposal of Hazardous Materials at any property owned or operated by the Loan Parties or any of their Subsidiaries except in compliance with Environmental Laws and so long as such use, handling, generation, storage, treatment, release or disposal of Hazardous Materials does not result in a Material Adverse Effect. 

(r) [Reserved].

(s) [Reserved].

(t) Inventory with Bailees. Not store any Inventory with a bailee, warehouseman, or similar party unless the Agent has granted its prior written consent and the Borrowers have delivered to the Agent a Bailee Agreement, with respect to the applicable Inventory.

(u) Anti-Terrorism Laws. No Loan Party shall conduct, deal in or engage in or permit any Affiliate or agent of any Loan Party within its control to conduct, deal in or engage in any of the following activities: (i) conduct any business or engage in any transaction or dealing with any person blocked pursuant to Executive Order No. 13224 (“Blocked Person”), including the making or receiving any contribution of funds, goods or services to or for the benefit of any Blocked Person;  (ii) deal in, or otherwise engage in any transaction relating to, any property or interests in property blocked pursuant to Executive Order No. 13224; or (iii) engage in on conspire to engage
in any transaction that evades or avoids, or has the purpose of evading or avoiding, or attempts to violate, any of the prohibitions set forth in Executive Order No. 13224 or the USA Patriot Act. Each applicable Loan Party shall deliver to the Agent and the Lenders any certification or other evidence requested from time to time by the Agent or any Lender, in its sole, confirming compliance with this Section 7.02(u).

ARTICLE VIII

[Intentionally Omitted]

ARTICLE IX

EVENTS OF DEFAULT

SECTION 9.01. Events of Default. If any of the following Events of Default shall occur and be continuing:

(a) the Borrowers shall fail to pay any principal of or interest on any Revolving Loan, any Agent Advance, any Reimbursement Obligation or any fee, indemnity or other amount payable under this Agreement or any other Loan Document when due (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise); 

 

 

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(b) any representation or warranty made or deemed made by or on behalf of any Loan Party or by any officer of the foregoing under or in connection with any Loan Document or under or in connection with any report, certificate, or other document delivered to the Agent, the Lenders or the L/C Issuer pursuant to any Loan Document shall have been incorrect in any material respect when made or deemed made; 

(c) any Loan Party shall fail to perform or comply with any covenant or agreement contained in (i) paragraphs (b)(vi), (c), (e), (g), (i), (p), (q), (s) or clauses (i)(C), (i)(D) or (i)(E) of paragraph (t) of Section 7.01 or Section 7.02, or any Loan Party shall fail to perform or comply with any negative covenant contained in Section 6 of any Pledge Agreement to which it is a party or in Section 5 of any Security Agreement to which it is a party, (ii) paragraphs (h), (j), (k), (l), or (n) of Section 7.01, and such failure, if capable of being remedied, shall remain unremedied for fifteen (15) days, (iii) clauses (i), (ii), (iii) or (iv) of paragraph (b), paragraphs (f), (o) or clauses (i)(B) or (ii) of paragraph (t) of Section 7.01, and such failure, if capable of being remedied, shall remain unremedied for ten (10) days, or (iv) paragraph (a), clause (v) or any
of clauses (vii) through (xiv) of paragraph (b), paragraph (d), paragraph (m), paragraph (r), or clause (i)(A) of paragraph (t) of Section 7.01, and such failure, if capable of being remedied, shall remain unremedied for three (3) Business Days, provided that, after the sixth instance of a failure to comply with a reporting requirement in paragraph (a), paragraph (b) or paragraph (t) of Section 7.01 in any year, the ten (10) day grace period contained in clause (iii) of this paragraph (c) and the three (3) Business Day grace period contained in clause (iv) of this paragraph (c) shall not be applicable for the remainder of such year;

(d) any Loan Party shall fail to perform or comply with any other term, covenant or agreement contained in any Loan Document to be performed or observed by it and, except as set forth in subsections (a), (b) and (c) of this Section 9.01, such failure, if capable of being remedied, shall remain unremedied for fifteen (15) days after the earlier of the date a senior officer of any Loan Party becomes aware of such failure and the date written notice of such default shall have been given by the Agent to such Loan Party;

(e) any Loan Party shall fail to pay any principal of or interest on any of its Indebtedness (excluding Indebtedness evidenced by this Agreement) in excess of $50,000, or any interest or premium thereon, when due whether by scheduled maturity, required prepayment, acceleration, demand or otherwise and such failure shall continue after the applicable grace period, if any, specified in the agreement or instrument relating to any such Indebtedness, or any other event, shall occur and shall continue after the applicable grace period, if any, specified in such agreement or instrument, if the effect of such default or event is to accelerate, or to permit the acceleration of, the maturity of such Indebtedness; or any such Indebtedness shall be declared to be due and payable, or required to be prepaid (other than by a regularly scheduled required prepayment), redeemed, purchased or
defeased or an offer to prepay, redeem, purchase or defease such Indebtedness shall be required to be made, in each case, prior to the stated maturity thereof;

(f) any Loan Party (i) shall institute any proceeding or voluntary case seeking to adjudicate it a bankrupt or insolvent, or seeking dissolution, liquidation, winding up, reorganization, arrangement, adjustment, protection, relief or composition of it or its debts under any law relating to bankruptcy, insolvency, reorganization or relief of debtors, or seeking the

 

 

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entry of an order for relief or the appointment of a receiver, trustee, custodian or other similar official for any such Person or for any substantial part of its property, (ii) shall be generally not paying its debts as such debts become due or shall admit in writing its inability to pay its debts generally, (iii) shall make a general assignment for the benefit of creditors, or (iv) shall take any action to authorize or effect any of the actions set forth above in this subsection (f);

(g) any proceeding shall be instituted against any Loan Party seeking to adjudicate it bankrupt or insolvent, or seeking dissolution, liquidation, winding up, reorganization, arrangement, adjustment, protection, relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee, custodian or other similar official for any such Person or for any substantial part of its property, and such proceeding shall remain undismissed or unstayed for a period of sixty (60) days or any receiver, trustee, custodian or other similar official is appointed to take possession of or operate all or any portion of the Property of any Loan Party;

(h) any material provision of any Loan Document shall at any time for any reason (other than pursuant to the express terms thereof) cease to be valid and binding on or enforceable against any Loan Party intended to be a party thereto, or the validity or enforceability thereof shall be contested by any party thereto, or a proceeding shall be commenced by any other Loan Party or any Governmental Authority having jurisdiction over any of them, seeking to establish the invalidity or unenforceability thereof, or any Loan Party shall deny in writing that it has any liability or obligation purported to be created under any Loan Document;

(i) any Security Agreement, any Pledge Agreement or any other security document, after delivery thereof pursuant hereto, shall for any reason fail or cease to create a valid and perfected (to the extent that Agent or the Lenders have taken steps to effect perfection) and, except to the extent permitted by the terms hereof or thereof, first priority Lien (subject to Permitted Liens) in favor of the Agent for the benefit of the Lenders on any Collateral purported to be covered thereby;

(j) any bank at which any deposit account, blocked account, or lockbox account of any Loan Party is maintained shall fail to comply with any of the terms of any deposit account, blocked account, lockbox account or similar agreement to which such bank is a party or any securities intermediary, commodity intermediary or other financial institution at any time in custody, control or possession of any investment property of any Loan Party shall fail to comply with any of the terms of any investment property control agreement to which such Person is a party;

(k) one or more judgments or orders for the payment of money exceeding $500,000 in the aggregate shall be rendered against any Loan Party and remain unsatisfied and either (i) enforcement proceedings shall have been commenced by any creditor upon any such judgment or order, or (ii) there shall be a period of thirty (30) consecutive days after entry thereof during which a stay of enforcement of any such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; provided, however, that any such judgment or order shall not give rise to an Event of Default under this subsection (k) if and for so long as (A) the amount of such judgment or order is covered by a valid and binding policy of insurance 

 

 

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between the defendant and the insurer covering full payment thereof and (B) such insurer has been notified, and has not disputed the claim made for payment, of the amount of such judgment or order;

(l) any Loan Party is enjoined, restrained or in any way prevented by the order of any court or any Governmental Authority from conducting all or any material part of its business for more than fifteen (15) days;

(m) any material damage to, or loss, theft or destruction of, any Collateral, whether or not insured, or any strike, lockout, labor dispute, embargo, condemnation, act of God or public enemy, or other casualty which causes, for more than fifteen (15) consecutive days, the cessation or substantial curtailment of revenue producing activities at any facility of any Loan Party, if any such event or circumstance could reasonably be expected to have a Material Adverse Effect;

(n) any cessation of a substantial part of the business of any Loan Party for a period which materially and adversely affects the ability of such Person to continue its business on a profitable basis;

(o) the loss, suspension or revocation of, or failure to renew, any license or permit now held or hereafter acquired by any Loan Party, if such loss, suspension, revocation or failure to renew could reasonably be expected to have a Material Adverse Effect;

(p) the indictment, or to the knowledge of such Loan Party, threatened indictment, of any Loan Party under any criminal statute, or commencement of criminal or civil proceedings against any Loan Party, pursuant to which statute or proceedings the penalties or remedies sought or available include forfeiture to any Governmental Authority of any material portion of the property of such Person;

(q) any Loan Party or any of its ERISA Affiliates shall have made a complete or partial withdrawal from a Multiemployer Plan, and, as a result of such complete or partial withdrawal any Loan Party or such ERISA Affiliate incurs a withdrawal liability in an annual amount exceeding $100,000; or a Multiemployer Plan enters reorganization status under Section 4241 of ERISA, and, as a result thereof such Loan Party’s, or such ERISA Affiliate’s annual contribution requirement with respect to such Multiemployer Plan increases in an annual amount exceeding $100,000;

(r) any Termination Event with respect to any Employee Plan shall have occurred, and, thirty (30) days after notice thereof shall have been given to any Loan Party by the Agent, (i) such Termination Event (if correctable) shall not have been corrected, and (ii) the then current value of such Employee Plan’s benefit liabilities exceeds the then current value of such Employee Plan’s assets determined in accordance with the assumptions used by the PBGC for plan terminations by more than $100,000 (or, in the case of a Termination Event involving liability under Section 409, 502(i), 502(l), 515, 4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or Section 4971 or 4975 of the Internal Revenue Code, the liability is in excess of such amount);

 

 

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(s) any Loan Party shall be liable for any Environmental Liabilities and Costs, the payment of which could reasonably be expected to have a Material Adverse Effect; 

(t) any provision of the Subordination Agreement shall at any time for any reason (other than pursuant to the express terms thereof) cease to be valid and binding on or enforceable against any holder of the Subordinated Indebtedness by the holders of any Senior Indebtedness (as defined in the Subordination Agreement), or the validity or enforceability thereof shall be contested by any party thereto, or a proceeding shall be commenced by any holder of the Subordinated Indebtedness or any Governmental Authority having jurisdiction over any of them, seeking to establish the invalidity or unenforceability thereof, or any holder of the Subordinated Indebtedness shall deny in writing that it has any liability or obligation purported to be created under the Subordination Agreement; or any of the Obligations (including, without limitation, to pay principal of and interest on the
Revolving Loans, the Reimbursement Obligations, and all fees, costs and expenses in connection therewith) shall not constitute “Senior Indebtedness” (as defined in the Subordination Agreement) for any reason;

(u) a Change of Control shall occur; and

(v) any “Event of Default” (as defined in any Subordination Loan Document) shall occur;

 then, and in any such event, the Agent may, and shall at the request of the Required Lenders, by notice to Administrative Borrower, (i) terminate the Revolving Credit Commitments, whereupon the Revolving Credit Commitments shall terminate immediately, (ii) declare all Revolving Loans and Reimbursement Obligations then outstanding to be due and payable, whereupon the aggregate principal of such Revolving Loans and Reimbursement Obligations, all accrued and unpaid interest thereon, all fees and all other amounts payable under this Agreement shall become due and payable immediately, without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by each Loan Party and (iii) exercise any and all of its other rights and remedies
  under applicable law (including, but not limited to, the Bankruptcy Code and the Uniform Commercial Code), hereunder and under the other Loan Documents; provided, however, that upon the occurrence of any Event of Default described in subsection (f) or (g) of this Section 9.01, without any notice to any Loan Party or any other Person or any act by the Agent or any Lender, all Revolving Credit Commitments shall automatically terminate and all Revolving Loans and Reimbursement Obligations then outstanding, together with all accrued and unpaid interest thereon, all fees and all other amounts due under this Agreement and the other Loan Documents shall become due and payable automatically and immediately, without presentment, demand, protest or notice of any kind, all of which are expressly waived by each Loan Party. Upon demand by the
    Agent after the occurrence and during the continuation of any Event of Default, the Borrowers shall deposit with the Agent with respect to each Letter of Credit then outstanding cash in an amount equal to one hundred and four percent (104%) of the aggregate maximum amount available for drawing under such outstanding Letters of Credit to be held by L/C Issuer as cash collateral for the application toward the Reimbursement Obligations or provided indemnification agreements or back-stop letters of credit, in form and substance reasonably satisfactory to the Agent, from a commercial bank or other financial institution acceptable to the Agent in its absolute discretion for any Letter of Credit Obligations with respect to such Letters of Credit.

 

 

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ARTICLE X

AGENT

SECTION 10.01. Appointment. Each Lender (and each subsequent holder of any Revolving Credit Note by its acceptance thereof) hereby irrevocably appoints and authorizes the Agent to perform the duties of the Agent as set forth in this Agreement including:  (i) to receive on behalf of each Lender any payment of principal of or interest on the Revolving Credit Notes outstanding hereunder and all other amounts accrued hereunder for the account of the Lenders and paid to the Agent, and, subject to Section 2.02 of this Agreement, to distribute promptly to each Lender its Pro Rata Share of all payments so received; (ii) to distribute to each Lender copies of all material notices and agreements received by the Agent and not required to be delivered to each Lender pursuant to the terms of this
Agreement, provided that the Agent shall not have any liability to the Lenders for the Agent’s inadvertent failure to distribute any such notices or agreements to the Lenders; (iii) to maintain, in accordance with its customary business practices, ledgers and records reflecting the status of the Obligations, the Revolving Loans, and related matters and to maintain, in accordance with its customary business practices, ledgers and records reflecting the status of the Collateral and related matters; (iv) to execute or file any and all financing or similar statements or notices, amendments, renewals, supplements, documents, instruments, proofs of claim, notices and other written agreements with respect to this Agreement or any other Loan Document; (v) to make the Revolving Loans and the Agent Advances, for the Agent or on behalf of the applicable Lenders as provided in this Agreement or any other Loan Document; (vi) to perform, exercise, and enforce any and all
other rights and remedies of the Lenders with respect to the Loan Parties, the Obligations, or otherwise related to any of same to the extent reasonably incidental to the exercise by the Agent of the rights and remedies specifically authorized to be exercised by the Agent by the terms of this Agreement or any other Loan Document; (vii)  to incur and pay such fees necessary or appropriate for the performance and fulfillment of its functions and powers pursuant to this Agreement or any other Loan Document; and (viii) subject to Section 10.03 of this Agreement, to take such action as the Agent deems appropriate on its behalf to administer the Revolving Loans and the Loan Documents and to exercise such other powers delegated to the Agent by the terms hereof or the Loan Documents (including, without limitation, the power to give or to refuse to give notices, waivers, consents, approvals and instructions and the power to make or to refuse to make determinations and
calculations) together with such powers as are reasonably incidental thereto to carry out the purposes hereof and thereof. As to any matters not expressly provided for by this Agreement and the other Loan Documents (including, without limitation, enforcement or collection of the Revolving Credit Notes), the Agent shall not be required to exercise any discretion or take any action, but shall be required to act or to refrain from acting (and shall be fully protected in so acting or refraining from acting) upon the instructions of the Required Lenders, and such instructions of the Required Lenders shall be binding upon all Lenders and all holders of Revolving Credit Notes; provided, however, that the L/C Issuer shall not be required to refuse to honor a drawing under any Letter of Credit and the Agent shall not be required to take
any action which, in the reasonable opinion of the Agent, exposes the Agent to liability or which is contrary to this Agreement or any Loan Document or applicable law.

