Document:

ex10-1.htm

    Exhibit
10.1

    

    SECOND
AMENDMENT AND AGREEMENT

     

    This
SECOND AMENDMENT AND AGREEMENT, dated as of June 17, 2009 (this “Second Amendment and
Agreement”), is hereby entered into by and between American Apparel,
Inc., a Delaware corporation (the “Company”), and
Lion/Hollywood L.L.C., a Delaware limited liability company (“Lion”).

     

    WHEREAS,
the Company and Lion are parties to the Investment Agreement, dated as of March
13, 2009, as amended as of April 10, 2009 (the “Investment
Agreement”);

     

    WHEREAS,
Section 5.2 of the Investment Agreement permits the Company and Lion to amend
the Investment Agreement by an instrument in writing signed by duly authorized
officers of each of the Company and Lion; and

     

    WHEREAS,
the Company and Lion each desire to further amend the Investment Agreement and
enter into certain other agreements as provided herein.

     

    NOW,
THEREFORE, in consideration of the premises, and of the representations,
warranties, covenants and agreements set forth herein, the Company and Lion
hereby agree as follows:

     

    1.           Defined
Terms.  Capitalized terms used but not defined herein shall
have the meanings assigned to them in the Investment Agreement.

     

    2.           Amendment of Sections 4.1(c)
and 4.1(f) of the Investment Agreement.  Sections 4.1(c) and
4.1(f) of the Investment Agreement are hereby amended by replacing all
references therein to “June 30, 2009” with “September 30, 2009.”

     

    3.           Company Stockholder
Meeting.  The Company agrees to use its commercially reasonable
best efforts to hold an annual meeting of stockholders of the Company (the
“Stockholder
Meeting”) as soon as reasonably practicable and in any event prior to
September 30, 2009 for the purpose of electing each of the Investor Directors to
the Board, among other matters.  The Company further agrees to
nominate each of the Investor Directors to be elected as a director at the
Stockholder Meeting, include each such nomination and other required information
regarding such individuals in the preliminary and definitive proxy statements
for the Stockholder Meeting and solicit or cause the solicitation of
proxies in connection with the election of each such individual as a
director.

     

    4.           Representations and
Warranties.  Each of the Company and Lion hereby represents and
warrants that (a) it has the requisite power and authority to execute and
deliver this Second Amendment and Agreement, (b) this Second Amendment and
Agreement has been duly and validly authorized by all necessary action by such
party, and (c) this Second Amendment and Agreement has been duly and validly
executed and delivered and, assuming due authorization and execution by the
other party hereto, 

     

    
      
         

      

      
         

        
          

        

      

      
         

      

       

      constitutes
its legal, valid and binding obligation enforceable against it in accordance
with its terms.

    

     

    5.           Governing Law;
Jurisdiction.  This Second Amendment and Agreement will be
governed by and construed in accordance with the laws of the State of New
York.  Any action against either party hereto, including any action
for provisional or conservatory measures or action to enforce any judgment
entered by any court in respect of any thereof, may be brought in any federal or
state court of competent jurisdiction located in the Borough of Manhattan in the
State of New York, and each party hereto irrevocably consents to the
jurisdiction and venue in the United States District Court for the Southern
District of New York and in the courts hearing appeals therefrom unless no
federal subject matter jurisdiction exists, in which event, each party hereto
irrevocably consents to jurisdiction and venue in the Supreme Court of the State
of New York, New York County, and in the courts hearing appeals
therefrom.  Each party hereto hereby irrevocably waives, and agrees
not to assert, by way of motion, as a defense, counterclaim or otherwise, in any
action or proceeding with respect to this Second Amendment and Agreement, any
claim that it is not personally subject to the jurisdiction of the above-named
courts for any reason other than the failure to serve process in accordance with
this Second Amendment and Agreement, that it or its property is exempt or immune
from jurisdiction of any such court or from any legal process commenced in such
courts (whether through service of notice, attachment prior to judgment,
attachment in aid of execution of judgment, execution of judgment or otherwise),
and to the fullest extent permitted by applicable law, that the suit, action or
proceeding in any such court is brought in an inconvenient forum, that the venue
of such suit, action or proceeding is improper, or that this Second Amendment
and Agreement, or the subject matter hereof or thereof, may not be enforced in
or by such courts and further irrevocably waives, to the fullest extent
permitted by applicable law, the benefit of any defense that would hinder,
fetter or delay the levy, execution or collection of any amount to which the
party is entitled pursuant to the final judgment of any court having
jurisdiction.  Each party expressly acknowledges that the foregoing
waiver is intended to be irrevocable under the laws of the State of New York and
of the United States of America.

     

    6.           WAIVER OF JURY
TRIAL.  EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES
ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR
RELATED TO THIS SECOND AMENDMENT AND AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.

     

    7.           Specific
Performance.  The parties hereby acknowledge and agree that
each party would not have an adequate remedy at law for money damages, and
irreparable damage would occur, in the event that any of the provisions of this
Second Amendment and Agreement were not performed in accordance with their
specific terms or were otherwise breached.  It is accordingly agreed
that any party shall be entitled to an injunction or injunctions to prevent
breaches of this Second Amendment and Agreement by the other party and to
enforce specifically the terms and provisions of this Second Amendment and
Agreement against the other party, this being in addition to any other remedy to
which either such party is entitled at law or in equity, and each party waives

     

    
      
         

      

      
         

        
          

        

      

      
         

      

       

      (a)
the defense in any action for an injunction or other equitable relief that a
remedy at law would be adequate and (b) agrees that any such action for
injunctive relief or specific performance may be brought in (and hereby
irrevocably submits to the jurisdiction of) any federal or state court in the
State of New York.

    

     

    8.           Severability.  If
any provision of this Second Amendment and Agreement or the application thereof
to any person (including the officers and directors of the parties hereto) or
circumstance is determined by a court of competent jurisdiction to be invalid,
void or unenforceable, the remaining provisions hereof, or the application of
such provision to persons or circumstances other than those as to which it has
been held invalid or unenforceable, will remain in full force and effect and
shall in no way be affected, impaired or invalidated thereby, so long as the
economic or legal substance of the transactions contemplated hereby is not
affected in any manner materially adverse to any party.  Upon such
determination, the parties shall negotiate in good faith in an effort to agree
upon a suitable and equitable substitute provision to effect the original intent
of the parties.

     

    9.           Counterparts and
Facsimile.  For the convenience of the parties hereto, this
Second Amendment and Agreement may be executed in any number of separate
counterparts, each such counterpart being deemed to be an original instrument,
and all such counterparts will together constitute the same
agreement.  Executed signature pages to this Second Amendment and
Agreement may be delivered by facsimile or other electronic means and such
electronic signature pages will be deemed as sufficient as if physical signature
pages had been delivered.

     

    10.           No Other Amendment and
Agreements.  Except to the extent expressly amended by this
Second Amendment and Agreement, all terms of the Investment Agreement shall
remain in full force and effect without amendment, change or
modification.

     

    11.           References to Investment
Agreement.  All references in the Investment Agreement to the
“Agreement” shall be deemed to be the Investment Agreement as amended by this
Second Amendment and Agreement.

     

    [signature page
follows]

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    IN
WITNESS WHEREOF, the Company and Lion have caused this Second Amendment and
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.

     

    

    

    
      
        
          	 
      	 
      	 
      
	 
      	
                  AMERICAN
      APPAREL, INC.

                
	 
      	 
      
	 
      	 
      
	 
      	 
      
	 
      	
                  By:

                	
                  
                    /s/
      Adrian Kowalewski

                  

                
	 
      	 
      	
                  Name:
      Adrian Kowalewski

                
	 
      	 
      	
                  Title:   Chief
      Financial Officer

                

        

      

    

    

    

    

    
      
        
          	 
      	 
      	 
      
	 
      	
                  LION/HOLLYWOOD
      L.L.C.

                
	 
      	 
      
	 
      	 
      
	 
      	 
      
	 
      	
                  By:

                	
                  
                    /s/
      Jacob Capps

                  

                
	 
      	 
      	
                  Name:
      Jacob Capps

                
	 
      	 
      	
                  Title:   Presidentex10.htm

    Exhibit
10.1

    AMENDMENT
NO. 1 TO RATIFICATION AGREEMENT AND

    AMENDMENT NO 8 TO LOAN AND
SECURITY AGREEMENT

     

    AMENDMENT
NO. 1 TO RATIFICATION AGREEMENT AND AMENDMENT NO. 8 TO LOAN AND SECURITY
AGREEMENT (this “Amendment”), dated as of June 1, 2009, is by and among Wachovia Capital Finance Corporation
(Central), an Illinois
corporation, in its capacity as agent acting for and on behalf of the
parties to the Loan Agreement (as hereinafter defined) as lenders (in such
capacity, “Agent”), the parties to the Loan Agreement as lenders (each
individually a “Lender” and collectively, “Lenders”), Hartmarx Corporation, a
Delaware corporation, as Debtor and Debtor-in-Possession (“US Borrower”),
Coppley Apparel Group Limited, an Ontario corporation (“Canadian Borrower”;
together with US Borrower, each individually, a “Borrower” and collectively,
“Borrowers”), and each of the companies listed on Exhibit A hereto as
guarantors, each as Debtor and Debtor-in-Possession (each individually a
“Guarantor” and collectively, “Guarantors”).

