Document:

Waiver and Amendment No.1 to Credit Agreement

 Exhibit 10.1 
 WAIVER AND AMENDMENT NO. 1 TO CREDIT AGREEMENT 
 This Waiver and Amendment No. 1 to Credit Agreement,
dated as of May 26, 2009 (this “Amendment”), to Credit Agreement, dated as of August 11, 2008 (as hereafter amended, restated or otherwise modified, the “Credit Agreement”) is entered into by and among
PERFUMANIA HOLDINGS, INC. (f/k/a E Com Ventures, Inc.), a Florida corporation (“Perfumania Holdings”), QUALITY KING FRAGRANCE, INC., a Delaware corporation (“QKF”), SCENTS OF WORTH, INC., a Florida corporation
(“Scents of Worth”), FIVE STAR FRAGRANCE COMPANY, INC., a New York corporation (“Five Star Fragrance”), DISTRIBUTION CONCEPTS, LLC, a Florida limited liability company (“Distribution Concepts”),
NORTHERN GROUP, INC., a New York corporation (“Northern Group”), PERFUMANIA, INC., a Florida corporation (“Perfumania”), MAGNIFIQUE PARFUMES AND COSMETICS, INC., a Florida corporation (“Magnifique
Parfumes”), TEN KESEF II, INC., a Florida corporation (“Ten Kesef”) and PERFUMANIA PUERTO RICO, INC., a Puerto Rico corporation (“Perfumania PR”) (Perfumania Holdings, QKF, Scents of Worth, Five Star
Fragrance, Distribution Concepts, Northern Group, Perfumania, Magnifique Parfumes, Ten Kesef and Perfumania PR are sometimes collectively referred to herein as the “Borrowers” and individually as a “Borrower”); the
other Credit Parties signatory thereto (each a “Credit Party” and, collectively, the “Credit Parties”); and General Electric Capital Corporation, for itself, as Lender, and as Agent for Lenders (in such capacity,
“Agent”), and the other Lenders signatory hereto. 
 RECITALS 
 A. Borrowers, Agent and Lenders are desirous of making specific amendments to the Credit Agreement, as and to the limited extent expressly set forth
herein. 
 B. Events of Default have occurred and currently exist under the Credit Agreement as a result of (i) Borrowers’ breach
of the financial covenant set forth in Section (d) of Annex G to the Credit Agreement, for the period ended on or about October 31, 2008, (ii) Borrowers’ breach of Section 6.1 of the Credit Agreement as
a result of the purchase by Magnifique Parfumes and Cosmetics, Inc. of the inventory and fixtures of three (3) retail stores from The Fragrance Depot, Inc. (which after the purchase changed its name) in the Sawgrass and Dolphin Malls in Florida
and the assumption of the related leases for a purchase price of $1,500,000 plus the value of the inventory (approximately $245,000) and the formation of a new wholly-owned subsidiary of Magnifique Parfumes and Cosmetics, Inc., The Fragrance Depot,
Inc., a Florida corporation, which holds no assets and engages in no business, formed to reserve the corporate name “Fragrance Depot,” (iii) the existence of another subsidiary, E Com Ventures Company (f/k/a PerHold FL, Inc.),
wholly-owned by Perfumania Holdings which has no assets or business and was formed to hold the E com name, but was not listed on Schedule 3.8 to the Credit Agreement, (iv) Borrowers’ breach of the financial covenants set forth in
Sections (a), (b) and (d) of Annex G to the Credit Agreement, for the period ended January 31, 2009, (v) Borrowers’ breach of Section (a) of Annex E to the Credit Agreement based on
failure to deliver the monthly financial information for the Fiscal Month of January 2009 and 

 
(vi) Borrowers’ breach of Section (d) of Annex F to the Credit Agreement based on the failure to deliver the annual audited Financial
Statements for the Fiscal Year ended on or about January 31, 2009 (the “Existing Events of Default”); 
 C. Agent and
Lenders are willing to grant a waiver limited to the Existing Events of Default, as set forth in, and subject to the terms and conditions of, this Amendment; 
 D. This Amendment shall constitute a Loan Document and these Recitals shall be construed as part of this Amendment. 
 NOW THEREFORE, in consideration of the premises and the mutual covenants hereinafter contained, and of the Loans and other extensions of credit heretofore, now or hereafter made to, or for the benefit of, Borrowers by Lenders, Borrowers,
Agent and Lenders hereby agree as follows: 
 1. Definitions. Except to the extent otherwise specified herein, capitalized terms used
in this Amendment shall have the same meanings ascribed to them in the Credit Agreement. 
 2. Amendments. 
 2.1. Section 1.5(a) of the Credit Agreement is hereby amended by it in its entirety and replacing it with the following: 
 “(a) Borrowers shall pay interest to Agent, for the ratable benefit of Lenders in accordance with the various Loans being made by each Lender, in
arrears on each applicable Interest Payment Date, at the following rates: (i) with respect to the Revolving Credit Advances, the Index Rate plus the Applicable Revolver Index Margin per annum or, at the election of Borrower Representative, the
applicable LIBOR Rate plus the Applicable Revolver LIBOR Margin per annum; and (ii) with respect to the Swing Line Loan, the Index Rate plus the Applicable Revolver Index Margin per annum. 
 The Applicable Margins shall be set in accordance with the following grid: 
  

