EXHIBIT 99.1
OPTION AGREEMENT
THIS AGREEMENT made as of this 30th day of January, 2004 between
▇▇▇▇ ▇▇▇▇▇▇ ("▇▇▇▇▇▇"), IZJD CORP., PACIFIC INVESTMENT GROUP, INC. and ▇▇▇▇▇▇▇
▇▇▇▇▇▇ (collectively, the "Stockholders"), all with an address at ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
or their respective assignees or designees, with an address at ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ (collectively, "Purchasers").
WHEREAS, each of the Stockholders solely, or jointly with
another of the Stockholders, directly owns shares of stock of E Com Ventures,
Inc., a Florida corporation (the "Company"), totaling, in the aggregate, at
least 277,204 shares of the Company, and Lekach has options to acquire at least
an additional 318,750 shares of stock of the Company and, subject to change of
control provisions in Lekach's Employment Agreement with the Company dated
February 1, 2002 (the "Employment Agreement"), another 125,000 options (the
"Lekach Options") all as set forth on Exhibit A hereto; and
WHEREAS, Stockholders desire to grant to Purchasers an option to
acquire shares of stock of the Company owned by Stockholders or for which any of
the Stockholders have options or other rights to acquire.
NOW, THEREFORE, for good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereto hereby
agree as follows:
1. Grant of Option. Each Stockholder hereby grants to Purchasers an
option (the "Option") to acquire all of the shares of capital stock of the
Company that are listed on the schedule set forth on Exhibit A hereto and made a
part hereof (the "Schedule") that are owned by any and all of the Stockholders,
beneficially or otherwise, or which Stockholders may now or at a later date have
the right to acquire, pursuant to any options, warrants, convertible securities
or other rights to acquire capital stock of the Company (collectively, the
"Securities").
2. Exercise and Closing of Option. (a) Exercise. Purchasers shall have
the right to exercise the Option in one or more installments and purchase any or
all of the Securities from and after the dates (each referred to individually as
a "Closing Date") and in the quantities set forth in the Schedule, for a price
of $12.70 per share (the "Share Price") by written notice ("Notice") to Lekach
no fewer than ten (10) business days prior to the applicable Closing Date,
subject to delay by Purchasers or Lekach as provided below. The Notice with
respect to the first installment shall be deemed delivered upon the execution
hereof. Each Notice shall specify the allocation among the Purchasers or their
designees of Securities to be acquired (and shall be accompanied by a
certificate of any designee certifying that the representation and warranties in
subsections 5(b) and 5(c) hereof are true and correct as to such designee).
(b) Stockholders' Deliveries. On each Closing Date for the
Securities for which Purchasers have given a Notice, Stockholders shall deliver
to Purchasers: certificates for all of the Securities to be acquired by the
Purchasers as of such Closing Date, in the applicable denominations and
registered in the name of the applicable Purchaser or his designee. Each such
certificate shall bear a legend substantially to the following effect:
The shares of stock represented by this Certificate have been
acquired, for investment only, directly or indirectly from the
issuer or an affiliate of the issuer without being registered
under the Securities Act of 1933, as amended ("Act"), or the
securities laws of any state or other jurisdiction, and are
restricted securities as that term is defined under Rule 144
promulgated under the Act. These shares may not be sold,
transferred, pledged, hypothecated or otherwise disposed of (a
"Transfer") unless they are registered under such Act and the
securities laws of any applicable states and other jurisdictions
or unless such Transfer is exempt from such registration.
(c) Purchasers' Deliveries. (i) On each Closing Date for the
Securities for which Purchasers have given a Notice, Purchasers shall deliver to
Lekach (or to such of the Stockholders as Lekach shall designate by prior
written notice to Purchasers) on behalf of the Stockholders, by wire transfer of
immediately available funds, an amount equal to the product of the Share Price
and the number of shares to be sold by the Stockholder to Purchasers on such
Closing Date (the "Option Exercise Payment"), less any advances made pursuant to
subsection (g) below.
(ii) On the effective date of the Escrow Agreement,
Purchasers shall deposit $5,000,000 with the Escrow Agent to fund a loan
("Loan") to Perfumania, Inc., pursuant to the terms of the Note and Security
Agreement annexed hereto as Exhibit B.
(d) Offset of Demand Note. Lekach acknowledges and agrees that
he is presently indebted to ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ in the amount of $1,000,000 plus
interest as set forth in that certain Demand Note dated December 8, 2003 made by
Lekach (the "Note") and guaranteed by ▇▇▇▇▇▇▇ ▇▇▇▇▇▇. Notwithstanding
Subparagraph 2(c) above and any other provisions of this Agreement or the Note,
Purchasers shall have the right to pay any applicable portion of the Option
Exercise Payment for the Securities that are subject to the Option installment
that becomes exercisable in April 2004 by offset against all or the maximum
applicable portion of the amount then owed under the Note. Upon any such offset,
the balance if any then due under the Note shall be adjusted accordingly. Prior
to the earlier of (i) the Closing Date for the Option installment that becomes
exercisable in April 2004; (ii) a material default hereunder by any Stockholder;
(iii) September 15, 2004; or (iv) the Expiry Date, as defined below, or earlier
termination of this Option Agreement pursuant to its terms (any of the
foregoing, a "Demand Date"), Purchasers and their permitted assigns shall make
no payment, conversion or other similar demand relating to the Note, and the
interest rate applicable under the Note shall remain at five (5) percent per
annum. After the Demand Date Purchasers and their permitted assigns may make any
applicable payment, conversion or other similar demand permitted pursuant to the
Note, provided, however, that any conversion demand shall only be valid with
respect to the shares of capital stock of the Company, if any, that are held by
Lekach at the time of such demand or that he can promptly acquire pursuant to
options that are then immediately exercisable and as to which shares are then
reserved, registered and duly authorized for issuance by the Company. Any shares
delivered pursuant to a conversion pursuant to the Note shall cease to be
subject to the Option and the share amounts, if any, then subject to the Option
shall be reduced thereby.