     

    W
I T N E S S E T H

     

    WHEREAS,
Borrowers and Guarantors have entered into financing arrangements with Agent and
Lenders pursuant to which Lenders (or Agent on behalf of Lenders) have made and
may make loans and advances and provide other financial accommodations to
Borrowers as set forth in, and subject to the terms and conditions of, the Loan
and Security Agreement, dated August 30, 2002, by and among Agent, Lenders,
JPMorgan Chase Bank, in its capacity as syndication agent for Lenders, Wells
Fargo Foothill, LLC, in its capacity as documentary agent for Lenders, Borrowers
and Guarantors (as amended and supplemented by Amendment No. 1 to Loan and
Security Agreement, dated February 25, 2003, Amendment No. 2 to Loan and
Security Agreement, dated July 22, 2004, Amendment No. 3 to Loan and Security
Agreement, dated January 3, 2005, Amendment No. 4 to Loan and Security
Agreement, dated October 31, 2005, Amendment No. 5 to Loan and Security
Agreement dated September 29, 2006, Amendment No. 6 to Loan and Security
Agreement, dated May 26, 2007, Amendment No. 7 to Loan and Security Agreement,
dated March 14, 2008, the Ratification and Amendment Agreement, dated as of
January 23, 2009 (“Ratification Agreement”), and this Amendment (as the same now
exists, is amended hereby and may hereafter be further amended, modified,
supplemented, extended, renewed, restated or replaced, the “Loan Agreement”))
and the other Financing Agreements (as defined in the Loan
Agreement);

     

    WHEREAS,
US Borrower and each Guarantor have each commenced a case under Chapter 11 of
the Bankruptcy Code (as defined in the Ratification Agreement) in the Bankruptcy
Court (as defined in the Ratification Agreement) and US Borrower and each
Guarantor have retained possession of their respective assets and are authorized
under the Bankruptcy Code to continue the operation of their respective
businesses as a debtor-in-possession;

     

    WHEREAS,
Canadian Borrower has commenced or will commence a proceeding under the CCAA (as
hereinafter defined) in the CCAA Court (as hereinafter defined) and Canadian
Borrower has retained or will retain possession of its assets and is or will be
authorized under the CCAA to continue the operation of its business as a
debtor-in-possession;

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    WHEREAS,
prior to the commencement of the Chapter 11 Cases and the CCAA Case, Agent and
Lenders made loans and advances and provided other financial accommodations to
Borrowers secured by substantially all assets and properties of Borrowers and
Guarantors as set forth in the Existing Financing Agreements (as defined in the
Ratification Agreement);

     

    WHEREAS,
Canadian Borrower has requested or is about to request that the CCAA Court enter
the CCAA Order (as hereinafter defined) pursuant to which, among other things,
Canadian Lender may make post-petition loans and advances and provide other
financial accommodations to Canadian Borrower secured by the Collateral as set
forth in the CCAA Order and the Financing Agreements;

     

    WHEREAS,
in connection with the entry by the CCAA Court of the CCAA Order, Borrowers,
Guarantors, Agent and Canadian Lender shall enter into a Forbearance Agreement
(as hereinafter defined);

     

    WHEREAS,
Debtors (as defined in the
Ratification Agreement) desire to reaffirm their obligations to Agent and
Lenders pursuant to the Existing Financing Agreements and acknowledge their
continuing liabilities to Agent and Lenders thereunder in order to induce Agent
and Lenders to make such post-petition loans and advances and provide such other
financial accommodations to Borrowers; and

     

    WHEREAS, Debtors have requested that Agent and Lenders (a) waive the Specified Events of Default (as defined
in the 5/09 Notice of Default (as defined herein)), (b) make or continue to make post-petition loans and advances and
provide other financial accommodations to Borrowers and (c) make certain amendments to the Loan
Agreement, the Ratification
Agreement and the other
Financing Agreements as set
forth herein, which Agent
and Lenders are willing to
do subject to the terms and conditions contained herein.

     

    NOW,
THEREFORE, in consideration of the foregoing, the mutual conditions and
agreements and covenants set forth herein and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:

     

    SECTION
1.  Interpretation.

     

    1.1           For
purposes of this Amendment, unless otherwise defined herein, all capitalized
terms used herein shall have the meanings assigned thereto in the Loan
Agreement.

     

    1.2           All
references to the terms “US Borrower”, “Borrowing Base Guarantor”, “Borrowing
Base Guarantors, “Canadian Borrower”, “Guarantor”, “Guarantors”, “Non-Borrowing
Base Guarantor” and “Non-Borrowing Base Guarantors” in the Loan Agreement or any
of the other Financing Agreements shall be deemed and each such reference is
hereby amended to mean and include (as applicable) the Debtors, each as defined
herein, and their successors and assigns (including any trustee or other
fiduciary hereafter appointed as any Debtor’s legal representative, as
applicable, or with respect to any Debtor the property of the estate of such
Debtor whether under Chapter 11 of the Bankruptcy Code or any subsequent Chapter
7 case or cases or under the CCAA or in any subsequent BIA (as hereinafter
defined) case or receivership case and its successor upon conclusion of the
Chapter 11 Case or CCAA

     

    
      
         

      

      
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    Case
of such Debtor, as the case may be); provided, that, in no event
shall Canadian Borrower be deemed to be a Guarantor of the Obligations of US
Borrower.

    

    SECTION
2.  Acknowledgment.

     

    2.1           Obligations of Canadian
Borrower.  Canadian Borrower hereby acknowledges, confirms and
agrees that, as of June 1, 2009, Canadian Borrower is indebted to Agent and
Lenders in respect of Pre-Petition Obligations consisting of (a) Revolving Loans
to Canadian Borrower made pursuant to the Existing Financing Agreements in the
aggregate principal amount of US $7,077,588.03  , together with
interest accrued and accruing thereon, (b) all costs, expenses, fees (including
attorneys’ fees and legal expenses) incurred in connection with the foregoing,
and (c) all other charges now or hereafter owed by Canadian Borrower to Agent
and Lenders, all of which are unconditionally owing by Canadian Borrower to
Agent and Lenders, without offset, defense or counterclaim of any kind, nature
and description whatsoever.

     

    2.2           Guaranteed
Obligations.  Each Guarantor hereby acknowledges, confirms and
agrees that:

     

       
(a)           all
obligations of such Guarantor under the Guarantor Documents are unconditionally
owing by such Guarantor to Agent and Lenders without offset, defense or
counterclaim of any kind, nature and description whatsoever, and

     

       
(b)           the
absolute and unconditional guarantee of the payment of the Pre-Petition
Obligations by such Guarantor pursuant to the Guarantor Documents extends to all
Post-Petition Obligations, subject only to the limitations set forth herein and
in the Guarantor Documents.

     

    2.3           Acknowledgment of Security
Interests.  Each Borrower and Guarantor hereby acknowledges,
confirms and agrees that Agent, for the benefit of itself and the other Lenders,
has and shall continue to have valid, enforceable and perfected first priority
and senior security interests in and liens upon all Pre-Petition Collateral
heretofore granted to Agent pursuant to the Existing Financing Agreements by
Borrowers and Guarantors as in effect immediately prior to the Petition Date to
secure all of the Obligations, as well as valid and enforceable first priority
and senior security interests in and liens upon all Post-Petition Collateral
granted to Agent, for the benefit of itself and the other Lenders, under the
Financing Order, the CCAA Order or hereunder or under any of the other Financing
Agreements or otherwise granted to or held by Agent and Lenders to secure all of
the Obligations (including the Pre-Petition Obligations and the Post-Petition
Obligations), in each case, subject only to liens or encumbrances expressly
permitted by the Loan Agreement and any other liens or encumbrances expressly
permitted by the Financing Order or the CCAA Order that may have priority over
the liens in favor of Agent and Lenders.

     

    2.4           Binding Effect of
Documents.  Each Borrower and Guarantor hereby acknowledges,
confirms and agrees that: (a) each of the Existing Financing Agreements to which
it is a party was duly executed and delivered to Agent and Lenders by such
Borrower or Guarantor and each is in full force and effect as of the date
hereof, (b) the agreements and obligations of such Borrower or Guarantor
contained in the Existing Financing Agreements

     

    
      
         

      

      
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    constitute
the legal, valid and binding obligations of such Borrower or Guarantor
enforceable against it in accordance with the terms thereof (except as may be
limited by bankruptcy, insolvency, or similar laws affecting the enforcement of
creditors’ rights generally), and such Borrower or Guarantor has no valid
defense, offset or counterclaim to the enforcement of such obligations, and (c)
Agent and Lenders are and shall be entitled to all of the rights, remedies and
benefits provided for in the Financing Agreements, the Financing Order and the
CCAA Order.

    

    SECTION
3.  Adoption
and Ratification; Guaranty.

