Document:

exv10w1

 

EXHIBIT 10.1

WESTREC CAPITAL PARTNERS, LLC

16633 Ventura Boulevard, Sixth Floor

Encino, CA 91436

July 25, 2006

The Fashion House Holdings, Inc.

The Fashion House, Inc.

6310 San Vicente Boulevard, Suite 330

Los Angeles, CA 90048

Attention: John Hanna

Dear Mr. Hanna:

     We understand that from time to time The Fashion House, Inc. (“FH”), a wholly owned
subsidiary of The Fashion House Holdings, Inc. (the “Company,” and together with the FH and
its other subsidiaries, the “Company Group”), must cause a bank to issue a letter of credit
to support its purchase orders from manufacturers located outside of the United States (each an
“LC” and collectively the “LCs”). The Company Group has been unable to obtain
these LCs because of its financial condition. The Company has from time to time requested, and
anticipates in the future from time to time requesting, that Westrec Capital Partners, LLC
(“Westrec”) provide credit enhancement to enable FH to obtain LCs to support its purchase
orders from offshore manufacturers.

     The purpose of this letter is to confirm our agreement with respect to credit enhancement that
Westrec has provided for LCs issued prior to the date hereof, and for future LCs.

     1. Existing LCs. Westrec has provided its credit enhancement for three LCs issued by Comerica
Bank (“Comerica”) on behalf of FH in the aggregate amount of $1,923,093.70 (the
“Existing LCs”)

2. Request to Provide Credit Enhancement

          (a) The Company or FH from time to time request that Westrec provide credit enhancement to
Comerica sufficient to enable Comerica to issue an LC on behalf of the FH. Westrec shall have no
obligation to provide such credit enhancement, but may determine to do so in its sole and absolute
discretion. In connection with any request, the Company and FH agree to provide to Westrec such
documentation as Westrec may request, such as current financial information, the contract with the
manufacturer, the proposed purchase orders to be supported by the LC, the agreement between
Comerica and FH and/or the Company, the proposed LC, and the proposed agreement between Westrec and
Comerica. The agreement(s) between the Company, FH and Comerica, the LCs and all other
applications, documents and information provided by the Company and FH to Comerica in connection
with the LCs (including Existing LCs) shall be referred to as the “Credit Documents.”

 

 

          (b) In connection with each LC, the Company shall provide to Westrec an officer’s certificate
in the form of Exhibit A to this Agreement, duly executed by the Chief Executive Officer or Chief
Financial Officer of the Company.

     3. Fees.

          (a) In connection with each LC, the Company and FH shall pay to Westrec a fee of 2.5% of the
principal amount of the LC (or such other amount as may be agreed to by Westrec and the Company)
(although the fee was 3.0% with respect to some or all of the Existing LCs). The fee shall be
payable upon the issuance of the LC by Comerica. It is understood that this fee is in addition to
any fees that may be payable to Comerica for the LCs. Any fee not paid when due shall bear
interest at the rate of 10% per annum.

          (b) The fee for the Existing LCs has been $51,121.

     4. Warrants.

          (a) Upon the date of issuance of an LC by Comerica, the Company shall issue a warrant (a
“Warrant”) to Westrec. Each Warrant shall be in the form of the warrant attached as
Exhibit B to this Agreement, or such other form as may from time to time be agreed to by Westrec,
completed as follows with respect to each LC:

               (i) The number of shares that may be acquired upon exercise of the Warrant shall be equal to
the principal amount of the LC multiplied by $0.0333, rounded up to the nearest whole share. Thus,
if the principal amount of the LC is $550,000, the number of shares would be 18,315.

               (ii) The exercise price per share shall be the lesser of: (A) $1.25 per share (subject to
adjustment for stock splits, stock dividends and reverse stock splits occurring after the date of
this Agreement); and (B) the Market Price of the Common Stock as of the date of issuance of the LC.
The “ Market Price” on any day shall be the average of the Daily Market Prices of
the Common Stock of the Company for the ten trading days ending on such day, rounded down to the
nearest whole cent. The “Daily Market Price” on any trading day shall be: (A) if the
Common Stock is listed on a national securities exchange or admitted to unlisted trading privileges
on such an exchange or quoted on The Nasdaq Stock Market, the Daily Market Price shall be the last
reported sale price of that security on such exchange or system on such day or, if no such sale is
made on such day, the average of the highest closing bid and lowest asked price for such day on
such exchange or system; (b) if the Common Stock is not so listed or quoted or admitted to unlisted
trading privileges, the Daily Market Price shall be the average of the last reported highest bid
and lowest asked prices quoted on the Nasdaq Electronic Bulletin Board, or, if not so quoted, then
by the National Quotation Bureau, Inc. on such day; or (c) if the Common Stock is not so listed or
quoted or admitted to unlisted trading privileges and bid and asked prices are not reported, the
Daily Market Price shall be determined by the Company’s Board of Directors in its reasonable, good
faith judgment.

          (b) The Company has issued to Westrec the following Warrants with respect to the Existing LCs:

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	Date of Issuance	 	No. Shares	 	Exercise Price
	5/15/06
	 	 	20,302	 	 	$	1.16	 
	6/22/06
	 	 	23,063	 	 	 	0.62	 
	6/22/06
	 	 	20,738	 	 	 	0.62	 

          (c) The Company shall not be obligated to issue Warrants to purchase more than an aggregate of
100,000 shares.

     5. Representations of the Company. FH and the Company represent and warrant to Westrec as of
the date hereof, and as of each date that the Company requests an LC and at the time Westrec
provides credit enhancement to enable an LC to be issued on behalf of the Company, that:

          (a) The Common Stock of the Company has been registered under Section 12(g) of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”) and the Company is subject to the
periodic reporting requirements of Section 13 of the Exchange Act. The Company has filed all
forms, reports, schedules, statements and other documents required to be filed by it under the
Exchange Act (the “SEC Documents”), and each of the SEC Documents, including, without
limitation, any financial statements and schedules included therein, (i) did not contain any untrue
statement of a material fact, contained all statements required to be stated therein, and did not
omit any material fact necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading and (ii) complied in all respects with the applicable
requirements of the Exchange Act and the applicable rules and regulations thereunder.

          (b) Each member of the Company Group: (i) has been duly organized and is validly existing as a
corporation in good standing under the laws of the jurisdiction of its incorporation with full
power and authority (corporate and other) to own, lease and operate its properties and conduct its
business as described in the SEC Documents; (ii) is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction in which the ownership or leasing of its
respective properties or the conduct of its respective business requires such qualification, except
where the failure to be so qualified or be in good standing would not have a material adverse
effect on the financial condition, results of operations, properties, projects or business of the
Company and its subsidiaries taken as a whole (a “Material Adverse Effect”); (iii) is in
possession of, and operating in compliance with, all authorizations, licenses, certificates,
consents, orders and permits from government authorities that are material to the conduct of its
business, all of which are valid and in full force and effect.

          (c) No member of the Company Group: (i) is in violation of its charter or bylaws; (ii) is in
default in the performance or observance of any obligation, agreement, covenant or condition
contained in any contract or agreement, or (ii) is in violation of any law, rule, regulation or
order, which violation or default would have a Material Adverse Effect.

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          (d) Each of FH and the Company has full legal right, power and authority to enter into this
Agreement and to perform the transactions contemplated hereby. This Agreement has been duly
authorized, executed and delivered by FH and the Company and is a valid and binding agreement on
the part of FH and the Company, enforceable in accordance with its terms; the performance of this
Agreement and the consummation of the transactions herein contemplated will not result in a breach
or violation of any of the terms and provisions of, or constitute a default under: (i) any contract
or agreement to which any member of the Company Group is a party or to which any of its assets are
subject; (ii) the charter or bylaws of any member of the Company Group, or (iii) any law, rule,
regulation or order. No consent, approval, authorization or order of, or qualification with, any
governmental authority having jurisdiction over any member of the Company Group or over its
respective properties or assets is required for the execution and delivery of this Agreement and
the consummation by the Company or FH of the transactions herein contemplated.

          (e) There is not any pending or, to the best of the FH’s and Company’s knowledge, threatened,
claim, action, suit, proceeding or arbitration against any member of the Company Group, or any
director or officer of any member of the Company Group in his or her capacity as such, that could
have a Material Adverse Effect.

          (f) The consolidated financial statements of the Company included in the SEC Documents fairly
present the consolidated financial position and the consolidated results of operations, cash flows
and stockholders’ equity of the Company Group at the respective dates and for the respective
periods to which they apply; and such financial statements comply as to form in all material
respects with applicable accounting requirements and with the rules and regulations of the
Securities and Exchange Commission (“SEC”) with respect hereto when filed, have been
prepared in accordance with generally accepted accounting principles consistently applied
throughout the periods involved except as may be otherwise stated therein (except as may be
indicated in the notes thereto or as permitted by the rules and regulations of the SEC). The
procedures pursuant to which the aforementioned financial statements have been audited are
compliant with generally accepted auditing standards.

          (g) Subsequent to the respective dates as of which information is given in the SEC Documents,
there has not been (i) any material adverse change in the business, prospects, financial condition
or results of operations of the Company Group taken as a whole, or (ii) any obligation, direct or
contingent, that is material to the Company Group taken as a whole incurred by any member of the
Company Group, except such obligations as have been incurred in the ordinary course of business.

          (h) All copies of agreements, invoices, purchase orders and other documents provided to
Westrec by the Company and FH are true and accurate copies of such agreements, invoices, purchase
orders and other documents; none of the information provided by the Company and/or FH in connection
with this Agreement and the Credit Documents contained any untrue statement of a material fact and
did not omit any material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.

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          (i) All representations and warranties made to Comerica in the Credit Documents are true and
correct, and the Company has complied with all of its obligations and agreements in the Credit
Documents.

     6. Representations of Westrec. In connection with the Warrants, Westrec represents and
warrants as follows:

          (a) Westrec is acquiring the Warrants for its own account, for investment purposes only and
not with a view to an unregistered distribution of the Warrants.

