SECOND AMENDMENT TO AMENDED AND RESTATED FINANCING AGREEMENT
EXHIBIT
10.3
SECOND AMENDMENT TO AMENDED
AND RESTATED FINANCING AGREEMENT
This SECOND AMENDMENT TO AMENDED AND
RESTATED FINANCING AGREEMENT (this “Amendment”) is entered into as of September
21, 2009, by and among Frederick’s of Hollywood Group Inc., a New York
corporation (“Group”), FOH Holdings, Inc., a Delaware corporation (the
“Parent”), Frederick’s of Hollywood, Inc., a Delaware corporation
(“Frederick’s”), Frederick’s of Hollywood Stores, Inc., a Nevada
corporation (“Stores”), Hollywood Mail Order, LLC, a Nevada limited liability
company (“Mail Order” and collectively with Group, the Parent, Frederick’s and
Stores, individually, a “Borrower”, and collectively, the “Borrowers”), and
Xxxxx Fargo Retail Finance II, LLC, a Delaware limited liability company, in its
capacity as Lender and as arranger and agent for the Lenders (in such capacity,
the “Agent”).
RECITALS
A. WHEREAS,
the Borrowers, the Lenders and the Agent are parties to that certain Amended and
Restated Financing Agreement, dated as of January 28, 2008, as amended by that
certain First Amendment to Amended and Restated Financing Agreement, dated as of
September 9, 2008 (as so amended, the “Financing
Agreement”);
B. WHEREAS,
the Borrowers have requested that the Agent and the Lenders agree to certain
further amendments to the Financing Agreement; and
C. WHEREAS,
the Agent and the Lenders are willing to agree to such amendments upon the terms
and subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of
the premises and the mutual agreements herein contained, and for other valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Agent, the Lenders and the Borrowers agree as follows:
1. Definitions. Unless
otherwise defined herein, initial capitalized terms have the meanings given to
them in the Financing Agreement.
2. Amendments. Upon
the Amendment Effective Date (as hereinafter defined) the Financing Agreement is
hereby amended as follows:
a.) Section
1.01 of the Financing Agreement is amended by amending and restating the
following defined terms (and related definitions) therein to read in their
entirety as follows:
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(i)
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“Applicable Margin”
means,
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(A) up to
and including the first date on which the Borrower shall have repaid, following
the Bridge Period, not less than $2,000,000 in aggregate principal amount of
Revolving Loans:
(i) with
respect to the initial $2,000,000 in outstanding Revolving Loans, a rate equal
to ten percent 10.0% per annum, and
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(ii) with
respect to outstanding Revolving Loans in excess thereof, maintained as (a) Base
Rate Loans, a rate equal to one and three-quarters percent (1.75%) per annum,
and (b) LIBOR Rate Loans, a rate equal to three percent (3.00%) per annum;
and
(B)
thereafter: with respect to outstanding Revolving Loans maintained as (a) Base
Rate Loans, a rate equal to one and three-quarters percent (1.75%) per annum,
and (b) LIBOR Rate Loans, a rate equal to three percent (3.00%) per
annum.”
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(ii)
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“Applicable Import L/C
Margin” means two and one quarter percent
(2.25%).
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(iii)
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“Applicable Standby L/C
Margin” means three percent
(3.00%).
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(iv)
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“Base
Rate” means, for any day, a per annum rate of interest equal to the
greatest of (a) the Federal Funds Rate in effect on such day plus 1/2 of
1%, (b) the rate of interest announced from time to time within Xxxxx
Fargo at its principal office in San Francisco as its “prime rate”, with
the understanding that the “prime rate” is one of Xxxxx Fargo’s base rates
(not necessarily the lowest of such rates) and serves as the basis upon
which effective rates of interest are calculated for those loans making
reference thereto and is evidenced by the recording thereof after its
announcement in such internal publications as Xxxxx Fargo may designate
and (c) the LIBOR Rate on such day for a one month Interest Period plus
1%. If for any reason Agent shall have determined (which
determination shall be conclusive absent manifest error) that it is unable
to ascertain the Federal Funds Rate for any reason, including the
inability or failure of Agent to obtain sufficient quotations in
accordance with the terms hereof, the Base Rate shall be determined
without regard to clause (a) of the first sentence of this definition
until the circumstances giving rise to such inability no longer
exist. Any change in the Base Rate due to a change in the “prime
rate” or the Federal Funds Rate shall be effective on the effective date
of such change in the “prime rate” or the Federal Funds Rate,
respectively.