     

    3.1           Canadian
Borrower hereby (a) ratifies, assumes, adopts and agrees to be bound by all of
the Existing Financing Agreements (as amended by the Ratification Agreement,
this Amendment, the Financing Order and the CCAA Order) to which it is a party
and (b) agrees to pay all of the Pre-Petition Obligations in accordance with the
terms of such Existing Financing Agreements to which it is a party, as amended
by the Ratification Agreement and this Amendment, and in accordance with the
Financing Order and the CCAA Order.  All of the Existing Financing
Agreements (as amended by the Ratification Agreement, this Amendment, the
Financing Order and the CCAA Order) are hereby incorporated herein by reference
and hereby are and shall be deemed adopted and assumed in full by Canadian
Borrower, as Debtor and Debtor-in-Possession, and considered as agreements
between Canadian Borrower, on the one hand, and Agent and Lenders, on the other
hand.  Canadian Borrower hereby ratifies, restates, affirms and
confirms all of the terms and conditions of the Existing Financing Agreements,
as amended and supplemented pursuant the Ratification Agreement, this Amendment,
the Financing Order and the CCAA Order, and Canadian Borrower agrees to be fully
bound, as Debtor and Debtor-in-Possession, by the terms of the Financing
Agreements to which Canadian Borrower is a party.

     

    SECTION
4.  Amendments.

     

    4.1           Additional
Definitions.  As used herein, the following terms shall have
the meanings given to them below, and the Loan Agreement, the Ratification
Agreement and the other Financing Agreements are hereby amended to include, in
addition and not in limitation, the following definitions:

     

       
(a)           “5/09
Notice of Default” shall mean the Letter re: Notice of Default and Reservation
of Rights, dated May 29, 2009, by Agent addressed to Borrowers and
Guarantors.

     

       
(b)           “6/09
Budget” shall mean the Budget, in form and substance satisfactory to Agent and
Required Lenders, setting forth the Projected Information with respect to the
period commencing with the week ending June 5, 2009 through and including the
week ending July 3, 2009.

     

       
(c)           “Allowed
Professional Fees” shall have the meaning ascribed to such term in the Financing
Order.

     

       
(d)           “Amendment
No. 8” shall mean Amendment No. 1 to Ratification Agreement and Amendment No. 8
to Loan and Security Agreement, dated as of June 1, 2009, by

     

    
      
         

      

      
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    and
among Borrowers, Guarantors, Agent and Lenders, as it now exists or may
hereafter be amended, modified, supplemented, extended, renewed, restated or
replaced.

    

       
(e)           “BIA” shall
mean the Bankruptcy and Insolvency Act (Canada), as amended from time to
time.

     

       
(f)           “Bid
Procedures Order” shall mean the Order (I) Approving Bidding Procedures, (II)
Granting Certain Bid Protections, (III) Approving Form and Manner of Sale Notes
and (IV) Setting Sale Hearing Date in Connection with Sale of Substantially All
of Debtors’ Assets, entered by the Bankruptcy Court on June 2,
2009.

     

       
(g)           “CCAA”
shall mean the Companies’ Creditors Arrangement Act (Canada), as amended from
time to time.

     

       
(h)           “CCAA Case”
shall mean the proceedings commenced by Canadian Borrower under the CCAA,
pending in the CCAA Court.

     

       
(i)           “CCAA
Court” shall mean the Ontario Superior Court of Justice, or such other Court
that may from time to time have jurisdiction over the CCAA case.

     

       
(j)           “CCAA
Order” shall mean the initial order that either the CCAA Court has entered or
that Canadian Borrower has requested that the CCAA Court enter in the CCAA Case
on or about June 10, 2009 and such other order relating thereto (in each case in
form and substance satisfactory to Agent and Lenders) authorizing, among other
things, (i) imposing a stay of proceedings in Canada against Canadian Borrower,
its assets, properties and undertakings, (ii) that the stay of proceedings in
the CCAA Case shall not apply to Agent and Canadian Borrower, (iii) that Agent
and Canadian Lender shall be unaffected creditors in the CCAA Case, (iv) the
authorization of Canadian Borrower to execute and deliver and enter into, comply
with, perform and be bound by all of the terms and provisions set forth in the
Forbearance Agreement, and (v) authorizing the extension of credit by Agent and
Canadian Lender to Canadian Borrower.

     

       
(k)           “CCAA
Priority Charges” shall mean the Administration Charge and the Directors’ Charge
(each as defined in the CCAA Order).

     

       
(l)           “Emerisque”
shall mean, collectively, Emerisque Brands UK Limited and SKNL North America,
B.V., and their respective successors and assigns.

     

       
(m)           “Emerisque
APA” shall mean the Amended and Restated Asset Purchase Agreement, dated as of
June 1, 2009, by and among US Borrower, the subsidiaries of US Borrower named
therein and Emerisque.

     

       
(n)           “Emerisque
Sale Closing Date” shall mean (i) in the event Emerisque is the Successful
Bidder, the Closing Date (as defined in the Emerisque APA as in effect as of the
date of Amendment No. 8) or (ii) in the event Emerisque is not the Successful
Bidder, the closing date of the sale to such other Successful
Bidder.

     

    
      
         

      

      
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(o)           “Forbearance
Agreement” shall mean the Forbearance Agreement, dated on or about June 10,
2009, by and among Borrowers, Guarantors, Agent and Canadian Lender, as it now
exists or may hereafter be amended, modified, supplemented, extended, renewed,
restated or replaced.

     

       
(p)           “Minimum
Sale Proceeds” shall mean the amount, as determined by Agent as of close of
business on the Business Day immediately prior to the Emerisque Sale Closing
Date, equal to seventy-two percent (72%) of the then outstanding
Obligations.

     

       
(q)           “Professional
Fee Carve Out” shall have the meaning ascribed to such term in the Financing
Order.

     

       
(r)           “Successful
Bidder” shall have the meaning ascribed to such term in the Bid Procedures
Order.

     

    4.2           Debtors.  The
definition of “Debtors” set forth in the Loan Agreement is hereby amended by
deleting such Section in its entirety and replacing it with the
following:

     

    ““Debtors”
shall mean, collectively, each Borrower and its successors and assigns
(including any trustee or other fiduciary hereafter appointed as its legal
representative or with respect to the property of the estate of such Person,
whether under (as applicable) Chapter 11 of the Bankruptcy Code or any
subsequent Chapter 7 case or under the CCAA or any subsequent BIA case, and its
successor upon conclusion of (as applicable) the Chapter 11 Case or the CCAA
Case of such Person).”

     

    4.3           Financing
Agreements.  All references to the term “Financing Agreements”
in the Loan Agreement or the other Financing Agreements shall be deemed, and
each such reference is hereby amended, to include, in addition and not in
limitation, the Ratification Agreement, this Amendment, the Forbearance
Agreement and all of the Existing Financing Agreements, as ratified, assumed and
adopted by each Borrower and Guarantor pursuant to the terms thereof, as amended
and supplemented thereby, the Side Letter Agreement, the Financing Order and the
CCAA Order, as each of the same now exists or may hereafter be amended,
modified, supplemented, extended, renewed, restated or replaced.

     

    4.4           Loan
Agreement.  All references to the term “Loan Agreement” in the
Loan Agreement or the other Financing Agreements shall be deemed, and each such
reference is hereby amended, to mean the Existing Loan Agreement, as amended by
the Ratification Agreement and this Amendment, and as ratified, assumed and
adopted by each Borrower and Guarantor pursuant to the terms thereof, the
Financing Order and the CCAA Order, as the same now exists or may hereafter be
amended, modified, supplemented, extended, renewed, restated or
replaced.

     

    4.5           Material Adverse
Effect.  The definition of “Material Adverse Effect” set forth
in Section 1.92 of the Loan Agreement is hereby amended by deleting such Section
in its entirety and replacing it with the following:

     

    
      
         

      

      
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    “1.92      “Material
Adverse Effect” shall mean a material adverse effect on (a) the financial
condition, business, assets or operations of Borrowers and Guarantors (taken as
a whole) or the legality, validity or enforceability of this Agreement or any of
the other Financing Agreements; (b) the legality, validity, enforceability,
perfection or priority of the security interests and liens of Agent upon the
Collateral; (c) the ability of Borrowers and Guarantors (taken as a whole) to
repay the Obligations or to perform their respective obligations under this
Agreement or any of the other Financing Agreements as and when to be performed;
or (d) the rights and remedies of Agent or any Lender hereunder or under any of
the other Financing Agreements; provided, that, the
commencement of the Chapter 11 Cases and the CCAA Case shall not constitute a
Material Adverse Effect.”

     

    4.6           Petition
Date.  The definition of “Petition Date” set forth in the Loan
Agreement is hereby amended by deleting such Section in its entirety and
replacing it with the following:

     

    ““Petition
Date” shall mean with respect to US Borrower and Guarantors, the date of the
commencement of the Chapter 11 Cases, and with respect to Canadian Borrower, the
date of the commencement of the CCAA Case.”