          (b) Westrec understands that an investment in the Warrants involves a high degree of risk, and
Westrec has the financial ability to bear the economic risk of this investment in the Warrants,
including a complete loss of such investment.

          (c) Westrec has such knowledge and experience in financial and business matters that it is
capable of evaluating the merits and risks of an investment in the Warrants and in protecting its
own interest in connection with this transaction.

          (d) Westrec understands that the issuance of the Warrants has not been registered under the
Securities Act of 1933, as amended (the “Securities Act”) or under any state securities
laws. Westrec is familiar with the provisions of the Securities Act and Rule 144 thereunder and
understands that the restrictions on transfer on the Warrants may result in Westrec being required
to hold the Warrants for an indefinite period of time.

          (e) Westrec agrees not to sell, transfer, assign, gift, create a security interest in, or
otherwise dispose of, with or without consideration (collectively, “Transfer”) any of the
Warrants except pursuant to an effective registration statement under the Securities Act or an
exemption from registration. As a further condition to any such Transfer, except in the event that
such Transfer is made pursuant to an effective registration statement under the Securities Act, if
in the reasonable opinion of counsel to the Company any Transfer of the warrants by the
contemplated transferee thereof would not be exempt from the registration and prospectus delivery
requirements of the Securities Act, the Company may require the contemplated transferee to furnish
the Company with an investment letter setting forth such information and agreements as may be
reasonably requested by the Company to ensure compliance by such transferee with the Securities
Act.

     7. Covenants of the Company and FH. The Company and FH agree to timely perform each and every
covenant, obligation and agreement under the Credit Documents.

     8. Subrogation and Indemnification. The Company and FH acknowledge and agree that in the
event Westrec makes any payment to Comerica (or its successors) in connection with any credit
enhancement provided by Westrec, Westrec will be subrogated to any and all rights and remedies
under the Credit Documents. The Company and FH agree to indemnify and hold Westrec, and its
directors, officers, managers, members, agents and representatives (the “Indemnified
Parties”) harmless from and against any claims, damages, liabilities, losses, obligations,
costs and expenses (including attorneys’ fees and court costs) resulting from, arising out of, or
related to: (a) this Agreement; (b) a breach of any of the representations, warrants, covenants or
agreements of the Company or

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FH under this Agreement or the Credit Documents; and (c) any action, suit, proceeding or claim
by Comerica or its successors against an Indemnified Party under or with respect to the credit
enhancements provided by Westrec.

9. Miscellaneous

          (a) Notices. Any notice, request or other communication required or permitted
hereunder shall be in writing and shall be delivered personally or by facsimile (receipt confirmed
electronically) or shall be sent by a reputable express delivery service or by certified mail,
postage prepaid with return receipt requested, addressed as follows:

if to the Company or FH, to:

The Fashion House, Inc.

6310 San Vicente Boulevard, Suite 330

Los Angeles, CA 90048

Attn: John Hanna

Fax: (323) 939-3052

if to Westrec, to:

Westrec Capital Partners, LLC

16633 Ventura Blvd.

Encino, California 91436

Attn: Gregory C. McPherson, President

Fax: (818) 907-1104

with a copy to:

Troy & Gould PC

1801 Century Park East, Suite 1600

Los Angeles, California 90067

Attn: Alan B. Spatz, Esq.

Fax: (310) 789-1431

Either party hereto may change the above-specified recipient or mailing address by notice to the
other party given in the manner herein prescribed. All notices shall be deemed given on the day
when actually delivered as provided above (if delivered personally or by facsimile, provided that
any such facsimile is received during regular business hours at the recipient’s location) or on the
day shown on the return receipt (if delivered by mail or delivery service).

          (b) Titles and Subtitles. The titles and subtitles of the sections of this Agreement
are used for convenience only and shall not be considered in construing or interpreting this
agreement.

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          (c)  Governing Law. This Agreement shall be governed by and construed in accordance
with the domestic laws of the State of California without giving effect to any choice of law or
conflict of law provision or rule (whether of the State of California or any other jurisdiction)
that would cause the application of the laws of any jurisdiction other than the State of
California.

          (d)  Severability. Whenever possible each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law, but if any provision
of this Agreement shall be or become prohibited or invalid under applicable law, such provision
shall be ineffective to the extent of such prohibition or invalidity without invalidating the
remainder of such provision or the remaining provisions of this Agreement.

          (e) Waiver and Amendment. Any term of this Agreement may be amended, waived or
modified with the written consent of the Company and Westrec. A waiver of any right under this
agreement shall be effective against Westrec if and only if such waiver is in writing.

          (f)  Remedies. No delay or omission by Westrec in exercising any of its rights,
remedies, powers or privileges hereunder or at law or in equity and no course of dealing between
Westrec and the Company or any other person shall be deemed a waiver by Westrec of any such rights,
remedies, powers or privileges, even if such delay or omission is continuous or repeated, nor shall
any single or partial exercise of any right, remedy, power or privilege preclude any other or
further exercise thereof by Westrec or the exercise of any other right, remedy, power or privilege
by Westrec. The rights and remedies of Westrec described herein shall be cumulative and not
restrictive of any other rights or remedies available under any other instrument, at law or in
equity.

          (g)  Attorneys’ Fees. If any action, suit, arbitration or other proceeding is
instituted to remedy, prevent or obtain relief from a default in the performance by any party to
this Agreement of its obligations under this Agreement, the prevailing party shall recover all of
such party’s attorneys’ fees incurred in each and every such action, suit, arbitration or other
proceeding, including any and all appeals or petitions therefrom. As used in this Section,
attorneys’ fees shall be deemed to mean the full and actual costs of any legal services actually
performed in connection with the matters involved calculated on the basis of the usual fee charged
by the attorney performing such services and shall not be limited to “reasonable attorneys’ fees”
as defined in any statute or rule of court.

          (h) Advice from Independent Counsel. The parties hereto understand that this
Agreement and the Warrants are legally binding agreements that may affect such party’s rights.
Each party represents to the other that it has received legal advice from counsel of its choice
regarding the meaning and legal significance of this Agreement and the Warrants and that it is
satisfied with its legal counsel and the advice received from it.

          (i) Judicial Interpretation. Should any provision of this Agreement or the Warrants
require judicial interpretation, it is agreed that a court interpreting or construing the same
shall not apply a presumption that the terms hereof shall be more strictly construed against any
person by reason of the rule of construction that a document is to be

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construed more strictly against the person who itself or through its agent prepared the same,
it being agreed that all parties have participated in the preparation of this Agreement and the
Warrants.

          (j) Counterparts. This Agreement may be executed in any number of counterparts, each
of which shall be deemed to be an original, but all of which together shall constitute one and the
same instrument.

          (k) Further Assurances. The parties to this Agreement shall upon request take any and
all actions and execute any and all documents reasonably necessary to effectuate the terms and
intent of this Agreement.

          (l) Joint and Several Obligations. All representations, warranties, covenants and
agreements of the Company and FH under this Agreement shall be joint and several.

	 	 	 	 	 	 	 
	 	 	Very truly yours,	 	 
	 
	 	 	 	 	 	 
	 	 	WESTREC CAPITAL PARTNERS, LLC	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ Gregory C. McPherson 	 	 
	 

	 	 	 	 

Gregory C. McPherson
	 	 
	 

	 	 	 	President	 	 

Accepted and agreed

as of the date set forth above

THE FASHION HOUSE HOLDINGS, INC.

	 	 	 	 	 
	By:
	 	/s/ John Hanna 	 	 
	 

	 	 

John Hanna, Chief Executive Officer
	 	 
	 
	 	 	 	 
	THE FASHION HOUSE, INC.	 	 
	 
	 	 	 	 
	By:
	 	/s/ John Hanna 	 	 
	 

	 	 

John Hanna, Chief Executive Officer
	 	 

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EXHIBIT A

to

Letter Agreement dated July 25, 2006

FORM OF OFFICER’S CERTIFICATE

                    , 2006

     This Certificate is being delivered in connection with that certain letter agreement dated as
of July 25, 2006 (the “Agreement”) by and among Westrec Capital Partners, LLC,
(“Westrec”), The Fashion House, Inc. (“FH”), and The Fashion House Holdings, Inc.
(the “Company”). Capitalized terms used in this Certificate have the meanings ascribed to
them in the Agreement.

     FH and the Company have requested that Westrec provide credit enhancement to support an LC
from Comerica on behalf of FH. In connection with such request, the undersigned hereby certifies
to as follows:

     1. The representations and warranties of FH and the Company in the Agreement and the Credit
Documents are true and correct as if made on the date hereof;

     2. Each of the Company and FH is in compliance in all respects with all of its agreements and
obligations under the Agreement and the Credit Documents; and

     3. There has been no material adverse change in the condition (financial or otherwise),
results of operations, assets, properties or prospects of the Company and its subsidiaries since
the financial statements included in the most recent SEC Document filed by the Company.

     IN WITNESS WHEREOF, the undersigned has signed and delivered this Certificate as of the date
set forth above.

	 	 	 	 	 	 	 
	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	Title:
	 	 

	 	 
	 

	 	 	 	 

	 	 

 

 

EXHIBIT B

to

Letter Agreement dated July 25, 2006

Form of Warrant

The securities represented by this Warrant have not been registered under the Securities Act of
1933, as amended (the “Act”), or under the provisions of any applicable state securities laws, but
have been acquired by the registered holder hereof for purposes of investment and in reliance on
statutory exemptions under the Act, and under any applicable state securities laws. These
securities and the securities issued upon exercise hereof may not be sold, pledged, transferred or
assigned, nor may this Warrant be exercised, except in a transaction which is exempt under the
provisions of the Act and any applicable state securities laws or pursuant to an effective
registration statement.

COMMON STOCK PURCHASE WARRANT

					
	 	 	 	 	 
	Date of Issuance:                    
	 	 
	 	Certificate No.                    