				
	 	  	Applicable
Margins	 
	 Applicable Revolver Index Margin
	  	3.500	%
	 Applicable Revolver LIBOR Margin
	  	4.500	%
	 Applicable L/C Margin
	  	4.500	%
	 Applicable Unused Line Fee Margin
	  	1.000	%”

 2.2. Section 1.14 of the Credit Agreement is hereby amended by deleting the first
sentence thereof in its entirety and replacing it with the following: 
 “Each Credit Party that is a party hereto shall, during normal
business hours, from time to time upon five (5) Business Days prior notice as frequently as Agent reasonably determines to be appropriate: (a) provide Agent and any of its officers, employees and agents access to its properties,
facilities, advisors, officers and employees of each Credit Party and to the Collateral, 

  

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(b) permit Agent, and any of its officers, employees and agents, to inspect, audit and make extracts from any Credit Party’s books and records, and
(c) permit Agent, and its officers, employees and agents, to inspect, review, evaluate and make test verifications and counts of the Accounts, Inventory and other Collateral of any Credit Party (it being understood that at least three field
examinations will be conducted per year).” 
 2.3. Section 6.13 of the Credit Agreement is hereby amended by deleting
clauses (e), (f) and (g) thereof in their entirety. 
 2.4. Section 6 of the Credit Agreement is hereby amended by
adding the following new Section 6.18: 
 “6.18 Subsidiary Restrictions. Neither The Fragrance Depot, Inc., a Florida
corporation wholly-owned by Magnifique Parfumes nor E Com Ventures Company (f/k/a PerHold FL, Inc.), a Florida corporation wholly-owned by Perfumania Holdings shall engage in any trade or business, or own any assets or incur any liabilities,
Indebtedness or Guaranteed Indebtedness.” 
 2.5. Annex A of the Credit Agreement is hereby amended by deleting clause (b) in
the definition of “Borrowing Base” and replacing it with the following: 
 “(b) beginning with the first Borrowing Base
Certificate delivered after the date of Waiver and Amendment No. 1 to this Agreement, up to 85% of the appraised net orderly liquidation value percentage (from the most recently completed and delivered appraisal of Borrowers’ Inventory
pursuant to this Agreement; provided, that, during the period beginning December 16 and ending December 31 of each year, the net orderly liquidation value percentage for the immediately following month of January shall be
used in this calculation) of Eligible Inventory, valued at the lower of cost (determined on a weighted average basis, which approximates a first-in, first-out basis) or market; 
 provided, further, that the maximum amount of Eligible Inventory used in determining the Borrowing Base (and to which the advance rate determined under clause (b) above shall be applied) shall not
exceed the amount set forth below for each applicable month end set forth below: 
  

					
	 Applicable Month End:
	  	 Maximum
Amount of
Eligible
Inventory

	 May 30, 2009
	  	$	  	233,783,000
	 July 4, 2009
	  	$	  	226,251,000
	 August 1, 2009
	  	$	  	225,421,000
	 August 29, 2009
	  	$	  	225,840,000
	 October 3, 2009
	  	$	  	229,586,000
	 October 31, 2009
	  	$	  	238,848,000
	 November 28, 2009
	  	$	  	244,335,000
	 January 2, 2009
	  	$	  	218,122,000
	 January 30, 2010
	  	$	  	217,050,000
	 February 28, 2010 and each month end thereafter thereafter
	  	Amount specified for such month end in the One Year Operating Plan plus $2,500,000”

  

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 2.6. Annex A of the Credit Agreement is hereby amended by deleting the definition of “Index
Rate” in its entirety and replacing it with the following: 
 “‘Index Rate’ means, for any day, a floating rate
equal to the highest of (i) the rate publicly quoted from time to time by The Wall Street Journal as the “prime rate” (or, if The Wall Street Journal ceases quoting a prime rate, the highest per annum rate of interest published by the
Federal Reserve Board in Federal Reserve statistical release H.15 (519) entitled “Selected Interest Rates” as the Bank prime loan rate or its equivalent), (ii) the Federal Funds Rate plus 50 basis points per annum, and
(iii) the sum of (x) the LIBOR Rate for a LIBOR Period of three (3) months as it appears on Reuters Screen LIBOR01 Page as of 11:00 a.m (London, England time) two (2) Business Days prior to such day, plus (y) the excess of
the Applicable Revolver LIBOR Margin over the Applicable Revolver Index Margin, in each instance, as of such day. Each change in any interest rate provided for in the Agreement based upon the Index Rate shall take effect at the time of such change
in the Index Rate.” 
 2.7. Annex A of the Credit Agreement is hereby amended by adding the following sentence to the definition
of “LIBOR Rate”: 
 “Notwithstanding the foregoing, the LIBOR Rate shall in no event be less than 2.00%.” 
 2.8. Annex A of the Credit Agreement is hereby amended by adding the following definition of “Short-Term Advances to Suppliers” in the
appropriate alphabetical order: 
 “‘Short-Term Advances to Suppliers’ means Advances to Suppliers if, and only to the
extent that, a Credit Party or Credit Parties shall receive Inventory shipments within five (5) Business Days from the applicable supplier to which such Advances have been paid.” 
 2.9. Annex E of the Credit Agreement is hereby amended by deleting clause (c) and replacing it with the following: 
 (c) Operating Plan. To Agent and Lenders, (i) as soon as available, but not later than the end of each Fiscal Year, an annual operating plan
for Borrowers, on a combined and, commencing with the Projections for the Fiscal Year ending on or about month-end, January, 2010, combining basis consistent with the historical Financial Statements of Borrowers, approved by the Board of Directors
of each of the Borrowers, for the following Fiscal Year, which (A) includes a statement of all of the material assumptions on which such plan is based, (B) includes monthly balance sheets, income statements and statements of cash flows for
the following year and (C) integrates sales, gross profits, operating expenses, operating profit, cash flow projections and Borrowing Availability projections, all prepared on the same basis and in similar detail as that on which operating
results are reported (and in the case of cash flow projections, representing management’s good faith estimates of future financial performance based on historical performance), and including plans for personnel, Capital Expenditures and
facilities; and (ii) thirty (30) days after the end of the Fiscal Years 