     

    4.7           Post-Petition
Collateral.  The definition of “Post-Petition Collateral” set
forth in the Loan Agreement is hereby amended by deleting such Section in its
entirety and replacing it with the following:

     

    ““Post-Petition
Collateral” shall mean, collectively, all now existing and hereafter acquired
real and personal property of each Debtor’s estate, wherever located, of any
kind, nature or description, including any such property in which a lien is
granted to Agent pursuant to the Financing Agreements, the Financing Order, the
CCAA Order or any other order entered or issued by the Bankruptcy Court or the
CCAA Court, and shall include, without limitation:

     

    (i)           all
of the Pre-Petition Collateral;

     

    (ii)           all
Accounts;

     

    (iii)           all
general intangibles, including, without limitation, all  Intellectual
Property;

     

    (iv)           all
goods, including, without limitation, all Inventory and all
Equipment;

     

    (v)           all
Real Property and fixtures;

     

    (vi)           all
chattel paper, including, without limitation, all tangible and electronic
chattel paper;

     

    
      
         

      

      
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    (vii)           all
instruments, including, without limitation, all promissory notes;

     

    (viii)                      all
documents;

     

    (ix)           all
deposit accounts;

     

    (x)           
all letters of credit, banker’s acceptances and similar instruments and
including all letter-of-credit rights;

     

    (xi)           all
supporting obligations and all present and future liens, security interests,
rights, remedies, title and interest in, to and in respect of Receivables and
other Collateral, including (a) rights and remedies under or relating to
guaranties, contracts of suretyship, letters of credit and credit and other
insurance related to the Collateral, (b) rights of stoppage in transit,
replevin, repossession, reclamation and other rights and remedies of an unpaid
vendor, lienor or secured party, (c) goods described in invoices, documents,
contracts or instruments with respect to, or otherwise representing or
evidencing, Receivables or other Collateral, including returned, repossessed and
reclaimed goods, and (d) deposits by and property of account debtors or other
persons securing the obligations of account debtors;

     

    (xii)           all
(A) investment property (including securities, whether certificated or
uncertificated, securities accounts, security entitlements, commodity contracts
or commodity accounts) and (B) monies, credit balances, deposits and other
property of Borrowers and Guarantors now or hereafter held or received by or in
transit to Agent, any Lender or their respective Affiliates or at any other
depository or other institution from or for the account of Borrowers or
Guarantors, whether for safekeeping, pledge, custody, transmission, collection
or otherwise;

     

    (xiii)          all
commercial tort claims;

     

    (xiv)         
to the extent not otherwise described above, all Receivables;

     

    (xv)          all
Records;

     

    (xvi)         as
to Canadian Borrower only, a hypothec to and in favor of Canadian Lender (as
agent for itself and US Lender) to the extent of the sum of C$30,000,000 in
lawful money of Canada with interest thereon at the rate of twenty-five (25%)
percent, with respect to all of its rights and interests to the Collateral;
and

     

    
      
         

      

      
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    (xviii)        all
products and proceeds of the foregoing, in any form, including insurance
proceeds and all claims against third parties for loss or damage to or
destruction of or other involuntary conversion of any kind or nature of any or
all of the other Collateral.”

     

    4.8           Post-Petition
Obligations.  The definition of “Post-Petition Obligations” set
forth in the Loan Agreement is hereby amended by deleting such Section in its
entirety and replacing it with the following:

     

    ““Post-Petition
Obligations” shall mean all Obligations (as defined in the Existing Loan
Agreement) arising on and after the Petition Date and whether arising on or
after the conversion or dismissal of the Chapter 11 Cases and/or the CCAA Case,
or before, during and after the confirmation of any plan of reorganization in
the Chapter 11 Cases and/or the CCAA Case, and whether arising under or related
to the Ratification Agreement, the Loan Agreement, the Guarantor Documents, the
other Financing Agreements, a Financing Order, a CCAA Order, by operation of law
or otherwise, and whether incurred by such Borrower or Guarantor as principal,
surety, endorser, guarantor or otherwise and including, without limitation, all
principal, interest, financing charges, letter of credit fees, unused line fees,
servicing fees, line increase fees, debtor-in-possession facility fees, early
termination fees, other fees, commissions, costs, expenses and attorneys’,
accountants’ and consultants’ fees and expenses incurred in connection with any
of the foregoing.”

     

    4.9           Reserves.  The
definition of “Reserves” set forth in Section 1.121 of the Loan Agreement is
hereby amended by deleting such definition in its entirety and replacing it with
the following:

     

    “1.121
“Reserves” shall mean as of any date of determination, such amounts as Agent may
from time to time establish and revise in good faith, following notice thereof
to Administrative Borrower, reducing the amount of Loans and Letter of Credit
Accommodations which would otherwise be available to any Borrower under the
lending formula(s) provided for herein:  (a) to reflect events,
conditions, contingencies or risks which, as determined by Agent in good faith,
adversely affect, or would have a reasonable likelihood of adversely affecting,
either (i) the Collateral or any other property which is security for the
Obligations, its value or the amount that might be received by Agent from the
sale or other disposition or realization upon such Collateral, or (ii) the
assets, business or prospects of any Borrower or Obligor, (ii) the business and
operations of Borrowers and Guarantors (taken as a whole) or (iii) the security
interests and

     

    
      
         

      

      
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              other
      rights of Agent or Canadian Lender in the Collateral (including the
      enforceability, perfection and priority thereof) or (b) to reflect Agent’s
      good faith belief that any collateral report or financial information
      furnished by or on behalf of any Borrower or Obligor to Agent is or may
      have been incomplete, inaccurate or misleading in any material respect or
      (c) to reflect outstanding Letter of Credit Accommodations as provided in
      Section 2.2 hereof or (d) in respect of any state of facts which Agent
      determines in good faith constitutes a Default or an Event of Default or
      (e) to reflect the amounts of the Priority Payables or (f) to reflect
      Agent’s good faith estimate of the amount necessary to reflect changes in
      applicable currency exchange rates or currency exchange markets or (g) to
      reflect (i) the Carve-Out Expenses (as defined in the Financing Order
      and/or the CCAA Order), (ii) the amount of any senior liens or claims in
      or against the Collateral that, in Agent’s determination, have priority
      over the liens and claims of Agent and Lenders or (iii) the amount of
      priority or administrative expense claims that, in Agent’s determination,
      may be required to be paid by Debtors or their estates at any time during
      the Chapter 11 Cases and/or the CCAA Case, or (h) to reflect the value of
      Inventory at leased locations with respect to which the lease therefor has
      not been assumed commencing on the date that is ten (10) weeks prior to
      the end of the one hundred twenty (120) day lease rejection/assumption
      period, as such period may be extended or shortened by the Bankruptcy
      Court, or (i) to reflect the value of Inventory held at any leased
      location as to which there has been filed a landlord’s motion to compel
      the assumption or rejection of the lease, in an amount determined by
      Agent, and considering the likelihood or unlikelihood of the success of
      such motion on its merits in the good faith judgment of
      Agent.  Without limiting the generality of the foregoing,
      Reserves may, at Agent’s option, be established to reflect: (i) dilution
      with respect to the Accounts (based on the ratio of the aggregate amount
      of non-cash reductions in Accounts for any period to the aggregate dollar
      amount of the sales of such Borrower or Guarantor for such period) as
      calculated by Agent for any period which exceeds or is reasonably
      anticipated to exceed five (5%) percent; (ii) a change in the turnover,
      age or mix of the categories of Inventory that adversely affects the
      aggregate value of all Inventory; (iii) material decreases in the
      percentage of finished goods Inventory pre-sold against firm purchase
      orders; (iv) increases in Inventory markdown reserves that are not
      otherwise accounted for in the most recent Inventory appraisal received by
      Agent; (v) amounts due or to become due to owners and lessors of premises
      where any Collateral is located, other than for those locations where
      Agent has received a Collateral Access Agreement reasonably acceptable to
      Agent, duly

            

    

    
      
         

      

      
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    executed
and delivered by the applicable owner or lessor in favor of Agent, (vi) amounts
due or to become due to owners and licensors of trademarks and other
Intellectual Property used by any Borrower or Guarantor; and (vii) the amount of
sales, excise or similar taxes to the extent included in the amount of any
Accounts reported to Agent.  The amount of any Reserve established by
Agent shall have a reasonable relationship to the event, condition or other
matter which is the basis for such Reserve as determined by Agent in good
faith.  To the extent that Agent shall have established a Reserve to
address an event, condition or matter in a manner satisfactory to Agent, the
percentages set forth in the definition of the Borrowing Base shall not be
reduced to address the same event, condition or matter.”

     

    4.10           Financial
Reporting.  Section 9.6(e) of the Loan Agreement is hereby
amended by deleting such Section in their entirety and replacing it with the
following:

     

    “(e)  Each
Borrower and Guarantor shall provide Agent and Lenders with copies of all
financial reports, schedules and other materials and information at any time
furnished by or on behalf of any Borrower or Guarantor to the Bankruptcy Court,
the U.S. Trustee, the CCAA Court, the Monitor, any creditors’ committee or such
Borrower’s or Guarantor’s shareholders, concurrently with the delivery
thereof.”

