WESTREC CAPITAL PARTNERS, LLC 16633 Ventura Boulevard, Sixth Floor Encino, CA 91436 July 9, 2007
00000
Xxxxxxx Xxxxxxxxx, Xxxxx Xxxxx
Xxxxxx,
XX 00000
July
9,
2007
The
Fashion House Holdings, Inc.
The
Fashion House Inc.
Xxxx
Xxxxx
0000
Xxx
Xxxxxxx Xxxxxxxxx, Xxxxx 000
Xxx
Xxxxxxx, XX 00000
Re:
Amended
and Restated Credit Enhancement Agreement Dated December 20,
2006
Gentlemen:
Reference
is made to that certain Amended and Restated Credit Enhancement Agreement dated
as of December 20, 2006, as amended by that certain letter agreement dated
April 10, 2007 (the “Agreement”),
by
and
between, on the one hand, The Fashion House Holdings, Inc., a Colorado
corporation (“FHH”),
and
its wholly owned subsidiary, The Fashion House, Inc., a Delaware corporation
(“FHI”),
acting jointly and severally, and on the other hand, Westrec Capital Partners,
LLC, a Delaware limited liability company (“Westrec”),
and
its controlling member, Xxxxxxx X. Xxxxx, an individual (“Sachs”).
Capitalized terms used in this letter shall have the meanings ascribed to them
in the Agreement.
The
purpose of this Letter Agreement is to amend the Agreement in certain respects.
For all purposes under the Agreement and other Credit Enhancement Documents,
this Letter Agreement shall be deemed to be part of the Agreement and one of
the
Credit Enhancement Documents. In addition, the Agreement as amended by this
Letter Agreement is a “Credit Enhancement Agreement” under the FHH Security
Agreement and the FHI Security Agreement with the effect, among other things,
that the collateral secures (among other things) the obligations of Borrower
under Direct Loans (as defined below).
Borrower
has advised Guarantors that Borrower’s operating expenses continue to exceed its
cash flows from operations and that Borrower requires additional financing
to
continue operations. Guarantors have made, and may in the future be willing
to
make, direct loans to Borrower.
Borrower
acknowledges that Guarantors have no obligation under the Credit Enhancement
Documents to make direct loans to Borrower. However, the parties desire to
amend
the Agreement to provide for the terms and conditions of direct loans by
Guarantors, or either of them, to Borrower. Accordingly, the parties agree
as
follows:
1. Section
1.1 is amended by adding a new Section 1.1.7 to read as follows:
1.1.7 “Direct
Loan”
shall
mean a loan or advance of funds directly by a Guarantor to
Borrower.
2. Section
1.1.4 is amended in its entirely to read as follows:
1.1.4 “Loan”
shall
mean Direct Loans and any loan, letter of credit or any other type of financing
provided under the Loan Agreement, and “Loans”
shall
mean all such Direct Loans, loans, letters of credit or other
financing.
3. Section
1.1.5 is amended in its entirety to read as follows:
1.1.5 “Loan
Agreement”
shall
mean any agreement pursuant to which Borrower may obtain financing through
a
Direct Loan, or a loan, letter of credit or other form of financing, the
combination of which is guaranteed by Guarantors, and “Loan
Agreements”
shall
mean all such agreements.
4. A
new
Section 2.9 is added to read as follows:
2.9
Direct Loans.
Each
Guarantor may, but shall have no obligation to, make Direct Loans to Borrower.
Each Direct Loan shall be on the following terms and conditions: (a) shall
be
due and payable on demand; (b) shall bear interest at a rate equal to the
greater
of
(i)
twenty
percent (20%) per annum,
or (ii)
the sum of (A) the Wall
Street Journal
Prime
Rate (or if the Wall
Street Journal
stops
publishing the Prime Rate, another prime or reference rate selected by
Guarantors) plus (B) 11.75%
per annum;
and (c) at
the request of the lending Guarantor, shall be evidenced by a note in form
and
substance satisfactory to such Guarantor. Guarantors shall not be entitled
to
Loan Fees under Section 2.2 of the Agreement with respect to Direct
Loans.
5. A
new
Section 3.5 is added to read as follows:
3.5.
The
Direct Loans shall have been paid in full.
6. Borrower
and Xxxxx jointly and severally represent and warrant to Guarantors that as
of
the date hereof: (a) the representations and warranties of Borrower under
Section 5 of the Agreement are true and correct in all material respects as
if
made on the date hereof; (b) no Event of Default shall have occurred and be
continuing; and (c) neither FHH, FHI nor Xxxxx is in breach or default of its
or
his obligations under any of the Credit Enhancement Documents, which Documents
are in full force and effect.
7. As
further consideration for this agreement by Guarantors, FHH, FHI and Xxxxx
each
hereby agree to the Release set forth in Exhibit A to this Letter
Agreement.
8.
Borrower
acknowledges that the costs and expenses of Guarantors in the negotiation,
execution and delivery of this Letter Agreement are the obligation of Borrower
under Section 2.6 of the Agreement. Guarantors agree that such costs and
expenses shall not exceed $2,000.
9. Except
as
expressly modified under this Letter Agreement, the Agreement and the other
Credit Enhancement Documents remain in full force and effect.