     For value received, The Fashion House Holdings, Inc., a Colorado corporation (the
“Company”), hereby grants to Westrec Capital Partners, LLC, a Delaware limited liability
company (“Westrec”), or its permitted transferees and assigns, the right to purchase from
the Company a total of                     shares of the Company’s common stock (“Common Stock”), at a
price per share equal to $                     (the “Initial Exercise Price”). The exercise price and
number of Warrant Shares (and the amount and kind of other securities) for which this Warrant is
exercisable shall be subject to adjustment as provided in Section 2 hereof. This Warrant is being
issued in connection with the letter agreement between Westrec, the Company and The Fashion House,
Inc. dated July 25, 2006 (the “Agreement”). Certain capitalized terms used herein are
defined in Section 4 hereof.

     This Warrant is subject to the following provisions:

     SECTION 1. Exercise of Warrant.

          (a) Terms of Warrant; Exercise Period. Subject to the terms of this Agreement, the
Registered Holder shall have the right, commencing on the date hereof and expiring at 11:59 P.M.
PST on the five-year anniversary hereof (the “Expiration Date”), to exercise this Warrant,
from time to time and in whole or in part, and receive from the Company the number of Warrant
Shares which the Registered Holder may at the time be entitled to receive on exercise of this
Warrant and payment of the Exercise Price then in effect for the Warrant Shares. To the extent not
exercised prior to the Expiration Date, this Warrant shall become void and all rights thereunder
and all rights in respect thereof under this Agreement shall cease as of such time.

          (b) Exercise Procedure.

 

 

               (i) This Warrant shall be deemed to have been exercised on the date specified in a written
notice from the Registered Holder to the Company (the “Exercise Time”) and within three
business days following the Exercise Time, the Registered Holder shall deliver the following to the
Company:

                    (A) a completed Exercise Agreement, as described in Section 1(c) below;

                    (B) this Warrant; and

                    (C) either (I) a check payable to the Company in an amount equal to the product of the
Exercise Price (as such term is defined in Section 2) multiplied by the number of Warrant Shares
being purchased upon such exercise (the “Aggregate Exercise Price”), (II) the surrender to
the Company of shares of Common Stock of the Company having a Fair Market Value equal to the
Aggregate Exercise Price, or (III) the delivery of a notice to the Company that the Registered
Holder is exercising the Warrant by authorizing the Company to reduce the number of Warrant Shares
subject to the Warrant by that number of shares having an aggregate Fair Market Value in excess of
the total Exercise Price for such shares equal to the Aggregate Exercise Price (a “Net
Exercise”).

               (ii) Certificates for Warrant Shares purchased upon exercise of this Warrant shall be
delivered by the Company to the Registered Holder within five business days after the date of the
Exercise Time. Unless this Warrant has expired or all of the purchase rights represented hereby
have been exercised, the Company shall prepare a new Warrant, substantially identical hereto,
representing the rights formerly represented by this Warrant that have not expired or been
exercised and shall, within such five-day period, deliver such new Warrant to the Person designated
for delivery in the Exercise Agreement.

               (iii) The Warrant Shares issuable upon the exercise of this Warrant shall be deemed to have
been issued to the Registered Holder at the Exercise Time, and the Registered Holder shall be
deemed for all purposes to have become the record holder of such Warrant Shares at the Exercise
Time.

               (iv) The Company shall not close its books against the transfer of this Warrant or of any
Warrant Shares issued or issuable upon the exercise of this Warrant in any manner which interferes
with the timely exercise of this Warrant.

               (v) The Company shall make any governmental filings or obtain any governmental approvals
necessary in connection with the exercise of this Warrant by the Registered Holder.

               (vi) The Company shall at all times reserve and keep available out of its authorized but
unissued capital stock, solely for the purpose of issuance upon the exercise of this Warrant, the
maximum number of Warrant Shares issuable upon the exercise of this Warrant. All Warrant Shares
that are so issuable shall, when issued and upon the payment of the Exercise Price therefor, be
duly and validly issued, fully paid and nonassessable and free from all taxes, liens and charges.
The Company shall take all such actions as may be

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necessary to assure that all such Warrant Shares may be so issued without violation by the
Company of any applicable law or governmental regulation or any requirements of any domestic
securities exchange upon which securities of the Company may be listed (except for official notice
of issuance which shall be immediately delivered by the Company upon each such issuance).

          (c) Exercise Agreement. Upon any exercise of this Warrant, the Registered Holder
shall deliver an Exercise Agreement in the form set forth in Exhibit I hereto, except that
if the Warrant Shares are not to be issued in the name of the Person in whose name this Warrant is
registered, the Exercise Agreement shall also state the name of the Person to whom the certificates
for the Warrant Shares are to be issued, and if the number of Warrant Shares to be issued does not
include all the Warrant Shares purchasable hereunder, it shall also state the name of the Person to
whom a new Warrant for the unexercised portion of the rights hereunder is to be issued.

     SECTION 2. Adjustment of Exercise Price and Number of Shares. In order to prevent
dilution of the rights granted under this Warrant, the Initial Exercise Price shall be subject to
adjustment from time to time as provided in this Section 2 (such price or such price as last
adjusted pursuant to the terms hereof, as the case may be, is herein called the “Exercise
Price”), and the number of Warrant Shares obtainable upon exercise of this Warrant shall be
subject to adjustment from time to time as provided in this Section 2.

     (a) Reorganization, Reclassification, Consolidation, Merger or Sale. In case of any
reclassification, capital reorganization, consolidation, merger, sale of all or substantially all
of the Company’s assets to another Person or any other change in the Common Stock of the Company,
other than as a result of a subdivision, combination, or stock dividend provided for in Section
2(b) below (any of which, a “Change Event”), then, as a condition of such Change Event,
lawful provision shall be made, and duly executed documents evidencing the same from the Company or
its successor shall be delivered to the Registered Holder, so that the Registered Holder shall have
the right at any time prior to the Expiration Date to purchase, at a total price equal to that
payable upon the exercise of this Warrant (subject to adjustment of the Exercise Price as provided
in Section 2), the kind and amount of shares of stock and other securities and property receivable
in connection with such Change Event by a holder of the same number of shares of Common Stock as
were purchasable by the Registered Holder immediately prior to such Change Event. In any such case
appropriate provisions shall be made with respect to the rights and interest of the Registered
Holder so that the provisions hereof shall thereafter be applicable with respect to any shares of
stock or other securities and property deliverable upon exercise hereof, and appropriate
adjustments shall be made to the purchase price per share payable hereunder, provided the aggregate
purchase price shall remain the same.

          (d) Subdivisions, Combinations and Other Issuances. If the Company shall at any time
prior to the Expiration Date (i) subdivide its Common Stock, by split up or otherwise, or combine
its Common Stock, or (ii) issue additional shares of its Common Stock or other equity securities as
a dividend with respect to any shares of its Common Stock, the number of shares of Common Stock
issuable on the exercise of this Warrant shall forthwith be proportionately increased in the case
of a subdivision or stock, or

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proportionately decreased in the case of a combination. Appropriate adjustments shall also be
made to the purchase price payable per share, but the aggregate purchase price payable for the
total number of Warrant Shares purchasable under this Warrant (as adjusted) shall remain the same.
Any adjustment under this Section 2(b) shall become effective at the close of business on the date
the subdivision or combination becomes effective, or as of the record date of such dividend, or in
the event that no record date is fixed, upon the making of such dividend.

          (e) Issuance of New Warrant. Upon the occurrence of any of the events listed in this
Section 2 that results in an adjustment of the type, number or exercise price of the securities
underlying this Warrant, the Registered Holder shall have the right to receive a new warrant
reflecting such adjustment upon the Registered Holder tendering this Warrant in exchange. The new
warrant shall otherwise have terms identical to this Warrant.

          (f) Notices.

               (i) The Company shall give written notice to the Registered Holder of this Warrant at least 10
days prior to the date on which the Company closes its books or takes a record for determining
rights to vote with respect to any event described in this Section 2 or any dissolution or
liquidation.

               (ii) The Company shall also give written notice to the Registered Holder of this Warrant at
least 10 days prior to the date on which any event described in this Section 2 or any dissolution
or liquidation shall take place.

     SECTION 3. Registration Rights.

     (a) Demand Registration.

          (i) As soon as practicable, but in no event later than the Filing Deadline, the Company shall
file with the SEC a Registration Statement on Form SB-2 covering the resale of all the Registrable
Securities. If Form SB-2 is unavailable for such a Registration, the Company shall register the
resale of the Registrable Securities on another appropriate form reasonably acceptable to the
Holders of at least a majority of the Registrable Securities and undertake to register the
Registrable Securities on Form SB-2 as soon as such form is available, provided that the Company
shall maintain the effectiveness of the Registration Statement then in effect until such time as a
Registration Statement on Form SB-2 covering the Registrable Securities has been declared effective
by the SEC. The Company shall use its reasonable best efforts to have such Registration Statement
declared effective by the SEC as soon as practicable, but in no event later than the Effectiveness
Deadline.

          (ii) The Company shall prepare and file with the SEC such amendments and supplements to the
Registration Statement filed under this Section 3(a)(i) as may be reasonably necessary to keep such
Registration Statement effective until all Registrable Securities have been sold pursuant to such
Registration Statement or pursuant to Rule 144. The Company shall comply with the provisions of
the Act with respect to the disposition of all Registrable Securities covered by such Registration
Statement during such period in

- 13 -

 

accordance with the intended methods of disposition by the Holders as set forth in such
Registration Statement.