  

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ended January 31, 2010 and January 31, 2011, a one-year operating plan for Borrowers, on a combined and combining basis consistent with the
historical Financial Statements of Borrowers, approved by the Board of Directors of each of the Borrowers, for the Fiscal Year ended on or about month-end January, 2011 or January, 2012, as the case may be, which (A) includes a statement of all
of the material assumptions on which such plan is based, (B) includes monthly balance sheets, income statements and statements of cash flows for the following two years, (C) includes monthly Borrowing Availability projections and
(D) integrates sales, gross profits, operating expenses, operating profit and cash flow projections, all prepared on the same basis and in similar detail as that on which operating results are reported (and in the case of cash flow projections,
representing management’s good faith estimates of future financial performance based on historical performance), and including plans for personnel, Capital Expenditures and facilities. Such one-year operating plan shall be prepared using
projections and assumptions consistent with historic performance, reasonably acceptable to Agent, including, by way of example but not of limitation, provisions reflecting trade and other payables being paid currently, and such plan shall
demonstrate monthly Borrowing Availability throughout such one-year period of at least (i) $15,000,000 plus (ii) the $15,000,000 amount required to be maintained under paragraph (a) of Annex G, Minimum Borrowing Availability
(such one year operating plan being defined as the “One Year Operating Plan”). 
 2.10. Annex E of the Credit
Agreement is hereby amended by deleting the term “combined and combining” and the word “combined” as each appear in the first sentence of clause (d) and replacing them, in both instances, with the word,
“consolidated.” 
 2.11. Annex E of the Credit Agreement is hereby amended by adding the following new Section (p):

 “(p) Additional Reporting. To Agent and Lenders, (i) within twenty one (21) days after the end of each Fiscal Month,
a profit and loss accounting of store performance by location (including net sales, gross margin and EBITDA), and (ii) on the first Business Day of each week, a cash flow projection (including projections of Borrowing Availability) for such
week and each of the twelve (12) weeks following such week. 
 2.12. Annex F of the Credit Agreement is hereby amended by
deleting paragraph (a) in its entirety and replacing it with the following: 
 “(a) To Agent, upon its request, and in any event no
less frequently than (x) 12:00 p.m. (New York time) on each Business Day, a Combined Notice of Revolving Credit Advance and Collateral Activity Report, as referenced in clause (i) below with updated information as to the gross amounts of
Accounts and Inventory as of the immediately preceding Business Day; and (y) 12:00 p.m. (New York time) on the third Business Day after the end of each week (together with a copy of all or any part of the following reports requested by any
Lender in writing after the Closing Date), the reports referenced in clauses (ii) and (iii) below, each of which shall be prepared by the applicable Borrower as of the last day of the immediately preceding week or the date two
(2) days prior to the date of any such request: 
 (i) a Combined Notice of Revolving Credit Advance and Collateral
Activity Report with respect to each Borrower, in each case accompanied by such supporting detail and documentation as shall be requested by Agent in its reasonable discretion; 
  

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 (ii) a Borrowing Base Certificate and, with respect to each Borrower, a summary of
Inventory by location and type with a supporting perpetual Inventory report, in each case accompanied by such supporting detail and documentation as shall be requested by Agent in its reasonable discretion; and 
 (iii) with respect to each Borrower, a weekly trial balance showing Accounts outstanding aged from due date as follows: current, 1 to 30
days, 31 to 60 days, 61 to 90 days and 91 days or more, accompanied by such supporting detail and documentation as shall be requested by Agent in its reasonable discretion.” 
 2.13. Annex F of the Credit Agreement is hereby amended by deleting paragraph (i) in its entirety and replacing it with the following:

 “(i) Borrowers, at their own expense, shall deliver to Agent (A) an appraisal of their Inventory no less frequently than each
Fiscal Quarter and (B) to the extent requested by Agent a desktop appraisal of such Inventory no less frequently than once each month, or, in each case, or at such more frequent intervals as Agent may request at any time, such appraisals to be
conducted by an appraiser engaged by Agent, and such appraisals to be in form and substance reasonably satisfactory to Agent; and” 
 2.14. Annex G of the Credit Agreement is hereby amended by deleting paragraph (a), “Minimum Fixed Charge Coverage Ratio,” in its entirety and replacing it with the following: 
 “(a) Minimum Fixed Charge Coverage Ratio. Beginning with the Fiscal Quarter ending January 30, 2010 and for each and every Fiscal Quarter
ending thereafter, the Credit Parties on a consolidated basis shall have, at the end of each such Fiscal Quarter, a Fixed Charge Coverage Ratio for the trailing 12-month period then ended of not less than 1.10 to 1.00. 
 2.15. Annex G of the Credit Agreement is hereby amended by deleting all of paragraph (b), “Inventory Turnover Ratio,” in its
entirety and replacing it with the following: 
 “[Intentionally Omitted]” 
 2.16. Annex G of the Credit Agreement is hereby amended by deleting paragraph (c), “Advances to Suppliers,” in its entirety and
replacing it with the following: 
 “(c) Advances to Suppliers. For each and every Fiscal Quarter, beginning with the Fiscal
Quarter ending May 2, 2009, Credit Parties (other than the Inactive Companies) on a combined basis shall not have, at any time, (i) aggregate outstanding Advances to Suppliers (other than Short-Term Advances to Suppliers) in excess of
$4,000,000 with respect to all suppliers or in excess of $3,000,000 with respect to any one supplier (together with its Affiliates) or (ii) aggregate Short-Term Advances to Suppliers in excess of $8,000,000 with respect to all suppliers or in
excess of $3,000,000 with respect to any one supplier (together with its Affiliates).” 
  

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 2.17. Annex G of the Credit Agreement is hereby amended by deleting paragraph (d),
“Maximum Leverage Ratio,” in its entirety. 
 2.18. For the avoidance of doubt, none of the Minimum Fixed Charge Coverage
Ratio, the Inventory Turnover Ratio or the Maximum Leverage Ratio shall be tested for the Fiscal Quarter ended on or about May 2, 2009. 
 2.19. In addition to any other Reserves which Agent may from time to time establish under the terms of this Agreement in its reasonable credit judgment, there shall be established and maintained at all times a Reserve against Borrowing
Availability in the amounts set forth below, during the periods set forth below: 
  

				
	 Period:
	  	Reserve
Against
Borrowing
Availability
	 May 22, 2009 – May 25, 2009
	  	$	9,000,000
	 May 26, 2009 – June 1, 2009
	  	$	10,000,000
	 June 2, 2009 – June 8, 2009
	  	$	10,500,000
	 June 9, 2009 – June 15, 2009
	  	$	11,000,000
	 June 16, 2009 – June 22, 2009
	  	$	11,500,000
	 June 23, 2009 – June 29, 2009
	  	$	12,000,000
	 June 30, 2009 – July 6, 2009
	  	$	12,500,000
	 July 7, 2009 – July 13, 2009
	  	$	13,000,000
	 .July 14, 2009 – July 20, 2009
	  	$	13,500,000
	 July 21, 2009 – July 27, 2009
	  	$	14,000,000
	 July 28, 2009 – August 3, 2009
	  	$	14,500,000
	 August 4, 2009 and thereafter
	  	$	15,000,000

 3. Waiver. Subject to the satisfaction of the conditions set forth in Section 4
below, Agent and Lenders hereby waive the Existing Events of Default. This is a waiver limited to the Existing Events of Default and shall not be deemed to constitute a waiver of any other term or provision of the Credit Agreement or any of the
other Loan Documents. 
 4. Conditions Precedent to Effectiveness. The effectiveness of the specific amendment set forth in
Section 2 hereof and the specific waiver set forth in Section 3 hereof is subject to the satisfaction of each of the following conditions precedent: 
 4.1. Amendment. This Amendment shall have been duly executed and delivered by the Borrowers, each other Credit Party, Agent and Requisite Lenders.

 4.2. Fee. Borrowers shall have paid to Agent, for the account of the Lenders, a fee equal to 0.75% of the Revolving Loan
Commitment, payable to each Lender that timely delivers its signature page to this Amendment. 
  