(e) Delay of Closing. By written notice given by Purchasers to
Lekach, or by Lekach to Purchasers, on or before the business day preceding a
Closing Date (other than in connection with the Option installment first
exercisable in January 2004), Purchasers or Lekach may delay the closing of the
acquisition of Securities pursuant to an exercise of the Option for not more
than thirty (30) days to a later date which shall be specified in such notice
and such later date shall be deemed the "Closing Date" for purposes of that
transaction.
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(f) Expiry of Option. The Option shall expire and all right,
claim or interest of Purchasers or their designees shall terminate as to any and
all applicable Securities which have not been purchased on or before the earlier
of December 31, 2005 or demand for payment of the Note (other than a demand
following a material default by any Stockholder hereunder) (the "Expiry Date");
provided that, if Stockholders shall fail to transfer to Purchasers any
Securities with respect to which the Option shall have been exercised, by reason
of a default of the Stockholders, the Expiry Date shall be extended until
Stockholders shall deliver such Securities.
(g) Advances.
(i) ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Company, Inc. In connection with
the exercise by Purchasers of the Option installment that becomes
exercisable in January 2004, Stockholders may request from Purchasers an
advance of a portion of the applicable Option Exercise Payment to repay
indebtedness of Stockholders due to ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Company, Inc. (the
"Pledgee") secured by Securities to be delivered in connection with such
exercise, by delivery of a written advance request to Purchasers within
two (2) business days of receipt by Stockholders of the applicable
Notice; provided that:
(A) Stockholders shall deliver to Purchasers a
pay-off letter executed by the Pledgee in form and substance to
the reasonable satisfaction of Purchasers in all material
respects;
(B) Any such advance shall be limited to the
amount due to the Pledgee as set forth in such pay-off letter
and shall be paid directly to the Pledgee; and
(C) Such pay-off letter shall include an
acknowledgment and undertaking by the Pledgee that it has been
instructed to issue such pledged Securities to Stockholders.
Upon receipt of the amount specified in such pay-off letter and
written direction by Lekach, which direction Lekach hereby
agrees to give contemporaneously with the payment to Escrow
Agent, as defined below, of the balance (net of any advances
made under Sections 2(g)(i) and 2(g) (ii) hereunder) of the
Option Exercise Payment for such Option installment. Lekach will
instruct the Company's transfer agent to transfer such
Securities into the name of Purchasers as provided in the
applicable Notice and to deliver certificates evidencing such
Securities in the name of Purchasers to ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, LLP.
(D) Such opinion or opinions of the Company's
counsel shall be rendered to the Pledgee, the Company and/or the
Company's transfer agent as shall be necessary to effect the
transfer of such Securities to Purchasers contemplated by the
applicable Notice.
(ii) Exercise Price. In the event Lekach intends to
exercise any Lekach Options to acquire Securities to be delivered in
connection with the exercise of any Option installment, Lekach may
request from Purchasers an advance of a portion of the applicable Option
Exercise Payment to fund the exercise price of such Lekach Options and
any applicable income tax withholdings by delivery of a written advance
request to Purchasers within two (2) business days of receipt by
Stockholders of the applicable Notice; provided that:
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(A) Lekach shall deliver to Purchasers (I)
executed copies of all instruments required to exercise such
Lekach Options, (II) executed stock powers endorsed to the
Nussdorfs as to the Securities issued upon exercise of such
Lekach Options, and (III) any other documents relating to such
Lekach Options and the exercise thereof and the transfer of such
Securities to Purchasers, as Purchasers shall reasonably
request;
(B) Any such advance shall be limited to the
amount of the exercise price of the Lekach Options plus
applicable withholding and shall be paid directly to the
Company, and
(C) Such opinion or opinions of the Company's
counsel shall be rendered to the Company and/or the Company's
transfer agent as shall be necessary to effect the transfer of
such Securities to Purchasers contemplated by the applicable
Notice.
(h) Upon execution of this Agreement, that portion of the
$5,499,989 Option Exercise Payment to be paid by Purchasers for the 433,070
shares of the capital stock of the Company that will be the subject of
Purchasers' exercise of the Option simultaneously with the date of execution of
this Agreement, and that is not to be advanced to Pledgee or paid to the Company
pursuant to Sections 2(g) (i) and 2(g) (ii) above, shall be delivered to ▇▇▇▇▇▇▇
& ▇▇▇▇▇▇, LLP, as escrow agent ("Escrow Agent"), to be deposited and held in
escrow in accordance with the terms and conditions of that certain Escrow
Agreement of even date herewith among Escrow Agent, Stockholders and Purchasers.
3. Covenants and Acknowledgements.
(a) Exercise of Options for, and Recovery of, Pledged Securities.
From time to time, prior to the Expiry Date, each of the Stockholders shall use
commercially reasonable efforts to:
(i) exercise any and all of such options, warrants,
convertible securities and other rights to acquire the Securities then
exercisable, including without limitation the Lekach Options, as shall
be necessary to ensure that each of the Stockholders beneficially owns
sufficient Securities to enable the Stockholders to deliver all
Securities that Purchasers then have the right to acquire pursuant to
the Option.
(ii) assist Purchasers' efforts, if any, to cause Securities
that Purchasers shall acquire pursuant to the Option to be registered
(at Purchasers' expense) under the Act and/or the securities laws of
any applicable states and other jurisdictions.