SECTION 10.02. Nature of Duties. The Agent shall have no duties or responsibilities except those expressly set forth in this Agreement or in the Loan Documents. 

 

 

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The duties of the Agent shall be mechanical and administrative in nature. The Agent shall not have by reason of this Agreement or any Loan Document a fiduciary relationship in respect of any Lender. Nothing in this Agreement or any of the Loan Documents, express or implied, is intended to or shall be construed to impose upon the Agent any obligations in respect of this Agreement or any of the Loan Documents except as expressly set forth herein or therein. Each Lender shall make its own independent investigation of the financial condition and affairs of the Loan Parties in connection with the making and the continuance of the Loans hereunder and shall make its own appraisal of the creditworthiness of the Loan Parties and the value of the Collateral, and the Agent shall have no duty or responsibility, either initially or on a continuing basis, to provide any Lender with any credit or other
information with respect thereto, whether coming into its possession before the initial Revolving Loan hereunder or at any time or times thereafter, provided that, upon the reasonable request of a Lender, the Agent shall provide to such Lender any documents or reports delivered to the Agent by the Loan Parties pursuant to the terms of this Agreement or any Loan Document. If the Agent seeks the consent or approval of the Required Lenders to the taking or refraining from taking any action hereunder, the Agent shall send notice thereof to each Lender. The Agent shall promptly notify each Lender any time that the Required Lenders have instructed the Agent to act or refrain from acting pursuant hereto.

SECTION 10.03. Rights, Exculpation, Etc. The Agent and its directors, officers, agents or employees shall not be liable for any action taken or omitted to be taken by it under or in connection with this Agreement or the other Loan Documents. Without limiting the generality of the foregoing, the Agent (i) may treat the payee of any Revolving Credit Note as the holder thereof until the Agent receives written notice of the assignment or transfer thereof, pursuant to Section 12.07 hereof, signed by such payee and in form satisfactory to the Agent; (ii) may consult with legal counsel (including, without limitation, counsel to the Agent or counsel to the Loan Parties), independent public accountants, and other experts selected by it and shall not be liable for any action taken or omitted to
be taken in good faith by it in accordance with the advice of such counsel or experts; (iii) makes no warranty or representation to any Lender and shall not be responsible to any Lender for any statements, certificates, warranties or representations made in or in connection with this Agreement or the other Loan Documents; (iv) shall not have any duty to ascertain or to inquire as to the performance or observance of any of the terms, covenants or conditions of this Agreement or the other Loan Documents on the part of any Person, the existence or possible existence of any Default or Event of Default, or to inspect the Collateral or other property (including, without limitation, the books and records) of any Person; (v) shall not be responsible to any Lender for the due execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or the other Loan Documents or any other instrument or document furnished pursuant hereto or thereto; and
(vi) shall not be deemed to have made any representation or warranty regarding the existence, value or collectibility of the Collateral, the existence, priority or perfection of the Agent’s Lien thereon, or any certificate prepared by any Loan Party in connection therewith, nor shall the Agent be responsible or liable to the Lenders for any failure to monitor or maintain any portion of the Collateral. The Agent shall not be liable for any apportionment or distribution of payments made in good faith pursuant to Section 2.02(c), and if any such apportionment or distribution is subsequently determined to have been made in error the sole recourse of any Lender to whom payment was due but not made, shall be to recover from other Lenders any payment in excess of the amount which they are determined to be entitled. The Agent may at any time request instructions from the Lenders with respect to any actions or approvals which by the terms of this 

 

 

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Agreement or of any of the Loan Documents the Agent is permitted or required to take or to grant, and if such instructions are promptly requested, the Agent shall be absolutely entitled to refrain from taking any action or to withhold any approval under any of the Loan Documents until it shall have received such instructions from the Required Lenders. Without limiting the foregoing, no Lender shall have any right of action whatsoever against the Agent as a result of the Agent acting or refraining from acting under this Agreement, the Revolving Credit Notes or any of the other Loan Documents in accordance with the instructions of the Required Lenders.

SECTION 10.04. Reliance. The Agent shall be entitled to rely upon any written notices, statements, certificates, orders or other documents or any telephone message believed by it in good faith to be genuine and correct and to have been signed, sent or made by the proper Person, and with respect to all matters pertaining to this Agreement or any of the Loan Documents and its duties hereunder or thereunder, upon advice of counsel selected by it.

SECTION 10.05. Indemnification. To the extent that the Agent is not reimbursed and indemnified by any Loan Party, the Lenders will reimburse and indemnify the Agent and the L/C Issuer from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses, advances or disbursements of any kind or nature whatsoever which may be imposed on, incurred by, or asserted against the Agent or the L/C Issuer in any way relating to or arising out of this Agreement or any of the Loan Documents or any action taken or omitted by the Agent or the L/C Issuer under this Agreement or any of the Loan Documents, in proportion to each Lender’s Pro Rata Share, including, without limitation, advances and disbursements made pursuant to Section 10.08; provided, however, that no Lender shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses, advances or disbursements for which there has been a final judicial determination that such resulted from the Agent’s or the L/C Issuer’s gross negligence or willful misconduct. The obligations of the Lenders under this Section 10.05 shall survive the payment in full of the Revolving Loans and the termination of this Agreement. 

SECTION 10.06. Agent Individually. With respect to its Pro Rata Share of the Total Revolving Credit Commitment hereunder, the Revolving Loans made by it and the Revolving Credit Notes issued to or held by it, the Agent shall have and may exercise the same rights and powers hereunder and is subject to the same obligations and liabilities as and to the extent set forth herein for any other Lender or holder of a Revolving Credit Note. The terms “Lenders” or “Required Lenders” or any similar terms shall, unless the context clearly otherwise indicates, include the Agent in its individual capacity as a Lender or one of the Required Lenders. The Agent and its Affiliates may accept deposits from, lend money to, and generally engage in any kind of banking, trust or other business with the
Borrowers as if it were not acting as an Agent pursuant hereto without any duty to account to the Lenders.

SECTION 10.07. Successor Agent.

(a) The Agent may resign from the performance of all its functions and duties hereunder and under the other Loan Documents at any time by giving at least thirty (30) Business Days’ prior written notice to Administrative Borrower and each Lender. Such resignation shall take effect upon the acceptance by a successor Agent of appointment pursuant to clauses (b) and (c) below or as otherwise provided below.

 

 

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(b) Upon any such notice of resignation, the Required Lenders shall appoint a successor Agent who, in the absence of a continuing Event of Default, shall be reasonably satisfactory to the Borrowers; provided, however, Wells Fargo Retail shall be deemed satisfactory to the Borrowers. Upon the acceptance of any appointment as the Agent hereunder by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations under this Agreement and the other Loan Documents. After the Agent’s resignation hereunder as the Agent, the provisions of this Article X shall inure to its benefit as to any actions taken or omitted to be taken by it while it was the Agent under this Agreement and the other Loan Documents.

(c) If a successor Agent shall not have been so appointed within said thirty (30) Business Day period, the retiring Agent shall then appoint a successor Agent who, if an Event of Default is not continuing, shall be reasonably satisfactory to the Borrowers, who shall serve as the Agent until such time, if any, as the Required Lenders appoint a successor Agent as provided above.

SECTION 10.08. Collateral Matters.

(a) The Agent may from time to time, during the occurrence and continuance of an Event of Default, make such disbursements and advances (“Agent Advances”) which the Agent, in its sole discretion, deems necessary or desirable to preserve or protect the Collateral or any portion thereof, to enhance the likelihood or maximize the amount of repayment by the Borrowers of the Revolving Loans, Reimbursement Obligations, Letter of Credit Obligations and other Obligations (other than the Bank Product Obligations) or to pay any other amount chargeable to the Borrowers pursuant to the terms of this Agreement, including, without limitation, costs, fees and expenses as described in Section 12.04. The Agent Advances shall be repayable on demand and be secured by the Collateral. The Agent Advances
shall not constitute Revolving Loans but shall otherwise constitute Obligations hereunder. The Agent shall notify each Lender and Administrative Borrower in writing of each Agent Advance, which notice shall include a description of the purpose of such Agent Advance. Without limitation to its obligations pursuant to Section 10.05, each Lender agrees that it shall make available to the Agent, upon the Agent’s demand, in Dollars in immediately available funds, the amount equal to such Lender’s Pro Rata Share of such Agent Advance. If such funds are not made available to the Agent by such Lender, the Agent shall be entitled to recover such funds on demand from such Lender, together with interest thereon, for each day from the date such payment was due until the date such amount is paid to the Agent, at the Federal Funds Rate for three Business Days and thereafter at the Base Rate.

(b) The Lenders hereby irrevocably authorize the Agent, at its option and in its discretion, to release any Lien granted to or held by the Agent upon any Collateral upon termination of the Total Revolving Credit Commitment and payment and satisfaction of all Revolving Loans, Reimbursement Obligations, Letter of Credit Obligations and all other Obligations which have matured and which the Agent has been notified in writing are then due and payable; or constituting property being sold or disposed of in the ordinary course of any Loan Party’s business and in compliance with the terms of this Agreement and the other Loan Documents; or constituting property in which the Loan Parties owned no interest at the time the 

 

 

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Lien was granted or at any time thereafter; or if approved, authorized or ratified in writing by the Lenders. Upon request by the Agent at any time, the Lenders will confirm in writing the Agent’s authority to release particular types or items of Collateral pursuant to this Section 10.08(b).

(c) Without in any manner limiting the Agent’s authority to act without any specific or further authorization or consent by the Lenders (as set forth in Section 10.08(b)), each Lender agrees to confirm in writing, upon request by the Agent, the authority to release Collateral conferred upon the Agent under Section 10.08(b). Upon receipt by the Agent of confirmation from the Lenders of its authority to release any particular item or types of Collateral, and upon prior written request by any Loan Party, the Agent shall (and is hereby irrevocably authorized by the Lenders to) execute such documents as may be necessary to evidence the release of the Liens granted to the Agent for the benefit of the Lenders upon such Collateral; provided, however, that (i) the Agent shall not be required to execute any such document on terms which, in the Agent’s opinion, would expose the Agent to liability or create any obligations or entail any consequence other than the release of such Liens without recourse or warranty, and (ii) such release shall not in any manner discharge, affect or impair the Obligations or any Lien upon (or obligations of any Loan Party in respect of) all interests in the Collateral retained by any Loan Party.

(d) The Agent shall have no obligation whatsoever to any Lenders to assure that the Collateral exists or is owned by the Loan Parties or is cared for, protected or insured or has been encumbered or that the Lien granted to the Agent pursuant to this Agreement has been properly or sufficiently or lawfully created, perfected, protected or enforced or is entitled to any particular priority, or to exercise at all or in any particular manner or under any duty of care, disclosure or fidelity, or to continue exercising, any of the rights, authorities and powers granted or available to the Agent in this Section 10.08 or in any of the Loan Documents, it being understood and agreed that in respect of the Collateral, or any act, omission or event related thereto, the Agent may act in any manner it may deem appropriate, in its sole discretion, given the Agent’s own interest in the
Collateral as one of the Lenders and that the Agent shall have no duty or liability whatsoever to any other Lender.

SECTION 10.09. Agency for Perfection.  The Agent and each Lender hereby appoints the Agent and each other Lender as agent and bailee for the purpose of perfecting the security interests in and liens upon the Collateral in assets which, in accordance with Article 9 of the Uniform Commercial Code, can be perfected only by possession or control (or where the security interest of a secured party with possession or control has priority over the security interest of another secured party) and the Agent and each Lender hereby acknowledges that it holds possession of or otherwise controls any such Collateral for the benefit of the Agent and the Lenders as secured party. Should any Lender obtain possession or control of any such Collateral, such Lender shall notify the Agent thereof, and, promptly upon the
Agent’s request therefor shall deliver such Collateral to the Agent or in accordance with the Agent’s instructions. Each Loan Party by its execution and delivery of this Agreement hereby consents to the foregoing.

 

 

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ARTICLE XI

[Intentionally Omitted]

ARTICLE XII

MISCELLANEOUS

SECTION 12.01. Notices, Etc. All notices and other communications provided for hereunder shall be in writing and shall be mailed, telecopied or delivered, if to any Loan Party, at the following address:

Frederick’s of Hollywood Group Inc.

1115 Broadway

New York, New York  10010

Attention: Thomas Rende, Chief Financial Officer

Telephone:  212-798-4740

Telecopier:  212-798-4741

with a copy to:

Marci J. Frankenthaler

Graubard Miller

The Chrysler Building

405 Lexington Avenue

New York, New York 10174-1901

Telephone:  212-818-8892

Telecopier:  212-818-8881

Other Applicable Borrower

c/o Frederick’s of Hollywood, Inc.

6608 Hollywood Blvd.

Hollywood, California  90028

Attention:  Linda LoRe

Telephone:  323-957-5899

Telecopier:  323-464-4219

with a copy to:

Marilyn Barrett

Jeffer, Mangels, Butler & Marmaro LLP

1900 Avenue of the Stars, 7th Floor

Los Angeles, CA 90067-4308

Telephone:  310-201-3532

Telecopier:  310-712-8532

 

 

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if to the Agent, to it at the following address:

Wells Fargo Retail Finance II, LLC

One Boston Place

18th Floor

Boston, MA 02108

Attn:  Jennifer Cann

Telephone:  617-854-7260

Telecopier:  866-328-8599

with a copy to:

Proskauer Rose LLP

One International Place

Boston, MA 02110

Attention:  Peter J. Antoszyk, Esq. 

Telephone:  617-526-9749

Telecopier:  617-526-9899

or, as to each party, at such other address as shall be designated by such party in a written notice to the other party complying as to delivery with the terms of this Section 12.01. All such notices and other communications shall be effective, (i) if mailed, when received or three (3) days after deposited in the mails, whichever occurs first, (ii) if telecopied, when transmitted and confirmation received, or (iii) if delivered, upon delivery, except that notices to the Agent or the L/C Issuer pursuant to Article II shall not be effective until received by the Agent or the L/C Issuer. 

SECTION 12.02. Amendments, Etc. No amendment or waiver of any provision of this Agreement or any Revolving Credit Note, and no consent to any departure by the Borrowers or any other Loan Party therefrom, shall in any event be effective unless the same shall be in writing and signed by the Required Lenders and the Borrower, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given provided, however, that no amendment, waiver or consent shall (i) increase the Revolving Credit Commitment of any Lender, reduce the principal of, or interest on, the Revolving Loans or the
Reimbursement Obligations payable to any Lender, reduce the amount of any fee payable for the account of any Lender, or postpone or extend any date fixed for any payment of principal of, or interest or fees on, the Revolving Loans or Letter of Credit Obligations payable to any Lender, in each case without the written consent of any Lender affected thereby, (ii) increase the Total Revolving Credit Commitment without the written consent of each Lender, (iii) change the percentage of the Revolving Credit Commitments or of the aggregate unpaid principal amount of the Revolving Credit Notes that is required for the Lenders or any of them to take any action hereunder, (iv) amend the definition of “Required Lenders” or “Pro Rata Share”, (v) release all or a substantial portion of the Collateral (except as otherwise provided in this Agreement and the other Loan Documents), subordinate any Lien granted in favor of the Agent for the benefit of the
Lenders, or release any Borrower or any Guarantor, (vi) modify, waive, release or subordinate the priority of the Obligations (except as permitted in this Agreement and the Loan Documents), or (vii) amend, modify or waive this Section 12.02 of this Agreement, in each case without the 

 

 

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written consent of each Lender. Notwithstanding the foregoing, no amendment, waiver or consent shall, unless in writing and signed by the Agent, affect the rights or duties of the Agent (but not in its capacity as a Lender) under this Agreement or the other Loan Documents.