Please
confirm your agreement to the foregoing by signing a copy of this Letter
Agreement and returning it to the undersigned.
|
Very
truly yours,
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| |
|
|
| By: | /s/ Xxxxxxx X. Xxxxx | |
|
Xxxxxxx
X. Xxxxx, Managing Member
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| |
|
|
| By: | /s/ Xxxxxxx X. Xxxxx | |
|
Xxxxxxx
X. Xxxxx
|
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Accepted
and agreed
as
of
July 9, 2007
| THE FASHION HOUSE HOLDINGS, INC. | |
|
By:
|
/s/ Xxxx Xxxxx |
|
Xxxx
Xxxxx,
Chief Executive Officer
|
|
| THE FASHION HOUSE, INC. | |
|
By:
|
/s/
Xxxx Xxxxx
|
|
Xxxx
Xxxxx, Chief Executive Officer
|
|
|
/s/
Xxxx Xxxxx
|
|
|
Xxxx
Xxxxx
|
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EXHIBIT
A
RELEASE
Pursuant
to that certain Letter Agreement to which this Release is attached as an
Exhibit, each of The Fashion House Holdings, Inc, The Fashion House, Inc. and
Xxxx Xxxxx (each, a “Releasor”)
agree
to the following in favor of Guarantors:
1. Acknowledgement
of No Claim.
Each
Releasor acknowledges and agrees that (a) it has no claim or cause of
action against Guarantors; (b) it has no offset or defense against any of
its obligations, indebtedness or contracts in favor of Guarantors; and
(c) Guarantors have heretofore properly performed and satisfied in a timely
manner all of their obligations to and contracts with Releasor.
2. Release
and Waiver.
Although Guarantors regard their conduct as proper and do not believe any
Releasor to have any claim, cause of action, offset or defense against
Guarantors, any parent, subsidiary or affiliate of the Guarantors, or any of
Guarantors’ past, present or future officers, directors, employees, attorneys or
any other representatives or agents (all of which parties besides Guarantors
are
herein collectively called the “Guarantors’
Agents”),
the
Guarantors wish (and each Releasor agrees) to eliminate any possibility that
any
conditions, acts, omissions, events, circumstances or matters which occurred
prior to the date of the Letter Agreement could impair or otherwise affect
any
rights, interests, contracts or remedies of Guarantors or otherwise subject
Guarantors or any of Guarantors’ Agents to any liability other than is expressly
stated in this Release. Therefore, each Releasor unconditionally releases and
waives on account of any condition, act, omission, event, contract, liability,
obligation, indebtedness, claim, cause of action, defense, circumstance or
matter of any kind whatsoever which existed, arose or occurred at any time
prior
to or concurrently with the date of the Letter Agreement (a) any and all
liabilities, obligations, or indebtedness, whether known or unknown, of any
kind
of Guarantors or any of the Guarantors’ Agents to Releasor, except the
obligations remaining to be performed by Guarantors on or after the date hereof
under the Credit Enhancement Documents; (b) any legal, equitable or other
obligations or duties, whether known or unknown, of Guarantors or any of
Guarantors’ Agents to Releasor; (c) any and all claims under any oral or
implied agreement, obligation or understanding with the Guarantors or any of
Guarantors’ Agents whether known or unknown, which is different from or in
addition to the express terms of the Credit Enhancement Documents; and
(d) any and all claims, causes of action, rights or defenses of any kind
whatsoever (if any), whether known, or unknown, which Releasor might otherwise
have against the Guarantors or any of Guarantors’ Agents.
3. Acknowledgements.
Each
Releasor hereby acknowledges and agrees that after the execution and delivery
of
the Letter Agreement, the only claims or causes of action which it could
possibly have against Guarantors or any of Guarantors’ Agents would be those
arising after the date of the Letter Agreement or a written contract hereafter
executed by Guarantors in favor of Releasor or those arising from conduct
occurring after the execution and delivery of the Letter Agreement. Each
Releasor agrees that it shall not institute or prosecute (or, except to the
extent required by law, in any way aid, assist, or cooperate with the
institution or prosecution of) any action, suit, hearing or other proceeding
of
any kind, nature or character at law or in equity against Guarantors, or any
of
Guarantors’ Agents in order to collect, enforce, declare, assert, establish or
otherwise raise any defense, claim, cause of action, contract, liability,
indebtedness or obligation which is within the scope of those released in this
Release or which arises out of any fact, contract, condition, claim, cause
of
action, indebtedness, liability, obligation, event, action, omission,
circumstance, or other matter or reason of any kind which is the basis for
any
such defense, claim, cause of action, liability, indebtedness or obligation
which is released hereunder. This Release shall constitute a complete defense
to
any claim, cause of action, defense, contract, liability, indebtedness or
obligation released hereunder.
4. No
Admission.
Nothing
in this Release (or any Credit Enhancement Document) shall be construed as
(or
shall be admissible in any legal action or proceeding as) any admission by
Guarantors or any of Guarantors’ Agents that any defense, indebtedness,
obligation, liability, contract, claim or cause of action exists which is within
the scope of those released within this Release because Guarantors deny that
any
such matters exist and regard this Release as unnecessary except to confirm
their understanding of the position of the parties.
5. California
Civil Code § 1542.
Each
Releasor agrees that it understands the meaning and effect of Section 1542
of
the California Civil Code, which provides:
“A
general release does not extend to claims which the creditor does not know
or
suspect to exist in his favor at the time of executing the release, which if
known by him must have materially affected this settlement with the
debtor.”