          (iii) In the event the Registration Statement required to be filed with the SEC pursuant to
Section 3(a)(i) is not filed with the SEC by the Filing Deadline, the Company shall issue to the
Registered Holder an additional warrant for each 30-day period (or a portion thereof) during which
time such Registration Statement has not been filed with the SEC, which additional warrants shall
be issued on the first day of each 30-day period commencing on the Filing Deadline. In addition,
if the Registration Statement required to be filed with the SEC pursuant to Section 3(a)(i) is not
declared effective by the SEC by the Effectiveness Deadline, the Company shall issue to the
Registered Holder an additional warrant for each 30-day period (or a portion thereof) during which
time such Registration Statement has not been declared effective by the SEC, which additional
warrants shall be issued on the first day of each 30-day period commencing on the Effectiveness
Deadline. Each such additional warrant (each, an “Additional Warrant”) shall be identical
to this Warrant, except that: (A) it shall be exercisable for a number of shares equal to 10% of
the number of shares into which this Warrant may be exercised; (B) the exercise price shall be 125%
of the Exercise Price; and (C) it shall be dated the date the Company is obligated to issue the
Warrant under this Section 3(a)(iii).

     (b) Piggyback Registration.

          (i) If, at any time commencing on the date hereof and expiring on the Expiration Date, the
Company proposes to file a Registration Statement (other than under a Registration Statement
pursuant to Form S-8 or Form S-4) to register its securities, and all of the Registrable Securities
are not then covered by an effective Registration Statement, the Company shall: (A) give written
notice by registered mail, at least 20 days prior to the filing of such Registration Statement to
the Holders of its intention to do so; and (B) include all Registrable Securities in such
Registration Statement with respect to which the Company has received written requests for
inclusion therein within 15 days of actual receipt of the Company’s notice.

          (ii) The Company shall have the right at any time after it shall have given written notice
pursuant to this Section 3(b) (irrespective of whether a written request for inclusion of any
Registration Securities shall have been made) to elect not to file any such Registration Statement,
or to withdraw the same after the filing but prior to the effective date thereof.

          (iii) If the Registration Statement pursuant to this Section 3(b) relates to a firmly
underwritten public offering and the managing underwriter(s) advise the Company in writing that in
their opinion the number of securities proposed to be included in the Registration Statement
(including the Registrable Securities) exceeds the number of securities which can be sold therein
without adversely affecting the marketability of the public offering, the Company will include in
such Registration Statement the number of securities requested to be included which in the opinion
of such underwriter(s) can be sold without adversely affecting the marketability of the offering,
pro rata among the respective holders of all securities proposed to be included in the Registration
Statement.

- 14 -

 

     (c) Covenants of the Company with Respect to Registration. In connection with each
Registration under this Section 3, the Company covenants and agrees as follows:

          (i) The Company shall use its best efforts to have any Registration Statement declared
effective at the earliest practicable time. The Company will promptly notify each Holder of
included Registrable Securities and confirm such advice in writing, (A) when such Registration
Statement becomes effective, (B) when any post-effective amendment to such Registration Statement
becomes effective and (C) of any request by the SEC for any amendment or supplement to such
Registration Statement or any prospectus relating thereto or for additional information.

          (ii) The Company shall furnish to each Holder of included Registrable Securities such number
of copies of such Registration Statement and of each such amendment and supplement thereto (in each
case including each preliminary prospectus and summary prospectus) in conformity with the
requirements of the Act, and such other documents as such Holders may reasonably request in order
to facilitate their disposition of the Registrable Securities.

          (iii) If the Company shall fail to comply with the provisions of Sections 3(a), 3(b) and/or
3(c) of this Warrant, the Company shall, in addition to any other equitable or other relief
available to the Holders, be liable for any or all special and consequential damages sustained by
the Holders requesting registration of their Registrable Securities.

          (iv) If at any time the SEC should institute or threaten to institute any proceedings for the
purpose of issuing a stop order suspending the effectiveness of any Registration Statement, the
Company will promptly notify each Registered Holder of Registrable Securities and will use all
reasonable efforts to prevent the issuance of any such stop order or to obtain the withdrawal
thereof as soon as possible.

          (v) The Company will use its good faith reasonable efforts and take all reasonably necessary
action which may be required in qualifying or registering the Registrable Securities included in a
Registration Statement for offering and sale under the securities or blue sky laws of such states
as reasonably are required by the Holders, provided that the Company shall not be obligated to
execute or file any general consent to service of process or to qualify as a foreign corporation to
do business under the laws of any such jurisdiction.

          (vi) The Company shall use its good faith reasonable efforts to cause such Registrable
Securities covered by a Registration Statement to be registered with or approved by such other
governmental agencies or authorities of the United States or any State thereof as may be reasonably
necessary to enable the Holder(s) thereof to consummate the disposition of such Registrable
Securities.

          (vii) The Company shall furnish to each Holder that has included Registrable Securities in a
Registration Statement and to the managing underwriter, if any, a signed counterpart, addressed to
such Holder or underwriter, of (i) an opinion of counsel to the Company, dated the effective date
of such Registration Statement (and, if such

- 15 -

 

Registration Statement includes an underwritten public offering, an opinion dated the date of
the closing under the underwriting agreement), and (ii) a “Cold Comfort” letter dated the effective
date of such Registration Statement (and, if such registration includes an underwritten public
offering, a letter dated the date of the closing under the underwriting agreement) signed by the
independent public accountants who have issued a report on the Company’s financial statements
included in such Registration Statement, in each case covering substantially the same matters with
respect to such Registration Statement and, in the case of such accountants’ letter, with respect
to events subsequent to the date of such financial statements, as are customarily covered in
opinions of issuer’s counsel and in accountants’ letters delivered to underwriters in underwritten
public offerings of securities.

          (viii) The Company shall deliver promptly to each Holder that has included Registrable
Securities in a Registration Statement and to the managing underwriter, if any, copies of all
correspondence between the SEC and the Company, its counsel or auditors and all non-privileged
memoranda relating to discussions with the SEC or its staff with respect to the Registration
Statement and permit each such Holder and underwriter to do such investigation, upon reasonable
advance notice, with respect to information contained in or omitted from the Registration Statement
as it deems reasonably necessary to comply with applicable securities laws or rules of the NASD.
Such investigation shall include access to books, records and properties and opportunities to
discuss the business of the Company with its officers and independent auditors, all to such
reasonable extent and at such reasonable times and as often as any such Holder shall reasonably
request.

          (ix) All expenses incident to the Company’s performance of or compliance with this Agreement,
including without limitation all registration and filing fees, fees and expenses of compliance with
securities or blue sky laws, printing expenses, messenger and delivery expenses, and fees and
disbursements of counsel for the Company and all independent certified public accountants,
underwriters (excluding discounts and commissions) and other Persons retained by the Company will
be borne by the Company. In no event shall the Company be obligated to be pay any discounts or
commissions with respect to the Registrable Shares sold by any Holder. In connection with each
Registration Statement, the Company will reimburse the Holders of included Registrable Securities
for the reasonable fees and disbursements of one counsel chosen by the Holders of a majority of the
included Registrable Securities.

     (d) Indemnification and Contribution.

          (i) The Company shall indemnify each Holder of the Registrable Securities included in any
Registration Statement, each of its officers, directors and agents (including brokers and
underwriters selling Registrable Securities on behalf of the Holder), and each Person, if any, who
controls such Holder within the meaning of Section 15 of the Act or Section 20(a) of the Exchange
Act against all losses, claims, damages, expenses and/or liabilities (including all expenses
reasonably incurred in investigating, preparing or defending against any claim whatsoever) to which
any of them may become subject under the Act, the Exchange Act, any state securities laws or
otherwise, arising from such Registration Statement, including, without limitation, any and all
losses, claims, damages,

- 16 -

 

expenses and liabilities caused by (I) any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement, or (II) any omission or alleged omission to
state in the Registration Statement a material fact required to be stated therein or necessary to
make the statements therein not misleading in light of the circumstances under which they were
made, except insofar as such losses, claims, damages or liabilities are caused by any such untrue
statement or omission or alleged untrue statement or omission based upon information furnished in
writing to Company by the Holder expressly for use therein.

          (ii) If requested by the Company prior to the filing of any Registration Statement covering
the Registrable Securities, each Holder of the Registrable Securities to be included in such
Registration Statement shall severally, and not jointly, indemnify the Company, its officers and
directors and each Person, if any, who controls the Company within the meaning of Section 15 of the
Act or Section 20(a) of the Exchange Act, against all losses, claims, damages, expenses and/or
liabilities (including all expenses reasonably incurred in investigating, preparing or defending
against any claim whatsoever) to which they may become subject under the Act, the Exchange Act or
otherwise, arising from written information furnished by such Holder, or their successors or
assigns, for specific inclusion in such Registration Statement, except that the maximum amount
which may be recovered from each Holder pursuant to this Section 3(d)(ii) or otherwise shall be
limited to the amount of net proceeds received by the Holder from the sale of the Registrable
Securities under such Registration Statement.

          (iii) In case any proceeding (including any governmental investigation) shall be instituted
involving any Person in respect of which indemnity may be sought pursuant to this Section 3(d),
such Person (an “Indemnified Party”) shall promptly notify the Person against whom such
indemnity may be sought (the “Indemnifying Party”) in writing and the Indemnifying Party
shall assume the defense thereof, including the employment of counsel reasonably satisfactory to
such Indemnified Party, and shall assume the payment of all fees and expenses; provided that the
failure of any Indemnified Party so to notify the Indemnifying Party shall not relieve the
Indemnifying Party of its obligations hereunder except to the extent (and only to the extent that)
that the Indemnifying Party is materially prejudiced by such failure to notify. In any such
proceeding, any Indemnified Party shall have the right to retain its own counsel, but the fees and
expenses of such counsel shall be at the expense of such Indemnified Party unless (A) the
Indemnifying Party and the Indemnified Party shall have mutually agreed to the retention of such
counsel or (B) in the reasonable judgment of such Indemnified Party representation of both parties
by the same counsel would be inappropriate due to actual or potential differing interests between
them. It is understood that the Indemnifying Party shall not, in connection with any proceeding or
related proceedings in the same jurisdiction, be liable for the reasonable fees and expenses of
more than one separate firm of attorneys (in addition to any local counsel) at any time for all
such Indemnified Parties (including in the case of Holder, all of its officers, directors and
controlling persons) and that all such fees and expenses shall be reimbursed as they are incurred.
In the case of any such separate firm for the Indemnified Parties, the Indemnified Parties shall
designate such firm in writing to the Indemnifying Party. The Indemnifying Party shall not be
liable for any settlement of any proceeding effected without its written consent (which consent
shall

- 17 -

 

not be unreasonably withheld or delayed), but if settled with such consent, or if there be a
final judgment for the plaintiff, the Indemnifying Party shall indemnify and hold harmless such
Indemnified Parties from and against any loss or liability (to the extent stated above) by reason
of such settlement or judgment. No Indemnifying Party shall, without the prior written consent of
the Indemnified Party, effect any settlement of any pending or threatened proceeding in respect of
which any Indemnified Party is or could have been a party and indemnity could have been sought
hereunder by such Indemnified Party, unless such settlement includes an unconditional release of
such Indemnified Party from all liability arising out of such proceeding.