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(v)
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“Borrowing Base”
means, at any time, the difference
between:
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(i) the
sum of
(A) Prior
to the Recapitalization Event, ninety percent (90%), and after the
Recapitalization Event, eighty five percent (85%), of the Eligible Credit Card
Accounts at such time,
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(B) Prior
to the Recapitalization Event, ninety percent (90%), and after the
Recapitalization Event, eighty five percent (85%), of the Eligible Wal-Mart
Account Receivables at such time,
(C) Prior
to the Recapitalization Event, eighty five percent (85%), and after the
Recapitalization Event, eighty percent (80%), of the Other Eligible Account
Receivables at such time,
(D) Prior to the Recapitalization Event, one hundred
percent (100%), and after the Recapitalization
Event, eighty-five percent (85%) of the Net
Retail Liquidation Value of Eligible Warehouse Liquid Inventory, provided that at no
time shall the amount attributable to Eligible In Transit Inventory pursuant to
paragraphs (D, (E) and (F), exceed $15,000,000 in the aggregate,
(E) Prior to the Recapitalization Event,
ninety percent (90%), and after the Recapitalization Event, eighty-five percent
(85%), of the then current Net Retail Liquidation Value of Eligible Retail
Inventory, provided that at no time shall the amount attributable to
Eligible In Transit Inventory pursuant to paragraphs (D, (E) and (F), exceed
$15,000,000 in the aggregate,
(F) The
lesser of (x) sixty percent (60%) of Eligible Wholesale Inventory, which shall
include inventory supported by documentary Letters of Credit (in such form as
acceptable to the Agent in its sole discretion), or (y) prior to the
Recapitalization Event, eighty five percent (85%), and after the
Recapitalization Event, eighty percent (80%) of the then current Net Retail
Liquidation Value of Eligible Wholesale Inventory, which shall include inventory
supported by documentary Letters of Credit (in such form as acceptable to the
Agent in its sole discretion), provided that at no
time shall the amount attributable to Eligible In Transit Inventory pursuant to
paragraphs (D, (E) and (F), exceed $15,000,000 in the aggregate,
and
(G)
during the Bridge Period, $2,000,000,
(ii)
minus, the sum
of (A) Required Minimum Availability Reserve, (B) Availability Reserves and (C)
without duplication, such other Reserves as the Agent may deem appropriate in
the exercise of its reasonable business judgment based upon the lending
practices of the Agent, which may include, without limitation reserves for
freight and duty with respect to outstanding Letters of Credit; provided that the
Agent shall have the right to have the Inventory reappraised by an independent
appraiser selected by the Agent from time to time for the purpose of
redetermining the advance rates of the Eligible Inventory and, as a result, the
Borrowing Base.
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(vi)
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“Required Minimum
Availability Reserve” means an amount equal to the greater of (x)
$2,250,000 and (y) seven and one-half percent (7.5%) of the Total
Revolving Credit Commitment as in effect from time to time (including,
without limitation, after giving effect to any Commitment
Increase).
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b.) Section
1.01 of the Financing Agreement is amended by adding the following new defined
terms (and corresponding definitions) in appropriate alphabetical order
therein:
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(i)
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“Adjusted Borrowing
Base” means, at any time, the Borrowing Base at such time,
determined without giving effect to clause (G)
thereof.
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(ii)
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“Bridge Facility
Effective Date” means September 21,
2009.
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(iii)
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“Bridge Period”
means the period commencing on the Bridge Facility Effective Date and
ending December 7, 2009.
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(iv)
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“Recapitalization
Event” means the receipt by Group of a written irrevocable
commitment from a third party (not constituting a Loan Party) to purchase
Capital Stock issued by Group for a purchase price of not less than
$10,000,000 payable in cash (of which not less than $4,900,000 (net of all
related costs and expenses) shall be received in cash by one or more of
the Borrowers contemporaneously with the closing thereof), pursuant to a
transaction and agreements acceptable to the Agent and the Required
Lenders in their sole discretion.
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c.) Section
2.06(b) of the Financing Agreement is amended and restated to read in its
entirety as set forth below:
“(b) Unused Line
Fee. From and after the Effective Date and until the Maturity
Date, the Borrowers shall pay to the Agent for the account of the Lenders in
accordance with their Pro Rata Shares an unused line fee (the “Unused Line Fee”),
which shall accrue at the rate per annum of one half of one percent (0.50%) on
the excess, if any, of (x) the Total Revolving Credit Commitment over (y) the
sum of the average principal amount of Revolving Loans and Letter of Credit
Obligations outstanding from time to time, less, during the Bridge Period,
$2,000,000, and shall be payable monthly in arrears on the first day of each
month commencing October 1, 2009.
d.) Section
7.01(g) of the Financing Agreement is amended by deleting each of the two
provisos therein in their entirety.