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 4.3. No Default. Other than the Existing Events of Default, before and after giving effect to this
Amendment, no Default or Event of Default shall have occurred and be continuing. 
 4.4. Certain Amendments. (i) The Existing
Nussdorf Convertible Note, the Nussdorf Subordinated Debt and the QKD Subordinated Debt shall have been amended to provide that no principal or interest shall be paid thereon prior to the Commitment Termination Date; provided that, the
Existing Convertible Note may be convertible into common equity in accordance with its terms and (ii) the intercreditor agreements with respect to the QKD Subordinated Debt, the Nussdorf Subordinated Debt and the Existing Nussdorf Convertible
Note shall have been amended in form and substance satisfactory to the Agent. 
 4.5. Certain Deliveries. Receipt by Agent of
(i) a profit and loss accounting of store performance by location (including net sales, gross margin and EBITDA) for the month ended February 28, 2009, (ii) a cash flow projection (including projections of Borrowing Availability) for
each of the thirteen (13) weeks following the date of this Amendment, (iii) an oral report as to the results of the desktop Inventory appraisal currently being performed, (iv) the monthly financial information required to be delivered
pursuant to Section (a) of Annex E to the Credit Agreement for the Fiscal Month of January 2009 and (v) the audited Financial Statements for Borrowers, on a consolidated basis, for the Fiscal Year ended January 31, 2009, in the
case of each such delivery, in form and substance satisfactory to Agent. 
 5. Reference to and Effect Upon the Credit Agreement and other
Loan Agreements. 
 5.1. Except for the specific amendments in Section 2 and the specific waiver set forth in
Section 3, above, the Credit Agreement and each other Loan Document shall remain in full force and effect and each is hereby ratified and confirmed. 
 5.2. The execution, delivery and effect of this Amendment shall be limited precisely as written and shall not be deemed to (i) be a consent to any waiver of any term or condition or any amendment or modification
of any term or condition of the Credit Agreement (except for the specific amendments set forth in Section 2 and the specific waiver set forth in Section 3 above) or any other Loan Document or (ii) prejudice any right,
power or remedy which the Agent or Lenders now has or may have in the future under or in connection with the Credit Agreement or any other Loan Document. 
 6. Acknowledgment and Consent of Credit Parties. Each Credit Party hereby consents to this Amendment and hereby confirms and agrees that (a) each Loan Document to which it is a party is, and shall continue
to be, in full force and effect and each is hereby ratified and confirmed in all respects, and (b) the Liens granted by such Credit Party on all Collateral of such Credit Party continue to secure the payment of all of the Obligations.

 7. Release. Borrowers and the other Credit Parties hereby waive, release, remise and forever discharge Agent, Lenders and each
other Indemnified Person from any and all actions, causes of action, suits or other claims of any kind or character, known or unknown, which any Borrower or Credit Party ever had, now has or might hereafter have against Agent, any Lender or any
other 

  

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Indemnified Person which relate, directly or indirectly, to any acts or omissions of Agent, any Lender or any other Indemnified Person on or prior to the
date hereof arising out of, in connection with, or otherwise relating to, the Loan Documents or any matter in connection therewith. 
 8.
Counterparts. This Amendment may be executed in any number of counterparts, each of which when so executed shall be deemed an original but all such counterparts shall constitute one and the same instrument. Delivery of an executed counterpart
of a signature page to this Amendment by telecopier shall be as effective as delivery of a manually executed counterpart signature page to this Amendment. 
 9. Costs and Expenses. As provided in Section 11.3 of the Credit Agreement, Borrowers shall pay on demand the reasonable fees, costs and expenses incurred by Agent in connection with the
preparation, execution and delivery of this Amendment. 
 10. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS (AS OPPOSED TO CONFLICTS OF LAW PROVISIONS) OF THE STATE OF NEW YORK. 
 11. Headings.
Section headings in this Amendment are included herein for convenience of reference only and shall not constitute a part of this Amendment for any other purpose. 
 [Signature Pages Follow] 
  

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 IN WITNESS WHEREOF, this Amendment has been duly executed as of the date first written above. 

 

			
	BORROWERS:
	
	PERFUMANIA HOLDINGS, INC. (f/k/a E Com Ventures, Inc.)
	QUALITY KING FRAGRANCE, INC.
	SCENTS OF WORTH, INC.
	FIVE STAR FRAGRANCE COMPANY, INC.
	DISTRIBUTION CONCEPTS, LLC
	NORTHERN GROUP, INC.
	PERFUMANIA, INC.
	MAGNIFIQUE PARFUMES AND COSMETICS, INC.
	TEN KESEF II, INC.
	 PERFUMANIA PUERTO RICO, INC.

		
	By:	 	 /s/ Donna Dellomo

	Name:	 	 Donna Dellomo

	Title:	 	 CFO

  

 [Signature Page – Waiver and Amendment No. 1 to Perfumania Credit Agreement] 

 The following Persons are signatories to this Amendment in their capacity as Credit Parties. 

 

			
	 FLOWING VELVET, INC.

	 ALADDIN FRAGRANCES, INC.

	 NICHE MARKETING GROUP, INC.

	 MODEL REORG ACQUISITION LLC

	 JACAVI, LLC

	 NORTHERN AMENITIES, LTD.

	 NORTHERN BRANDS, INC.

	 PERFUMANIA.COM, INC.

		
	By:	 	 /s/ Donna Dellomo

	Name:	 	 Donna Dellomo

	Title:	 	 CFO

  

 [Signature Page – Waiver and Amendment No. 1 to Perfumania Credit Agreement] 

			
	GENERAL ELECTRIC CAPITAL CORPORATION, as Agent and a Lender
		
	 By:
	 	 /s/ Kristina M. Miller

		 	Duly Authorized Signatory

  

 [Signature Page – Waiver and Amendment No. 1 to Perfumania Credit Agreement] 

			
	WACHOVIA BANK NATIONAL ASSOCIATION
		
	By:	 	 /s/ Robert H. Waters, Jr.