     

    4.11           Events of
Default.  Sections 10.1(o) through and including 10.1(bb) of
the Loan Agreement are hereby amended by deleting such Sections in their
entirety and replacing them with the following:

     

    “(o)  the
occurrence of any condition or event which permits Agent or any Lender to
exercise any of the rights and remedies set forth in the Financing Order or the
CCAA Order, including, without limitation, any Event of Default (as defined in
the Financing Order) or any Event of Default (as defined in the CCAA
Order);

     

    (p)  the
termination or non-renewal of the Financing Agreements as provided for in the
Financing Order or the CCAA Order;

     

    (q)  any
Borrower or Guarantor suspends or discontinues or is enjoined by any court or
Governmental Authority from continuing to conduct all or any material part of
its business, or a trustee, receiver or custodian is appointed for any Borrower
or Guarantor, or any of their respective properties;

     

    
      
         

      

      
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    (r)  any
act, condition or event occurring after the Petition Date that has or would
reasonably expect to have a Material Adverse Effect;

     

    (s)  the
conversion of any Chapter 11 Case to a case under Chapter 7 of the Bankruptcy
Code or the converstion of the CCAA Case to a receivership under the
BIA;

     

    (t)  the
dismissal of any Chapter 11 Case or any subsequent Chapter 7 case, either
voluntarily or involuntarily, or the dismissal of the CCAA Case or an subsequent
receivership under the BIA, or the termination, suspension or modification of
the stay of proceedings in the Chapter 11 Cases or the CCAA Case, either
voluntarily or involuntarily;

     

    (u)  the
grant of a lien on or other interest in any property of any Borrower or
Guarantor other than a lien or encumbrance permitted by Section 9.8 hereof or by
the Financing Order or the CCAA Order, or an administrative expense claim other
than such administrative expense claim permitted by the Financing Order or the
Ratification Agreement by the grant of or allowance by the Bankruptcy Court
which is superior to or ranks in parity with Agent’s and Lenders’ security
interests in or liens upon the Collateral or their Superpriority Claim (as
defined in the Financing Order);

     

    (v)  the
Financing Order or the CCAA Order shall be reversed, revoked, remanded, stayed,
rescinded, vacated, modified in a manner that is adverse or could reasonably be
expected to be adverse to the interests of Agent or any Lenders, or amended on
appeal or by the Bankruptcy Court or the CCAA Court without the prior written
consent of Agent (and no such consent shall be implied from any other
authorization or acquiescence by Agent or any Lender);

     

    (w)  the
appointment of a trustee pursuant to Sections 1104(a)(1) or 1104(a)(2) of the
Bankruptcy Code or a trustee or interim receiver pursuant to the BIA or a
receiver or receiver and manager under Canadian law;

     

    (x)  the
appointment of an examiner with expanded powers pursuant to Section 1104(a) of
the Bankruptcy Code;

     

    (y)  the
filing of a plan of reorganization or liquidation by or on behalf of any
Borrower or Guarantor, to which Agent and Lenders have not consented in writing,
which does not provide for

     

    
      
         

      

      
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    payment
in full of all Obligations on the effective date thereof in accordance with the
terms and conditions contained herein;

     

    (z)  the
confirmation of any plan of reorganization or liquidation in the Chapter 11 Case
of any Borrower or Guarantor or the CCAA Case of Canadian Borrower, to which
Agent and Lenders have not consented to in writing, which does not provide for
payment in full of all Obligations on the effective date thereof in accordance
with the terms and conditions contained herein;

     

    (aa)  any
Borrower or Obligor makes an assignment for the benefit of creditors, makes or
sends notice of a bulk transfer or calls a meeting of its creditors or principal
creditors in connection with a moratorium or adjustment of the Indebtedness due
to them; or

     

    (bb)  the
Final Financing Order shall not have been entered by the Bankruptcy Court, and
become effective, or the CCAA Order shall not have been entered by the CCAA
Court, and become effective, within thirty (30) days of the Petition
Date.”

     

    4.12           Governing Law; Choice of
Forum; Service of Process; Jury Trial Waiver.  Section 11.1(a)
of the Loan Agreement is hereby amended by adding the following at the end of
such Section:

     

    “except
to the extent that the provisions of the Bankruptcy Code or the CCAA are
applicable and specifically conflict with the foregoing.”

     

    4.13           Term.  Section
13.1(a) of the Loan Agreement is hereby amended by deleting the first sentence
of such Section in its entirety and replacing it with the
following:

     

    “This
Agreement and the other Financing Agreements shall become effective as of the
date set forth on the first page hereof and shall continue in full force and
effect for a term ending on the earlier to occur of (i) July 1, 2009; provided, that, upon the
execution and delivery of Amendment No. 8 by all Lenders, such date shall be
July 7, 2009, (ii) the later of (A) the close of business on the business day
immediately preceding the Emerisque Sale Closing Date and (B) the close of
business on the business day immediately preceding the closing date of the sale
of substantially all of the assets of Canadian Borrower, (iii) the date of the
confirmation of a plan of reorganization or liquidation for any Debtor in the
Chapter 11 Cases, and (iv) the last termination date set forth in the Final
Financing Order (the earlier to occur of clauses (i), (ii), (iii) and (iv)
referred to herein as the “Maturity

     

    
      
         

      

      
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    Date”);
provided, that, (1)(x) from and
after the Emerisque Sale Closing Date, if the closing date of the sale of
substantially all of the assets of Canadian Borrower has not occurred and the
Maturity Date has not otherwise occurred, the US Commitments shall be reduced to
$0, and (y) from and after the closing date of the sale of substantially all of
the assets of Canadian Borrower, if the Emerisque Sale Closing Date has not
occurred and the Maturity Date has not otherwise occurred, the Canadian
Commitments shall be reduced to $0, and (2) this Agreement and all other
Financing Agreements must be terminated simultaneously.”

     

    4.14           Budget.  Effective
as of the date of this Amendment, Section 5.3(c) of the Ratification Agreement
is hereby amended and restated in its entirety as follows:

     

    “Each
Borrower acknowledges, confirms and agrees that, commencing with the week ending
May 29, 2009: (i) for the trailing three (3) week period ending on the Friday of
each week, (i) the actual aggregate weekly cash receipts during such period for
all line items in the Budget shall not be less than ninety (90%) percent of the
projected aggregate weekly cash receipts during such period for all such line
items in the Budget, (ii) for the trailing three (3) week period ending on the
Friday of each week, the actual aggregate weekly cash disbursements for
“employee related expenses”, “inventory related expenses”, “overhead related
expenses” (as each such term is defined in the Budget) and all other expenses
(taken as a whole) during such period shall not be greater than one hundred ten
(110%) percent of the projected aggregate weekly cash disbursements for each
such category of expenses set forth in the Budget during such period, (iii) for
the trailing three (3) week period ending on the Friday of each week, the actual
aggregate weekly cash disbursements for all line items in the Budget during such
period shall not be greater than one hundred ten (110%) percent of the projected
aggregate weekly cash disbursements for all such line items set forth in the
Budget during such period, and (iv) for the one (1) week period ending on the
Friday of each week, the actual aggregate principal amount of Loans and Letter
of Credit Accommodations outstanding during such period shall not be greater
than one hundred three (103%) percent of the projected aggregate principal
amount of Loans and Letter of Credit Accommodations outstanding as set forth in
the Budget during such period.”

     

    SECTION
5.  Sale
Milestones.

     

    5.1           On
or before June 25, 2009, the Bankruptcy Court shall hold a hearing to consider
approval of the highest and best bid(s) for the sale of all or substantially all
of the Debtors’ assets (the “Sale”) in accordance with the terms of the Bid
Procedures Order (the “Sale

     

    
      
         

      

      
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    Hearing”).  At
least five (5) days prior to the Sale Hearing, Emerisque or such other
Successful Bidder shall deliver to Agent, for the benefit of itself and the
other Lenders, a financing commitment satisfactory to Agent demonstrating, among
other things, that Emerisque or such other Successful Bidder has the financial
wherewithal to consummate the Sale.

    

    5.2           Not
later than two (2) Business Days following the Sale Hearing, the Bankruptcy
Court shall enter an order, in form and substance satisfactory to Agent,
approving such Sale to Emerisque pursuant to the Emerisque APA or, in the event
Emerisque is not the Successful Bidder, to such other Successful Bidder pursuant
to an agreement in form and substance satisfactory to Agent (the “Sale
Order”).

     

    5.3           5.3           Not
later than July 7, 2009, (a) if Emerisque is the Successful Bidder, the
Emerisque Sale Closing Date shall occur and (i) Borrowers shall remit to the
Agent Payment Account on the Emerisque Sale Closing Date all of the proceeds of
such Sale, which shall include a cash amount equal to or greater than the
Minimum Sale Proceeds, for application by Agent to the Obligations in accordance
with the Financing Agreements, and (ii) Emerisque shall deliver to Agent, for
the benefit of itself and the other Lenders, an original subordinated promissory
note in the amount of $5,500,000 and containing such other terms satisfactory to
Agent and consistent with the Emerisque APA, or (b) if Emerisque is not the
Successful Bidder, the closing of such Sale shall occur and Borrowers, or such
other Successful Bidder, shall remit to Agent, for the benefit of itself and the
other Lenders, on the closing of such Sale all of the proceeds of such Sale,
which shall include a cash amount equal to or greater than the Minimum Sale
Proceeds, for application by Agent to the Obligations in accordance with the
Financing Agreements, together with such other consideration for the benefit of
Agent and the Lenders as may be satisfactory to Agent and approved pursuant to
the Sale Order.