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e.) Section
7.01 of the Financing Agreement is amended by adding a new subsection, Section
7.01(w), therein which Section shall read in its entirety as
follows:
“(w) No
later than July 15, 2009, the Borrowers shall retain, at their sole cost and
expense, a financial consultant reasonably acceptable to the Agent to evaluate
the Borrowers’ financial condition, business, operations and
prospects. Unless otherwise consented to by the Agent in writing, the
Borrowers shall at all times thereafter retain the services of such financial
consultant and cooperate fully therewith and shall make available such senior
executives and other members of management and all information, books and
records requested by such Persons. The Borrower shall cause such
financial consultant to share all results, reports and other data generated as a
result of such evaluation with the Agent and the Lenders.”
f.) Section
7.01 of the Financing Agreement is amended by adding a new subsection, Section
7.01(x), therein which Section shall read in its entirety as
follows:
“(x) Recapitalization. The
Borrowers shall consummate the Recapitalization Event on or before December 7,
2009.
g.) Section
7.02(d) of the Financing Agreement is amended by deleting the word “and”
immediately before clause (E) therein and by inserting the following clause (F)
immediately following clause (E) therein:
“ and (F)
consummate the Recapitalization Event.”
h.) Section
9.01(c) of the Financing Agreement is amended by amending and restating clause
(i) therein to read in its entirety as follows:
“(i) paragraphs
(b)(vi), (c), (e), (g), (i), (p), (q), (s), (x) or clauses (i)(C), (i)(D) or
(i)(E) of paragraph (t) of Section 7.01 or Section 7.02, or any Loan Party shall
fail to perform or comply with any negative covenant contained in Section 6
of any Pledge Agreement to which it is a party or in Section 5 of any Security
Agreement to which it is a party,”
3. Conditions to
Effectiveness. This Amendment shall become effective upon the
satisfaction (or waiver by the Agent) of each of the following conditions (the
first date on which said conditions have been so satisfied (or so waived), the
“Amendment Effective Date”):
a.) The
Borrowers, the Agent and the Lenders shall each have executed and delivered two
originals of this Amendment;
b.) On
the Amendment Effective Date, no Default or Event of Default shall
exist;
c.) The
Borrowers shall have paid the Amendment Fee (as hereinafter defined) in full to
the Agent; and
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d.) The
Borrowers shall have paid all reasonable fees, costs and expenses of the Agent
and the Lenders in connection with this Amendment, including, without
limitation, the fees and expenses of Proskauer Rose, LLP.
If the
Amendment Effective Date shall not have occurred by the close of business (New
York time) on September 22, 2009 (or such later time as the Agent consents to in
writing), this Amendment shall be deemed rescinded, null and void.
4. No
Waiver. Except as expressly stated herein, nothing herein
shall be deemed to constitute a waiver of compliance with, or other modification
of, any term or condition contained in the Financing Agreement or any other Loan
Document and nothing contained herein shall constitute a course of conduct or
dealing among the parties hereto. Except as expressly stated herein,
the Agent and the Lenders reserve all rights, privileges and remedies under the
Loan Documents.
5. Representations. In
order to induce the Agents and the Lenders to execute this Amendment, the
Borrowers hereby represent, warrant and covenant to the Agent and the Lenders
that as of the date hereof and as of the Amendment Effective Date (which
representations, warranties and covenants shall survive execution and delivery
of this Amendment):
a.) the
Borrowers are duly organized, validly existing and in good standing under the
laws of their respective jurisdictions of formation;
b.) the
Borrowers have the power and authority to execute, deliver and perform their
obligations under this Amendment;
c.) the
execution, delivery and performance by the Borrowers of this Amendment has been
duly authorized by all necessary action and does not and will not require any
registration with, consent or approval of, notice to or action by, any other
Person;
d.) this
Amendment constitutes the legal, valid and binding obligation of the Borrowers,
enforceable against the Borrowers in accordance with its terms; and
e.) no
Default or Event of Default exists.
6. Fee. In
consideration for the amendments to the Financing Agreement provided herein, the
Borrowers shall pay an amendment fee to the Agent, for the ratable benefit of
the Lenders based upon their Pro Rata Shares, in an amount equal to $150,000
(the “Amendment Fee”), which fee shall be fully earned on the Amendment
Effective Date, and due and payable one-half on the Amendment Effective Date and
the remainder upon the Recapitalization Event.