	Name:	 	 Robert H. Waters, Jr.

	Title:	 	 Director

  

 [Signature Page – Waiver and Amendment No. 1 to Perfumania Credit Agreement] 

			
	BANK OF AMERICA, N.A.
		
	By:	 	 /s/ Edgar Ezerins

	Name:	 	 Edgar Ezerins

	Title:	 	 Senior Vice President

  

 [Signature Page – Waiver and Amendment No. 1 to Perfumania Credit Agreement] 

			
	TD BANK, N.A.
		
	By:	 	 /s/ Stephen A. Caffrey

	Name:	 	 Stephen A. Caffrey

	Title:	 	 Vice President

  

 [Signature Page – Waiver and Amendment No. 1 to Perfumania Credit Agreement] 

			
	UNION BANK OF CALIFORNIA
		
	By:	 	  

	Name:	 	  

	Title:	 	  

  

 [Signature Page – Waiver and Amendment No. 1 to Perfumania Credit Agreement] 

			
	RBS BUSINESS CAPITAL, a division of RBS Asset Finance, Inc.
		
	By:	 	  

	Name:	 	  

	Title:	 	  

  

 [Signature Page – Waiver and Amendment No. 1 to Perfumania Credit Agreement] 

			
	BANK LEUMI USA
		
	By:	 	 /s/ John Grieco

	Name:	 	 John Grieco

	Title:	 	 First Vice President

  

			
	
		
	By:	 	 /s/ Nancy Pulla

	Name:	 	 Nancy Pulla

	Title:	 	 Assistant Treasurer

  

 [Signature Page – Waiver and Amendment No. 1 to Perfumania Credit Agreement]EX-10.1

AMENDMENT AGREEMENT

This Amendment Agreement (the “Agreement”), dated as of May 26, 2009, is by and among
Converted Organics Inc., a Delaware corporation (the “Company”) and the investors signatory
hereto (each, a “Purchaser” and collectively, the “Purchasers”).

Reference is made to that certain Securities Purchase Agreement (the “Purchase
Agreement”), dated May 19, 2009, by and among the Company and the Purchasers, pursuant to which
the Purchasers were issued warrants (the “Existing Warrants”) to purchase shares of Common
Stock, par value $0.0001 per share (the “Common Stock”);

WHEREAS, the Existing Warrants were issued pursuant to an effective registration statement,
file No. 333-158784 (the “Registration Statement”).

NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement, and for
good and valuable consideration the receipt and adequacy of which are hereby acknowledged, the
Purchasers and the Company agree as follows:

ARTICLE I

DEFINITIONS

Section 1.1 Definitions. Capitalized terms not defined in this Agreement shall have
the meanings ascribed to such terms in the Purchase Agreement.

ARTICLE II

EXERCISE OF WARRANTS,

AMENDMENTS AND OTHER AGREEMENTS

Section 2.1 Exercise of Existing Warrants. Each Purchaser hereby agrees, severally
and not jointly with the other Purchasers, to exercise all of such Purchaser’s Existing Warrants at
an exercise price of $1.40 per share, for aggregate cash proceeds to the Company from all
Purchasers of $2,100,000, otherwise pursuant to the terms of the Existing Warrants. Each Purchaser
shall execute and deliver the aggregate cash exercise price for such Existing Warrants to the bank
account designated in writing by the Company; provided, however, that a Purchaser
shall not be required to exercise such certain portion of its Existing Warrant to the extent that
Section 2(e) of the Existing Warrant is violated by the resulting Common Stock issuance of such
certain portion. The shares underlying the Existing Warrants shall be delivered to the Purchaser’s
to the DTC account of such Purchaser set forth on the signature page hereto.

Section 2.2 Issuance of New Warrants. Each Purchaser shall be issued a new Common
Stock purchase warrant (collectively, the “Warrants”) off the Registration Statement to
purchase up to a number of shares of Common Stock equal to the number of shares issued to such
Purchaser pursuant to Section 2.1 (the “Warrant Shares”), otherwise in the form of the
Existing Warrant issued pursuant to the Purchase Agreement, except that the Exercise Price shall be
$1.61, the Termination Date shall be August 14, 2009 and Section 2(f) shall be triggered at a VWAP
of $2.42 rather than $2.10. The Company shall have a sufficient number of shares of Common Stock
reserved and available off the Registration Statement until the Termination Date of the Warrant.
The date of the closing of the exercise of the Existing Warrants and other transactions
contemplated hereunder shall be referred to as the “Closing”.

Section 2.3 Effect on Purchase Agreement. The covenants of the Company with respect
to the Warrants and Warrant Shares shall be identical in all respects to the covenants of the
Company with respect to the Existing Warrants (and shares of Common Stock underlying the Existing
Warrants) issued pursuant to the Purchase Agreement. Except as expressly set forth herein, all of
the terms and conditions of the Transaction Documents shall continue in full force and effect after
the execution of this Agreement, and shall not be in any way changed, modified or superseded by the
terms set forth herein. This Agreement shall not constitute a novation or satisfaction and accord
of any Transaction Document.