SECTION 12.03. No Waiver; Remedies, Etc. No failure on the part of the Agent or any Lender to exercise, and no delay in exercising, any right hereunder or under any other Loan Document shall operate as a waiver thereof; nor shall any single or partial exercise of any right under any Loan Document preclude any other or further exercise thereof or the exercise of any other right. The rights and remedies of the Agent and the Lenders provided herein and in the other Loan Documents are cumulative and are in addition to, and not exclusive of, any rights or remedies provided by law. The rights of the Agent and the Lenders under any Loan Document against any party thereto are not conditional or contingent on any attempt by the Agent and the Lenders to exercise any of their rights under any other Loan
Document against such party or against any other Person.

SECTION 12.04. Expenses; Taxes; Attorneys’ Fees. The Borrowers will pay on demand, all reasonable costs and expenses incurred by or on behalf of the Agent (and, in the case of clauses (c) through (m) below, the Lenders), regardless of whether the transactions contemplated hereby are consummated, including, without limitation, reasonable fees, costs, client charges and expenses of counsel for the Agent (and, in the case of clauses (c) through (m) below, the Lenders), accounting, due diligence, periodic field audits, physical counts, valuations, investigations, searches and filings, monitoring of assets, appraisals of Collateral, environmental assessments, miscellaneous disbursements, examination, travel, lodging and meals, arising from or relating to:  (a) the negotiation, preparation, execution,
delivery, performance and administration of this Agreement and the other Loan Documents, (including, without limitation, the preparation of any additional Loan Documents, pursuant to Section 7.01(c), (b) any requested amendments, waivers or consents to this Agreement or the other Loan Documents whether or not such documents become effective or are given, (c) the preservation and protection of any of the Lenders’ rights under this Agreement or the other Loan Documents, (d) the defense of any claim or action asserted or brought against the Agent or the Lenders by any Person that arises from or relates to this Agreement, any other Loan Document, the Agent’s or the Lenders’ claims against the Borrowers and each other Loan Party, or any and all matters in connection therewith, (e) the commencement or defense of, or intervention in, any court proceeding arising from or related to this Agreement or any other Loan Document, (f) the filing of any petition,
complaint, answer, motion or other pleading by the Agent or the Lenders, or the taking of any action in respect of the Collateral or other security, in connection with this Agreement or any other Loan Document, (g) the protection, collection, lease, sale, taking possession of or liquidation of, any Collateral or other security in connection with this Agreement or any other Loan Document, (h) any attempt to enforce any Lien or security interest in any Collateral or other security in connection with this Agreement or any other Loan Document, (i) any attempt to collect from the Borrowers or any other Loan Party, (j) the receipt by the Agent or the Lenders of any advice from professionals with respect to any of the foregoing, (k) all liabilities and costs arising from or in connection with the past, present or future operations of the Borrowers and each other Loan Party involving any damage to real or personal property or natural resources or harm or injury alleged to have resulted from
any Release of Hazardous Materials on, upon or into such property, (l) any Environmental Liabilities and Costs incurred in connection with the investigation, removal, cleanup and/or remediation of any Hazardous Materials present or arising out of the operations 

 

 

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of any facility of any Borrower or any other Loan Party, or (m) any Environmental Liabilities and Costs incurred in connection with any Environmental Lien. Without limitation of the foregoing or any other provision of any Loan Document:  (x) the Borrowers agree to pay all stamp, document, transfer, recording or filing taxes or fees and similar impositions now or hereafter reasonably determined by the Agent or any Lender to be payable in connection with this Agreement or any other Loan Document, and the Borrowers agree to save the Agent and the Lenders harmless from and against any and all present or future claims, liabilities or losses with respect to or resulting from any omission to pay or delay in paying any such taxes, fees or impositions, (y) the Borrowers agree to pay all broker fees that may become due in connection with the transactions contemplated by this Agreement, and (z) if the
Borrowers fail to perform any covenant or agreement contained herein or in any other Loan Document, the Agent may itself perform or cause performance of such covenant or agreement, and the expenses of the Agent incurred in connection therewith shall be reimbursed on demand by the Borrowers; provided that prompt written notice of any such actions taken by the Agent shall be given to Group; provided further, that the failure to provide such notice shall not relieve the obligation of the Borrowers to reimburse the Agent in connection therewith.

SECTION 12.05. Right of Set-off. Upon the occurrence and during the continuance of any Event of Default, any Lender may, and is hereby authorized to, at any time and from time to time, without notice to the Borrowers (any such notice being expressly waived by the Borrowers) and to the fullest extent permitted by law, set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by such Lender to or for the credit or the account of the Borrowers against any and all obligations of either now or hereafter existing under any Loan Document, irrespective of whether or not such Lender shall have made any demand hereunder or thereunder and although such obligations may be contingent or unmatured. Each Lender agrees
to notify Administrative Borrower promptly after any such set-off and application made by such Lender provided that the failure to give such notice shall not affect the validity of such set-off and application.

SECTION 12.06. Severability. Any provision of this Agreement, which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining portions hereof or affecting the validity or enforceability of such provision in any other jurisdiction.

SECTION 12.07. Assignments and Participations.

(a) This Agreement and the Revolving Credit Notes shall be binding upon and inure to the benefit of the Borrowers and the other the Loan Parties and the Agent and each Lender and their respective successors and assigns; provided, however, that each of the Borrowers and the other Loan Parties may not assign or transfer any of their rights hereunder, or under the Revolving Credit Notes, without the prior written consent of each Lender and any such assignment without the Lenders’ prior written consent shall be null and void.

(b) Each Lender may, with the written consent of the Agent and, in the absence of a continuing Event of Default, the Administrative Borrower (such consent in the case of the Administrative Borrower is not required in the case of Affiliates of any Lender and is not 

 

 

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to be unreasonably withheld or delayed), assign to one or more other lenders or other entities all or a portion of its rights and obligations under this Agreement (including, without limitation, all or a portion of its Revolving Credit Commitment, the Revolving Loans made by it, the Revolving Credit Notes held by it and its Pro Rata Share of Letter of Credit Obligations); provided, however, that (i) except in the case of assignments to Affiliates of a Lender in which case there are no minimums, such assignment is in an amount which is at least $1,000,000 or a multiple of $100,000 in excess thereof (or the remainder of such Lender’s Revolving Credit Commitment) (except such minimum amount shall not apply to an assignment by a Lender to
an Affiliate of such Lender or a fund or account managed by such Lender or an Affiliate of such Lender) and (ii) the parties to each such assignment shall execute and deliver to the Agent, for its acceptance, an Assignment and Acceptance, together with any Revolving Credit Note subject to such assignment and, except in the case of assignments to Affiliates of a Lender, such parties shall deliver to the Agent a processing and recordation fee of $5,000 (except the payment of such fee shall not be required in connection with an assignment by a Lender to an Affiliate of such Lender or a fund or account managed by such Lender or an Affiliate of such Lender) and (iii) no written consent of the Agent shall be required in connection with any assignment by a Lender to an Affiliate of such Lender or a fund or account managed by such Lender or an Affiliate of such Lender. Upon such execution, delivery and acceptance, from and after the effective date specified in each Assignment and
Acceptance, which effective date shall be at least three Business Days after the delivery thereof to the Agent (or such shorter period as shall be agreed to by the Agent and the parties to such assignment), (A) the assignee thereunder shall become a “Lender” hereunder and, in addition to the rights and obligations hereunder held by it immediately prior to such effective date, have the rights and obligations hereunder that have been assigned to it pursuant to such Assignment and Acceptance and (B) the assigning Lender thereunder shall, to the extent that rights and obligations hereunder have been assigned by it pursuant to such Assignment and Acceptance, relinquish its rights and be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all or the remaining portion of an assigning Lender’s rights and obligations under this Agreement, such Lender shall cease to be a party hereto). 

(i) By executing and delivering an Assignment and Acceptance, the assigning Lender and the assignee thereunder confirm to and agree with each other and the other parties hereto as follows:  (A) other than as provided in such Assignment and Acceptance, the assigning Lender makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Agreement or any other Loan Document or the execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or any other Loan Document furnished pursuant hereto; (B) the assigning Lender makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Loan Parties or any of their Subsidiaries or the performance or observance by the Loan Parties of any of
their obligations under this Agreement or any other Loan Document furnished pursuant hereto; (C) such assignee confirms that it has received a copy of this Agreement and the other Loan Documents, together with such other documents and information it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Acceptance; (D) such assignee will, independently and without reliance upon the Assigning Lender, the Agent or any Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement and the other 

 

 

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Loan Documents; (E) such assignee appoints and authorizes the Agent to take such action as Agent on its behalf and to exercise such powers under this Agreement and the other Loan Documents as are delegated to the Agent by the terms thereof, together with such powers as are reasonably incidental thereto; and (F) such assignee agrees that it will perform in accordance with their terms all of the obligations which by the terms of this Agreement and the other Loan Documents are required to be performed by it as a Lender.

(ii) The Agent shall maintain, or cause to be maintained at its offices, a copy of each Assignment and Acceptance delivered to and accepted by it and a register for the recordation of the names and addresses of the Lenders and the Revolving Credit Commitments of, and principal amount of the Revolving Loans and Letter of Credit Obligations owing to each Lender from time to time (the “Register”). The entries in the Register shall be conclusive and binding for all purposes, absent manifest error, and the Borrowers, the Agent and the Lenders may treat each Person whose name is recorded in the Register as a Lender hereunder for all purposes of this Agreement. The Register shall be available for inspection by Administrative Borrower and any Lender at any reasonable time and from time to time upon reasonable prior notice.

(iii) Upon its receipt of an Assignment and Acceptance executed by an assigning Lender and an assignee, together with the Revolving Credit Notes subject to such assignment, the Agent shall, if the Agent consents to such assignment and if such Assignment and Acceptance has been completed (i) accept such Assignment and Acceptance, (ii)  give prompt notice thereof to Administrative Borrower, (iii) record the information contained therein in the Register, and (iv) prepare and distribute to each Lender and Administrative Borrower a revised Schedule 1.01(C) hereto after giving effect to such assignment, which revised Schedule 1.01(C) shall replace the prior Schedule 1.01(C) and become part of this Agreement.

(iv) Any foreign Person who purchases or is assigned or participates in any portion of a Revolving Loan shall provide the Agent (in the case of a purchase or assignment) or the Lender (in the case of a participation) with a completed Internal Revenue Service Form W-8 (Certificate of Foreign Status) or a substantially similar form for such purchaser, participant or any other affiliate who is a holder of beneficial interests in the Revolving Loan.

(c) Each Lender may sell participations to one or more banks or other entities in or to all or a portion of its rights and obligations under this Agreement and the other Loan Documents (including, without limitation, all or a portion of its Revolving Credit Commitment, the Revolving Loans made by it and its Pro Rata Share of the Letter of Credit Obligations); provided, that (i) such Lender’s obligations under this Agreement (including without limitation, its Revolving Credit Commitment hereunder) and the other Loan Documents shall remain unchanged; (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, and the Borrowers, the Agent and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement and the other Loan
Documents, and (iii) a participant shall not be entitled to require such Lender to take or omit to take any action hereunder except (A) action directly effecting an extension of the maturity dates or decrease in the principal amount of the Revolving Loans or Letter of Credit Obligations, or (B) action directly effecting an extension 

 

 

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of the due dates or a decrease in the rate of interest payable on the Revolving Loans or the fees payable under this Agreement, or (C) actions directly effecting a release of all or a substantial portion of the Collateral or any Borrower or any Guarantor (except as set forth in Section 10.08 of this Agreement or any Loan Document). The Loan Parties agree that each participant shall be entitled to the benefits of Section 2.08 and Section 4.05 of this Agreement with respect to its participation in any portion of the Revolving Credit Commitments and the Revolving Loans as if it were a Lender.

SECTION 12.08. Counterparts. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which shall be deemed to be an original, but all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of this Agreement by telecopier shall be equally as effective as delivery of an original executed counterpart of this Agreement. Any party delivering an executed counterpart of this Agreement by telecopier also shall deliver an original executed counterpart of this Agreement but the failure to deliver an original executed counterpart shall not affect the validity, enforceability, and binding effect of this Agreement. The foregoing shall apply to each other Loan Document mutatis mutandis.

SECTION 12.09. GOVERNING LAW. THIS AGREEMENT, THE REVOLVING CREDIT NOTES AND THE OTHER LOAN DOCUMENTS (UNLESS EXPRESSLY PROVIDED TO THE CONTRARY IN ANOTHER LOAN DOCUMENT IN RESPECT OF SUCH OTHER LOAN DOCUMENT) SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED IN THE STATE OF NEW YORK.

SECTION 12.10. CONSENT TO JURISDICTION; SERVICE OF PROCESS AND VENUE. ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK IN THE COUNTY OF NEW YORK OR OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH LOAN PARTY HEREBY IRREVOCABLY ACCEPTS IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS. EACH LOAN PARTY HEREBY IRREVOCABLY APPOINTS THE SECRETARY OF STATE OF THE STATE OF NEW YORK AS ITS AGENT FOR SERVICE OF PROCESS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING AND FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS AND IN ANY SUCH ACTION OR
PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO THE ADMINISTRATIVE BORROWER AT ITS ADDRESS FOR NOTICES AS SET FORTH IN SECTION 12.01 AND TO THE SECRETARY OF STATE OF THE STATE OF NEW YORK, SUCH SERVICE TO BECOME EFFECTIVE TEN (10) DAYS AFTER SUCH MAILING. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE AGENT AND THE LENDERS TO SERVICE OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST ANY LOAN PARTY IN ANY OTHER JURISDICTION. EACH LOAN PARTY HEREBY EXPRESSLY AND 

 

 

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IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE JURISDICTION OR LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. TO THE EXTENT THAT ANY LOAN PARTY HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, EACH LOAN PARTY HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.

SECTION 12.11. WAIVER OF JURY TRIAL, ETC. EACH LOAN PARTY, THE AGENT AND EACH LENDER HEREBY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM CONCERNING ANY RIGHTS UNDER THIS AGREEMENT, THE REVOLVING CREDIT NOTES OR OTHER LOAN DOCUMENTS, OR UNDER ANY AMENDMENT, WAIVER, CONSENT, INSTRUMENT, DOCUMENT OR OTHER AGREEMENT DELIVERED OR WHICH IN THE FUTURE MAY BE DELIVERED IN CONNECTION THEREWITH, OR ARISING FROM ANY FINANCING RELATIONSHIP EXISTING IN CONNECTION WITH THIS AGREEMENT, AND AGREES THAT ANY SUCH ACTION, PROCEEDINGS OR COUNTERCLAIM SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY. EACH LOAN PARTY CERTIFIES THAT NO OFFICER, REPRESENTATIVE, AGENT OR ATTORNEY OF THE AGENT OR ANY LENDER HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT THE AGENT OR ANY LENDER WOULD NOT, IN
THE EVENT OF ANY ACTION, PROCEEDING OR COUNTERCLAIM, SEEK TO ENFORCE THE FOREGOING WAIVERS. EACH LOAN PARTY HEREBY ACKNOWLEDGES THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE AGENT AND THE LENDERS ENTERING INTO THIS AGREEMENT.