(b) No Sale or Transfer of Securities. Except as provided
herein, no Stockholder shall sell, transfer or assign or grant any option,
warrant or other right to acquire, all or any portion of its interest in the
Securities.
(c) Exercise, Approval and Registration Conditions. Lekach
agrees that he shall not exercise any of the Lekach Options to acquire 125,000
shares of the Company's common stock granted to him pursuant to Section 7.p. of
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Lekach's Employment Agreement with the Company dated February 1, 2002 (the
"Employment Agreement") as the result of the change of control referred to above
(the "Doubled Options") until the earlier to occur of: (i) the receipt of the
requisite approval of the stockholders of the Company, as may be required by
NASDAQ listing requirements, of the amendment of the 2000 Stock Option Plan of
the Company (the "Plan"), or (ii) April 23, 2004. Purchasers agree that if
Lekach is unable to exercise the Doubled Options on or after April 23, 2004, he
shall not be in breach of any provision of the Agreement and Purchasers agree
not to assert or support any position or view inconsistent with any claim, suit
or proceeding by Lekach relating to or arising from his inability to exercise
the Doubled Options. Purchasers further agree that notwithstanding any other
provision hereof Lekach shall have no obligation to exercise any stock options
or to sell any Securities pursuant to the Option unless at the time such
Securities are to be sold pursuant to the applicable Notice a registration
statement on Form S-8 is then currently effective with respect to the applicable
Securities.
(d) Further Assurances. Each party hereto agrees to take all
actions reasonably requested by any other party hereto to effect the
transactions contemplated hereby.
4. Representations and Warranties of Stockholders. The following
representations and warranties made by Stockholders shall be true and correct in
all material respects when made and as of each Closing Date:
(a) As of the date of this Agreement, each Stockholder solely,
or jointly with another of the Stockholders, owns shares of stock of the Company
totaling, in the aggregate, at least 277,204 shares, and, after giving effect to
the execution hereof, Lekach has options to acquire at least an additional
318,750 shares of stock of the Company which are currently exercisable and an
additional 125,000 shares subject to the change of control provisions in the
Employment Agreement, and are or shall be the sole owners of the shares of the
Securities set forth in Exhibit A as of the dates indicated; provided, however,
that the Stockholders have assumed for purposes of this paragraph (but make no
representation or warranty) that the number of Lekach Options shall increase by
125,000 (to a total of 443,750) as the result of the terms and provisions of the
Employment Agreement and the execution hereof.
(b) Neither the Company nor the Stockholders has issued or
granted to any person (other than Purchasers) any proxy or right to vote any of
the Securities or any option, warrant, convertible security or other right to
acquire any of the Securities.
(c) Except as otherwise provided herein there are and will be no
contractual restrictions on the transfer of the Securities to Purchasers upon
each exercise of an installment of the Option and, upon transfer to Purchasers,
the Securities will be free of any restrictions other than as provided for under
Subparagraph 2(b) above.
(d) All of the Securities are, or will be, fully paid and
nonassessable.
(e) The execution and delivery of this Agreement and the
performance of Stockholders' obligations hereunder will not (i) result in the
violation of any law, statute, rule, regulation or ordinance, order, judgment,
injunction or decree binding on it, nor (ii) result in or cause a conflict with,
breach of, default under or permit the termination of (or in the creation of an
encumbrance) under any document, instrument or agreement by which Stockholders
are bound.
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5. Representations and Warranties of Purchasers. The following
representations and warranties made by Purchasers shall be true and correct in
all material respects when made and as of each Closing Date:
(a) The execution and delivery of this Agreement and the performance of
Purchasers' obligations hereunder will not (i) result in the violation of any
law, statute, rule, regulation, or ordinance, order, judgment, injunction or
decree binding on it, nor (ii) result in or cause a conflict with, breach of,
default under or permit the termination of (or the creation of an encumbrance
under), any document, instrument or agreement by which either Purchaser is
bound.
(b) Purchasers are purchasing the Securities for their own accounts,
for investment purposes and not with a present view to any distribution thereof
in violation of any applicable securities laws. It is understood that the
disposition of each Purchaser's property shall at all times be within such
Purchaser's control. If Purchasers should in the future decide to dispose of any
of the Securities, it is understood that they may do so but only in compliance
with the Act and applicable securities laws. Purchasers are as of the date
hereof and will be as of the Closing Date "accredited investors" as defined in
Rule 501(a) under the Act.
(c) Purchasers are experienced in evaluating and investing in companies
such as the Company, are familiar with the risks associated with the business
and operations of such companies, have such knowledge and experience in
financial and business matters as to be capable of evaluating the merits and
risks of their investment, and have the ability to bear the economic risks of
their investment. Purchasers have had, during the course of the transaction and
prior to their acquisition of the Securities, a reasonable opportunity to obtain
and receive information concerning the Company and its assets, business and
operations.
6. Proxy. Each of the Stockholders hereby irrevocably appoints each of
the Purchasers as his, her or its proxy with respect to the Securities with full
power and authority to attend all shareholder meetings and exercise all rights
of a voting shareholder of the Company from and after the first Closing Date,
including, without limitation, the payment in full on or before such date of the
Option Exercise Payment for the shares subject to the Option installment that
becomes exercisable in January 2004. Each Stockholder and each such owner will
not revoke or withdraw the appointment of Purchasers as his, her or its proxies
without the written consent of Purchasers. Stockholders hereby acknowledge that
said proxy is irrevocable and coupled with an interest. The appointment and
proxy set forth in this Section 6 shall expire and be of no further force or
effect on and after April 15, 2004 in the event the sale of the Securities that
are subject to the Option installment that becomes exercisable in March 2004 has
not been consummated in full, other than as a result of a default by any
Stockholder hereunder, the inability of any Stockholder to deliver certificates
for such Securities registered in the name of the applicable Purchaser or his
designee or the failure of a Stockholder to make any other delivery pursuant to
Section 2(b) with respect to the sale of such Securities.