Section 2.4 Press Release and Prospectus Supplement. On or before 8:30 am ET on May
27, 2009 the Company shall issue a press release reasonably acceptable to each Purchaser disclosing
the material terms of the transactions contemplated hereby. In addition, within 1 Trading Day of
the date hereof, the Company shall file a prospectus supplement under Rule 424 under the Securities
Act to the Registration Statement disclosing the terms of the transactions hereunder.

Section 2.5 Conditions to Purchasers Obligations. The respective obligations of the
Purchasers hereunder in connection with the Closing are subject to the following conditions being
met:

(a) the accuracy in all material respects on the date of the Closing of the
representations and warranties of the Company contained herein;

(b) all obligations, covenants and agreements of the Company required to be performed
at or prior to the Closing shall have been performed;

(c) the delivery of an opinion of counsel to the Company regarding this Agreement and
the issuance of the Warrants hereunder, in form and substance reasonably acceptable to the
Purchasers;

(d) there shall have been no Material Adverse Effect with respect to the Company since
the date hereof; and

(e) from the date hereof to the Closing, trading in the Common Stock shall not have
been suspended by the Commission (except for any suspension of trading of limited duration
agreed to by the Company, which suspension shall be terminated prior to the Closing), and,
at any time prior to the Closing, trading in securities generally as reported by Bloomberg
Financial Markets shall not have been suspended or limited, or minimum prices shall not have
been established on securities whose trades are reported by such service, or on any Trading
Market, nor shall a banking moratorium have been declared either by the United States or New
York State authorities nor shall there have occurred any material outbreak or escalation of
hostilities or other national or international calamity of such magnitude in its effect on,
or any material adverse change in, any financial market which, in each case, in the
reasonable judgment of each Purchaser, makes it impracticable or inadvisable to consummate
the transactions hereunder.

ARTICLE III

REPRESENTATIONS AND WARRANTIES

Section 3.1 Representations and Warranties of the Company. The Company hereby make
the representations and warranties set forth below to the Purchasers as of the date of its
execution of this Agreement:

(a) Authorization; Enforcement. The Company has the requisite corporate
power and authority to enter into and to consummate the transactions contemplated by
this Agreement and otherwise to carry out its obligations hereunder and thereunder. The
execution and delivery of this Agreement by the Company and the consummation by it of the
transactions contemplated hereby have been duly authorized by all necessary action on the
part of such Company and no further action is required by such Company, its board of
directors or its stockholders in connection therewith. This Agreement has been duly
executed by the Company and, when delivered in accordance with the terms hereof will
constitute the valid and binding obligation of the Company enforceable against the Company
in accordance with its terms except (i) as limited by general equitable principles and
applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting enforcement of creditors’ rights generally, (ii) as limited by laws
relating to the availability of specific performance, injunctive relief or other equitable
remedies and (iii) insofar as indemnification and contribution provisions may be limited by
applicable law.

(b) No Conflicts. The execution, delivery and performance of this Agreement by
the Company and the consummation by the Company of the transactions contemplated hereby do
not and will not: (i) conflict with or violate any provision of the Company’s certificate or
articles of incorporation, bylaws or other organizational or charter documents, or (ii)
conflict with, or constitute a default (or an event that with notice or lapse of time or
both would become a default) under, result in the creation of any lien upon any of the
properties or assets of the Company, or give to others any rights of termination, amendment,
acceleration or cancellation (with or without notice, lapse of time or both) of, any
material agreement, credit facility, debt or other material instrument (evidencing Company
debt or otherwise) or other material understanding to which the Company is a party or by
which any property or asset of the Company is bound or affected, or (iii) conflict with or
result in a violation of any law, rule, regulation, order, judgment, injunction, decree or
other restriction of any court or governmental authority to which the Company is subject
(including federal and state securities laws and regulations), or by which any property or
asset of the Company is bound or affected.

(c) Issuance of Warrants. The Warrants and Warrant Share, when issued in
accordance with the terms of this Agreement and the Warrants, will be duly authorized,
validly issued, fully paid and nonassessable. Except as set forth in the SEC Reports, there
are no issued or outstanding securities and no issued or outstanding options, warrants or
other rights, or commitments or agreements of any kind, contingent or otherwise, to purchase
or otherwise acquire shares of Common Stock or any issued or outstanding securities of any
nature convertible into shares of Common Stock. There is no proxy or any other agreement,
arrangement or understanding of any kind authorized, effective or outstanding which
restricts, limits or otherwise affects the right to vote any shares of Common Stock.

(d) Other Representations, Warranties and Covenants. The representations and
warranties of the Company with respect to the Warrants and Warrant Shares shall be identical
in all respects to the representations and warranties of the Company with respect to the
Existing Warrants (and shares of Common Stock underlying the Existing Warrants) issued
pursuant to the Purchase Agreement and other Transaction Documents and the Company hereby
makes such representations and warranties as though fully set forth herein as of the date
hereof, and all such representations and warranties are incorporated herein by reference.