SECTION 12.12. Consent by the Agent and Lenders. Except as otherwise expressly set forth herein to the contrary, if the consent, approval, satisfaction, determination, judgment, acceptance or similar action (an “Action”) of the Agent or any Lender shall be permitted or required pursuant to any provision hereof or any provision of any other agreement to which the Borrowers and any other Loan Party are parties and to which the Agent or any Lender has succeeded thereto, such Action shall be required to be in writing and may be withheld or denied by the Agent or such Lender, in its sole discretion, with or without any reason, and without being subject to question or challenge on the grounds that such Action was not taken in good faith.

SECTION 12.13. Integration. This Agreement, together with the other Loan Documents, reflects the entire understanding of the parties with respect to the transactions contemplated hereby and shall not be contradicted or qualified by any other agreement, oral or written, before the date hereof.

SECTION 12.14. No Party Deemed Drafter. Each of the parties hereto agrees that no party hereto shall be deemed to be the drafter of this Agreement.

 

 

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SECTION 12.15. Reinstatement; Certain Payments. If any claim is ever made upon the any Agent, any Lender or the L/C Issuer for repayment or recovery of any amount or amounts received by the Agent, such Lender or the L/C Issuer in payment or on account of any of the Obligations, the Agent, such Lender or the L/C Issuer shall give prompt notice of such claim to each other Agent and Lender and Administrative Borrower, and if the Agent, such Lender or the L/C Issuer repays all or part of such amount by reason of (i) any judgment, decree or order of any court or administrative body having jurisdiction over the Agent, such Lender or the L/C Issuer or any of its property, or (ii) any good faith settlement or compromise of any such claim effected by the Agent, such Lender or
the L/C Issuer with any such claimant, then and in such event each Loan Party agrees that (A) any such judgment, decree, order, settlement or compromise shall be binding upon it notwithstanding the cancellation of any Indebtedness hereunder or under the other Loan Documents or the termination of this Agreement or the other Loan Documents, and (B) it shall be and remain liable to the Agent, such Lender or the L/C Issuer hereunder for the amount so repaid or recovered to the same extent as if such amount had never originally been received by such Agent, the Lender or the L/C Issuer.

SECTION 12.16. Group as the Agent for the Borrowers. Each Borrower hereby irrevocably appoints Group as the borrowing agent and attorney-in-fact for the Borrowers which appointment shall remain in full force and effect unless and until the Agent shall have received prior written notice signed by all of the Borrowers that such appointment has been revoked and that another Borrower has been so appointed. Each Borrower hereby irrevocably appoints and authorizes Group (i) to provide the Agent with all notices with respect to Revolving Loans obtained for the benefit of any Borrower and all other notices and instructions under this Agreement and (ii) to take such action as Group deems appropriate on its behalf to obtain Revolving Loans and to exercise such other powers as are reasonably incidental
thereto to carry out the purposes of this Agreement. It is understood that the handling of the Loan Account and Collateral of the Borrowers in a combined fashion, as more fully set forth herein, is done solely as an accommodation to the Borrowers in order to utilize the collective borrowing powers of the Borrowers in the most efficient and economical manner and at their request, and that neither the Agent, the Lenders, nor the L/C Issuer shall incur liability to the Borrowers as a result hereof. Each of the Borrowers expects to derive benefit, directly or indirectly, from the handling of the Loan Account and the Collateral in a combined fashion since the successful operation of each Borrower is dependent on the continued successful performance of the integrated group. To induce the Agent, the Lenders and the L/C Issuer to do so, and in consideration thereof, each of the Borrowers hereby jointly and severally agrees to indemnify the Indemnitees (as hereinafter defined) and hold the
Indemnitees harmless against any and all liability, expense, loss or claim of damage or injury, made against such Indemnitee by any of the Borrowers or by any third party whosoever, arising from or incurred by reason of (a) the handling of the Loan Account and Collateral of the Borrowers as herein provided, (b) the Agent and the Lenders relying on any instructions of Group, or (c) any other action taken by the Agent, any Lender or the L/C Issuer hereunder or under the other Loan Documents.

SECTION 12.17. Indemnification. In addition to each Loan Party’s other Obligations under this Agreement, each Loan Party agrees to, jointly and severally, defend, protect, indemnify and hold harmless the Agent, each Lender, the L/C Issuer and all of their respective officers, directors, employees, attorneys, consultants and agents (collectively called 

 

 

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the “Indemnitees”) from and against any and all losses, damages, liabilities, obligations, penalties, fees, reasonable costs and expenses (including, without limitation, reasonable attorneys’ fees, costs and expenses) incurred by such Indemnitees, whether prior to or from and after the Effective Date, whether direct, indirect or consequential, as a result of or arising from or relating to or in connection with any of the following:  (i) the negotiation, preparation, execution or performance or enforcement of this Agreement, any other Loan Document or of any other document executed in connection with the transactions contemplated by this Agreement, (ii) the Agent’s or any Lender’s furnishing of funds to the Borrowers or the L/C Issuer’s issuing of Letters of Credit for the account of the Borrowers under this Agreement, including, without limitation, the
management of any such Revolving Loans, the Reimbursement Obligations or the Letter of Credit Obligations, (iii) any matter relating to the financing transactions contemplated by this Agreement or the other Loan Documents or by any document executed in connection with the transactions contemplated by this Agreement or the other Loan Documents, or (iv) any claim, litigation, investigation or proceeding relating to any of the foregoing, whether or not any Indemnitee is a party thereto (collectively, the “Indemnified Matters”); provided, however, that the Loan Parties shall not have any obligation to any Indemnitee under this Section 12.17 for any Indemnified Matter caused by the gross negligence or willful misconduct of such Indemnitee, as determined by a final judgment of a court of competent jurisdiction.
Such indemnification for all of the foregoing losses, damages, fees, costs and expenses of the Indemnitees are chargeable against the Loan Account. To the extent that the undertaking to indemnify, pay and hold harmless set forth in this Section 12.17 may be unenforceable because it is violative of any law or public policy, each Loan Party shall, jointly and severally, contribute the maximum portion which it is permitted to pay and satisfy under applicable law, to the payment and satisfaction of all Indemnified Matters incurred by the Indemnitees. This Indemnity shall survive the repayment of the Obligations and the discharge of the Liens granted under the Loan Documents.

SECTION 12.18. Records. The unpaid principal of and interest on the Notes, the interest rate or rates applicable to such unpaid principal and interest, the duration of such applicability, the Revolving Credit Commitments, and the accrued and unpaid fees payable pursuant to Section 2.06 hereof, including, without limitation, the Closing Fee, Loan Servicing Fee, the Letter of Credit Fee and the Unused Line Fee, shall at all times be ascertained from the records of the Agent, which shall be conclusive and binding absent manifest error.

SECTION 12.19. Binding Effect. This Agreement shall become effective when it shall have been executed by each Loan Party, the Agent and each Lender and when the conditions precedent set forth in Section 5.01 hereof have been satisfied or waived in writing by the Agent, and thereafter shall be binding upon and inure to the benefit of each Loan Party, the Agent and each Lender, and their respective successors and assigns, except that the Loan Parties shall not have the right to assign their rights hereunder or any interest herein without the prior written consent of each Lender, and any assignment by any Lender shall be governed by Section 12.07 hereof.

SECTION 12.20. Confidentiality. The Agent and each Lender agrees (on behalf of itself and each of its affiliates, directors, officers, employees and representatives) to use reasonable precautions to keep confidential, in accordance with its customary procedures for handling confidential information of this nature and in accordance with safe and sound practices of comparable commercial finance companies, any non-public information supplied to it by the 

 

 

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Loan Parties pursuant to this Agreement or the other Loan Documents which is identified by the Loan Parties as being confidential at the time the same is delivered to such Person (and which at the time is not, and does not thereafter become, publicly available or available to such Person from another source not known to be subject to a confidentiality obligation to such Person not to disclose such information), provided that nothing herein shall limit the disclosure of any such information (i) to the extent required by statute, rule, regulation or judicial process, (ii) to counsel for the Agent or any Lender, (iii) to examiners, auditors or accountants, (iv) in connection with any litigation to which the Agent or any Lender is a party or (v) to any assignee or participant (or prospective
assignee or participant) so long as such assignee or participant (or prospective assignee or participant) first agrees, in writing, to be bound by confidentiality provisions similar in substance to this Section 12.20. The Agent and each Lender agrees that, upon receipt of a request or identification of the requirement for disclosure pursuant to clause (iv) hereof, it will make reasonable efforts to keep the Loan Parties informed of such request or identification; provided that the each Loan Party acknowledges that the Agent and each Lender may make disclosure as required or requested by any Governmental Authority or representative thereof and that the Agent and each Lender may be subject to review by Securitization Parties or other regulatory agencies and may be required to provide to, or otherwise make available for review by, the representatives of such parties or agencies any such non-public
information.

SECTION 12.21. Limitations on Liability of Officers. Anything herein or in any other Loan Document to the contrary notwithstanding any and all references to the actions, obligations and/or liabilities of any Borrower shall refer only to the actions, obligations and/or liabilities of the Borrower and shall not impose any personal obligations or liabilities on the officers thereof, provided that no officer of a Borrower shall be exonerated or exculpated for any deficiency, loss or damage suffered by the Agent or any of the Lenders as a result of any fraud or malfeasance by such officer.

SECTION 12.22. Intent to Limit Charges to Maximum Lawful Rate. In no event shall the interest rate or rates payable under this Agreement, plus any other amounts paid in connection herewith, exceed the highest rate permissible under any law that a court of competent jurisdiction shall, in a final determination, deem applicable. The Borrowers, the Lenders and the Agent, in executing and delivering this Agreement, intend legally to agree upon the rate or rates of interest and manner of payment stated within it; provided, however, that, anything contained herein to the contrary notwithstanding, if said rate or rates of interest or manner of payment
exceeds the maximum allowable under applicable law, then, ipso facto, as of the date of this Agreement, the Borrowers are and shall be liable only for the payment of such maximum as allowed by law, and any payment received from the Borrowers in excess of such legal maximum, whenever received, shall be applied to reduce the principal balance of the Obligations to the extent of such excess.

SECTION 12.23. USA Patriot Act-Notice. Each Lender (for itself and not on behalf of any Lender) hereby notifies each of the Loan Parties that pursuant to the requirements of the USA Patriot Act (Title III of Pub.L. 107-56 (signed into law October 26, 2001)) (the “Patriot Act”), it is required to obtain, verify and record information that identifies the Loan Parties, which information includes the name and address of each of the Loan Parties and other information that will allow such Lender, as applicable, to identify each Loan Party in accordance with the Patriot Act.

 

 

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written.

 


  	 
	 
	BORROWERS:

	 
	 
	FREDERICK’S OF HOLLYWOOD GROUP INC.

	 
	 
	

By: 
	/s/ Thomas Rende

	 
	 
	 
	Name: Thomas Rende

	 
	 
	 
	Title:  Chief Financial Officer





 


  	 
	 
	FOH HOLDINGS, INC.

	 
	 
	

By: 
	/s/ Linda LoRe 

	 
	 
	 
	Name: Linda LoRe

	 
	 
	 
	Title: President and Chief Executive Officer 





 


  	 
	 
	FREDERICK’S OF HOLLYWOOD, INC.

	 
	 
	

By: 
	/s/ Linda LoRe 

	 
	 
	 
	Name: Linda LoRe

	 
	 
	 
	Title: President and Chief Executive Officer





 


  	 
	 
	FREDERICK’S OF HOLLYWOOD STORES, INC.

	 
	 
	

By: 
	/s/  Linda LoRe 

	 
	 
	 
	Name: Linda LoRe

	 
	 
	 
	Title: President and Chief Executive Officer





 


  	 
	 
	HOLLYWOOD MAIL ORDER, LLC

	 
	 
	

By: FOH Holdings, Inc., its Manager

	 
	 
	

By: 
	/s/ Linda LoRe 

	 
	 
	 
	Name: Linda LoRe

	 
	 
	 
	Title: President and Chief Executive Officer





 


  	 
	 
	AGENT AND LENDER:

	 
	 
	WELLS FARGO RETAIL FINANCE II, LLC

	 
	 
	

By: 
	/s/ Jennifer Cann 

	 
	 
	 
	Name: Jennifer Cann

	 
	 
	 
	Title:nbsp; Senior Vice President





 

 










Schedule 1.01(C)

Lenders and Lenders’ Commitments

 


  	Lender
	 
	Revolving Credit Commitment
	 
	Percentage

	Wells Fargo Retail Finance II, LLC 
	 
	$25,000,0002
	 
	100.00%

	Total
	 
	$25,000,000
	 
	100.00%





______________

  	2
	Subject to Section 2.01(c) of this Agreement.





 

 










 

 

AMENDED AND RESTATED FINANCING AGREEMENT

Dated as of January 28, 2008

by and among

FREDERICK’S OF HOLLYWOOD GROUP INC.,

and

CERTAIN OF ITS SUBSIDIARIES,

as Borrowers,


   



THE FINANCIAL INSTITUTIONS FROM TIME TO TIME PARTY HERETO


   



and

WELLS FARGO RETAIL FINANCE II, LLC,

as the Arranger and Agent

 

 

 

 










TABLE OF CONTENTS

 


  	 
	 
	 
	 
	Page
	 

	ARTICLE I DEFINITIONS; CERTAIN TERMS
	 
	1
	 

	SECTION 1.01.
	 
	Definitions
	 
	1
	 

	SECTION 1.02.
	 
	Terms Generally
	 
	30
	 

	SECTION 1.03.
	 
	Accounting and Other Terms
	 
	30
	 

	SECTION 1.04.
	 
	Time References
	 
	30
	 

	ARTICLE II THE LOANS
	 
	31
	 

	SECTION 2.01.
	 
	Revolving Credit Commitments
	 
	31
	 

	SECTION 2.02.
	 
	Making the Loans
	 
	32
	 

	SECTION 2.03.
	 
	Revolving Credit Notes; Repayment of Loans
	 
	34
	 

	SECTION 2.04.
	 
	Interest
	 
	34
	 

	SECTION 2.05.
	 
	Reduction of Commitment; Prepayment of Revolving Loans
	 
	37
	 

	SECTION 2.06.
	 
	Fees
	 
	39
	 

	SECTION 2.07.
	 
	Cash Management
	 
	40
	 

	SECTION 2.08.
	 
	Taxes
	 
	41
	 

	SECTION 2.09.
	 
	Early Termination by Borrowers
	 
	43
	 

	ARTICLE IIA LETTERS OF CREDIT
	 
	44
	 

	SECTION 2.01A. 
	 
	Letter of Credit Guaranty
	 
	44
	 

	SECTION 2.02A.
	 
	Participations
	 
	46
	 

	SECTION 2.03A.
	 
	Letters of Credit
	 
	47
	 

	ARTICLE III [Intentionally Omitted]
	 
	49
	 

	ARTICLE IV FEES, PAYMENTS AND OTHER COMPENSATION
	 
	49
	 

	SECTION 4.01.
	 
	Audit and Collateral Monitoring Fees
	 
	49
	 

	SECTION 4.02.
	 
	Payments; Computations and Statements
	 
	49
	 

	SECTION 4.03.
	 
	Sharing of Payments, Etc.
	 
	50
	 

	SECTION 4.04.
	 
	Apportionment of Payments
	 
	50
	 

	SECTION 4.05.
	 