7. Survival of Covenants, Agreements, Representations and Warranties.
All covenants, agreements, representations and warranties made herein or in any
other document referred to herein or delivered to any party pursuant hereto
shall be deemed to have been relied on by each such party, notwithstanding any
investigation made by such party or on his behalf.
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8. No Brokers or Finders. No Stockholders or Purchaser has contracted
for or otherwise arranged for the services of any person who has, or as a result
of the transactions contemplated herein will have, any right or valid claim
against the Company, Stockholders or Purchasers for any commission, finders fee
or other similar payment.
9. Miscellaneous.
(a) Notices. Any notice or other communication by any party to
the other hereunder shall be made or given by personal delivery, facsimile,
telex, first class mail or overnight delivery service to the other party's
address set forth above and shall be deemed given upon the earlier of actual
receipt thereof or deposit thereof in the mail or with an overnight delivery
service.
(b) Governing Law. This agreement shall be governed by and
construed under the laws of the State of Florida.
(c) Consent to Jurisdiction. Each party hereto hereby consents
to the jurisdiction of the Courts of the State of Florida and the United States
District Court for the Southern District of Florida in any action brought in
connection herewith.
(d) Liability. The obligations and liabilities hereunder of each
of the persons comprising the Stockholders and Purchasers, respectively, are and
shall be joint and several.
(e) Counterparts. This Agreement may be executed in multiple
counterparts each of which shall constitute an original hereof.
IN WITNESS WHEREOF, the undersigned have executed this Agreement
as of the date first above written.
/s/ ▇▇▇▇ ▇▇▇▇▇▇
-----------------------------------
▇▇▇▇ ▇▇▇▇▇▇
IZJD CORP.
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇
Title: CEO
PACIFIC INVESTMENT GROUP, INC.
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇
Title: CEO
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/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
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▇▇▇▇▇▇▇ ▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
-----------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
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▇▇▇▇▇ ▇▇▇▇▇▇▇▇
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Exhibit A
1. Ownership of Securities
a. Ownership of Shares
▇▇▇▇ ▇▇▇▇▇▇ 115,750
1ZJD Corp. 131,004
Pacific Investment Group, Inc. 28,450
Ilia and ▇▇▇▇▇▇ ▇▇▇▇▇▇ 2,000
Total 277,204
b. Ownership of Options
▇▇▇▇ ▇▇▇▇▇▇ 318,750/1/
/1/ As the result of the terms and provisions of the Employment Agreement,
upon the execution hereof the parties anticipate that the number of
Lekach Options shall increase by 125,000 to 443,750.
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Exhibit A (cont'd)
2. Dates of Option Exercise and Number of Shares of Stock to be Purchased by
Purchasers
------------------ --------------------- -------------------- ------------------
Date Total # of Shares Shares Owned Lekach Options
------------------ --------------------- -------------------- ------------------
1/30/04 433,070 277,204 155,866
------------------ --------------------- -------------------- ------------------
3/15/04 162,884 - 162,884
------------------ --------------------- -------------------- ------------------
4/23/04 125,000 - 125,000
------------------ --------------------- -------------------- ------------------
Total 720,954 277,204 443,750
------------------ --------------------- -------------------- ------------------
------------------ --------------------- -------------------- ------------------
Price $12.70/share
Notes:
1. Numbers shown with respect to Options Held assume doubling of certain options
pursuant to the Employment Agreement upon giving effect to a change of control
of the Company.
2. The Closing Date with respect to the Securities that are subject to the
Option installment that becomes exercisable in April 2004 shall be delayed to
the extent the provisions of Section 3(c) hereof so require.
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Exhibit B
PERFUMANIA, INC.
SUBORDINATED SECURED DEMAND NOTE
$5,000,000 ________, 2004
FOR VALUE RECEIVED, Perfumania, Inc., a Florida corporation (the
"Company"), hereby unconditionally promises to pay ON DEMAND to the order of
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ (collectively, the "Holder"), in immediately
available funds, the principal amount of Five Million Dollars ($5,000,000), and
to pay interest on the unpaid principal amount hereof at the rate set forth in
Section 4. All amounts owed hereunder shall be paid in lawful money of the
United States of America.
This Note is subject to the following terms and conditions:
1. Security. This Note and the amounts payable hereunder, including
principal and accrued interest, is secured by that Security Agreement between
the Holder and the Company dated as of the date hereof ("Security Agreement").
2. Subordination. This Note and the amounts payable hereunder,
including principal and accrued interest shall be subordinate and junior to the
Senior Bank Loans. For the purpose of this Note, "Senior Bank Loans" shall mean
any and all obligations, liabilities and indebtedness of the Company to GMAC
Commercial Credit LLC (the "Senior Lender"), all obligations, liabilities and
indebtedness in connection with the refinancing of the indebtedness to the
Senior Lender.
3. Prepayment. The outstanding principal balance of this Note may be
prepaid by the Company at any time and from time to time, without premium or
penalty of any kind or nature whatsoever.
4. Payments of Interest. The Company shall pay or cause to be paid to
Holder interest on the unpaid principal amount hereof from time to time
outstanding at a rate per annum equal to the then current Prime Rate plus one
percent quarterly in arrears on the last day of each calendar quarter commencing
on March 31, 2004 until this Note shall be paid in full. As used herein, the
term "Prime Rate" shall mean for each calendar month the prime rate listed in
the Wall Street Journal in the "Money Rates" column published on the date which
is one Business Day (as defined below) prior to the beginning of such calendar
month for such calendar month. If the Prime Rate cannot be determined in
accordance with the preceding sentence, then the Company will notify Holder and
instead determine the Prime Rate by using the rates offered to prime banks by
Citibank, N.A. (but in all other respects in accordance with the preceding
sentence). Interest shall be calculated on the basis a 360 day year based on the
actual number of days elapsed.