          (iv) To the extent any indemnification by an Indemnifying Party is prohibited or limited by
law, the Indemnifying Party agrees to make the maximum contribution with respect to any amounts for
which, he, she or it would otherwise be liable under this Section 3(d) to the fullest extent
permitted by law; provided, however, that (A) no contribution shall be made under circumstances
where a party would not have been liable for indemnification under this Section 3(d) and (B) no
seller of Registrable Securities guilty of fraudulent misrepresentation (within the meaning used in
the Securities Act) shall be entitled to contribution from any party who was not guilty of such
fraudulent misrepresentation.

     (e) Nothing contained in this Agreement shall be construed as requiring the Holders to
exercise their Warrants prior to the filing of any Registration Statement or the effectiveness
thereof.

     (f) The Company shall not, directly or indirectly, enter into any merger, business combination
or consolidation in which (i) the Company shall not be the surviving corporation and (ii) the
shareholders of the Company are to receive, in whole or in part, capital stock or other securities
of the surviving corporation, unless the surviving corporation shall, prior to such merger,
business combination or consolidation, agree in writing to assume the obligations of the Company
under this Agreement, and for that purpose references hereunder to “Registrable Securities”
shall be deemed to include the securities which the Holders would be entitled to receive in
exchange for Registrable Securities under any such merger, business combination or consolidation,
provided that to the extent such securities to be received are convertible into shares of Common
Stock of the issuer thereof, then any such shares of Common Stock as are issued or issuable upon
conversion of said convertible securities shall also be included within the definition of
“Registrable Securities.”

     SECTION 4. Definitions. The following terms have the meanings set forth below:

     “Act” means the Securities Act of 1933, as amended.

     “Effectiveness Deadline” shall mean six months from the date of initial issuance of
this Warrant.

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

     “Fair Market Value” shall be determined on a per Share basis as of the close of the

- 18 -

 

business day preceding the date of exercise, which determination shall be made as follows: (A)
if the Common Stock is listed on a national securities exchange or admitted to unlisted trading
privileges on such an exchange or quoted on the The Nasdaq Stock Market, the Fair Market Value
shall be the last reported sale price of that security on such exchange or system on such day or,
if no such sale is made on such day, the average of the highest closing bid and lowest asked price
for such day on such exchange or system; (b) if the Common Stock is not so listed or quoted or
admitted to unlisted trading privileges, the Fair Market Value shall be the average of the last
reported highest bid and lowest asked prices quoted on the Nasdaq Electronic Bulletin Board, or, if
not so quoted, then by the National Quotation Bureau, Inc. on such day; or (c) if the Common Stock
is not so listed or quoted or admitted to unlisted trading privileges and bid and asked prices are
not reported, the Fair Market Value shall be determined by the Company’s Board of Directors in its
reasonable, good faith judgment.

     “Filing Deadline” shall mean three months from the date of initial issuance of this
Warrant.

     “Holders” means the Registered Holder, and the registered holders of all other
Warrants (including Additional Warrants) originally issued pursuant the Agreement, and the
registered holders of the Registrable Securities.

     “Person” means an individual, a limited liability company, a partnership, a joint
venture, a corporation, a trust, an unincorporated organization and a government or any department
or agency thereof.

     “Registered Holder” means the registered holder of this Warrant.

     “Registrable Securities” means the Warrant Shares and any securities issued with
respect to the Warrant Shares by virtue of a stock dividend, stock split, reclassification or
reorganization, provided that the Warrant Shares and such other securities shall no longer by
Registrable Securities once they have been sold or transferred pursuant to an effective
Registration Statement under the Act or pursuant to Rule 144.

     “Registration” shall mean a registration of Registrable Securities under the Act
pursuant to Section 3 of this Agreement.

     “Registration Statement” shall mean the Registration Statement, as amended from time
to time, filed with the SEC in connection with a Registration, and each prospectus that is used in
connection with such Registration Statement (including any preliminary prospectus).

     “Rule 144” means Rule 144 of the SEC under the Act.

     “SEC” means the United States Securities and Exchange Commission, or any successor
regulatory agency.

     “Warrant” means the right to purchase one or more Warrant Shares pursuant to the terms
of this Warrant, as the same may be transferred, divided or exchanged pursuant to

- 19 -

 

the terms hereof.

     “Warrant Shares” means shares of the Common Stock issuable upon exercise of the
Warrant; provided, however, that if there is a change such that the securities issuable upon
exercise of the Warrant are issued by a Person other than the Company or there is a change in the
class of securities so issuable, then the term “Warrant Shares” shall mean shares of the security
issuable upon exercise of the Warrant if such security is issuable in shares, or shall mean the
equivalent units in which such security is issuable if such security is not issuable in shares.

     SECTION 5. No Voting Rights; Limitations of Liability. This Warrant shall not entitle
the holder hereof to any voting rights or other rights as a stockholder of the Company. No
provision hereof, in the absence of affirmative action by the Registered Holder to purchase Warrant
Shares, and no enumeration herein of the rights or privileges of the Registered Holder shall give
rise to any liability of such Registrable Holder for the Exercise Price or as a stockholder of the
Company.

     SECTION 6. Warrant Transferable. Subject to compliance with applicable securities
laws and the terms of this Section 6, this Warrant and all rights hereunder are transferable, in
whole or in part, without charge to the Registered Holder upon surrender of this Warrant with a
properly executed Assignment (in the form of Exhibit II hereto) at the principal office of the
Company.

     SECTION 7. Warrant Exchangeable for Different Denominations. This Warrant is
exchangeable, upon the surrender hereof by the Registered Holder at the principal office of the
Company, for new Warrants of like tenor representing in the aggregate the purchase rights
hereunder, and each of such new Warrants shall represent such portion of such rights as is
designated by the Registered Holder at the time of such surrender. The date the Company initially
issues this Warrant shall be deemed to be the “Date of Issuance” hereof regardless of the number of
times new certificates representing the unexpired and unexercised rights formerly represented by
this Warrant shall be issued. All Warrants representing portions of the rights hereunder are
referred to herein as the “Warrants.”

     SECTION 8. Replacement. Upon receipt of evidence reasonably satisfactory to the
Company of the ownership and the loss, theft, destruction or mutilation of any certificate
evidencing this Warrant, and in the case of any such loss, theft or destruction, upon receipt of
indemnity reasonably satisfactory to the Company, or, in the case of any such mutilation upon
surrender of such certificate, the Company shall (at the expense of the Registered Holder) execute
and deliver in lieu of such certificate a new certificate of like kind representing the same rights
represented by such lost, stolen, destroyed or mutilated certificate and dated the date of such
lost, stolen, destroyed or mutilated certificate.

     SECTION 9. Notices. All notices, requests, deliveries, consents and other
communications provided for herein shall be in writing and shall be effective upon delivery in
person, faxed, or mailed by certified or registered mail, return receipt requested, postage
pre-paid, addressed as follows:

- 20 -

 

If to the Company, to:

The Fashion House Holdings, Inc.

6310 San Vicente Boulevard, Suite 330

Los Angeles, CA 90048-5499

Attn: John Hanna, CEO

If to Westrec, to:

Westrec Capital Partners, LLC

16633 Ventura Boulevard, Sixth Floor

Encino, CA 91436

Attn: Gregory C. McPherson

Fax: (818) 907-1104

or, in any case, at such other address or addresses as shall have been furnished in writing to the
Company (in the case of a Registered Holder of Warrants) or to the Registered Holders of Warrants
(in the case of the Company) in accordance with the provisions of this paragraph.

     SECTION 10. Amendment and Waiver. Except as otherwise provided herein, the provisions
of the Warrants may be amended and the Company may take any action herein prohibited, or omit to
perform any act herein required to be performed by it, only if the Company has obtained the written
consent of the Holders representing a majority of the Warrant Shares obtainable upon exercise of
the then-outstanding Warrants; provided, however, that no such action may change the Exercise Price
of the Warrants or the number of shares or class of capital stock obtainable upon exercise of each
Warrant without the written consent of all Holders.

     SECTION 11. Descriptive Headings; Governing Law.

     (a) The descriptive headings of the several Sections of this Warrant are inserted for
convenience only and do not constitute a part of this Warrant.

     (b) All issues and questions concerning the construction, validity, enforcement and
interpretation of this Agreement shall be governed by, and construed in accordance with, the laws
of the State of California, without giving effect to any choice of law or conflict of law rules or
provisions (whether of the State of California or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the State of California.

     SECTION 12. Warrant Register. The Company shall maintain at its principal executive
office books for the registration and the registration of transfer of this Warrant. The Company
may deem and treat the Registered Holder as the absolute owner hereof

- 21 -

 

(notwithstanding any notation of ownership or other writing thereon made by anyone) for all
purposes and shall not be affected by any notice to the contrary.