	Increased Costs and Reduced Return
	 
	51
	 

	SECTION 4.06.
	 
	Joint and Several Liability of the Borrowers
	 
	52
	 

	ARTICLE V CONDITIONS TO LOANS
	 
	53
	 

	SECTION 5.01.
	 
	Conditions Precedent to Effectiveness
	 
	53
	 

	SECTION 5.02.
	 
	Conditions Precedent to all Revolving Loans and Letters of Credit
	 
	56
	 

	ARTICLE VI REPRESENTATIONS AND WARRANTIES
	 
	58
	 

	SECTION 6.01.
	 
	Representations and Warranties
	 
	58
	 

	ARTICLE VII COVENANTS
	 
	66
	 

	SECTION 7.01.
	 
	Affirmative Covenants
	 
	66
	 

	SECTION 7.02.
	 
	Negative Covenants
	 
	75
	 

	ARTICLE VIII [Intentionally Omitted]
	 
	80
	 

	ARTICLE IX EVENTS OF DEFAULT
	 
	80
	 





 

 

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	Page
	 

	SECTION 9.01.
	 
	Events of Default
	 
	80
	 

	ARTICLE X AGENT
	 
	85
	 

	SECTION 10.01.
	 
	Appointment
	 
	85
	 

	SECTION 10.02.
	 
	Nature of Duties
	 
	85
	 

	SECTION 10.03.
	 
	Rights, Exculpation, Etc.
	 
	86
	 

	SECTION 10.04.
	 
	Reliance
	 
	87
	 

	SECTION 10.05.
	 
	Indemnification
	 
	87
	 

	SECTION 10.06.
	 
	Agent Individually
	 
	87
	 

	SECTION 10.07.
	 
	Successor Agent
	 
	87
	 

	SECTION 10.08.
	 
	Collateral Matters
	 
	88
	 

	SECTION 10.09.
	 
	Agency for Perfection
	 
	89
	 

	ARTICLE XI [Intentionally Omitted]
	 
	90
	 

	ARTICLE XII MISCELLANEOUS
	 
	90
	 

	SECTION 12.01.
	 
	Notices, Etc.
	 
	90
	 

	SECTION 12.02.
	 
	Amendments, Etc.
	 
	91
	 

	SECTION 12.03.
	 
	No Waiver; Remedies, Etc.
	 
	92
	 

	SECTION 12.04.
	 
	Expenses; Taxes; Attorneys’ Fees
	 
	92
	 

	SECTION 12.05.
	 
	Right of Set-off
	 
	93
	 

	SECTION 12.06.
	 
	Severability
	 
	93
	 

	SECTION 12.07.
	 
	Assignments and Participations
	 
	93
	 

	SECTION 12.08.
	 
	Counterparts
	 
	96
	 

	SECTION 12.09.
	 
	GOVERNING LAW
	 
	96
	 

	SECTION 12.10.
	 
	CONSENT TO JURISDICTION; SERVICE OF PROCESS AND VENUE
	 
	96
	 

	SECTION 12.11.
	 
	WAIVER OF JURY TRIAL, ETC.
	 
	97
	 

	SECTION 12.12.
	 
	Consent by the Agent and Lenders
	 
	97
	 

	SECTION 12.13.
	 
	Integration
	 
	97
	 

	SECTION 12.14.
	 
	No Party Deemed Drafter
	 
	97
	 

	SECTION 12.15.
	 
	Reinstatement; Certain Payments
	 
	98
	 

	SECTION 12.16.
	 
	Frederick’s as Agent for Borrowers
	 
	98
	 

	SECTION 12.17.
	 
	Indemnification
	 
	98
	 

	SECTION 12.18.
	 
	Records
	 
	99
	 

	SECTION 12.19.
	 
	Binding Effect
	 
	99
	 

	SECTION 12.20.
	 
	Confidentiality
	 
	99
	 

	SECTION 12.21.
	 
	Limitations on Liability of Officers
	 
	100
	 

	SECTION 12.22.
	 
	Intent to Limit Charges to Maximum Lawful Rate
	 
	100
	 

	SECTION 12.23.
	 
	USA Patriot Act Notice
	 
	100
	 





 

 

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SCHEDULES AND EXHIBITS

 


  	Schedule 1.01(A)
	 
	Guarantors

	Schedule 1.01(B)
	 
	Eligible Jurisdictions

	Schedule 1.01(C)
	 
	Lenders and Revolving Credit Commitments

	Schedule 1.01(D)
	 
	Permitted Holders

	Schedule 1.01(E)
	 
	Warehouse Locations

	Schedule 2.07(a)
	 
	Cash Management Banks; Cash Management Accounts

	Schedule 2.03A(a)(ii)
	 
	Existing Letters of Credit

	Schedule 6.01(e)
	 
	Subsidiaries

	Schedule 6.01(f)
	 
	Litigation; Commercial Tort Claims

	Schedule 6.01(i)
	 
	ERISA

	Schedule 6.01(o)
	 
	Real Property

	Schedule 6.01(q)
	 
	Environmental Matters

	Schedule 6.01(r)
	 
	Insurance

	Schedule 6.01(u)
	 
	Bank Accounts

	Schedule 6.01(v)
	 
	Intellectual Property

	Schedule 6.01(w)
	 
	Material Contracts

	Schedule 6.01(z)
	 
	Name; Jurisdiction of Organization; Organizational ID Number; Chief Place of Business; FEIN

	Schedule 6.01(ee)
	 
	Credit Card Processors

	Schedule 6.01(ff)
	 
	Acquisition: Material Consents and Approvals

	Schedule 7.01(a)
	 
	Collateral Reporting Requirements

	Schedule 7.01(m)
	 
	Collateral Locations

	Schedule 7.01(v)
	 
	Post-Effective Date Obligations

	Schedule 7.02(b)
	 
	Existing Liens

	Schedule 7.02(f)
	 
	Existing Investments

	Schedule 7.02(l)
	 
	Limitations on Dividends and Other Payment Restrictions

	Exhibit A
	 
	Form of Revolving Credit Note

	Exhibit B
	 
	Form of Guaranty

	Exhibit C
	 
	Form of Notice of Borrowing

	Exhibit D
	 
	Form of Bailee Agreement

	Exhibit E
	 
	Acquisition Agreement

	Exhibit F
	 
	Form of Assignment and Acceptance

	Exhibit G
	 
	Form of Pledge Agreement

	Exhibit H
	 
	Form of Security Agreement

	Exhibit I
	 
	Form of Compliance Certificate

	Exhibit J
	 
	Form of Borrowing Base Certificate

	Exhibit K
	 
	Form of Letter of Credit Application

	Exhibit L
	 
	Form of Credit Card Bank Depository Account Agreement

	Exhibit M
	 
	Form of Collateral Access Agreement

	Exhibit N
	 
	Form of LIBOR Notice

	Exhibit O
	 
	Form of Plan Projections





 

 

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EXHIBIT A

FORM OF REVOLVING CREDIT NOTE

See Exhibit 10.8 of this Form 8-K

 

 














EXHIBIT B

FORM OF GUARANTY

GUARANTY, dated [___________], made by [NAME OF GUARANTOR], a [_____________] (“Guarantor”), in favor of each of the Lenders (as hereinafter defined) and Wells Fargo Retail Finance II, LLC, as agent for the Lenders (the “Agent”) pursuant to the Financing Agreement referred to below.

WITNESSETH:

WHEREAS, Fredericks of Hollywood Group Inc., a New York corporation (“Group”), FOH Holdings, Inc., a Delaware corporation (the “Parent”), Frederick’s of Hollywood, Inc., a Delaware corporation (“Frederick’s”), Frederick’s of Hollywood Stores, Inc., a Nevada corporation (“Stores”), Hollywood Mail Order LLC, a Nevada limited liability company (“Mail Order”; together with the Group, Parent, Frederick’s and Stores, each, a
“Borrower” and collectively, the “Borrowers”), the financial institutions from time to time party thereto (each individually a “Lender” and collectively, the “Lenders”), and the Agent are parties to an Amended and Restated Financing Agreement, dated as of January [__], 2008 (such Agreement, as amended, restated or otherwise modified from time to time, being hereinafter referred to as the “Financing Agreement”);

WHEREAS, pursuant to the Financing Agreement, the Lenders have agreed to make certain revolving credit loans to the Borrowers and to provide a subfacility for the issuance of letters of credit for the account of the Borrowers;

WHEREAS, Group directly or indirectly owns all of the issued and outstanding shares of capital stock of Guarantor;

WHEREAS, it is a condition precedent to the making of any Revolving Loan or the provision of any Letter of Credit or Letter of Credit Guaranty pursuant to the Financing Agreement that Guarantor shall have executed and delivered to the Agent and the Lenders a guaranty guaranteeing the obligations of the Borrowers under the Loan Documents (as defined in the Financing Agreement);

WHEREAS, the Borrowers and the Guarantor are mutually dependent on each other in the conduct of their respective businesses as an integrated operation, with the credit needed from time to time by the Guarantor often being provided through financing obtained by the Borrowers and the ability of the Borrowers to obtain such financing being dependent on the successful operations of the Guarantor; and

WHEREAS, Guarantor has determined that its execution, delivery and performance of this Guaranty directly benefit, and are within the purposes and in the best interests of, Guarantor;

NOW, THEREFORE, in consideration of the premises and the agreements herein and in order to induce the Lenders to make and maintain the Revolving Loans pursuant to the Financing Agreement, Guarantor hereby agree with the Lenders and the Agent as follows:

 

 








SECTION 1. Definitions. Reference is hereby made to the Financing Agreement for a statement of the terms thereof. All terms used in this Guaranty which are defined therein and not otherwise defined herein shall have the same meanings herein as set forth therein.

SECTION 2. Guaranty. Guarantor hereby (i) irrevocably, absolutely and unconditionally guarantees the prompt payment by the Borrowers, as and when due and payable (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise), of all amounts now or hereafter owing in respect of the Revolving Credit Notes, the Financing Agreement and the other Loan Documents, whether for principal, interest (including, without limitation, interest accruing on or after the commencement of any Insolvency Proceeding relating to a Borrower), Bank Product Obligations, Reimbursement Obligations, Letter of Credit Obligations, premiums, indemnities, fees, costs, expenses (including, without limitation, fees, costs and expenses arising or accruing on or after the commencement of any Insolvency Proceeding
relating to a Borrower), or otherwise, and whether accruing before or subsequent to the commencement of any Insolvency Proceeding relating to a Borrower (notwithstanding the operation of the automatic stay under Section 362(a) of the Bankruptcy Code), and the due performance and observance by each Borrower of its other obligations now or hereafter existing in respect of the Loan Documents (collectively, the “Obligations”); and (ii) agrees to pay any and all expenses (including counsel fees, costs and expenses) incurred by the Agent, the L/C Issuer and the Lenders in enforcing any of their rights under this Guaranty. Without limiting the generality of the foregoing, Guarantor’s liability shall extend to all amounts that constitute part of the Obligations and would be owed by a Borrower under the Financing Agreement or other Loan Documents but for the fact that such document is unenforceable or
not allowable due to the existence of an Insolvency Proceeding involving a Borrower.

SECTION 3. Guarantor’s Obligations Unconditional.

(a) Guarantor hereby guarantees that the Obligations will be paid strictly in accordance with the terms of the Loan Documents, regardless of any law, regulation or order now or hereafter in effect in any jurisdiction affecting any of such terms or the rights of the Agent, the L/C Issuer or the Lenders with respect thereto. Guarantor agrees that its guarantee constitutes a guaranty of payment when due and not of collection and waives any right to require that any resort be made by the Agent, the L/C Issuer or the Lenders to any Collateral. The obligations of Guarantor under this Guaranty are independent of the obligations under the Financing Agreement and the other Loan Documents, and a separate action or actions may be brought and prosecuted against Guarantor to enforce this Guaranty, irrespective of whether any action is brought against any Borrower or any other Loan Party or
whether any Borrower or any other Loan Party is joined in any such action. The liability of Guarantor hereunder shall be absolute and unconditional irrespective of: (i) any lack of validity or enforceability of any Loan Document or any agreement or instrument relating thereto; (ii) any change in the time, manner or place of payment of, or in any other term in respect of, all or any of the Obligations, or any other amendment or waiver of or consent to any departure from any provision of any Loan Document (including the creation or existence of any Obligations in excess of the amount permitted by any lending formulas contained in the Loan Documents or the amount evidenced by the Loan Documents); (iii) any exchange or release of, or non-perfection of any Lien on or security

 

 

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interest in, any Collateral, or any release or amendment or waiver of or consent to any departure from any other guaranty, for all or any of the Obligations; (iv) the existence of any claim, set-off, defense or other right that Guarantor may have at any time against any Person, including, without limitation, the Agent, the L/C Issuer or any of the Lenders, or (v) any other circumstance which might otherwise constitute a defense available to, or a discharge of, any Borrower or any Loan Party in respect of the Obligations or Guarantor in respect hereof.

(b) This Guaranty (i) is a continuing guaranty and shall remain in full force and effect until such date on which all of the Obligations and all other expenses to be paid by the Guarantor pursuant hereto shall have been Paid in Full after the Total Revolving Credit Commitment shall have been terminated and the Letters of Credit are cancelled or cash collateralized and (ii) shall continue to be effective or shall be reinstated, as the case may be, if at any time any payment of any of the Obligations is rescinded or must otherwise be returned by the Agent, the L/C Issuer or any Lender, in connection with an Insolvency Proceeding with respect to a Borrower or otherwise, all as though such payment had not been made. As used herein, “Paid in Full” means the indefeasible, full and final payment in
cash, in immediately available funds, of all the Obligations (whether or not any of the Obligations shall have been voided, disallowed or subordinated pursuant to any provision of the Bankruptcy Code, any applicable state fraudulent conveyance law, any other law in connection with an Insolvency Proceeding or otherwise) after (A) the termination of the Revolving Credit Commitments and (B) (1) the termination of all Letters of Credit and all Letter of Credit Guaranties or (2) the receipt by the Agent of cash collateral (or at the Agent’s option, a letter of credit issued for the account of the applicable Loan Parties and at the expense of the applicable Loan Parties, in form and substance satisfactory to the Agent, by an issuer acceptable to the Agent and payable to the Agent as beneficiary) in such amounts as the Agent determines are reasonably necessary to secure the Agent and the Lenders from loss, cost, damage or expense, including attorneys’ fees, costs and expenses, in
connection with any contingent Obligations, including issued and outstanding Letters of Credit and Letter of Credit Guaranties and checks or other payments provisionally credited to the Obligations and/or as to which the Agent or any Lender has not yet received final and indefeasible payment. All Letters of Credit and Letter of Credit Guaranties shall be cash collateralized (or collateralized by such letter of credit) by an amount equal to one hundred four percent (104%) of the greatest amount for which the Letters of Credit and Letter of Credit Guaranties then existing may be drawn, plus the amount of any fees and expenses payable in connection therewith through the end of the latest expiration date of any such Letters of Credit and Letter of Credit Guaranties. The expressions “prior payment in full”, “payment in full”, “paid or satisfied in full” and “paid in full” (whether or not such expressions are capitalized) and other similar phrases
shall have correlative meanings.

SECTION 4. Waivers.