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5. Payments. Any payment hereunder which is stated to be due on a day
which is not a Business Day shall be made on the next succeeding Business Day
(and interest shall accrue for such extension of time). "Business Day" shall
mean any day other than a Saturday or Sunday or a day on which banks in New York
are authorized or required by law to be closed.
6. Default. The occurrence of any one or more of the following events
shall constitute an event of default (each an "Event of Default") hereunder:
(i) if the Company becomes insolvent or makes an assignment for the
benefit of creditors;
(ii) if there shall be filed by or against the Company any petition for
any relief under the bankruptcy laws of the United States now or hereafter in
effect or any proceeding shall be commenced with respect to the Company under
any insolvency, readjustment of debt, reorganization, dissolution, liquidation
or similar law or statute of any jurisdiction now or hereafter in effect
(whether at law or in equity), provided that in the case of any involuntary
filing or the commencement of any involuntary proceeding against the Company
such proceeding or petition shall have continued undismissed and unvacated for
30 days; or
(iii) if any petition or application to any court or tribunal, at law
or in equity, shall be filed by or against the Company for the appointment of
any receiver or Company for the Company or any material part of the property of
the Company, provided that in the case of any involuntary filing against the
Company, such proceeding or appointment shall have continued undismissed and
unvacated for 30 days; or
(iv) if the Company shall fail for any reason to make any payment of
principal and/or interest hereunder within 10 business days after such payment
is due; or
(v) if the Company shall fail for any reason to make any payment of
principal and interest under any Senior Bank Loan, within 30 days after such
payment is due.
Remedies Upon Default; Default Interest.
(i) If any Event of Default shall occur for any reason, then and in any
such event, in addition to all rights and remedies of the Holder under
applicable law or otherwise, all such rights and remedies being cumulative, not
exclusive and enforceable alternatively, successively and concurrently, the
Holder may, at its option, declare any or all amounts owing under this Note to
be due and payable, whereupon the then unpaid balance hereof, together with all
accrued and unpaid interest thereon, shall forthwith become due and payable.
(ii) Upon the occurrence of an Event of Default, or upon the maturity
hereof (by demand, acceleration or otherwise), the principal and any accrued but
unpaid interest owing on said principal sum (the "Obligations") shall bear
interest from the date of occurrence of such Event of Default or such maturity
until collection (including any period of time occurring after judgment), at the
"Default Rate," being the lower of (A) the highest rate allowed by applicable
law, or (B) a simple interest rate per annum equal to 3% above the Prime Rate in
effect on the date of maturity (acceleration or otherwise). All default interest
charges (X) shall be in addition to, and not in lieu of, any other remedy
available to Holder; (Y) shall be added to the Obligations and secured by the
Security Agreement, and (Z) shall not be construed as an agreement or privilege
to extend the date of the payment of the Obligations, nor as a waiver of any
other right or remedy accruing to Holder by reason of the occurrence of any
Event of Default.
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7. Lost, Stolen, Mutilated or Destroyed Note. If this Note shall be
mutilated, lost, stolen, or destroyed, the Company shall execute and deliver, in
exchange and substitution for and upon cancellation of a mutilated Note, or in
lieu of or in substitution for a lost, stolen, or destroyed Note, a new Note for
the principal amount of this Note so mutilated, lost, stolen, or destroyed but
only upon receipt of evidence (which may consist of a signed affidavit of the
Holder) of such loss, theft, or destruction of such Note, and of the ownership
thereof, and indemnity all reasonably satisfactory to the Company.
8. Other Matters
(a) Sale of Note; Assignment. This Note is negotiable, and this Note
may be sold, assigned, transferred or conveyed, by pledge or otherwise, without
the prior written consent of the Company.
(b) Modification; Waiver. This Note may be amended, modified,
superseded, canceled, renewed or extended, and the terms hereof may be waived,
only by a written instrument signed by the Company and the Holder. Any waiver by
the Company or the Holder of a breach of any provision of this Note shall not
operate as or be construed to be a waiver of any other breach of such provision
or of any breach of any other provision of this Note. The failure of the Company
or the Holder to insist upon strict adherence to any term of this Note on one or
more occasions shall not be considered a waiver or deprive that party of the
right thereafter to insist upon strict adherence to that term or any other term
of this Note. No delay on the part of any party in exercising any right, power
or privilege hereunder shall operate as a waiver thereof or hereof, nor shall
any waiver on the part of any party of any right, power or privilege hereunder
preclude any other or further exercise hereof or the exercise of any other
right, power or privilege hereunder. Any waiver must be in writing. The rights
and remedies provided herein are cumulative and are not exclusive of any rights
or remedies which any party may otherwise have at law or in equity.
(c) Notices. Any notice required or permitted to be given hereunder
("Notices") shall be in writing and delivered personally or mailed by registered
or certified mail, postage prepaid and return receipt requested, or by fax, as
follows: (i) if to the Company: ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇, Attn: A ▇▇▇▇ ▇▇▇▇▇, fax no. (▇▇▇) ▇▇▇-▇▇▇▇, with a copy to: Akerman
Senterfitt, ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇.
Attn:▇▇▇▇ ▇▇▇▇▇▇▇], fax no. [▇▇▇ ▇▇▇ ▇▇▇▇ ]; and (ii) if to the Holder: ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attn: ▇▇▇▇▇▇▇ ▇▇▇▇, fax no.