     SECTION 13. Fractions of Shares. The Company may, but shall not be required, to issue
a fraction of a Warrant Share upon the exercise of this Warrant in whole or in part. As to any
fraction of a share that the Company elects not to issue, the Company shall make a cash payment in
respect of such fraction in an amount equal to the same fraction of the market price of a Warrant
Share on the date of such exercise (as determined by the board of directors in its reasonable
discretion).

     SECTION 14. Attorneys’ Fees. If any action, suit, arbitration or other proceeding is
instituted to remedy, prevent or obtain relief from a default in the performance by any party to
this Agreement of its obligations under this Agreement, the prevailing party shall recover all of
such party’s attorneys’ fees incurred in each and every such action, suit, arbitration or other
proceeding, including any and all appeals or petitions therefrom. As used in this Section,
attorneys’ fees shall be deemed to mean the full and actual costs of any legal services actually
performed in connection with the matters involved calculated on the basis of the usual fee charged
by the attorney performing such services and shall not be limited to “reasonable attorneys’ fees”
as defined in any statute or rule of court.

     IN WITNESS WHEREOF, the Company has caused this Warrant to be signed and attested by its duly
authorized officers and to be dated as of the Date of Issuance hereof.

	 	 	 	 	 	 	 
	 	 	THE FASHION HOUSE HOLDINGS, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 

Name:
	 	 
	 

	 	 	 	Title:	 	 

- 22 -

 

EXHIBIT I

EXERCISE AGREEMENT

					
	 	 	 	 	 
	To:
	 	 
	 	Dated:

     The undersigned, pursuant to the provisions set forth in the attached Warrant (Certificate No.
W-                    ), hereby subscribes for the purchase of                     Warrant Shares covered by such Warrant and
makes payment herewith in full therefor at the price per share provided by such Warrant. Please
issue the Warrant Shares in the following names and amounts:

					
	 	 	 	 	 
	Name
	 	 
	 	Number of Warrant Shares

     The undersigned elects to pay the exercise price by Net Exercise:                     Yes                     No

	 	 	 	 	 	 	 
	 

	 	Signature	 	 	 	 
	 

	 	 	 	 

	 	 
	 

	 	Address	 	 	 	 
	 

	 	 	 	 

	 	 

- 23 -

 

EXHIBIT II

ASSIGNMENT

     FOR VALUE RECEIVED,                                                                                  hereby sells, assigns and transfers all of
the rights of the undersigned under the attached Warrant (Certificate No. W-                    ) with respect to
the number of the Warrant Shares covered thereby set forth below, unto:

	 	 	 	 	 
	Name of Assignee	 	Address	 	No. of Shares
	 

	 	 
	 	 

	 	 	 	 	 	 	 
	 

	 	Signature	 	 	 	 
	 

	 	 	 	 

	 	 
	 

	 	Witness	 	 	 	 
	 

	 	 	 	 

	 	 

     The Assignee agrees to be bound by the terms of the Warrant.

	 	 	 	 	 	 	 
	 

	 	Signature	 	 	 	 
	 

	 	 	 	 

	 	 
	 

	 	Witness	 	 	 	 
	 

	 	 	 	 

	 	 

- 24 -exv10w2

 

EXHIBIT 10.2

CIT Commercial Services

300 South Grand
Avenue 
 Los Angeles, California 90071

May 18,2006

The Fashion House, Inc.

6310 San Vicente Blvd., Suite 275

Los Angeles, California 90048

FACTORING AGREEMENT

Ladies and Gentlemen:

     We are pleased to confirm the terms and conditions that will govern our funds in use
accounting, non-borrowing, notification factoring arrangement with you (the “Agreement”).

     1. SALE OF ACCOUNTS

     You sell and assign to us, and we purchase as absolute owner, all accounts arising
from your sales of inventory or rendition of services, including those under any trade names,
through any divisions and through any selling agent (collectively, the “Accounts” and
individually, an “Account”).

     2. CREDIT APPROVAL

     2.1 Requests for credit approval for all of your orders must be submitted to our Credit
Department via computer by either: (a) On-Line Terminal Access, or (b) Electronic Batch
Transmission. If you are unable to submit orders via computer, then orders can be submitted
over the phone, by fax or in writing. All credit decisions by our Credit Department
(including
approvals, declines and holds) will be sent to you daily by a Credit Decisions Report, which
constitutes the official record of our credit decisions. Credit approvals will be effective
only if
shipment is made or services are rendered within thirty (30) days from the completion date
specified in our credit approval. Credit approval of any Account may be withdrawn by us any
time before delivery is made or services are rendered.

     2.2 We assume the Credit Risk on each Account approved in the Credit Decision
Report. “Credit Risk” means the customer’s failure to pay the Account in full when due on its
longest maturity solely because of its financial inability to pay. If there is any change in
the
amount, terms, shipping date or delivery date for any shipment of goods or rendition of
services
(other than accepting returns and granting allowances as provided in section 8 below), you
must
submit a change of terms request to us, and, if such pertains to a Factor Risk Account, then
we
shall advise you of our decision either to retain the Credit Risk or to withdraw the credit
approval. Accounts on which we bear the Credit Risk are referred to collectively as “Factor
Risk
Accounts”, and individually as a “Factor Risk Account”. Accounts on which you bear some or all
of the risk as to credit are referred to collectively as “Client Risk Accounts”, and
individually as a
“Client Risk Account”.

Page 1 of 10

 

 

     2.3 We shall have no liability to you or to any person, firm or entity for declining,
withholding or withdrawing credit approval on any order. If we decline to credit approve an order
and furnish to you any information regarding the credit standing of that customer, such information
is confidential and you agree not to reveal same to the customer, your sales agent or any third
party. You agree that we have no obligation to perform, in any respect, any contracts relating to
any Accounts.

     3. INVOICING

     You agree to place a notice (in form and content acceptable to us) on each invoice and
invoice equivalent that the Account is sold, assigned and payable only to us, and to take all
necessary steps so that payments and remittance information are directed to us. All invoices, or
their equivalents, will be promptly mailed or otherwise transmitted by you to your customers at
your expense. You will provide us with copies of all invoices (or the equivalent thereof if the
invoices were sent electronically), confirmation of the sale of the Accounts to us and proof of
shipment or delivery, all as we may reasonably request. If you fail to provide us with copies of
such invoices (or equivalents) or such proofs when requested by us, we will not bear any Credit
Risk as to those Accounts.

     4. REPRESENTATIONS AND WARRANTIES

     4.1 You represent and warrant that: each Account is based upon a bona fide sale
and delivery of inventory or rendition of services made by you in the ordinary course of
business; the inventory being sold and the Accounts created are your exclusive property and
are not, and will not be, subject to any lien, consignment arrangement, encumbrance or
security
interest other than in our favor; all amounts are due in United States Dollars; all original
invoices
bear notice of the sale and assignment to us; any taxes or fees relating to your Accounts or
inventory are solely your responsibility; and none of the Accounts factored with us hereunder
represent sales to any subsidiary, affiliate or parent company. You also warrant and represent
that: your customers have accepted the goods or services and owe and are obligated to pay
the full amounts stated in the invoices according to their terms, without dispute, claim,
offset,
defense, deduction, rejection, recoupment, counterclaim or contra account, other than as to
returns and allowances as provided in section 8 below (the foregoing being referred to in this
Agreement as “Customer Claims”).

     4.2 You further represent and warrant that: your legal name is exactly as set forth on
the signature page of this Agreement, you are a duly organized and validly existing business
organization incorporated or registered in the state of Delaware, and are qualified to do
business in all states where required; the most recent financial statements provided by you to
us
accurately reflect your financial condition as of that date and there has been no material
adverse change in your financial condition since the date of those financial statements. You
agree to furnish us with such information concerning your business affairs and financial
condition as we may reasonably request from time to time, including financial statements as of
the end of each fiscal year.

     4.3 You agree that you will promptly notify us of any change in your: name, state of
incorporation or registration, location of your chief executive office, place(s) of business,
and
legal or business structure. Further, you agree that you will promptly notify us of any change
in
control of the ownership of your business organization, and of significant lawsuits
or
proceedings against you.

Page 2 of 10

 

 

     5. PURCHASE OF ACCOUNTS

     We shall purchase the Accounts for the gross amount of the respective invoices, less:
factoring fees or charges, trade and cash discounts allowable to, or taken by, your customers,
credits, cash on account and allowances (“Purchase Price”). Our purchase of the Accounts will be
reflected on the Statement of Account (defined in section 10 below), which we shall render to you,
which will also reflect all credits and discounts made available to your customers.

     6. ADVANCES

     We do not expect to advance funds to you prior to the collection of the Accounts, but
we may do so at your request in our sole discretion, subject to such additional terms and
conditions as we may reasonably request. We have the right, at any time and from time to time, to
hold any reserves we deem reasonably necessary as security for the payment and performance of any
and all of your Obligations (defined in section 12 below). All amounts you owe us, including all
advances to you and any debit balance in your Client Position Account (defined in section 10
below), and any Obligations, are payable on demand and may be charged to your account at any time.

     7. PAYMENT OF ACCOUNTS

     7.1 All payments received by us on the Accounts will be promptly applied to your
account with us after crediting your customer’s account. The Purchase Price for Accounts with
respect to which such remittances have been received and applied by us during a week, less
any amounts due us, will be transferred and disbursed to you on Friday of the following week,
or
on the next business day thereafter, if said Friday is not a business day. No checks, drafts
or
other instruments received by us will constitute final payment of an Account unless and until
such items have actually been collected.

     7.2 The amount of the Purchase Price of any Factor Risk Account which remains
unpaid will be deemed collected and will be credited to your account as of the earlier of the
following dates:

     (a) the date of the Account’s longest maturity if a proceeding or petition is filed by or
against the customer under any state or federal bankruptcy or insolvency law, or if a receiver
or
trustee is appointed for the customer; or

     (b) the last day of the third month following the Account’s longest maturity date if
such Account remains unpaid as of said date without the occurrence of any of the events
specified in clause (a) above.