(a) Guarantor hereby waives: (i) promptness and diligence; (ii) notice of acceptance and notice of the incurrence of any Obligation by the Borrowers; (iii) notice of any actions taken by the Agent, the L/C Issuer, the Borrowers, any Loan Party or any Lender under any Loan Document or any other agreement or instrument relating thereto; (iv) all other notices, demands and protests, and all other formalities of every kind in connection with the enforcement of the Obligations or of the obligations of Guarantor hereunder, the omission of or delay in

 

 

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which, but for the provisions of this Section 4, might constitute grounds for relieving Guarantor of its obligations hereunder; (v) any right to compel or direct the Agent, the L/C Issuer or the Lenders to seek payment or recovery of any amounts owed under this Guaranty from any one particular fund or source; (vi) any requirement that the Agent protect, secure, perfect or insure any security interest or Lien or any property subject thereto or exhaust any right or take any action against any Borrower, any Loan Party or any other Person or any Collateral; and (vii) any other defense available to Guarantor. Guarantor agrees that the Agent, the L/C Issuer and the Lenders shall have no obligation to marshall any assets in favor of Guarantor or against or in payment of any or all of the Obligations.

(b) To the fullest extent permitted by applicable law, Guarantor hereby waives: (i) any rights to assert against any of the Agent, the L/C Issuer or a Lender any defense (legal or equitable), set-off, counterclaim, or claim which Guarantor may now or at any time hereafter have against the Borrowers or any other party liable to any of the Agent, the L/C Issuer or a Lender; (ii) any defense, set-off, counterclaim, or claim, of any kind or nature, arising directly or indirectly from the present or future lack of perfection, sufficiency, validity, enforceability of the Guarantied Obligations or any security therefor, or any defense based on suretyship or impairment of collateral; (iii) any defense arising by reason of any claim or defense based upon an election of remedies by any of the Agent, the L/C Issuer or a Lender, including any defense based upon an election of remedies by
any of the Agent, the L/C Issuer or a Lender under the provisions of §§ 580d and 726 of the California Code of Civil Procedure, or any similar law of California or any other jurisdiction; and (iv) the benefit of any statute of limitations affecting Guarantor’s liability hereunder or the enforcement thereof, and any act which shall defer or delay the operation of any statute of limitations applicable to the Obligations shall similarly operate to defer or delay the operation of such statute of limitations applicable to Guarantor’s liability hereunder.

(c) If any of the Obligations at any time are secured by a mortgage or deed of trust upon real property, the Agent, the L/C Issuer or a Lender may elect, in their sole discretion, upon a default with respect to the Obligations, to foreclose such mortgage or deed of trust judicially or nonjudicially in any manner permitted by law, before or after enforcing this Guaranty, without diminishing or affecting the liability of Guarantor hereunder. Guarantor understands that (i) by. virtue of the operation of California’s antideficiency law applicable to nonjudicial foreclosures or any similar laws of any other jurisdiction, an election by the Agent, the L/C Issuer or a Lender nonjudicially to foreclose such a mortgage or deed of trust probably would have the effect of impairing or destroying rights of subrogation, reimbursement, contribution, or indemnity of Guarantor against the
Borrowers or other guarantors or sureties, and (ii) absent the waiver given by Guarantor herein, such an election would estop the Agent, the L/C Issuer and the Lenders from enforcing this Guaranty against Guarantor. Understanding the foregoing, and understanding that the Guarantor hereby is relinquishing a defense to the enforceability of this Guaranty, Guarantor hereby waives any right to assert against the Lenders any defense to the enforcement of this Guaranty, whether denominated “estoppel” or otherwise, based on or arising from an election by the Agent, the L/C Issuer or a Lender nonjudicially to foreclose any such mortgage or deed of trust. Guarantor understands that the effect of the foregoing waiver may be that Guarantor may have liability hereunder for amounts with respect to which Guarantor may be left without rights of subrogation, reimbursement, contribution, or

 

 

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indemnity against the Borrowers or other guarantors or sureties. Guarantor also agrees that the “fair market value” provisions of Section 580a of the California Code of Civil Procedure or any similar laws of any other jurisdiction shall have no applicability with respect to the determination of Guarantor’s liability under this Guaranty.

(d) Without limiting the generality of any other waiver or other provision set forth in this Guaranty, Guarantor waives all rights and defenses that Guarantor may have if the Borrowers’ debt is secured by real property. This means, among other things:

(i) The Agent, the L/C Issuer and the Lenders may collect from Guarantor without first foreclosing on any real or personal property collateral that may be pledged by the Borrowers.

(ii) If the Agent, the L/C Issuer and the Lenders foreclose on any real property collateral that may be pledged by the Borrowers:

(1) the amount of the debt may be reduced only by the price for which that collateral is sold at the foreclosure sale, even if the collateral is worth more than the sale price.

(2) the Agent, the L/C Issuer and the Lenders may collect from Guarantor even if the Agent, the L/C Issuer and the Lenders, by foreclosing on the real property collateral, have destroyed any right Guarantor may have to collect from the Borrowers.

This is an unconditional and irrevocable waiver of any rights and defenses Guarantor may have if the Borrowers’ debt is secured by real property. These rights and defenses are based upon Section 580a, 580b, 580d, or 726 of the California Code of Civil Procedure or any similar laws of California or any other jurisdiction.

(e) WITHOUT LIMITING THE GENERALITY OF ANY OTHER WAIVER OR OTHER PROVISION SET FORTH IN THIS GUARANTY, GUARANTOR HEREBY WAIVES, TO THE MAXIMUM EXTENT SUCH WAIVER IS PERMITTED BY LAW, ANY AND ALL BENEFITS OR DEFENSES ARISING DIRECTLY OR INDIRECTLY UNDER ANY ONE OR MORE OF CALIFORNIA CIVIL CODE §§ 2799, 2808, 2809, 2810, 2815, 2819, 2820, 2821, 2822, 2838, 2839, 2845, 2847, 2848, 2849, AND 2850, CALIFORNIA CODE OF CIVIL PROCEDURE §§ 580a, 580b, 580c, 580d, AND 726, AND CHAPTER 2 OF TITLE 14 OF THE CALIFORNIA CIVIL CODE OR ANY SIMILAR LAWS OF CALIFORNIA OR ANY OTHER JURISDICTION.

(f) WITHOUT LIMITING THE GENERALITY OF ANY OTHER WAIVER OR OTHER PROVISION SET FORTH IN THIS GUARANTY, GUARANTOR WAIVES ALL RIGHTS AND DEFENSES ARISING OUT OF AN ELECTION OF REMEDIES BY THE AGENT AND THE LENDERS, EVEN THOUGH THAT ELECTION OF REMEDIES, SUCH AS A NONJUDICIAL FORECLOSURE WITH RESPECT TO SECURITY FOR A GUARANTIED OBLIGATION, HAS DESTROYED GUARANTOR’S RIGHTS OF SUBROGATION AND REIMBURSEMENT AGAINST THE BORROWERS BY

 

 

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THE OPERATION OF SECTION 580d OF THE CALIFORNIA CODE OF CIVIL PROCEDURE OR ANY SIMILAR LAWS OF CALIFORNIA OR ANY OTHER JURISDICTION OR OTHERWISE.

SECTION 5. Subrogation. Guarantor agrees not to exercise any rights which it may acquire by way of subrogation hereunder, by any payment made by it hereunder or otherwise, until such date after the Final Maturity Date on which all of the Obligations and all other fees, costs and expenses to be paid by the Guarantor pursuant hereto shall have been Paid in Full. If any amount shall be paid to Guarantor on account of such subrogation rights at any time when all of the Obligations and all such other expenses shall not have been paid in full, such amount shall be held in trust for the benefit of the Agent, the L/C Issuer and the Lenders, shall be segregated from the other funds of the Guarantor and shall forthwith be paid over to the Agent to be applied in whole or in part by the Agent against the
Obligations, whether matured or unmatured, and all such other expenses in accordance with the terms of the Financing Agreement. If (i) Guarantor shall make payment to the Agent of all or any portion of the Obligations and (ii) all of the Obligations and all such other fees, costs and expenses shall be paid in full, the Agent will, at Guarantor’s request, execute and deliver to Guarantor (without recourse, representation or warranty) appropriate documents necessary to evidence the transfer by subrogation to Guarantor of an interest in the Obligations resulting from such payment by Guarantor, such subrogation to be fully subject and subordinate, however, to the collection by the Agent, the L/C Issuer and the Lenders of all other amounts due to the Agent, the L/C Issuer and the Lenders by the Borrowers and each other Loan Party under the Financing Agreement and the other Loan Documents.

SECTION 6. Representations and Warranties. Guarantor, jointly and severally, hereby represents and warrants as follows:

(a) Guarantor (i) is a corporation, limited liability company or partnership duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization as set forth on the first page hereof, (ii) has all requisite power and authority to execute, deliver and perform this Agreement and each other Loan Document to be executed and delivered by it pursuant hereto and to consummate the transactions contemplated hereby and thereby, and (iii) is duly qualified to do business and is in good standing in each jurisdiction in which the character of the properties owned or leased by it or in which the transaction of its business makes such qualification necessary.

(b) The execution, delivery and performance by Guarantor of this Guaranty and each other Loan Document to which Guarantor is a party (i) have been duly authorized by all necessary action, (ii) do not and will not contravene its charter or by-laws, its limited liability company or operating agreement or its certificate of partnership or partnership agreement, as applicable, or any applicable law or any contractual restriction binding on or affecting it or any of its properties, (iii) do not and will not result in or require the creation of any Lien, security interest or other charge or encumbrance upon or with respect to any of its properties other than pursuant to any Loan Document, and (iv) do not and will not result in any default, noncompliance, suspension, revocation, impairment, forfeiture or nonrenewal of any permit, license, authorization or approval applicable to it or
its operations or any of its properties.

 

 

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(c) No authorization, approval or other action by, and no notice to or filing with, any Governmental Authority or other regulatory body is required in connection with the due execution, delivery and performance by Guarantor of this Guaranty or any of the other Loan Documents to which Guarantor is a party.

(d) Each of this Guaranty and the other Loan Documents to which Guarantor is a party is a legal, valid and binding obligation of Guarantor, enforceable against Guarantor in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws.

(e) There is no pending or, to the best knowledge of Guarantor, threatened action, suit or proceeding against Guarantor or to which any of the properties of Guarantor is subject, before any court or other Governmental Authority or any arbitrator that (i) could have a Material Adverse Effect or (ii) relates to the Financing Agreement or any other Loan Document or any of the transactions contemplated hereby or thereby.

(f) Guarantor now has and will continue to have independent means of obtaining information concerning the affairs, financial condition and business of the Borrowers and the other Loan Parties, and has no need of, or right to obtain from, the Agent, the L/C Issuer or any Lender any credit or other information concerning the affairs, financial condition or business of any of the Borrowers or the other Loan Parties that may come under the control of the Agent, the L/C Issuer or any Lender.

SECTION 7. Right of Set-off. Upon the occurrence and during the continuance of any Event of Default, the Agent, the L/C Issuer and the Lenders may, and are hereby authorized to, at any time and from time to time, without notice to Guarantor (any such notice being expressly waived by Guarantor) and to the fullest extent permitted by law, set-off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by the Agent, the L/C Issuer or any Lender to or for the credit of the account of Guarantor against any and all obligations of the Guarantor now or hereafter existing under this Guaranty, irrespective of whether or not the Agent, the L/C Issuer or any Lender shall have made any demand under this Guaranty and
although such obligations may be contingent or unmatured. The Agent, the L/C Issuer and the Lenders agree to notify the Guarantor promptly after any such set-off and application made by the Agent or such Lender, provided that the failure to give such notice shall not affect the validity of such set-off and application. The rights of the Agent, the L/C Issuer and the Lenders under this Section 7 are in addition to other rights and remedies (including, without limitation, other rights of set-off) which the Agent and the Lenders may have.

SECTION 8. Notices, Etc. All notices and other communications provided for hereunder shall be in writing and shall be mailed (by certified mail, postage prepaid and return receipt requested), telecopied or delivered, if to Guarantor, to it c/o Frederick’s at its address set forth in the Financing Agreement; if to the Agent, to it at its address set forth in the Financing Agreement; or, as to any such Person, at such other address as shall be designated by such Person in a written notice to such other Persons complying as to delivery with the terms of this Section 8. All such notices and other communications shall be effective (i) if mailed, when

 

 

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received or three days after deposited in the mails, whichever occurs first, (ii) if telecopied, when transmitted and a confirmation is received, or (iii) if delivered, upon delivery.

SECTION 9. Consent to Jurisdiction; Waiver of Immunities. 

(a) Guarantor hereby irrevocably submits to the jurisdiction of the courts of the State of New York, the courts of the United States of America for the Southern District of the State of New York in any action, suit or proceeding arising out of or relating to this Guaranty, and Guarantor hereby irrevocably agrees that all claims in respect of such action, suit or proceeding may be heard and determined in the State of New York or such federal court. Guarantor consents to the service of any and all process in any such action, suit or proceeding by mailing (by certified or registered mail, postage prepaid and return receipt requested) or delivering a copy of such process to Guarantor at its address set forth in Section 8 hereof or at such other address of which the Agent shall have been notified pursuant thereto. Guarantor agrees that a final judgment in any such action, suit or
proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.

(b) Nothing in this Section 9 shall affect the right of the Agent to serve legal process in any other manner permitted by law or affect the right of the Agent to bring any action, suit or proceeding against Guarantor or its property in the courts of any other jurisdictions.

(c) Guarantor hereby expressly and irrevocably waives, to the fullest extent permitted by law, any objection which it may now or hereafter have to the laying of venue of any such action, suit or proceeding brought in any such court referred to above and any claim that any such action, suit or proceeding has been brought in an inconvenient forum. To the extent that Guarantor has or hereafter may acquire any immunity from jurisdiction of any court or from any legal process (whether through service or notice, attachment prior to judgment, attachment in aid of execution or otherwise) with respect to itself or its property, Guarantor hereby irrevocably waives such immunity in respect of its obligations under this Guaranty and the other Loan Documents.

(d) To the extent that Guarantor has or hereafter may acquire any immunity from jurisdiction of any court or from any legal process (whether through service or notice, attachment prior to judgment, attachment in aid of execution, execution or otherwise) with respect to itself or its property, Guarantor hereby irrevocably waives such immunity in respect of its obligations under this Guaranty

(e) Guarantor hereby expressly and irrevocably waives any right it may have to claim or recover in any action, suit or proceeding referred to in this Section any special, exemplary, punitive or consequential damages.

SECTION 10. WAIVER OF JURY TRIAL. GUARANTOR AND, BY ACCEPTANCE HEREOF, THE AGENT, THE L/C ISSUER AND EACH LENDER WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM CONCERNING ANY RIGHTS UNDER THIS GUARANTY, THE LOAN DOCUMENTS OR UNDER ANY AMENDMENT, WAIVER, CONSENT, INSTRUMENT,

 

 

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DOCUMENT OR OTHER AGREEMENT DELIVERED OR WHICH IN THE FUTURE MAY BE DELIVERED IN CONNECTION THEREWITH, OR ARISING FROM ANY RELATIONSHIP EXISTING IN CONNECTION WITH THIS GUARANTY, AND AGREES THAT ANY SUCH ACTION, PROCEEDING OR COUNTERCLAIM SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.

SECTION 11. Miscellaneous.

(a) Guarantor will make each payment hereunder in lawful money of the United States of America and in immediately available funds to the Agent, for the benefit of the Lenders, at such address specified by the Agent from time to time by notice to the Guarantor.

(b) No amendment of any provision of this Guaranty shall be effective unless it is in writing and signed by Guarantor and the Agent, and no waiver of any provision of this Guaranty, and no consent to any departure by Guarantor therefrom, shall be effective unless it is in writing and signed by the Agent, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given.