▇▇▇-▇▇▇-▇▇▇▇, with copy to ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, LLP, ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇▇▇ Attn: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, fax no. (▇▇▇) ▇▇▇-▇▇▇▇, or such
other address as the either party hereto may designate by Notice to the other.
(d) Severability. If any provision of this Note is invalid, illegal, or
unenforceable, the balance of this Note shall remain in effect, and if any
provision is inapplicable to any person or circumstance, it shall nevertheless
remain applicable to all other persons and circumstances. The rate of interest
on this Note is subject to any limitations imposed by applicable usury laws.
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(e) Headings. The headings in this Note are solely for convenience of
reference and shall be given no effect in the construction or interpretation of
this Note.
(f) Governing Law. This Note shall be governed by and construed in all
respects under the laws of the State of Florida, without reference to its
conflict of laws, rules or principles.
(g) Saving Clause. This Note is subject to the express condition that
at no time shall the Company be obligated or required to pay interest on the
principal balance due hereunder at a rate which could subject Holder to either
civil or criminal liability as a result of being in excess of the maximum
interest rate which the Company is permitted by law to contract or agree to pay.
If by the terms of this Note, the Company is at any time required or obligated
to pay interest on the principal balance due hereunder, at a rate in excess of
such maximum rate, the interest rate shall be deemed to be immediately reduced
to such maximum rate and all previous payments in excess of the maximum rate
shall be deemed to have been payments in reduction of principal and not on
account of the interest due hereunder notwithstanding the other provisions
hereof.
IN WITNESS WHEREOF, the Company has caused this Note to be executed on
its behalf by the undersigned officer thereunto duly authorized.
PERFUMANIA, INC.
By:
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Name: A. ▇▇▇▇ ▇▇▇▇▇
Title: Chief Financial Officer
14
SECURITY AGREEMENT
SECURITY AGREEMENT (the "Agreement") made and entered into as of
_______________, 2004, by and between Perfumania, Inc., a Florida corporation
("Debtor"), and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ (collectively "Secured
Party").
R E C I T A L S
A. Debtor has executed a Subordinated Secured Demand Note of even
date herewith, payable to the order of the Secured Party.
B. As a condition precedent to Secured Party's acceptance of the
Note, Grantor grants the security interests and undertakes the
obligations contemplated by this Agreement.
NOW, THEREFORE, in consideration of the premises and to induce Secured
Party to accept the Note in partial satisfaction of certain obligations owing by
Debtor to Secured Party, and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, Grantor hereby agrees
with Secured Party as follows:
9. Grant of Security Interest. As security for the payment and
performance when due of the Obligations, Debtor does hereby assign and transfer
unto Secured Party, and does hereby grant to Secured Party a continuing security
interest in, all of Debtor's right, title and interest in, to and under all of
the following, whether now existing or hereafter acquired: all of Debtor's
assets and properties, whether tangible or intangible, including without
limitation, Debtor's Accounts, Inventory, Goods, General Intangibles, Chattel
Paper, Documents and Instruments, and all Proceeds and products of any and all
of the foregoing (collectively, the "Collateral").
10. Representations, Warranties and Covenants of Debtor. Debtor
represents, warrants and covenants as follows:
(a) No Liens. Debtor is, and as to Collateral acquired by it after the
date hereof will be, the owner of such Collateral free from any Liens, other
than Permitted Liens, and Debtor shall defend the Collateral against all claims
and demands of all persons at any time claiming the same of any interest therein
adverse to Secured Party. Debtor will, at its own expense, take such action as
may be necessary duly to discharge any such Lien if the same shall arise at any
time.
(b) Chief Executive Office; Records. The chief executive office of
Debtor is located at ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇. The originals
or copies of all documents evidencing the Collateral and the account and records
of Debtor relating thereto are, and will continue to be, maintained at, and
controlled and directed from, such chief executive office or at such new
locations as Debtor may establish in accordance with this Section 2(b). Debtor
shall not establish a new location for such chief executive office until it has
given to Secured Party not less than thirty (30) days' prior written notice of
its intention so to do, describing such new location and providing such other
information in connection therewith as Secured Party may reasonably request.
15
(c) Further Actions. Upon written request from Secured Party, Debtor
will provide Secured Party with copies of such lists of and reports with respect
to the Collateral as Debtor furnishes from time to time to the holder(s) of any
Senior Lien. In addition, Debtor will, upon the request of Secured Party,
execute and/or deliver to Secured Party from time to time such instruments, and
take such further steps relating to the Collateral and the property or rights
covered by the security interest hereby granted, which Secured Party may
reasonable request to establish and maintain a valid, enforceable security
interest in the Collateral as provided herein or to perfect, preserve or protect
its security interest in the Collateral, all in accordance with the Uniform
Commercial Code or any other relevant law. Debtor authorizes Secured Party to
file any such financing statements without the signature of Debtor.
11. Remedies Upon Occurrence of Event of Default.
(a) Remedies: Obtaining the Collateral Upon Default. Subject to the
rights of the holder(s) of any Senior Lien, Debtor agrees that, if any Event of
Default shall have occurred and be continuing, then and in every such case,
subject to any mandatory requirements of applicable law then in effect, Secured
Party, in addition to any rights now or hereafter existing under applicable law,
shall have all rights as a secured creditor under the Uniform Commercial Code
and may: (i) personally, or by agents or attorneys, take possession of the
Collateral or any part thereof, from Debtor or any other person who then has
possession of any part thereof with or without notice or process of law, and for
that purpose may enter upon Debtor's premises where any of the Collateral is
located and remove the same; and (ii) instruct the obligor or obligors on any
instrument or other obligation constituting the Collateral to make any payment
required by the terms of such instrument directly to Secured Party; and (iii)
sell, assign or otherwise liquidate, or direct Debtor to sell, assign or
otherwise liquidate, any or all of the Collateral or any part thereof, and take
possession of the proceeds of any such sale or liquidation.