     

    SECTION
6.  Professional Fee Carve-Out;
CCAA Priority Charges.

     

    6.1           Professional Fee
Carve-Out.

     

       
(a)          Debtors hereby
acknowledge, confirm and agree that:

     

    (i)             as
of the date of the 5/09 Notice of Default, the Professional Fee Carve Out in the
amount of $2,250,000 is due and payable pursuant to the Final Financing
Order,

     

    (ii)            the
Professional Fee Carve Out in the amount of $2,250,000 has been advanced by
Lenders and constitutes a Loan and Obligations outstanding under the Loan
Agreement (the “Carve-Out Loan”),

     

    (iii)           Agent,
for the account of Debtors, shall hold the proceeds of such Carve-Out Loan for
distribution on account of Allowed Professional Fees in accordance with the
Final Financing Order, promptly after the earlier to occur of (A) the
declaration or notice of the occurrence of an Event of Default (other than the
5/09 Notice of Default and the Specified Events of Default as set forth therein)
after the date of Amendment No. 8, (B) the receipt by Agent of the Minimum Sale
Proceeds or such other amounts satisfactory to Agent and approved by the
Bankruptcy Court in accordance with Section 5.3 above and (C) the Maturity Date
(a “Carve-Out Release Event”); provided, that, Agent shall
release the proceeds of the

     

    
      
         

      

      
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    Carve-Out
Loan to Debtors (or their designee) for disbursement on account of Allowed
Professional Fees in accordance with the Final Financing Order promptly after
the entry by the Bankruptcy Court of an Order, in form and substance
satisfactory to Agent, which provides, among other things, (A) that the proceeds
of the Carve-Out Loan shall be used by Debtors to satisfy Allowed Professional
Fees and Carve-Out Expenses in accordance with the Final Financing Order until
paid in full, (B) that Debtors are solely responsible for the payment of Allowed
Professional Fees in accordance with the Final Financing Order, (C) for the
release and discharge of Agent and Lenders, and their respective successors and
assigns, from any and all demands, causes of action and any and all other claims
and liabilities whatsoever, which any person (including, without limitation, any
Professional), or any of their respective successors and/or assigns, may now or
hereafter have or claim to have against Agent and Lenders for or on account of,
or in relation to, or in any way in connection with the Professional Fee Carve
Out and any Carve-Out Expenses and other amounts associated therewith and/or
related thereto, and (D) that Agent and Lenders shall have no further obligation
or liability to pay, fund or otherwise ensure funding of the Professional Fee
Carve Out or any other amounts, including, without limitation, any other Allowed
Professional Fees, which obligation shall be the sole and absolute
responsibility of Debtors,

    

    (iv)             except
as provided under Section 6.1(a)(i),(ii) and (iii) above, Agent and Lenders
shall have no further obligation or liability to pay, fund or otherwise ensure
funding of the Professional Fee Carve Out or any other amounts, including,
without limitation, any other Allowed Professional Fees, which obligation shall
be the sole and absolute responsibility of Debtors, and

     

    (v)             any
payment or reimbursement made at any time in respect of Allowed Professional
Fees, whether made directly by Agent or any Lender or by or on behalf of
Debtors, and whether made using proceeds of the Carve-Out Loan or otherwise,
shall at all times be subject to the Final Financing Order, including
specifically Section 2.3.2 thereof.

     

    (b)           Debtors
hereby further acknowledge, confirm and agree that, in accordance with Section
2.5.2 of the Financing Order, from and after the occurrence of a Carve-Out
Release Event, any payment remitted to or for the account of Debtors in respect
of Allowed Professional Fees, whether made directly by Agent or any Lender or by
or on behalf of Debtors, including any payments from the proceeds of the
Carve-Out Loan, shall permanently reduce the Professional Fee Carve Out on a
dollar-for-dollar basis.

     

    (c)           Agent
and Lenders hereby acknowledge, confirm and agree that, consistent with Section
2.5.2 of the Financing Order, prior to the occurrence of a Carve-Out Release
Event, any payment remitted to or for the account of Debtors in respect of
Allowed Professional Fees, whether made directly by Agent or any Lender or by or
on behalf of Debtors, shall not reduce the amount of the Professional Fee Carve
Out or the Carve-Out Loan.

     

    6.2           CCAA Priority
Charges.  Debtors hereby acknowledge, confirm and agree that,
(a) pursuant to the CCAA Order, Canadian Borrower is required from time to time
to pay CCAA Priority Charges and (b) the amount of CCAA Priority Charges, which
Agent determines is or may be payable from time to time by Canadian Borrower,
shall be advanced by Canadian Lender in accordance with and subject to the terms
and conditions of the Forbearance

     

    
      
         

      

      
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    Agreement,
the CCAA Order and/or any other Order of the CCAA Court, and an escrow
agreement, in form and substance satisfactory to Agent, to be executed by and
among Agent, Canadian Lender and the Monitor (as defined in the CCAA
Order).

    

    SECTION
7.  6/09
Budget.

     

    7.1           On
or prior to the date of this Amendment, Borrowers shall have prepared and
delivered to Agent, in form and substance satisfactory to Agent, the 6/09
Budget.

     

    7.2           Borrowers
and Guarantors hereby acknowledge, confirm and agree that (i) the 6/09 Budget
shall in all respects be subject to the terms and conditions of Section 5.3 of
the Ratification Agreement, (ii) Borrowers shall be required to comply with the
requirements of Section 5.3 of the Ratification Agreement with respect to the
6/09 Budget and (iii) any Material Budget Deviation with respect to the 6/09
Budget shall constitute an Event of Default under the Financing
Agreements.

     

    SECTION
8.  Waiver
of Specified Events of Default.

     

    8.1           Waiver.  Pursuant
to Borrowers request, subject to the terms and conditions contained herein,
Agent and Lenders hereby waive(a) the Specified Events of Default and (b) the
filing by Canadian Borrower of the CCAA Case.

     

    8.2           Reservation of
Rights.  Agent
and Lenders have not waived and are not by this Amendment waiving, and
have no present intention of waiving, any Default or Event of Default, which may
have occurred prior to the date hereof, or may be continuing on the date hereof,
or any Event of Default which may occur after the date hereof, other than the
Specified Events of Default as and to the extent set forth in Section 3.1 above,
whether the same or similar to the Specified Events of Default or
otherwise.  Agent and Lenders reserve the right, in their discretion,
to exercise any or all of their rights and remedies arising under the Financing
Agreements, applicable law or otherwise, as a result of any other Event of
Default which may have occurred prior to the date hereof, or are continuing on
the date hereof, or any Event of Default which may occur after the date hereof,
whether the same or similar to the Specified Events of Default or
otherwise.  Nothing contained herein shall be construed as a waiver of
the failure of Borrowers and Guarantors to comply with the terms of the Loan
Agreement and the other Financing Agreements after such time.

     

    SECTION
9.  Representations, Warranties
and Covenants.

     

    Each
Borrower and Guarantor hereby represents, warrants and covenants with and to
Agent and Lenders as follows:

     

    9.1           Financing Order and CCAA
Order.

     

    (a)           The
Final Financing Order has been duly entered, is valid, subsisting and continuing
and has not been vacated, modified, reversed on appeal, or vacated or modified
by any order of the Bankruptcy Court (other than as consented to by Agent) and
is not subject to any pending appeal or stay or other action by the Bankruptcy
Court which impairs or prevents the enforcement of any provision contained
therein.

     

    
      
         

      

      
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    (b)           The
CCAA Order has been or shall be duly entered, is valid, subsisting and
continuing and shall not be vacated, modified, reversed on appeal, or vacated or
modified by any order of the CCAA Court (other than as consented to by Agent and
Lenders) and shall not be subject to any pending appeal, stay or other action by
the CCAA Court which impairs or prevents the enforcement of any provision
contained therein.

     

    9.2           Use of
Proceeds.  Notwithstanding anything to the contrary set forth
in Section 6.6 of the Loan Agreement, (a) all Loans and Letter of Credit
Accommodations provided by Agent or any Lender to Borrowers pursuant to the
Financing Orders, the CCAA Order, the Loan Agreement or otherwise, shall be used
by Borrowers for general operating and working capital purposes in the ordinary
course of business of Borrowers in accordance with the 6/09 Budget pursuant to
Section 5.3 of the Ratification Agreement, and (b) unless authorized by the
Bankruptcy Court and/or the CCAA Court and approved by Agent in writing, no
portion of any administrative expense claim or other claim relating to the
Chapter 11 Cases and/or the CCAA Case shall be paid with the proceeds of Loans
or Letter of Credit Accommodations provided by Agent and Lenders to Borrowers,
other than those administrative expense claims and other claims relating to the
Chapter 11 Cases and/or the CCAA Case directly attributable to the operation of
the business of any Borrower or Guarantor in the ordinary course of such
business in accordance with the Financing Agreements and the 6/09
Budget.