(c) No failure on the part of the Agent to exercise, and no delay in exercising, any right hereunder or under any other Loan Document shall operate as a waiver thereof, nor shall any single or partial exercise of any right preclude any other or further exercise thereof or the exercise of any other right. The rights and remedies of the Agent and the Lenders provided herein and in the other Loan Documents are cumulative and are in addition to, and not exclusive of, any rights or remedies provided by law. The rights of the Agent and the Lenders under any Loan Document against any party thereto are not conditional or contingent on any attempt by the Agent and the Lenders to exercise any of their rights under any other Loan Document against such party or against any other Person.

(d) Any provision of this Guaranty which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining portions hereof or thereof or affecting the validity or enforceability of such provision in any other jurisdiction.

(e) This Guaranty shall (i) be binding on Guarantor and its successors and assigns, and (ii) inure, together with all rights and remedies of the Agent and the Lenders hereunder, to the benefit of the Agent and the Lenders and their respective successors, transferees and assigns. Without limiting the generality of clause (ii) of the immediately preceding sentence, to the extent permitted by Section 12.07 of the Financing Agreement, any Lender may assign or otherwise transfer any Revolving Credit Note held by it, and assign or otherwise transfer its rights under any other Loan Document, to any other Person, and such other Person shall thereupon become vested with all of the benefits in respect thereof granted to the Lenders herein or otherwise. None of the rights or obligations of Guarantor hereunder may be assigned or otherwise transferred without the prior written consent of the Agent.

(f) This Guaranty and the other Loan Documents represent the entire agreement of the Guarantor, the Agent, the L/C Issuer and the other Lenders with respect to the subject matter hereof, and there are no promises, undertakings, representations or warranties by

 

 

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the Agent, the L/C Issuer or any of the other Lenders relative to the subject matter thereof not expressly set forth or referred to herein or in the other Loan Documents.

(g) Section headings herein are included for convenience of reference only and shall not constitute a part of this Agreement for any other purpose.

(h) [Reserved].

(i) This Guaranty shall be governed by and construed in accordance with the law of the State of New York.

IN WITNESS WHEREOF, Guarantor has caused this Guaranty to be executed by an officer thereunto duly authorized, as of the date first above written.

 


	
                         
 	
                         
 	
                        GUARANTOR:
 
	
                         
 	
                         
 	
                         
 
	
                         
 	
                         
 	
                         
 
	
                         
 	
                         
 	
                        [NAME OF GUARANTOR]
 
	
                          
 	
                         
 	
                        

                        By: 
 	
                          
 
	
                         
 	
                         
 	
                         
 	
                        Name:
 
	
                         
 	
                         
 	
                         
 	
                        Title:
 




 

 

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EXHIBIT C

FORM OF NOTICE OF BORROWING

Wells Fargo Retail Finance II, LLC

as Agent for the Lenders

party to the Financing

Agreement referred to below

One Boston Place, Suite 1800

Boston, Massachusetts 02108

Attention: [_________________]

Ladies and Gentlemen:

The undersigned, [__________], a [_______] [_______] the Administrative Borrower under and as defined in the Amended and Restated Financing Agreement dated as of January [__], 2008 (the “Financing Agreement”, the terms defined therein being used herein as therein defined), by and among the Administrative Borrower, FOH Holdings, Inc., a Delaware corporation, Frederick’s of Hollywood, Inc., a Delaware corporation, Frederick’s of Hollywood Stores, Inc., a Nevada corporation, Hollywood Mail Order, LLC, a Nevada limited liability company, the financial institutions from time to time party to the Financing Agreement (collectively, the “Lenders”) and Wells Fargo Retail Finance II, LLC, a Delaware limited liability company, as agent for the Lenders (the “Agent”), hereby gives you notice pursuant to Section 2.02 of the Financing Agreement that the
undersigned hereby requests a Revolving Loan under the Financing Agreement, and in that connection sets forth below the information relating to such Revolving Loan (the “Proposed Loan”) as required by Section 2.02 of the Financing Agreement.


	
                         
 	
                        (i) 
 	
                        The aggregate principal amount of the Proposed Loan is $_________.
 





	
                         
 	
                        (ii) 
 	
                        The date of the Proposed Loan is ____ __, 20__.
 




 

 








The undersigned hereby certifies that (i) the representations and warranties contained in Article VI of the Financing Agreement and in each other Loan Document, certificate or other writing delivered to the Agent, the Lenders or the L/C Issuer pursuant thereto on or prior to the date hereof that are subject to materiality or Material Adverse Effect qualifications are true and correct in all respects and the representations and warranties contained in Article VI of the Financing Agreement and in each other Loan Document, certificate or other writing delivered to the Agent, the Lenders or the L/C Issuer pursuant hereto or thereto on or prior to the date hereof that are not subject to materiality or Material Adverse Effect qualifications are true and correct in all material respects in each case, on and as of the date of the Proposed Loan, (ii) no Default or Event of
Default has occurred or is continuing or will result from the making of the Proposed Loan to be made as of the date of the Proposed Loan, and (iii) the conditions set forth in Section 5.02 of the Financing Agreement have been satisfied as of the date of the Proposed Loan.

  


	
                         
 	
                         
 	
                        Very truly yours,
 
	
                         
 	
                         
 	
                         
 
	
                         
 	
                         
 	
                        [ADMINISTRATIVE BORROWER]
 
	
                          
 	
                         
 	
                        

                        By: 
 	
                           
 
	
                         
 	
                         
 	
                         
 	
                        Name:
 Title:
 




 

 















EXHIBIT D

FORM OF BAILEE AGREEMENT

THIS BAILEE AGREEMENT is entered into this [__] day of [_______], 20[__], by and among [Frederick’s of Hollywood Group Inc., a New York corporation] [Fredericks of Hollywood, Inc., a Delaware corporation] [Frederick’s of Hollywood Stores, Inc., a Nevada corporation] [Hollywood Mail Order LLC, a Nevada limited liability company] (“Company”), [NAME OF BAILEE] (“Bailee”), and Wells Fargo Retail Finance II, LLC (“Agent”), and is made with reference to the following facts:

(A) From time to time, Bailee performs [logistics services and makes advances for Company] [storage or transportation services] with respect to now owned and hereafter acquired goods, documents of title and other property (collectively, with proceeds of the foregoing, the “Collateral”). Bailee holds [carrier’s and/or warehouse liens upon the Collateral under Article 7 of the Uniform Commerical Code or other applicable law] and/or [consensual security interests in the Collateral under Article 9 of the Uniform Commercial Code or other applicable law].

(B) Lender is extending certain financial accommodations to Company pursuant to certain financing arrangements set forth in the Amended and Restated Financing Agreement, dated as of January [__], 2008, by and among Company (and certain of its affiliates), as Borrower, the financial institutions from time to time party thereto (the “Lenders”) and Wells Fargo Retail Finance II, LLC as the agent for the Lenders (as amended, restated or otherwise modified from time to time, the “Financing Agreement”), pursuant to which the Lenders have agreed to make loans to Company and assist Company in obtaining letters of credit. Pursuant to the Financing Agreement, Company granted a security interest in all of its assets, including now owned and hereafter acquired goods, documents of title and other property (including inventory) and without limitation all proceeds thereof,
to the Agent for the benefit of the Lenders to secure the obligations of Company and its affiliates under the Loan Documents (as defined in the Financing Agreement).

(C) The parties desire to establish the relative priorities of Bailee’s and Agent’s liens and security interests.

NOW, THEREFORE, the parties hereto agree as follows:

1. Bailee acknowledges that is has notification of Agent’s security interest in the Collateral and that it holds the Collateral as bailee for Agent’s benefit. Agent acknowledges that it has notification [(a) of Bailee’s liens and security interests] [and (b) that Bailee has or expects to acquire a purchase-money security interest in the Collateral]. [Agent is deemed to have such notification each time Bailee performs services or makes advances with respect to Collateral. Bailee’s liens and security interest have priority over Agent’s security interest].

2. Bailee represents that is has no knowledge at this time of any security interest or other claims with respect to the Collateral, other than the security interests set forth herein.

 

 










3. Upon payment in full of all accrued and unpaid fees and charges which the Company may owe to Bailee (collectively, the “Charges”), Bailee shall, upon written direction by Agent:  (a) deliver any or all Collateral in Bailee’s possession or control to Agent or its stated designee; and (b) not comply with instructions originated by Company, its agents, employees or other representatives with respect to the disposition, delivery or release of Collateral in Bailee’s possession or control.

4. Company hereby releases Bailee from any and all claims and liability arising from Bailee’s acting in accordance with any directions which Bailee in good faith believes to have originated from Agent. Agent shall indemnify and hold harmless Bailee for any claims for damages or personal injury or property damage arising out of any acts or omissions by Agent, its agents, employees or other representatives while on Bailee’s premises.

5. Bailee acknowledges and agrees that it will not enforce any of its liens or security interests in the Collateral without giving five (5) business days’ prior written notice thereof to Agent, but failure to give such notice shall not impair Bailee’s enforcement of its rights.

6. Prior to delivery of Collateral, upon Agent’s request Bailee shall:  (a) notify Agent of the amount of accrued but unpaid Charges; and (b) permit Agent at Bailee’s sole discretion to enter Bailee’s premises during business hours for purposes of inspection of the Collateral.

7. This Bailee Agreement does not impose any obligation or duty on Bailee or Agent other than those expressed herein.

8. Notwithstanding any course of dealing or other conduct, no provision of this Bailee Agreement may be waived or modified, expect by a writing signed by all parties.

9. Bailee agrees to promptly notify Agent when the Charges exceed $[________] USD.

10. In the event that either party desires to terminate this Bailee Agreement, the terminating party shall provide thirty (30) days written notice of its intention to do so. During such 30-day notice period, all parties will continue to cooperate with each other and undertake all such action as may be reasonably required in connection with such termination. Such notice shall be given to the following address for Agent and Bailee respectively:

 


  	Agent:
	Bailee:

	Wells Fargo Retail Finance II, LLC,
	[NAME OF BAILEE] 

	One Boston Place, 18th Floor
	[ADDRESS] 

	Boston, Massachusetts 02108
	[ADDRESS] 

	Attn: Jennifer Cann
	Attn: [__________]

	Re: Frederick’s of Hollywood, Inc.
	 





 

 










Company:

c/o Frederick’s of Hollywood, Inc.

6608 Hollywood Blvd.

Hollywood, California  90028

Attention:  Linda LoRe

Telephone:  323-957-5899

Telecopier:  323-464-4219

11. This Bailee Agreement shall be construed under the internal substantive laws of [________]. In the event of an action to enforce the terms of this Bailee Agreement, the prevailing party shall be entitled to its attorneys’ fees and costs.

 


  	 
	 
	WELLS FARGO RETAIL FINANCE II, LLC (“Agent”)

	 
	 
	 

	 
	 
	By 
	 

	 
	 
	Its
	 





  


  	 
	 
	[FREDERICK’S OF HOLLYWOOD GROUP INC., a New York corporation]

	 
	 
	 

	 
	 
	[FREDERICK’S OF HOLLYWOOD, INC., a Delaware corporation]

	 
	 
	 

	 
	 
	[FREDERICK’S OF HOLLYWOOD STORES, INC., a Nevada corporation]

	 
	 
	 

	 
	 
	[HOLLYWOOD MAIL ORDER, LLC, a Nevada limited liability company, By: FOH Holdings, Inc., as its Manager] (“Company”)





 


  	 
	 
	By 
	 

	 
	 
	Its
	 





 


  	 
	 
	[NAME OF BAILEE] (“Bailee”)

	 
	 
	 

	 
	 
	By 
	 

	 
	 
	Its
	 





 

 















EXHIBIT E

ACQUISITION AGREEMENT

Included as Annex A of the Definitive Proxy Statement (No. 001-05893), filed November 30, 2007 and incorporated herein by reference

 

 
















EXHIBIT F

FORM OF ASSIGNMENT AND ACCEPTANCE

Dated ________ __, 20__

Reference is made to the Amended and Restated Financing Agreement, dated as of January [__], 2008 (as the same may be further amended, restated, supplemented or otherwise modified from time to time, the “Financing Agreement”), by and among Frederick’s of Hollywood Group Inc., a New York corporation, FOH Holdings, Inc., a Delaware corporation, Frederick’s of Hollywood, Inc., a Delaware corporation, Frederick’s of Hollywood Stores, Inc., a Nevada corporation, Hollywood Mail Order, LLC, a Nevada limited liability company (collectively, the “Borrowers”), the financial institutions from time to time party thereto (each individually a “Lender” and collectively, the “Lenders”), and Wells Fargo Retail Finance II, LLC, a Delaware limited liability company, as
agent for the Lenders (in such capacity, the “Agent”). Terms defined in the Financing Agreement are used herein as therein defined.

_________________ (solely in its capacity as a Lender under the Financing Agreement) (the “Assignor”) and _____________ (the “Assignee”) agree as follows:

1. The Assignor hereby sells and assigns to the Assignee, without recourse, representation or warranty, and the Assignee hereby purchases and assumes from the Assignor, a _____%* interest (the “Assigned Interest”) in and to all of the Assignor’s rights and obligations, solely as a Lender, under the Financing Agreement and the other Loan Documents as of the Effective Date (as defined below) (including, without limitation, (i) if the Total Revolving Credit Commitment shall not have been terminated, the Assignor’s Revolving Credit Commitment as in effect on the date hereof, (ii) the outstanding principal amount of the Revolving Loans made by the Assignor, (iii) the Assignor’s Pro Rata Share of the Letter of Credit Obligations and (iv) the Revolving Credit Note evidencing the Assignor’s Revolving Loans).

2. The Assignor (i) represents and warrants as of the date hereof that its Revolving Credit Commitment (without giving effect to assignments thereof which have not yet become effective) is $[___]; (ii) represents and warrants that it is the legal and beneficial owner of the interest it is assigning hereunder; (iii) makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made by or in connection with the Financing Agreement or any other Loan Document, the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Financing Agreement, any other Loan Document, or any other instrument or document furnished pursuant thereto; (iv) makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Loan Parties or the performance or
observance by any Loan Party of any of its obligations under the Financing Agreement, any other Loan Document or any other instrument or document furnished pursuant thereto; and (v) attaches the Revolving Credit Note referred to in paragraph 1 above, and requests that the Agent exchange the Revolving Credit Note for new Revolving Credit Notes (appropriately dated so that no loss of interest accrued prior to the date hereof shall result with respect to the portion of the Revolving Loans assigned or the portion of the Revolving Loans retained by the Assignor), consisting of a Revolving Credit Note in the principal amount

______________

	
                        *
 	
                        Specify percentage to no more than 4 decimal points.
 




 

 








of $___________ , payable to the order of the Assignee, and a Revolving Credit Note in the principal amount of $_____________ payable to the order of the Assignor.

(a) The Assignee represents and warrants that it has become a party hereto solely in reliance upon its own independent investigation of the financial and other circumstances surrounding the Loan Parties, the Collateral, the Revolving Loans, the Letters of Credit and all aspects of the transactions evidenced by or referred to in the Loan Documents, or has otherwise satisfied itself thereto, and that it is not relying upon any representation, warranty or statement (except any such representation, warranty or statement expressly set forth in this Agreement) of the Assignor in connection with the assignment made under this Agreement. The Assignee further acknowledges that the Assignee will, independently and without reliance upon the Agent, the Assignor or any other Lender and based upon the Assignee’s review of such documents and information as the Assignee deems appropriate
at the time, make and continue to make its own credit decisions in entering into this Agreement and taking or not taking action under the Loan Documents. The Assignor shall have no duty or responsibility either initially or on a continuing basis to make any such investigation or any such appraisal on behalf of the Assignee or to provide the Assignee with any credit or other information with respect thereto, whether coming into its possession before the making of the initial extension of credit under the Financing Agreement or at any time or times thereafter.