(b) Remedies; Disposition of Collateral. Subject to the rights of the
holder(s) of any Senior Lien, any Collateral repossessed by Secured Party
pursuant to Section 3(a), and any other Collateral whether or not so repossessed
by Secured Party, may be sold, assigned, leased or otherwise disposed of under
one or more contracts or as an entirety, and without the necessity of gathering
at the place of sale the property to be sold, and in general in such manner, at
such time or times, at such place or places and on such terms as Secured Party
may, in compliance with any mandatory requirements of applicable law, determine
to be commercially reasonable. Any such disposition which shall be a private
sale or other private proceeding permitted by such requirements shall be made
upon not less than 10 days' written notice to Debtor specifying the time at
which such disposition is to be made. Any such disposition which shall be a
public sale permitted by such requirements shall be made upon not less than 10
days' written notice to Debtor specifying the time and place of such sale and,
in the absence of applicable requirements of law, shall be by public auction
after publication of notice of such action not less than 10 days prior thereto
in accordance with applicable law.
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(c) Application of Proceeds. Subject to the rights of the holder(s) of
any Senior Lien, the proceeds of any Collateral disposed of by Secured Party
pursuant to Section 3(b) shall be applied as follows: first, to the payment of
any and all expenses and fees (including reasonable attorneys' fees) incurred by
Secured Party in obtaining, taking possession of, removing, insuring, repairing,
storing and disposing of Collateral; next, to the payment of the Obligations in
the following order of priority: (i) all interest accrued and unpaid; (ii) the
principal amount owing on the Note; and (iii) all other Obligations then owing;
and any surplus then remaining shall be paid to Debtor, subject, however, to the
rights of the holder of any then existing Lien of which Secured Party has actual
notice.
(d) Remedies Cumulative. No failure or delay on the part of Secured
Party in exercising any right, power or privilege hereunder and no course of
dealing between Debtor and Secured Party or the holder of the Note shall operate
as a waiver thereof; nor shall any single or partial exercise of any right,
power or privilege hereunder preclude any other or further exercise thereof or
the exercise of any other right, power or privilege hereunder or thereunder. The
rights, powers and remedies herein expressly provided are cumulative and not
exclusive of any rights, powers or remedies which Secured Party would otherwise
have.
(e) Power of Attorney. Debtor hereby constitutes and appoints Secured
Party its true and lawful attorney, with full power after the occurrence of an
Event of Default and for so long as the same shall be continuing (in the name of
Debtor or otherwise), to act, require, demand, receive, compound and give
acquittance for any and all monies and claims for monies due or to become due to
Debtor under or arising out of the Collateral, to endorse any checks or other
instruments or orders in connection therewith and to file any claims or take any
action or institute any proceedings which Secured Party may deem to be necessary
or advisable in the premises, which appointment as attorney is coupled with an
interest.
12. Indemnity. Debtor agrees to indemnify, reimburse and hold Secured
Party harmless from any and all losses, damages, penalties, claims, actions,
judgments, suits, costs, expenses or disbursements (including reasonable
attorneys' fees and expenses) which may be imposed on, asserted against or
incurred by Secured Party in connection with the creation, preservation or
protection of Secured Party's Liens on, and security interest in, the
Collateral, including, without limitation, in connection with the recording or
filing of instruments and documents in public offices, payment or discharge of
any taxes or Liens upon or in respect of the Collateral, premiums for insurance
with respect to the Collateral and all other fees, costs and expenses in
connection with protecting, maintaining or preserving the Collateral and Secured
Party's interest therein, whether through judicial proceedings or otherwise. The
indemnity obligations of Debtor contained in this Section 4 shall constitute
Obligations secured by the Collateral and shall continue in full force and
effect notwithstanding the full payment of the Note and all of the other
Obligations.
17
13. Definitions. The following terms shall have the meaning herein
specified unless the context otherwise requires. Such definitions shall be
equally applicable to the singular and plural forms of the terms defined.
"Accounts," "Chattel Paper," "Documents," "Goods," "General
Intangibles," "Instruments," "Inventory" and "Proceeds" shall have the meanings
assigned to such terms in the Uniform Commercial Code.
"Event of Default" shall mean the occurrence of any of the following
events: (a) a "Default" (as such term is defined in the Note) shall have
occurred and be continuing, (b) any representation or warranty made by Debtor
herein shall prove to have been false or incorrect in any material respect at
the time made; or (c) Debtor shall fail to perform or observe any other covenant
or agreement to be performed or observed by it hereunder and such failure shall
continue unremedied for a period of thirty (30) days after written notice
thereof from Secured Party to Debtor.
"Lien" shall mean any mortgage, pledge, lien, charge, encumbrance,
lease, exercise of rights, security interest or claim of any nature whatsoever.
"Note" shall mean the Subordinated Secured Note of Debtor to Secured
Party dated the date hereof, in the original principal amount of Five Million
Dollars ($5,000,000).
"Obligations" shall mean: (a) the indebtedness of Debtor to Secured
Party pursuant to the Note; (b) all sums advanced by Secured Party to preserve
the Collateral or its security interest in the Collateral; and (c) in the event
of any proceeding for the collection or enforcement of the Note or this
Agreement after an Event of Default shall have occurred and be continuing, the
reasonable expenses of retaking, holding, preparing for sale or lease, selling
or otherwise disposing or realizing on the Collateral, or of any exercise by
Secured Party of its rights hereunder.