Section 3.2 Representations and Warranties of the Purchasers. The Purchaser hereby
makes the representations and warranties set forth below to the Company as of the date of its
execution of this Agreement:

(a) Due Authorization. Such Purchaser represents and warrants that (i) the
execution and delivery of this Agreement by it and the consummation by it of the
transactions contemplated hereby have been duly authorized by all necessary action on its
behalf and (ii) this Agreement has been duly executed and delivered by such Purchaser and
constitutes the valid and binding obligation of such Purchaser, enforceable against it in
accordance with its terms.

ARTICLE IV

MISCELLANEOUS

Section 4.1 Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be made in accordance with the provisions of
the Purchase Agreement.

Section 4.2 Survival. All warranties and representations (as of the date such
warranties and representations were made) made herein or in any certificate or other instrument
delivered by it or on its behalf under this Agreement shall be considered to have been relied upon
by the parties hereto and shall survive the issuance of the Existing Warrants. This Agreement shall
inure to the benefit of and be binding upon the successors and permitted assigns of each of the
parties; provided however that no party may assign this Agreement or the obligations and rights of
such party hereunder without the prior written consent of the other parties hereto.

Section 4.3 Execution. This Agreement may be executed in two or more counterparts,
all of which when taken together shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each party and delivered to the other party, it
being understood that both parties need not sign the same counterpart. In the event that any
signature is delivered by facsimile transmission, such signature shall create a valid and binding
obligation of the party executing (or on whose behalf such signature is executed) with the same
force and effect as if such facsimile signature page were an original thereof.

Section 4.4 Severability. If any provision of this Agreement is held to be invalid or
unenforceable in any respect, the validity and enforceability of the remaining terms and provisions
of this Agreement shall not in any way be affected or impaired thereby and the parties will attempt
to agree upon a valid and enforceable provision that is a reasonable substitute therefor, and upon
so agreeing, shall incorporate such substitute provision in this Agreement.

Section 4.5 Governing Law. All questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be determined pursuant to the Governing Law
provision of the Purchase Agreement.

Section 4.6 Entire Agreement. The Agreement, together with the exhibits and schedules
thereto, contain the entire understanding of the parties with respect to the subject matter hereof
and supersede all prior agreements and understandings, oral or written, with respect to such
matters, which the parties acknowledge have been merged into such documents, exhibits and
schedules.

Section 4.7 Construction. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect any of the
provisions hereof. The language used in this Agreement will be deemed to be the language chosen by
the parties to express their mutual intent, and no rules of strict construction will be applied
against any party.

Section 4.8 Independent Nature of Purchasers’ Obligations and Rights. The obligations
of each Purchaser hereunder are several and not joint with the obligations of any other Purchasers
hereunder, and no Purchaser shall be responsible in any way for the performance of the obligations
of any other Purchaser hereunder. Nothing contained herein or in any other agreement or document
delivered at any closing, and no action taken by any Purchaser pursuant hereto, shall be deemed to
constitute the Purchasers as a partnership, an association, a joint venture or any other kind of
entity, or create a presumption that the Purchasers are in any way acting in concert with respect
to such obligations or the transactions contemplated by this Agreement. Each Purchaser shall be
entitled to protect and enforce its rights, including without limitation the rights arising out of
this Agreement, and it shall not be necessary for any other Purchaser to be joined as an additional
party in any proceeding for such purpose.

Section 4.9 Termination.  This Agreement may be terminated by any Purchaser, as to
such Purchaser’s obligations hereunder, by written notice to the other parties, if the Closing has
not been consummated on or before June 5, 2009.

Section 4.10 Fees and Expenses. The Company has agreed to reimburse Iroquois Master
Fund Ltd. the sum of $25,000 for its out-of-pocket legal fees and expenses, none of which has been
paid prior to the date hereof and Chardan Capital Markets, LLC a financial advisory fee of $147,000
on the exercise of the Existing Warrants. Except as expressly set forth herein, each party shall
pay the fees and expenses of its advisers, counsel, accountants and other experts, if any, and all
other expenses incurred by such party incident to the negotiation, preparation, execution, delivery
and performance of this Agreement. The Company shall pay all transfer agent fees, stamp taxes and
other taxes and duties levied in connection with the delivery of any Warrants or Warrant Shares.

***********************

1

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

	 
	CONVERTED ORGANICS INC.

	By:     

Name:

	Title:

2

[PURCHASER SIGNATURE PAGES TO COIN

AMENDMENT AGREEMENT]

IN WITNESS WHEREOF, the undersigned have caused this Agreement to be duly executed by their
respective authorized signatories as of the date first indicated above.

Name of Purchaser:      

Signature of Authorized Signatory of Purchaser:      

Name of Authorized Signatory:      

Title of Authorized Signatory:       

Address for Notice of Purchaser as set forth in the signature pages to the Purchase Agreement.

Purchaser DTC Instructions:

Existing Warrants to be exercised:

3

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