     

    9.3           Binding Effect of
Documents.  This Amendment and the other Financing Agreements
to which it is a party have been duly executed and delivered by such Borrower or
Guarantor, as the case may be, and are in full force and effect.  The
agreements and obligations of each Borrower and Guarantor contained in the
Financing Agreements constitute legal, valid and binding obligations of each
such party enforceable by Agent against each such party in accordance with their
respective terms.

     

    9.4           No
Defaults.  After giving effect to this Amendment, no Default or
Event of Default exists as of the date of this Amendment.

     

    9.5           No Conflict,
Etc.  The execution and delivery and performance of this
Amendment by each Borrower and Guarantor will not violate any material
agreement, instrument or undertaking by which it is bound, and will not result
in, or require, the creation or imposition of any lien, charge, security
interest or other encumbrance on any of its properties or revenues.

     

    SECTION
10.  Conditions
Precedent.  This Amendment shall not become effective unless
all of the following conditions precedent have been satisfied in full, as
determined by Agent and Lenders:

     

    10.1           The
receipt by Agent of an original (or faxed or electronic copy) of this Amendment,
duly authorized, executed and delivered by each Debtor and each
Lender;

     

    10.2           The
receipt by Agent of the 6/09 Budget;

     

    10.3           The
receipt by Agent of an Order, in form and substance satisfactory to Agent,
authorizing Debtors to enter into and comply with this Amendment;

     

    
      
         

      

      
        18

        
          

        

      

      
         

      

    

    10.4           Other
than the voluntary commencement of the Chapter 11 Cases and the CCAA Case, no
material impairment of the priority of Agent’s and Lenders’ security interests
in the Collateral shall have occurred from the date of the latest field
examinations of Agent and Lenders to the Petition Date; and

     

    10.5           The
entry by the CCAA Court of the CCAA Order, in form and substance satisfactory to
Agent, authorizing post-petition financing under the terms set forth in the
Ratification Agreement in an amount acceptable to Agent and Lenders, in their
discretion, and such CCAA Order shall contain such other terms or provisions as
Agent and its counsel shall require; and each Borrower and Guarantor shall
comply in full with the notice and other requirements of the CCAA and applicable
rules thereunder with respect to any relevant CCAA Order in a manner acceptable
to Agent and its counsel.

     

    SECTION
11.  Provisions of General
Application.

     

    11.1           Effect of this
Amendment.  Except as expressly amended pursuant hereto and
except for the consents and waivers expressly granted herein, no other changes
or modifications to the Financing Agreements are intended or implied and, in all
other respects, the Financing Agreements are hereby specifically ratified,
restated and confirmed by all parties hereto as of the effective date
hereof.  To the extent that any provision of the Loan Agreement or any
of the other Financing Agreements are inconsistent with the provisions of this
Amendment, the provisions of this Amendment shall control.  The Loan
Agreement and this Amendment shall be read and construed as one
agreement.

     

    11.2           Additional Events of
Default.  The parties hereto acknowledge, confirm and agree
that it shall constitute an Event of Default under the Loan Agreement and the
other Financing Agreements if (a) any Borrower or Guarantor fails to comply with
the covenants, conditions and agreements contained herein or (b) there occurs
any default by Borrowers under the Emerisque APA, which default continues for
more than the applicable cure period, if any, with respect thereto and/or is not
waived in writing by the other parties thereto.

     

    11.3           Governing
Law.  The validity, interpretation and enforcement of this
Amendment and any dispute arising out of the relationship between the parties
hereto, whether in contract, tort, equity or otherwise, shall be governed by the
internal laws of the State of Illinois but excluding any principles of conflicts
of law or other rule of law that would cause the application of the law of any
jurisdiction other than the laws of the State of Illinois, unless otherwise
expressly provided in a Financing Agreement, except to the extent that the
provisions of the Bankruptcy Code are applicable and specifically conflict with
the foregoing.

     

    11.4           Binding
Effect.  This Amendment shall be binding upon and inure to the
benefit of each of the parties hereto and their respective successors and
assigns.  Any
acknowledgments or consents contained herein shall not be construed to
constitute a consent to any other or further action by any Borrower or Guarantor
or to entitle such Borrower or Guarantor to any other
consent.

     

    11.5           Further
Assurances.  Each Borrower and Guarantor shall, at its expense,
at any time or times duly execute and deliver, or shall use its best efforts to
cause to be duly

     

    
      
         

      

      
        19

        
          

        

      

      
         

      

    

    executed
and delivered, such further agreements, instruments and documents, including,
without limitation, additional security agreements, collateral assignments, UCC
or PPSA financing statements or amendments or continuations thereof, landlord’s
or mortgagee’s waivers of liens and consents to the exercise by Agent and
Lenders of all the rights and remedies hereunder, under any of the other
Financing Agreements, any Financing Order, the CCAA Order or applicable law with
respect to the Collateral, and do or use its best efforts to cause to be done
such further acts as may be reasonably necessary or proper in Agent’s opinion to
evidence, perfect, maintain and enforce the security interests of Agent and
Lenders, and the priority thereof, in the Collateral and to otherwise effectuate
the provisions or purposes of the Ratification Agreement, this Amendment, any of
the other  Financing Agreements, the Financing Order or CCAA
Order.  Upon the request of Agent, at any time and from time to time,
each Borrower and Guarantor shall, at its cost and expense, do, make, execute,
deliver and record, register or file updates to the filings of Agent and Lenders
with respect to the Intellectual Property with the United States Patent and
Trademark Office, the financing statements, mortgages, deeds of trust, deeds to
secure debt, and other instruments, acts, pledges, assignments and transfers (or
use its best efforts to cause the same to be done) and will deliver to Agent and
Lenders such instruments evidencing items of Collateral as may be requested by
Agent.  Upon the request of Agent, at any time and from time to time,
Borrowers and Guarantors shall, at their cost and expense deliver to Agent any
financial information, projections, budgets, business plans, cash flows and such
other information as Agent shall reasonably request.

    

    11.6           Costs and
Expenses.  In addition to and not in limitation of the
provisions of Section 9.21 of the Loan Agreement, Borrowers shall pay to Agent
on demand all costs and expenses that Agent and Lenders shall pay or incur in
connection with the negotiation, preparation, consummation, administration,
enforcement, and termination of the Ratification Agreement, this Amendment, the
other Financing Agreements, the Financing Order or the CCAA Order, including,
without limitation: (a) reasonable attorneys' and paralegals' fees and
disbursements of counsel to, and reasonable fees and expenses of consultants,
accountants and other professionals retained by, Agent and Lenders; (b) costs
and expenses (including reasonable attorneys' and paralegals' fees and
disbursements) for any amendment, supplement, waiver, consent, or subsequent
closing in connection with the Ratification Agreement, the Amendment, the other
Financing Agreements, the Financing Order, the CCAA Order and the transactions
contemplated hereby and thereby; (c) taxes, fees and other charges for recording
any agreements or documents with any Governmental Authority, and the filing of
UCC or PPSA financing statements and continuations, and other actions to
perfect, protect, and continue the security interests and liens of Agent in the
Collateral; (d) sums paid or incurred to pay any amount or take any action
required of Borrowers and Guarantors under the Financing Agreements, the
Financing Order or the CCAA Order that Borrowers and Guarantors fail to pay or
take; (e) costs of appraisals, inspections and verifications of the Collateral
and including travel, lodging, and meals for inspections of the Collateral and
the Debtors’ operations by Agent or its agents and to attend court hearings or
otherwise in connection with the Chapter 11 Cases; (f) costs and expenses of
preserving and protecting the Collateral; (g) all out-of-pocket expenses and
costs heretofore and from time to time hereafter incurred by Agent during the
course of periodic field examinations of the Collateral and Debtors' operations,
plus a per diem charge at the rate of $1,000 per person per day for Agent’s
examiners in the field and office; provided, that, so long as no Default or
Event of Default shall exist or have occurred and be continuing, Debtors shall
not be required to pay such per diem charge for more than four (4) such field
examinations in

     

    
      
         

      

      
        20

        
          

        

      

      
         

      

    

    any
twelve (12) month period (and any field examinations conducted at such time as a
Default or Event of Default shall exist or have occurred and be continuing shall
not be deemed to constitute a field examination for purposes of such
limitation); and (h) costs and expenses (including attorneys' and paralegals'
fees and disbursements) paid or incurred to obtain payment of the Obligations,
enforce the security interests and liens of Agent and Lenders, sell or otherwise
realize upon the Collateral, and otherwise enforce the provisions of the
Ratification Agreement, this Amendment, the other Financing Agreements, the
Financing Order or the CCAA Order, or to defend any claims made or threatened
against Agent or any Lender arising out of the transactions contemplated hereby
(including, without limitation, preparations for and consultations concerning
any such matters).  The foregoing shall not be construed to limit any
other provisions of the Financing Agreements regarding costs and expenses to be
paid by Borrowers.  All sums provided for in this Section shall be
part of the Obligations, shall be payable on demand, and shall accrue interest
after demand for payment thereof at the highest rate of interest then payable
under the Financing Agreements.  Agent is hereby irrevocably
authorized to charge any amounts payable hereunder directly to any account
maintained by Agent with respect to any Borrower or Guarantor.

    

    11.7           Headings.  The
headings listed herein are for convenience only and do not constitute matters to
be construed in interpreting this Amendment.