"Permitted Liens" shall mean (i) the Lien created hereby in favor of
Secured Party, (ii) the first priority security interest in favor of any Senior
Lender and a second priority security interest in favor of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇,
Inc. (collectively, "Senior Liens"), (iii) Liens for taxes either not yet due or
being contested in good faith (and for the payment of which adequate reserves
have been provided) by appropriate proceedings diligently pursued and (iv)
materialmen's, mechanics', workmen's, landlord's, employees' or other like Liens
arising in the ordinary course of business for amounts the payment of which is
either not yet delinquent or is being contested in good faith (and for the
payment of which adequate reserves have been provided) by appropriate
proceedings diligently pursued.
"Senior Lender" shall mean GMAC Commercial Finance LLC and any other
bank or lending institution that extends credit to Debtor on or after the date
hereof in connection with the refinancing of Debtor's indebtedness to GMAC
Commercial Finance LLC or any other Senior Lender.
"Uniform Commercial Code" shall mean the Uniform Commercial Code as in
effect on the date hereof in the State of Florida and in any other applicable
jurisdiction.
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14. Miscellaneous.
(a) Governing Law. This Agreement and its validity, construction and
performance shall be governed in all respects by the internal laws of the State
of Florida (without reference to the conflict of laws provisions or principles
thereof).
(b) Binding Effect; Assignment. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and assigns; but neither this Agreement nor any of the rights, benefits or
obligations hereunder shall be assigned, by operation of law or otherwise, by
either party hereto without the prior written consent of the other party.
Nothing in this Agreement, express or implied, is intended to confer upon any
person other than the parties hereto and their respective permitted successors
and assigns, any rights, benefits or obligations hereunder.
(c) Amendment; Waiver. This Agreement shall not be changed, modified or
amended in any respect except by the mutual written agreement of the parties
hereto. Any provision of this Agreement may be waived in writing by the party
which is entitled to the benefits thereof. No waiver of any provision of this
Agreement shall be deemed to or shall constitute a waiver of any other provision
hereof (whether or not similar), nor shall any such waiver constitute a
continuing waiver.
(d) Notices. Any notice required or permitted to be given hereunder
("Notices") shall be in writing and delivered personally or mailed by registered
or certified mail, postage prepaid and return receipt requested, or by fax, as
follows: (i) if to the Company: ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇, Attn: Chief Financial Officer, fax no. (▇▇▇) ▇▇▇-▇▇▇▇, with a copy to:
Akerman Senterfitt, ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇-▇▇▇▇. Attn: ▇▇▇▇ ▇▇▇▇▇▇▇, fax no. ▇▇▇ ▇▇▇ ▇▇▇▇; and (ii) if to the Secured
Party: ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attn: ▇▇▇▇▇▇▇ ▇▇▇▇, fax
no. ▇▇▇-▇▇▇-▇▇▇▇, with copy to ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, LLP, ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇▇▇ Attn: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, fax no. (▇▇▇) ▇▇▇-▇▇▇▇, or such
other address as the either party hereto may designate by Notice to the other.
(e) Obligations Absolute. The obligations of Debtor hereunder shall be
absolute and unconditional and shall remain in full force and effect without
regard to, and shall not be released, suspended, discharged, terminated or
otherwise affected by, any circumstance or occurrence whatsoever, including,
without limitation: any renewal, extension, amendment or modification of, or
addition or supplement to or deletion from, the Note, or any assignment or
transfer thereof; any waiver, consent, extension, indulgence or other action or
inaction under or in respect of the Note or this Agreement or any exercise or
non-exercise of any right, remedy, power or privilege under or in respect hereof
or the Note; the furnishing of additional security to Secured Party or any
acceptance thereof or the sale, exchange, release, surrender or realization of
or upon any security by Secured Party; or any invalidity, irregularity or
unenforceability of all or part of the Obligations or of any security therefor.
(f) Debtor's Duties. It is expressly agreed, anything herein contained
to the contrary notwithstanding, that Debtor shall remain liable to perform all
of the obligations assumed by it with respect to the Collateral and Secured
Party shall not have any obligations or liabilities with respect to any
Collateral by reason of or arising out of this Agreement, nor shall Secured
Party be required or obligated in any manner to perform or fulfill any of the
obligations of Debtor under or with respect to any Collateral.
19
(g) Severability. Any term or provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction
only, be ineffective only to the extent of such prohibition or unenforceability
without invalidating the remaining provisions hereof or affecting the validity
or enforceability of such provision in any other jurisdiction.
(h) Headings. The captions, headings and titles herein are for
convenience of reference only and shall not effect the construction, meaning or
interpretation of this Agreement or any term or provision hereof.
(i) Counterparts. This Agreement may be executed through the use of one
or more counterparts, each of which shall be deemed an original and all of which
shall be considered one and the same agreement, notwithstanding that all parties
are not signatories to the same counterpart.
(j) Entire Agreement. This Agreement merges and supersedes any and all
prior agreements, understandings, discussions, assurances, promises,
representations or warranties among the parties with respect to the subject
matter hereof, and contains the entire agreement among the parties with respect
to the subject matter hereof.
(k) Termination; Release. When all Obligations have been paid in full,
this Agreement shall terminate, and Secured Party, at the request and expense of
Debtor, will execute and deliver to Debtor the proper instruments (including
Uniform Commercial Code termination statements on form UCC-3) acknowledging the
termination of this Agreement, and will duly assign, transfer and deliver to
Debtor (without recourse and without any representation or warranty) such of the
Collateral as may be in possession of Secured Party and has not theretofore been
sold or otherwise applied or released pursuant to this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers all as of the day and year first
written above.
PERFUMANIA, INC.
By:
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Name:
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Title:
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