If any Factor Risk Account credited to you was not paid for any reason other than Credit Risk, we
shall reverse the credit and charge your account accordingly, and such Account is then deemed to
be a Client Risk Account.

     8. CUSTOMER CLAIMS AND CHARGE BACKS

     8.1 You must notify us promptly of any matter affecting the value, enforceability or
collectibility of any Account and of all Customer Claims. You agree to promptly issue credit
memoranda or otherwise adjust the customer’s account upon accepting returns or granting
allowances. For full invoice credit memoranda, you agree to send duplicate copies thereof to us

Page 3 of 10

 

 

and to confirm their assignment to us. We shall cooperate with you in the adjustment of
Customer Claims, but we retain the right to adjust Customer Claims on Factor Risk Accounts directly
with customers, upon such terms as we in our sole discretion may deem advisable.

     8.2 We may at any time charge back to your account the amount of: (a) any Factor
Risk Account which is not paid in full when due for any reason other than Credit Risk; (b) any
Factor Risk Account which is not paid in full when due because of an act of God, civil strife,
or
war; (c) anticipation (interest) deducted by a customer on any Account; (d) Customer Claims;
(e) any Client Risk Account which is not paid in full when due; and (f) any Account for which
there is a breach of any representation or warranty. A charge back does not constitute a
reassignment of an Account. We shall not bear the Credit Risk on any Account charged back to
you. We shall immediately charge any deduction taken by a customer to your account.

     8.3 We may at any time charge to your account the amount of: (a) payments we
receive on Client Risk Accounts which we are required at any time to turnover or return
(including preference claims); (b) all remittance expenses (including incoming wire charges,
currency conversion fees and stop payment fees), other than stop payment fees on Factor Risk
Accounts; (c) expenses, collection agency fees and attorneys’ fees incurred by us in
collecting
or attempting to collect any Client Risk Account or any Obligation (defined in section 12
below);
and (d) our fees for handling collections on Client Risk Accounts which you have requested us
to process, as provided in the Guide (see section 18.2 below).

     9. HANDLING AND COLLECTING ACCOUNTS; RETURNED GOODS

     9.1 As owners of the Factor Risk Accounts, we have the right to: (a) bring suit, or
otherwise enforce collection, in your name or ours; (b) modify the terms of payment, (c)
settle,
compromise or release, in whole or in part, any amounts owing, and (d) issue credits in your
name or ours. To the extent applicable, you waive any and all claims and defenses based on
suretyship. If moneys are due and owing from a customer for both Factor Risk Accounts and
Client Risk Accounts, you agree that any payments or recoveries received on such Accounts
may be applied first to any Factor Risk Accounts. Once you have granted or issued a discount,
credit or allowance on any Account, you have no further interest therein. Any checks, cash,
notes or other documents or instruments, proceeds or property received with respect to the
Accounts must be held by you in trust for us, separate from your own property, and immediately
turned over to us with proper endorsements. We may endorse your name or ours on any such
check, draft, instrument or document.

     9.2 As owners and assignees of the Accounts and all proceeds thereof, upon our
written notice, you will, at your expense, comply with our instructions relative to any and
all
returned, rejected, reclaimed or repossessed inventory (“Returned Goods”).

     10. STATEMENT OF ACCOUNT

     After the end of each month, we shall send you certain reports reflecting Accounts
purchased, advances made, if any, fees and charges and all other financial transactions between us
during that month (“Reports”). The Reports sent to you each month include a Statement of Account
reflecting transactions in three sections: Accounts Receivable, Client Position Account and Funds
In Use. The Reports shall be deemed correct and binding upon you and shall constitute an account
stated between us unless we receive your written statement of exceptions within thirty (30) days
after same are mailed to you.

Page 4 of 10

 

 

     11. GRANT OF SECURITY INTEREST

     11.1 You hereby assign and grant to us a continuing security interest in all of your right,
title and interest in and to all of your now existing and future (herein collectively the
“Collateral”): (a) accounts (including the Accounts), instruments, documents, chattel paper
(including electronic chattel paper), and any other obligations owing to you; (b) unpaid
seller’s rights (including rescission, repossession, replevin, reclamation and stoppage in
transit); (c) rights to any inventory represented by the foregoing, including Returned Goods;
(d) reserves and credit balances arising hereunder; (e) guarantees, collateral, supporting
obligations and letter of credit rights with respect to the foregoing; (f) insurance policies,
proceeds or rights relating to the foregoing; (g) general intangibles (including all payment
intangibles and all other rights to payment); (h) cash and non-cash proceeds of the foregoing;
and (h) Books and Records (defined in section 13 below) evidencing or pertaining to the
foregoing.

     11.2 You agree to comply with all applicable laws to perfect our security interest in collateral
pledged to us hereunder, and to execute such documents as we may require to effectuate the
foregoing and to implement this Agreement. You irrevocably authorize us to file financing
statements, and all amendments and continuations with respect thereto, all in order to create,
perfect or maintain our security interest in the Collateral, and you hereby ratify and confirm
any and all financing statements, amendments and continuations with respect thereto heretofore
and hereafter filed by us pursuant to the foregoing authorization.

     12. OBLIGATIONS SECURED

     The security interest granted hereunder and any lien or security interest that we now or
hereafter have in any of your other assets, collateral or property, secure the payment and
performance of all of your now existing and future indebtedness and obligations to us, whether
absolute or contingent, whether arising under this Agreement or any other agreement or arrangement
between us, by operation of law or otherwise (“Obligations”). Obligations also includes ledger debt
(which means indebtedness for goods and services purchased by you from any party whose accounts
receivable are factored or financed by us), and indebtedness arising under any guaranty, credit
enhancement or other credit support granted by you in our favor. Any reserves or balances to your
credit and any other assets, collateral or property of yours in our possession constitutes security
for any and all Obligations.

     13. BOOKS AND RECORDS AND EXAMINATIONS

     13.1 You agree to maintain such Books and Records concerning the Accounts as we may
reasonably request and to reflect our ownership of the Accounts therein. “Books and
Records” means your accounting and financial records (whether paper, computer or
electronic), data, tapes, discs, or other media, and all programs, files, records and
procedure manuals relating thereto, wherever located.

     13.2 Upon our reasonable request, you agree to make your Books and Records available to us
for examination and to permit us to make copies or extracts thereof. Also, you agree to
permit us to visit your premises during your business hours and to conduct such
examinations as we deem reasonably necessary. To cover our costs and expenses of any such
examinations, we shall charge you a fee for each day, or part thereof, during which such
examination is conducted, plus any out-of-pocket costs and expenses incurred by us, as
provided in the Guide (see section 18.2 below).

Page 5 of 10

 

     14. INTEREST

     14.1 Interest is charged on any adjustments under this Agreement and on any advances
that may be made under section 6 above, as of the last day of each month based on the daily debit
balances in your Funds In Use account for that month, at a rate equal to the greater of: (a) the
sum of 1% plus the JPMorgan Rate (defined below), or (b) 6% per annum. The JPMorgan Rate is the per
annum rate of interest publicly announced by JPMorgan Chase Bank (or its successor) in New York,
New York from time to time as its prime rate, and is not intended to be the lowest rate of interest
charged by JPMorgan Chase Bank to its borrowers. Any change in the rate of interest hereunder due
to a change in the JPMorgan Rate will take effect as of the first of the month following such
change in the JPMorgan Rate. All interest is calculated on a 360 day year.

     14.2 If you, as a client of ours, purchase goods or services from another client of ours and your
payments on these invoices are not timely received, a late interest payment, at our then late
interest rate, will be charged to your account with us and shall be deemed an Obligation under
this Agreement.

     14.3 In no event will interest charged hereunder exceed the highest lawful rate. In the event,
however, that we do receive interest in excess of the highest lawful rate, you agree that your
sole remedy would be to seek repayment of such excess, and you irrevocably waive any and all
other rights and remedies which may be available to you under law or in equity.

     15. FACTORING FEES AND OTHER CHARGES

     15.1 For our services hereunder, you will pay us a factoring fee or charge as set forth
below on the gross face amount of all Accounts factored with us, but in no event less than
$5.00 per invoice.

The factoring fee will be as follows:

     (a) 1% on the gross face amount of all Accounts factored with us during each calendar
month on the first Ten Million Dollars ($10,000,000.00) of Accounts during any Contract
Year; and

     15.2 0.9% on the gross face amount of all Accounts factored with us during each calendar
month on Accounts in excess of Ten Million Dollars ($10,000,000.00) during such Contract
Year.

As used herein the term “Contract Year” shall mean any twelve-month period commencing June 1, 2006
and each subsequent twelve-month period thereafter.

In addition, you will pay a fee of one-quarter of one percent (1/4 of 1%) of the gross face amount
of each Account for each thirty (30) day period or part thereof by which the longest terms of sale
applicable to such Account exceed sixty (60) days (whether as originally stated or as a result of a
change of terms requested by you or the customer). For Accounts arising from sales to customers
located outside the fifty states of the United States of America, you will pay us an additional
factoring fee of 1 % of the gross face amount of all such Accounts. All factoring fees or charges
are due and charged to your account upon our purchase of the underlying Account. Commencing June 1,
2006, if the actual factoring fees or charges paid to us by you during any quarter or part thereof
(“Period”) is less than $16,000.00 (“Minimum Factoring Fees”), we shall

Page 6 of 10

 

charge your account as of the end of such Period with an amount equal to the difference
between the actual factoring fees or charges paid during such Period and said Minimum Factoring
Fees.