7. Counterparts. This
Amendment may be executed by the parties hereto in any number of separate
counterparts, each of which when so executed, shall be deemed an original and
all said counterparts when taken together shall be deemed to constitute but one
and the same instrument.
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8. Successors and
Assigns. This Amendment shall be binding upon and inure to the
benefit of the Borrowers and their successors and permitted assigns, and the
Lenders and the Agent and their successors and permitted assigns.
9. Further
Assurance. The Borrowers hereby agree from time to time, as
and when requested by the Agent, to execute and deliver or cause to be executed
and delivered, all such documents, instruments and agreements and to take or
cause to be taken such further or other action as the Agent may reasonably deem
necessary or desirable in order to carry out the intent and purposes of this
Amendment.
10. GOVERNING
LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK (WITHOUT REGARD TO
ITS CONFLICT OF LAWS PROVISIONS OTHER THAN SECTION 5-1401 OF THE GENERAL
OBLIGATIONS LAW OF THE STATE OF NEW YORK).
11. Severability. Wherever
possible, each provision of this Amendment shall be interpreted in such manner
as to be effective and valid under applicable law, but if any provision of this
Amendment shall be prohibited by or invalid under such 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
Amendment.
12. Reaffirmation. Each
Borrower hereby ratifies and reaffirms all of its payment and performance
obligations, contingent or otherwise, under each of the Loan Documents to which
it is a party (after giving effect hereto). Each Borrower hereby
acknowledges that, except as expressly modified herein, each of the Loan
Documents, remains in full force and effect and is hereby ratified and
reaffirmed.
13. Acknowledgment of Rights;
Release of Claims. Each Borrower hereby acknowledges that:
(a) it has no defenses, claims or set-offs to the enforcement by the Agent
or the Lenders of the liabilities, obligations and agreements of the Borrowers
under the Financing Agreement or other Loan Documents on the date hereof; and
(b) to its knowledge, the Agent and the Lenders have fully performed all
undertakings and obligations owed to it as of the date hereof. In
consideration of the Agent and the Lenders entering into this Amendment, each
Borrower hereby irrevocably releases and forever discharges the Agent, the
Lenders and their respective Affiliates, and each such Person’s respective
directors, officers, employees, agents, attorneys and representatives (each, a
“Released
Person”) of and from all damages, losses, claims, demands, liabilities,
obligations, actions or causes of action whatsoever which such Borrower may now
have or claim to have against any Released Person for or because of any matter
or thing done, omitted or suffered to be done or omitted by any of the Released
Persons prior to and including the date hereof and on account of or in any way
concerning, arising out of or founded upon the Financing Agreement or any other
Loan Document, whether presently known or unknown and of every nature and extent
whatsoever. This Section 13 shall survive the termination of the
Financing Agreement and payment in full of the Obligations
thereunder.
[Signature
Pages Follow]
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IN WITNESS WHEREOF, the parties
hereto have caused this Second Amendment to Amended and Restated Financing
Agreement to be duly executed by their respective duly authorized officers as of
the date first written above.
BORROWERS:
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FREDERICK’S
OF HOLLYWOOD GROUP INC.
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By:
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/s/
Xxxxxx Xxxxx
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Name: Xxxxxx
Xxxxx
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Title: Chief
Financial Officer
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FOH
HOLDINGS, INC.
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By:
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/s/
Xxxxxx Xxxxx
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Name: Xxxxxx
Xxxxx
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Title: Chief
Financial Officer
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FREDERICK’S
OF HOLLYWOOD, INC.
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By:
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/s/
Xxxxxx Xxxxx
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Name: Xxxxxx
Xxxxx
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Title: Chief
Financial Officer
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FREDERICK’S
OF HOLLYWOOD STORES, INC.
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By:
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/s/
Xxxxxx Xxxxx
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Name: Xxxxxx
Xxxxx
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Title: Chief
Financial Officer
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HOLLYWOOD
MAIL ORDER, LLC
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By:
FOH Holdings, Inc., its Manager
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By:
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/s/
Xxxxxx Xxxxx
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Name: Xxxxxx
Xxxxx
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Title: Chief
Financial
Officer
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AGENT
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XXXXX
FARGO RETAIL FINANCE II, LLC
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By:
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/s/ Xxxxxx Xxxx
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Name: Xxxxxx
Xxxx
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Title: Vice
President
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LENDER
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XXXXX
FARGO RETAIL FINANCE II, LLC
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By:
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/s/ Xxxxxx Xxxx
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Name: Xxxxxx
Xxxx
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Title: Vice
President
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