     

    11.8           Counterparts.  This
Amendment may be executed in any number of counterparts, each of which shall be
an original but all of which taken together shall constitute one and the same
agreement.  Delivery of an executed counterpart of this Amendment by
telefacsimile or other electronic means shall have the same force and effect as
the delivery of an original executed counterpart of this
Amendment.  Any party delivering an executed counterpart of this
Amendment by telefacsimile or other electronic means shall also deliver an
originally executed counterpart of this Amendment, but the failure to do so
shall not affect the validity, enforceability or binding effect of this
Amendment.

     

    [REMAINDER
OF THIS PAGE INTENTIONALLY LEFT BLANK]

     

    
      
         

      

      
        21

        
          

        

      

      
         

      

    

    IN
WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly
executed as of the day and year first above written.

    

    
      
        	 
      	
                AGENT AND LENDERS:

              
	 
      	 
      	 
      
	 
      	
                WACHOVIA
      CAPITAL FINANCE 

                CORPORATION
      (CENTRAL), as 

                Agent
      and as Lender

              
	 
      	 
      	 
      
	 
      	
                By:

              	
                /s/
      Vicki Geist

              
	 
      	
                Name:

              	
                Vicki
      Geist

              
	 
      	
                Title:

              	
                Director

              

      

    

    

    

    
      	 
      	
              BANK
      OF AMERICA, N.A., as a Lender

            
	 
      	 
      	 
      
	 
      	
              By:

            	
              /s/
      Lynn D. Simmons

            
	 
      	
              Name:

            	
              Lynn
      D. Simmons

            
	 
      	
              Title:

            	
              Senior
      Vice President

            

    

    

    
      	 
      	
              JPMORGAN
      BUSINESS CREDIT CORP., as 

              a
      Lender

            
	 
      	 
      	 
      
	 
      	
              By:

            	
              /s/
      Christopher D. Zawie

            
	 
      	
              Name:

            	
              Christopher
      D. Zawie

            
	 
      	
              Title:

            	
              Senior
      Vice President

            

    

    

    
      	 
      	
              WEBSTER
      BUSINESS CREDIT, as a Lender

            
	 
      	 
      	 
      
	 
      	
              By:

            	
              /s/
      Julian Vigdor

            
	 
      	
              Name:

            	
              Julian
      Vigdor

            
	 
      	
              Title:

            	
              AVP

            

    

    

    

    

    

    

    [SIGNATURES
CONTINUED ON NEXT PAGE]

     

    
      
        
          [Signature
Page to Amendment No. 1 to Ratification Agreement; Amendment No. 8 to
LSA]

          
            	
                    1304790.18 

                  	 
      	 
      

          

          

        

         

      

      
         

        
          

        

      

      
         

      

    

    [SIGNATURES
CONTINUED FROM PRIOR PAGE]

     

    

    
      	 
      	
              THE
      CIT GROUP/COMMERCIAL 

              SERVICES,
      INC., as a Lender

            
	 
      	 
      	 
      
	 
      	
              By:

            	
              /s/
      Samuel Addison

            
	 
      	
              Name:

            	
              Samuel
      Addison

            
	 
      	
              Title:

            	
              Assistant
      Vice President

            

    

    

    

    
      	 
      	
              UPS
      CAPITAL CORPORATION, as 

              a
      Lender

            
	 
      	 
      	 
      
	 
      	
              By:

            	
              /s/
      Mike O’Neil

            
	 
      	
              Name:

            	
              Mike
      O’Neil

            
	 
      	
              Title:

            	
              Sr.
      Credit Officer

            

    

    

    

    
      	 
      	
              RZB
      FINANCE LLC, as a Lender

            
	 
      	 
      	 
      
	 
      	
              By:

            	
              /s/
      Christoph Hoedl

            
	 
      	
              Name:

            	
              Christoph
      Hoedl

            
	 
      	
              Title:

            	
              First
      Vice President

            
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	
              By:

            	
              /s/
      Randall Abrams

            
	 
      	
              Name:

            	
              Randall
      Abrams

            
	 
      	
              Title:

            	
              Vice
      President

            
	 
      	 
      	 
      

    

    

    

    

    

    

    

    [SIGNATURES
CONTINUED ON NEXT PAGE]

     

     

    
      
        
          [Signature
Page to Amendment No. 1 to Ratification Agreement; Amendment No. 8 to
LSA]

          
            	
                    1304790.18 

                  	 
      	 
      

          

          

        

         

      

      
         

        
          

        

      

      
         

      

    

    [SIGNATURES
CONTINUED FROM PRIOR PAGE]

    

    

    
      
        	 
      	
                BORROWERS

              
	 
      	 
      	 
      
	 
      	
                HARTMARX
      CORPORATION, as Debtor 

                and
      Debtor-in-Possession

              
	 
      	 
      	 
      
	 
      	
                By:

              	
                /s/
      Glenn R. Morgan

              
	 
      	
                Name:

              	
                Glenn
      R. Morgan

              
	 
      	
                Title:

              	
                Executive
      Vice President and 

                Chief
      Financial Officer

              

      

    

    

    

    
      	 
      	
              COPPLEY
      APPAREL GROUP LIMITED

            
	 
      	 
      	 
      
	 
      	
              By:

            	
              /s/
      Glenn R. Morgan

            
	 
      	
              Name:

            	
              Glenn
      R. Morgan

            
	 
      	
              Title:

            	
              Vice
      President

            

    

    

    

    
      
        	 
      	
                GUARANTORS

              
	 
      	 
      	 
      
	 
      	
                EACH
      OF THE COMPANIES LISTED ON

                EXHIBIT
      A HERETO, each as Debtor and 

                Debtor-in-Possession

              
	 
      	 
      	 
      
	 
      	
                By:

              	
                /s/
      Glenn R. Morgan

              
	 
      	
                Name:

              	
                Glenn
      R. Morgan

              
	 
      	
                Title:

              	
                Vice
      President of each 

                such
      company

              

      

    

    

    

    

    

    

    
      
        
          [Signature
Page to Amendment No. 1 to Ratification Agreement; Amendment No. 8 to
LSA]

          
            	
                    1304790.18 

                  	 
      	 
      

          

          

        

         

      

      
         

        
          

        

      

      
         

      

    

    EXHIBIT
A

    TO

    AMENDMENT

    

    Guarantors

    

    

    
      	
              Anniston
      Sportswear Corporation

            	
              Robert
      Surrey, Inc.

            
	
              Consolidated
      Apparel Group, Inc.

            	
              Robert’s
      International Corporation

            
	
              Direct
      Route Marketing Corporation

            	
              SALHOLD,
      Inc.

            
	
              Hart
      Schaffner & Marx

            	
              Seaford
      Clothing Co.

            
	
              Hickey-Freeman
      Co., Inc.

            	
              Society
      Brand, Ltd.

            
	
              HMX
      Sportswear, Inc.

            	
              Sweater.com
      Apparel, Inc.

            
	
              International
      Women’s Apparel, Inc.

            	
              TAG
      Licensing, Inc.

            
	
              Jaymar-Ruby,
      Inc.

            	
              Tailored
      Trend, Inc.

            
	
              HMX
      Luxury, Inc.

            	
              Thorngate
      Uniforms, Inc.

            
	
              Monarchy
      Group, Inc., formerly known as M Acquisition Corp.

            	
              Trade
      Finance International Limited

            
	
              M.
      Wile & Company, Inc.

            	
              Winchester
      Clothing Company

            
	
              National
      Clothing Company, Inc.

            	
              Yorke
      Shirt Corporation

            
	
              Simply Blue Apparel, Inc.,
      formerly known as SB Acquisition Corp.

            	
              Zooey
      Apparel, Inc.

            
	
              Universal
      Design Group, Ltd.

            	 
      
	
              Briar,
      Inc.

            	 
      
	
              Chicago
      Trouser Company, Ltd.

            	 
      
	
              C.
      M. Clothing, Inc.

            	 
      
	
              C.
      M. Outlet Corp.

            	 
      
	
              Country
      Miss, Inc.

            	 
      
	
              Country
      Suburbans, Inc.

            	 
      
	
              E-Town
      Sportswear Corporation

            	 
      
	
              Fairwood-Wells,
      Inc.

            	 
      
	
              Gleneagles,
      Inc.

            	 
      
	
              Handmacher
      Fashions Factory Outlet, Inc.

            	 
      
	
              Handmacher-Vogel,
      Inc.

            	 
      
	
              Hartmarx
      International, Inc.

            	 
      
	
              Hart
      Services, Inc.

            	 
      
	
              Thos.
      Heath Clothes, Inc.

            	 
      
	
              Higgins,
      Frank & Hill, Inc.

            	 
      
	
              Hoosier
      Factories, Incorporated

            	 
      
	
              HSM
      University, Inc.

            	 
      
	
              Intercontinental
      Apparel, Inc.

            	 
      
	
              JRSS,
      Inc.

            	 
      
	
              Kuppenheimer
      Men’s Clothiers Dadeville, Inc.

            	 
      
	
              NYC
      Sweaters, Inc.

            	 
      
	
              106
      Real Estate Corp.

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