     15.3 You agree to pay all costs and expenses incurred by us in connection with or in any
way related to: (i) this Agreement or (ii) the preparation, execution, administration and
enforcement of this Agreement, including all reasonable fees and expenses attributable to
the services of our attorneys (whether in-house or outside), search fees and public record
filing fees. Furthermore, you agree to pay to us our fees (as more fully set forth in
the Guide, see section 18.2 below) including fees for: (a) special reports prepared by us
at your request; (b) wire transfers; (c) handling change of terms requests relating to
Accounts; and (d) your usage of our on-line computer services. Beginning on the first of
the month six months from the date hereof, you also agree to pay us our fees for: (i) each
new customer set-up on our customer accounts receivable data base and each new customer
relationship established for you; (ii) crediting your account with proceeds of
non-factored invoices received by us; and (iii) charge backs of invoices factored with us
that were paid directly to you. All such fees will be charged to your account when
incurred. We may change our fees from time to time upon notice to you; however, any
failure to give you such notice does not constitute a breach of this Agreement and does
not impair our ability to institute any such change.

     15.4 Any tax or fee of any governmental authority imposed on or arising from any
transactions between us, any sales made by you, or any inventory relating to such sales is
your sole responsibility (other than income and franchise taxes imposed on us which are
not related to any specific transaction between us). If we are required to withhold or
pay any such tax or fee, or any interest or
penalties thereon, you hereby indemnify and hold us harmless therefor and we shall
charge your account with the full amount thereof.

     15.5 In addition to the fees and charges under this Agreement, you will pay us, as of the
date hereof, a facility fee in the amount of $3,000.00 for the initial setup,
implementation of your account with us and for the use of our in-house legal department
and facilities in documenting this Agreement.

     16. TERMINATION

     16.1 You may terminate this Agreement only as of an Anniversary Date and then only by
giving us at least sixty (60) days prior written notice of termination. Upon any
termination of this Agreement, we shall be entitled to the unpaid portion of the Minimum
Factoring Fees, if any, for such Period or Periods for the remainder of the term of this
Agreement, as applicable, and as provided in section 15.1 above, as of the effective date
of termination. “Anniversary Date” means the last day of the month occurring two years
from the date hereof, and the same date in each year thereafter. Except as otherwise
provided, we may terminate this Agreement at any time by giving you at least sixty (60)
days prior written notice of termination. However, we may terminate this Agreement
immediately, without prior notice to you, upon the occurrence of an Event of Default
(defined in section 17.1 below).

     16.2 This Agreement remains effective between us until terminated as herein
provided. Unless sooner demanded, all Obligations will become immediately due and payable upon any
termination of this Agreement.

     16.3 All of our rights, liens and security interests hereunder continue and remain in full
force and effect after any termination of this Agreement and pending a final accounting,
we may

Page 7 of 10

 

withhold any balances in your account unless we are supplied with an indemnity satisfactory
to us to cover all Obligations. You agree to continue to assign accounts receivable to us and to
remit to us all collections on accounts receivable, until all Obligations have been paid in full or
we have been supplied with an indemnity satisfactory to us to cover all Obligations.

     17. EVENTS OF DEFAULT AND REMEDIES UPON DEFAULT

     17.1 It is an “Event of Default” under this Agreement if: (a) your business ceases or a
meeting of your creditors is called; (b) any bankruptcy, insolvency, arrangement, reorganization,
receivership or similar proceeding is commenced by or against you under any federal or state law;
(c) you breach any representation, warranty or covenant contained in this Agreement; (d) you fail
to pay any Obligation when due, or (e) any default shall have occurred under any other agreement or
arrangement between us.

     17.2 After the occurrence of an Event of Default which is not waived by us, we may terminate
this Agreement without notice to you. We shall then have immediate access to any and all Books and
Records as may pertain to the Accounts, Returned Goods and any other collateral hereunder.
Furthermore, as may be necessary to administer and enforce our rights in the Accounts, Returned
Goods and any other collateral hereunder, or to facilitate the collection or realization thereof,
we have your permission to use (at your expense) your personnel, supplies, equipment, computers and
space, at your place of business or elsewhere.

     17.3 After the occurrence of an Event of Default which is not waived by us, with respect to any
other property or collateral in which we have a security interest, we shall have all of the rights
and remedies of a secured party under Article 9 of the Uniform Commercial Code. If notice of
intended disposition of any such property or collateral is required by law, it is agreed that five
(5) days notice constitutes reasonable notice. The net cash proceeds resulting from the exercise
of any of the foregoing rights, after deducting all charges, costs and expenses (including
reasonable attorneys’ fees) will be applied by us to the payment or satisfaction of the
Obligations, whether due or to become due, in such order as we may elect. You remain liable to us
for any deficiencies. With respect to Factor Risk Accounts and Returned Goods relating thereto,
you hereby confirm that we are the owners thereof, and that our rights of ownership permit us to
deal with this property as owner and you confirm that you have no interest therein.

     18. MISCELLANEOUS PROVISIONS

     18.1 This Agreement, and all attendant documentation, as the same may be amended from
time to time, constitutes the entire agreement between us with regard to the subject matter hereof,
and supersedes any prior agreements or understandings. This Agreement can be changed only by a
writing signed by both of us. Our failure or delay in exercising any right hereunder will not
constitute a waiver thereof or bar us from exercising any of our rights at any time. The validity,
interpretation and enforcement of this Agreement is governed by the laws of the State of
California, excluding the conflict laws of such State.

     18.2 The Client Service Guide, as supplemented and amended from time to time (the “Guide”) has
been furnished to you or is being furnished to you concurrently with the signing of this Agreement,
and by your signature below you acknowledge receipt thereof. The Guide provides information on
credit approval processes, accounting procedures and fees. The procedures for Electronic Batch
Transmission are covered in supplemental instructions to the Guide. From time to time, we may
provide you with amendments, additions, modifications, revisions or supplements to the Guide, which
will be operative for transactions between us. All

Page 8 of 10

 

information and exhibits contained in the Guide, on any screen accessed by you, and on any
print-outs, reports, statements or notices received by you are, and will be, our exclusive property
and are not to be disclosed to, or used by, anyone other than you, your employees or your
professional advisors, in whole or in part, unless we have consented in writing.

     18.3 This Agreement binds and benefits each of us and our respective successors and assigns,
provided, however, that you may not assign this Agreement or your rights hereunder without our
prior written consent.

     18.4 Section headings are for convenience only and are not controlling. The use of “including”
means “including without limitation”.

     18.5 If any provision of this Agreement is contrary to, prohibited by, or deemed invalid under
applicable laws or regulations, such provision will be inapplicable and deemed omitted to such
extent, but the remainder will not be invalidated thereby and will be given effect so far as
possible.

     19. JURY TRIAL WAIVER

     TO THE EXTENT PERMITTED BY APPLICABLE LAW, EACH PARTY HERETO HEREBY WAIVES ANY RIGHT TO A TRIAL BY
JURY IN ANY ACTION OR PROCEEDING ARISING DIRECTLY OR INDIRECTLY OUT OF THIS AGREEMENT, OR ANY OTHER
AGREEMENT OR TRANSACTION BETWEEN THE PARTIES HERETO. NOTWITHSTANDING THE PLACE OF EXECUTION HEREOF,
EACH PARTY HERETO AGREES THAT THE VALIDITY, INTERPRETATION AND ENFORCEMENT OF THIS AGREEMENT AND
ALL RIGHTS HEREUNDER SHALL BE GOVERNED BY THE LAWS OF THE STATE OF CALIFORNIA.

     The parties to this Agreement prefer that any dispute between or among them be resolved in
litigation subject to the above jury trial waiver. If, and only if, a pre-dispute jury trial waiver
of the type provided for herein is unenforceable in litigation to resolve any dispute, claim, cause
of action or controversy under this Agreement or any other document (each, a “Claim”) in the venue
where the Claim is being brought pursuant to the terms of this Agreement, then, upon the written
request of any party, such Claim, including any and all questions of law or fact relating thereto,
shall be determined exclusively by a judicial reference proceeding. Except as otherwise provided
herein, venue for any such reference proceeding shall be in the state or federal court in the
County or District where venue is appropriate under applicable law (the “Court”). The parties shall
select a single neutral referee, who shall be a retired state or federal judge. If the parties
cannot agree upon a referee within 30 days, the Court shall appoint the referee. The referee shall
report a statement of decision to the Court. Notwithstanding the foregoing, nothing in this
paragraph shall limit the right of any party at any time to exercise self-help remedies, foreclose
against collateral or obtain provisional remedies (including without limitation, requests for
temporary restraining orders, preliminary injunctions, writs of possession, writs of attachment,
appointment of a receiver, or any orders that a court may issue to preserve the status quo, to
prevent irreparable injury or to allow a party to enforce its liens and security interests). The
parties shall bear the fees and expenses of the referee equally unless the referee orders
otherwise. The referee also shall determine all issues relating to the applicability,
interpretation, and enforceability of this section. The parties acknowledge that any Claim
determined by reference pursuant to this section shall not be adjudicated by a jury

Page 9 of 10

 

     If the foregoing is in accordance with your understanding, please so indicate by signing and
returning to us the original and one copy of this Agreement. This Agreement will take effect as of
the date set forth above but only after being accepted below by one of our officers in Los Angeles,
California, after which we shall forward a fully executed copy to you for your files.

	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Very truly yours,
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	THE CIT GROUP/COMMERCIAL SERVICES, INC.
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	By:
	 	/s/ Vivian Lee
	 

	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	Name:
	 	Vivian Lee
	 

	 	 	 	 	 	Title:
	 	Vice President and
	 

	 	 	 	 	 	 	 	Director of Business Development Asian Pacific
	 
	 	 	 	 	 	 	 	 
	Read and Agreed to:	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	THE FASHION HOUSE, INC.	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	By:

	 	/s/ Michael McHugh	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	Name:

	 	Michael McHugh	 	 	 	 	 	 
	Title:

	 	CFO	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Accepted at Los Angeles, California
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	THE CIT GROUP/COMMERCIAL SERVICES, INC.
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	By:
	 	/s/ Peggy Joyce
	 

	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	Name:
	 	Peggy Joyce
	 

	 	 	 	 	 	Title:
	 	Vice President
	 

	 	 	 	 	 	 	 	Client Service Director

Page 10 of 10

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