(b) The Assignee represents and warrants to the Assignor that it has experience and expertise in the making of loans such as the Revolving Loans or with respect to the other types of credit which may be extended under the Financing Agreement; that it has acquired its Assigned Interest for its own account and not with any intention of selling all or any portion of such interest; and that it has received, reviewed and approved copies of all Loan Documents.

(c) The Assignor shall not be responsible to the Assignee for the execution, effectiveness, accuracy, completeness, legal effect, genuineness, validity, enforceability, collectibility or sufficiency of any of the Loan Documents or for any representations, warranties, recitals or statements made therein or in any written or oral statement or in any financial or other statements, instruments, reports, certificates or any other documents made or furnished or made available by the Assignor to the Assignee or by or on behalf of the Loan Parties to the Assignor or the Assignee in connection with the Loan Documents and the transactions contemplated thereby or for the financial condition or business affairs of the Loan Parties or any other Person liable for the payment of any Revolving Loans, Letter of Credit Obligations, other amounts owed in connection with other extensions of credit
under the Financing Agreement or other Obligations or the value of the Collateral or any other matter. The Assignor shall not be required to ascertain or inquire as to the performance or observance of any of the terms, conditions, provisions, covenants or agreements contained in any of the Loan Documents or as to the use of the proceeds of the Revolving Loans or Letters of Credit or other extensions of credit under the Financing Agreement or as to the existence or possible existence of any Event of Default or Default.

(d) Each party to this Agreement represents and warrants to the other party to this Agreement that it has full power and authority to enter into this Agreement and to perform its obligations under this Agreement in accordance with the provisions of this 

 

 








Agreement, that this Agreement has been duly authorized, executed and delivered by such party and that this Agreement constitutes a legal, valid and binding obligation of such party, enforceable in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, moratorium or other similar laws affecting creditors’ rights generally and by general equitable principles.

(e) Each party to this Agreement represents and warrants that the making and performance by it of this Agreement do not and will not violate any law or regulation of the jurisdiction of its incorporation or any other law or regulation applicable to it.

(f) Each party to this Agreement represents and warrants that all consents, licenses, approvals, authorizations, exemptions, registrations, filings, opinions and declarations from or with any agency, department, administrative authority, statutory corporation or judicial entity necessary for the validity or enforceability of its obligations under this Agreement have been obtained, and no governmental authorizations other than any already obtained are required in connection with its execution, delivery and performance of this Agreement.

(g) The Assignor represents and warrants that it is the legal and beneficial owner of the interest being assigned and that such interest is free and clear of any Lien.

(h) The Assignor makes no representation or warranty and assumes no responsibility with respect to the operations, condition (financial or otherwise), business or assets of the Loan Parties or the performance or observance by the Loan Parties of any of their obligations under the Financing Agreement or any other Loan Document.

(i) The Assignee appoints and authorizes the Agent to take such action as an agent on its behalf and to exercise such powers under the Loan Documents as are delegated to the Agent by the terms thereof, together with such powers as are reasonably incidental thereto.

(j) The Assignee agrees that it will perform in accordance with their terms all of the obligations which by the terms of the Financing Agreement or any other Loan Document are required to be performed by it as a Lender.

(k) The Assignee confirms that it has received all documents and information it has deemed appropriate to make its own credit analysis and decision to enter into this Agreement.

(l) The Assignee specifies as its address for notices the office set forth beneath its name on the signature pages hereof. 

 

 








IN WITNESS WHEREOF, the parties hereto have caused this Assignment and Acceptance to be executed and delivered as of the date first written above.

 


	
                         
 	
                         
 	
                         
 	
                        ASSIGNOR
 
	
                         
 	
                         
 	
                         
 	
                         
 
	
                         
 	
                         
 	
                         
 	
                        [_________________________________________]
 
	
                         
 	
                         
 	
                         
 	
                         
 
	
                         
 	
                         
 	
                           
 	
                         
 	
                        By: 
 	
                           
 
	
                         
 	
                         
 	
                         
 	
                         
 	
                        Name: 
 	
                         
 
	
                         
 	
                         
 	
                         
 	
                         
 	
                        Title: 
 	
                         
 




 


	
                         
 	
                         
 	
                         
 	
                        ASSIGNEE
 
	
                         
 	
                         
 	
                         
 	
                         
 
	
                         
 	
                         
 	
                         
 	
                        [_________________________________________]
 
	
                         
 	
                         
 	
                         
 	
                         
 
	
                         
 	
                         
 	
                           
 	
                         
 	
      By: 
 	
                           
 
	
                         
 	
                         
 	
                         
 	
                         
 	
                         
 	
                        Name: 
 
	
                         
 	
                         
 	
                         
 	
                         
 	
                         
 	
                        Title: 
 




 


	
                        [CONSENTED TO BY ADMINISTRATIVE BORROWER1]
 	
                         
 
	
                         
 	
                         
 	
                         
 
	
                        [_______________________________]
 	
                         
 	
                         
 
	
                         
 	
                         
 	
                         
 
	
      By: 
 	
                           
 	
                         
 	
                         
 	
                         
 
	
                         
 	
                        Name: 
 	
                         
 	
                         
 	
                         
 
	
                         
 	
                        Title: 
 	
                         
 	
                         
 	
                         
 




 


	
                        [APPROVED BY AGENT2]
 	
                         
 
	
                         
 	
                         
 	
                         
 
	
                        [_______________________________]
 	
                         
 	
                         
 
	
                         
 	
                         
 	
                         
 
	
      By: 
 	
                           
 	
                         
 	
                         
 	
                         
 
	
                         
 	
                        Name: 
 	
                         
 	
                         
 	
                         
 
	
                         
 	
                        Title: 
 	
                         
 	
                         
 	
                         
 




______________

	
                        1
 	
                        If required pursuant to Section 12.07 of the Financing Agreement.
 
	
                        2
 	
                        If required pursuant to Section 12.07 of the Financing Agreement.
 





 

 


















EXHIBIT G

FORM OF PLEDGE AGREEMENT

See Exhibit 10.10 of this Form 8-K

 

 















EXHIBIT H

FORM OF SECURITY AGREEMENT

See Exhibit 10.9 of this Form 8-K

 

 
















EXHIBIT L

FORM OF CREDIT CARD BANK

DEPOSITORY ACCOUNT AGREEMENT

[DATE]

[Name and

Address of Credit Card

Depository Bank]

Ladies and Gentlemen:

We refer to [Credit Card Agreement] dated _____________, ___ (as amended or otherwise modified from time to time, the “Credit Card Agreement”) between you and [Frederick’s of Hollywood Group Inc., a New York corporation] [Frederick’s of Hollywood, Inc., a Delaware corporation] [Frederick’s of Hollywood Stores, Inc., a Nevada corporation] [Hollywood Mail Order LLC, a Nevada limited liability company] (the “Borrower”). The Borrower has entered into an Amended and Restated Financing Agreement, dated as of January [__], 2008 (as amended, restated or otherwise modified from time to time, the “Financing Agreement”), with certain financial institutions party thereto (the
“Lenders”) and Wells Fargo Retail Finance II, LLC, a Delaware limited liability company, as agent for the Lenders (the “Agent”), pursuant to which the Lenders have agreed to make loans to the Borrower and assist the Borrower in obtaining letters of credit. Pursuant to the Financing Agreement, the Borrower granted a security interest in all of its assets, including inventory and any proceeds thereof, to the Agent for the benefit of the Lenders to secure the obligations of the Borrower under the Loan Documents (as defined in the Financing Agreement).

By signing this letter agreement, you agree that from and after the date hereof, all monies, instruments or other property owing under the Credit Card Agreement to the Borrower shall be held for the benefit of the Agent, as secured party. You hereby further agree, and the Borrower hereby irrevocably instructs you, to transfer all amounts owing to the Borrower in accordance with the terms of the Credit Card Agreement, in same day funds, to an account no. _________ maintained with ____ at:

 


	
                        For the account of:
 	
                         
 	
                        Wells Fargo Retail Finance II, LLC
 (Cash Concentration Account)
 Account #:
 




(the “Cash Concentration Account”) or such other account designated in writing by the Agent.

From and after the date hereof, no officer or agent of the Borrower shall have the authority to withdraw or transfer any funds owing under the Credit Card Agreement and the Agent shall have the sole authority to give you instructions with respect to the withdrawal or transfer of any funds owing under the Credit Card Agreement including, without limitation, the authority to designate a new Cash Concentration Account. The instructions set forth in this letter 

 

 








agreement may only be changed upon written instruction from the Agent. Any correspondence with the Agent should be to:

 


	
                         
 	
                        Wells Fargo Retail Finance II, LLC
 One Boston Place
 Suite 1800
 Boston, Massachusetts 02108
 Attention: Business Finance Division Manager
 
	
                         
 	
                        Telephone: (617) 854-7251
 Telecopy: (617) 523-4027
 




 


	
                         
 	
                         
 	
                        Very truly yours,
 
	
                         
 	
                         
 	
                         
 
	
                         
 	
                         
 	
                        [FREDERICK’S OF HOLLYWOOD
 GROUP INC.]
 
	
                         
 	
                         
 	
                         
 
	
                         
 	
                         
 	
                        [FREDERICK’S OF HOLLYWOOD, INC.]
 
	
                         
 	
                         
 	
                         
 
	
                         
 	
                         
 	
                        [FREDERICK’S OF HOLLYWOOD
 STORES, INC.]
 
	
                         
 	
                         
 	
                         
 
	
                         
 	
                         
 	
                        [HOLLYWOOD MAIL ORDER, LLC
 By: FOH Holdings, Inc., as its Manager]
 
	
                         
 	
                         
 	
                         
 
	
                          
 	
                         
 	
                        By: 
 	
                          
 
	
                         
 	
                         
 	
                         
 	
                        Name:
 
	
                         
 	
                         
 	
                         
 	
                        Title:
 




 


	
                         
 	
                         
 	
                         
 	
                         
 	
                        WELLS FARGO RETAIL FINANCE II, LLC
 as Agent
 
	
                         
 	
                         
 	
                         
 	
       
 	
                         
 	
                         
 
	
                         
 	
                         
 	
                          
 	
                         
 	
                        By: 
 	
                          
 
	
                         
 	
                         
 	
                         
 	
                         
 	
                        Name: 
 	
                         
 
	
                         
 	
                         
 	
                         
 	
                         
 	
                        Title: 
 	
                         
 




Acknowledged and agreed to as

of the date first above written:

_________________________ [Date]

 


	
                        [Credit Card Depository Bank]
 	
                         
 	
                         
 
	
                         
 	
                         
 	
                         
 
	
      By: 
 	
                          
 	
                         
 	
                         
 	
                          
 
	
                        Title: 
 	
                         
 	
                         
 	
                         
 	
                         
 




 

 

2

 













EXHIBIT M

COLLATERAL ACCESS AGREEMENT

[LANDLORD]

[ADDRESS] 

Re: [PREMISES]

Ladies and Gentlemen:

We understand that you are the owner of certain real property located at [ADDRESS] (the “Premises”) which are presently leased to [NAME OF TENANT] (“Tenant”), pursuant to a lease between [LANDLORD] (“Landlord”) and Tenant dated on or about [DATE] (the “Lease”). 

Tenant and certain of its affiliates (together, the “Companies”) have entered into certain financing arrangements with Wells Fargo Retail Finance II, LLC, as agent (together with its successors and assigns, in such capacity, the “Agent”), and various institutional investors (the “Lenders”), pursuant to which the Companies have granted liens in favor of the Agent (for the benefit of itself and the Lenders) in all of their personal property (collectively the “Personal Property”), certain of which, including without limitation the Companies’ inventory, equipment and books and records, has been and will from time to time be located at the Premises. 

To induce the Lenders to provide such financing arrangements to the Companies under such financing arrangements in reliance upon the Personal Property as collateral, the Agent and the Companies hereby request that Landlord acknowledge and agree, for the benefit of the Agent and the Lenders, that:

1. Landlord waives and relinquishes any lien, rights of levy or distraint, claim, security interest or other interest Landlord may now or hereafter have in or with respect to any of the Personal Property, whether for rent or otherwise. For purposes hereof, the term “Personal Property” shall not include plumbing and electrical fixtures, heating, ventilation and air conditioning, wall and floor coverings, walls or ceilings and other fixtures not constituting trade fixtures. 

2. The Personal Property may be installed in or located on the Premises and is not and shall not be deemed a fixture or part of the real property but shall at all times be considered personal property. 

3. Landlord hereby agrees that if Tenant defaults in its obligations to the Lenders or the Agent and, as a result, the Agent seeks to enforce its security interest in the Lease or the Personal Property, Landlord will permit the Agent, at the Agent’s option, to (a) succeed to Tenant’s right, title and interest under the Lease, or (b) enter into and remain in the Premises for up to ninety (90) days after the Agent declares the default, provided that the

 

 








Agent pays the rental payments due under the Lease for the period of time that the Agent so uses the Premises, or (c) remove the Personal Property from the Premises within a reasonable time, not to exceed ninety (90) days after the Agent gives notice to Landlord of the default, provided that the Agent pays the rental payments due under the Lease for the period of time the Agent so uses the Premises and the Agent pays for any damages caused by the Agent or its representatives in removing the Personal Property from the Premises. Landlord further agrees that Landlord will not hinder the Agent’s actions in enforcing its liens on the Personal Property.

4. Landlord agrees to send a copy of any written notice of a default under the Lease at the time each notice is sent to any of the Companies to: 

Wells Fargo Retail Finance II, LLC

One Boston Place – 18th Floor

Boston, MA 02108

Attn: Jennifer Cann

Upon receipt of any such notice, Agent shall have the right, but not the obligation, to cure such default within ten (10) days thereafter. Any payment made or act done by Agent to cure any such default shall not constitute an assumption of the Lease or any obligations of Tenant. 

5. Landlord shall notify all successor owners, transferees, Lenders and mortgagees of the existence of this agreement and the terms contained herein. 

The Companies agree that Landlord shall have no liability to the Companies as a result of Landlord’s compliance herewith. The agreements contained herein shall continue in force until all obligations and liabilities of Companies to the Lenders and the Agent are paid and performed in full and all financing arrangements between the Lenders, the Agent and the Companies have been terminated. The statements and agreements contained herein shall be binding upon, and shall inure to the benefit of, the Agent, the Companies, Landlord, mortgagees of the Premises and the successors and assigns of all of the foregoing.

(Signature page follows)

 

 








Dated as of this _____________ day of _____________________, 2008.
 

 


	
                         
 	
                         
 	
                        WELLS FARGO RETAIL FINANCE II, LLC, as Agent
 
	
                         
 	
                         
 	
                         
 
	
                         
 	
                         
 	
                        By: 
 	
                         
 
	
                         
 	
                         
 	
                        Name:
 	
                         
 
	
                         
 	
                         
 	
                        Title:
 	
                         
 




 


	
                         
 	
                         
 	
                        [TENANT]
 
	
                         
 	
                         
 	
                         
 
	
                         
 	
                         
 	
                        By: 
 	
                         
 
	
                         
 	
                         
 	
                        Name:
 	
                         
 
	
                         
 	
                         
 	
                        Title:
 	
                         
 




 


	
                        ACKNOWLEDGED AND AGREED:
 	
                         
 	
                         
 
	
                         
 	
                         
 	
                         
 
	
                        [LANDLORD]
 	
                         
 	
                         
 
	
                         
 	
                         
 	
                         
 
	
                        By: 
 	
                         
 	
                         
 	
                         
 	
                         
 
	
                        Name: 
 	
                         
 	
                         
 	
                         
 	
                         
 
	
                        Title: