UNITED STATES
	SECURITIES AND EXCHANGE COMMISSION
	Washington, D.C. 20549
	SCHEDULE 13D

(Rule 13d-101)

 

INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT

TO RULE 13d-1(a) AND AMENDMENTS THERETO FILED PURSUANT TO

RULE 13d-2(a)

 

Under the Securities Exchange Act of 1934
(Amendment No. 6)*

 

(Name of Issuer)

 

(Title of Class of Securities)

 

(CUSIP Number)

 

(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)

 

(Date of Event Which Requires Filing of this Statement)

If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following box. o

Note: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See Rule 13d-7 for other parties to whom copies are to be sent.

The information required on the remainder of this cover page shall not be deemed to be “filed” for the purpose of Section 18 of the Securities Exchange Act of 1934 (“Act”) or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes).

*   The remainder of this cover page shall be filled out for a reporting person’s initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page. The information required on the remainder of this cover page shall not be deemed to be “filed” for the purpose of Section 18 of the Securities Exchange Act of 1934 (“Act”) or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes).

 

 

Item 1.

Security and Issuer

 

This statement constitutes Amendment No. 6 to the Schedule 13D relating to the Common Stock, par value $0.01 (the “Shares”), issued by The Talbots, Inc. (the “Issuer”), and hereby amends the Schedule 13D filed with the Securities and Exchange Commission on August 1, 2011 (the “Initial Schedule 13D”), Amendment No. 1 to the Initial Schedule 13D filed on December 6, 2011, Amendment No. 2 to the Initial Schedule 13D filed on January 30, 2012, Amendment No. 3 to the Initial Schedule 13D filed on May 7, 2012, Amendment No. 4 to the Initial Schedule 13D filed on May 15, 2012 and Amendment No. 5 to the Initial Schedule 13D filed on May 22, 2012 on behalf of the Reporting Persons (as defined in the Initial Schedule 13D), to furnish the additional information set forth herein. All capitalized terms contained herein but not otherwise defined shall have the meanings ascribed to such terms in the Initial Schedule 13D.

 

Item 4.

Purpose of Transaction

 

Item 4 is hereby amended by adding the following:

 

Merger Agreement

 

On May 30, 2012, the Issuer entered into an Agreement and Plan of Merger (the “Merger Agreement”) with TLB Holdings LLC, a Delaware limited liability company (“Parent”) and TLB Merger Sub Inc., a Delaware corporation and a wholly owned subsidiary of Parent (“Sub”).  Parent and Sub are affiliates of Sycamore Partners, L.P. and Sycamore Partners A, L.P. (collectively, the “Sponsor”).  Parent and Sub were formed solely for the purpose of effecting the transactions contemplated by the Merger Agreement and have not engaged in any activities except in connection with these transactions.

 

Upon the terms and subject to the conditions of the Merger Agreement, Sub has agreed to commence a cash tender offer for all of the outstanding Shares (the “Offer”) within 10 business days of the date of the Merger Agreement for a purchase price of $2.75 per share in cash, without interest (the “Offer Price”).  The Merger Agreement provides that, regardless of whether the Offer is consummated, Sub will be merged with and into the Issuer and the Issuer will become a wholly owned subsidiary of Parent (the “Merger”).  At the effective time of the Merger, each Share issued and outstanding immediately prior to the effective time of the Merger (other than Shares owned by Parent, Sub, the Issuer, or any stockholder of the Issuer who is entitled to and properly exercises appraisal rights under Delaware law) will be cancelled and converted into the right to receive the Offer Price.

 

The obligation of Sub to purchase shares tendered in the Offer is subject to the satisfaction or waiver of a number of conditions set forth in the Merger Agreement, including the expiration or termination of applicable waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, that the Office of the Comptroller of the Currency has determined not to disapprove, or has not disapproved, under the Change in Bank Control Act, the acquisition of control of Talbots Classic National Bank by Parent and its affiliates, as applicable, the receipt of a letter from the Pension Benefit Guaranty Corporation stating that it has concluded its investigation regarding The Talbots, Inc. Pension Plan and the transactions contemplated by the Merger Agreement and the related financings, a minimum level of availability being maintained by the Issuer under the Amended and Restated Credit Agreement, dated as of February 16, 2012, among the Issuer, as the borrower representative, and The Talbots Group, Limited Partnership, Talbots Classics Finance Company, Inc. and the Issuer, as the borrowers, and General Electric Capital Corporation, as the agent, and the lenders party thereto, receipt of proceeds by Parent of the debt financings pursuant to the debt commitment letters from General Electric Capital Corporation and Wells Fargo Bank, National Association (or alternative debt financing pursuant to the terms and subject to the conditions set forth in the Merger Agreement) and/or the lenders party to such debt commitment letters (or new debt commitment letters for any such alternative debt financing) have confirmed to Parent and Sub that such debt financing (or such alternative debt financing) in an amount sufficient to consummate the Offer and the Merger will be available at the consummation of the Offer on the terms and conditions set forth in the debt commitment letters (or such new debt commitment letters), and other closing conditions.  In addition, it is a condition to Sub’s obligation to purchase the shares tendered in the Offer that (1) the number of the outstanding Shares that have been validly tendered and not validly withdrawn, when added (without duplication of Shares) to the number of Shares owned by Parent and its subsidiaries as of immediately prior to the expiration of the Offer, represent at least a majority of the Shares owned by Parent and its subsidiaries as of immediately prior to the expiration of the Offer and (2) the number of the outstanding Shares that have been validly tendered and not validly withdrawn, when added to (without duplication of Shares) the number of Shares owned by Parent and its subsidiaries as of immediately prior to the expiration of the Offer plus the number of Shares to be purchased by Sub pursuant to the top-up option granted to Sub pursuant to the Merger Agreement (the “Top-Up”), represent at least one more share than 90% of (x) the outstanding Shares as of immediately prior to the expiration of the Offer, plus (y) the aggregate number of Shares issuable to holders of Issuer stock options, restricted stock, restricted stock units, performance stock units and warrants, as applicable, from which the Issuer or its representatives have received notices of exercise prior to the expiration of the Offer (and as to which Shares have not yet been issued to such exercising holders of Issuer stock options, restricted stock, restricted stock units, performance stock units and warrants, as applicable), plus (z) the number of Shares to be purchased by Sub under the Top-Up. Under certain circumstances (but subject in any event to the satisfaction or waiver of other conditions to the consummation of the Merger as set forth in the Merger Agreement), the parties have agreed to complete the Merger without the prior completion of the Offer, after receipt of the affirmative vote of a majority of the outstanding Shares in favor of the adoption of the Merger Agreement and approval of the transactions contemplated thereby. In that case, the consummation of the Merger would be

 

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subject to similar conditions as the Offer conditions, other than the addition of the stockholder approval requirement and the inapplicability of the minimum tender conditions and the condition regarding Parent’s receipt of the debt financing.

 

The aggregate amount required by Parent and Sub to pay the consideration in connection with the transactions contemplated by the Merger Agreement is approximately $369 million, including rollover and/or refinancing of net debt.  It is anticipated that the financing for the transactions contemplated by the Merger Agreement will consist of (i) equity financing to be contributed to Parent by the Sponsor in the form of cash and (ii) debt financing arranged by Parent and Sub, each as described in further detail below.

 

If the transactions contemplated by the Merger Agreement are consummated, the Shares will no longer be traded on the New York Stock Exchange and the Shares will cease to be registered under the Exchange Act, and the Issuer will be privately held by Parent.

 

The foregoing description of the Merger Agreement is qualified in its entirety by reference to the full text of the Merger Agreement, a copy of which is attached hereto as Exhibit 6 and is incorporated herein by reference.

 

Sycamore Equity Commitment

 

On May 30, 2012, the Sponsor entered into an equity commitment letter with Parent (the “Equity Commitment Letter”) in connection with the transactions contemplated by the Merger Agreement.  The Sponsor agreed under the Equity Commitment Letter to contribute an aggregate amount of $210 million in cash (as the same may be reduced in accordance with the terms and conditions of the Equity Commitment Letter), subject to certain conditions, for the purpose of funding the consideration to be paid in connection with the Offer and/or the Merger, as applicable, pursuant to, and in accordance with the terms of the Merger Agreement.

 

The foregoing description of the Equity Commitment Letter is qualified in its entirety by reference to the full text of the Equity Commitment Letter, a copy of which is attached hereto as Exhibit 7 and is incorporated herein by reference.

 

Limited Guarantee

 

In connection with the transactions contemplated by the Merger Agreement, on May 30, 2012, the Sponsor entered into a Limited Guarantee with the Issuer (the “Limited Guarantee”).  Under the terms of the Limited Guarantee, the Sponsor irrevocably and unconditionally guaranteed, subject to certain conditions, (i) Parent’s termination fee under the Merger Agreement, (ii) all of the liabilities and obligations of Parent and Sub under the Merger Agreement and (iii) all of the liabilities and obligations of Sycamore Partners Management, L.L.C. under the Confidentiality Agreement; provided that in no event shall the aggregate liability of the Sponsor pursuant to the Limited Guarantee exceed the amount of Parent’s termination fee under the Merger Agreement plus the amount of any liability pursuant to Section 7.09(d) and Section 9.03(g) of the Merger Agreement plus the amount of all attorneys’ fees payable by Sycamore Partners Management, L.L.C. pursuant to the Confidentiality Agreement.

 

The foregoing description of the Limited Guarantee is qualified in its entirety by reference to the full text of the Limited Guarantee, a copy of which is attached hereto as Exhibit 8 and is incorporated herein by reference.

 

GE Debt Commitment Letter

 

In connection with the transactions contemplated by the Merger Agreement, on May 30, 2012, Sub entered into a letter agreement (the “GE Debt Commitment Letter) with General Electric Capital Corporation (“GE”).  Under the terms of the GE Debt Commitment Letter, GE agreed to, subject solely to the terms and conditions set forth in the GE Debt Commitment Letter, upon the closing of the Merger, (i) consent to a “change of control” resulting from the Merger under the existing amended and restated credit agreement, dated as of February 16, 2012, among the Issuer and certain of its subsidiaries (the “Borrowers”), certain other credit parties designated therein, the lenders designated therein and GE, as agent (the “Existing Revolving Loan Agreement”), (ii) make certain agreed modifications to the Existing Revolving Loan Agreement and (iii) continue to make available to the Borrowers the Existing Revolving Loan Agreement, or a replacement thereof, in either case on the terms and conditions of the Existing Revolving Loan Agreement as modified in accordance with the immediately preceding clauses (i) and (ii).

 

The foregoing description of the GE Debt Commitment Letter is qualified in its entirety by reference to the full text of the GE Debt Commitment Letter, a copy of which is attached hereto as Exhibit 9 and is incorporated herein by reference.

 

Wells Fargo Debt Commitment Letter

 

In connection with the transactions contemplated by the Merger Agreement, on May 30, 2012, Sub entered into a letter agreement (the “Wells Fargo Debt Commitment Letter”) with Wells Fargo Bank, National Association (“Wells Fargo”), as agent (the “Agent”), and each of Well Fargo, Tennenbaum Opportunities Fund VI, LLC, 1903 OnShore Funding, LLC, 1903 OffShore Loans SPV Limited and Stone Tower Credit Solutions Master Fund Ltd., as lenders (the “Lenders”).  Under the terms of the Wells Fargo Debt Commitment Letter, the Agent and the Lenders agreed to, subject solely to the terms and conditions set forth in the Wells Fargo Debt

 

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Commitment Letter, upon the closing of the Merger, (i) consent to a “change of control” resulting from the Merger under the existing term loan agreement, dated as of February 16, 2012, among the Issuer and certain of its subsidiaries (the “Borrowers”), certain other credit parties designated therein, the Agent and the Lenders (the “Existing Term Loan Agreement”), (ii) make certain agreed modifications to the Existing Term Loan Agreement, (iii) allow the Existing Term Loan Agreement to remain outstanding, or provide a replacement thereof, in either case on the terms and conditions of the Existing Term Loan Agreement as modified in accordance with the immediately preceding clauses (i) and (ii), and (iv) provide an additional last out term loan (such additional last out term loan to be provided by one of the Lenders specified in the Wells Fargo Debt Commitment Letter) in an amount equal to the lesser of (x) $11 million and (y) the difference between the aggregate commitment of $85 million under the Wells Fargo Debt Commitment Letter and the existing term loan amount pursuant to the Existing Term Loan Agreement.

 

The foregoing description of the Wells Fargo Debt Commitment Letter is qualified in its entirety by reference to the full text of the Wells Fargo Debt Commitment Letter, a copy of which is attached hereto as Exhibit 10 and is incorporated herein by reference.

 

Item 6.

Contracts, Arrangements, Understandings or Relationships with Respect to Securities of the Issuer

 

Item 6 is hereby amended by adding the following:

 

On May 30, 2012, Parent, Merger Sub and the Issuer entered into the Merger Agreement, a discussion of which is contained in Item 4 hereof and is incorporated into this Item 6 by reference.

 

On May 30, 2012, the Sponsor entered into the Equity Commitment Letter with Parent, a discussion of which is contained in Item 4 hereof and is incorporated into this Item 6 by reference.

 

On May 30, 2012, the Sponsor entered into the Limited Guarantee with the Issuer, a discussion of which is contained in Item 4 hereof and is incorporated into this Item 6 by reference.

 

On May 30, 2012, Sub entered into the GE Debt Commitment Letter, a discussion of which is contained in Item 4 hereof and is incorporated into this Item 6 by reference.

 

On May 30, 2012, Sub entered into the Wells Fargo Debt Commitment Letter, a discussion of which is contained in Item 4 hereof and is incorporated into this Item 6 by reference.

 

Item 7.

Material to be Filed as Exhibits

 

Item 7 is hereby amended by adding the following:

 

Exhibit 6		Agreement and Plan of Merger, dated as of May 30, 2012, by and among The Talbots, Inc., TLB Holdings LLC and TLB Merger Sub Inc. (incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K filed with the Securities and Exchange Commission by The Talbots, Inc. on June 1, 2012).
Exhibit 7		Equity Commitment Letter, dated as of May 30, 2012, by and among Sycamore Partners, L.P., Sycamore Partners A, L.P. and TLB Holdings LLC.
Exhibit 8		Limited Guarantee, dated as of May 30, 2012, by and among Sycamore Partners, L.P., Sycamore Partners A, L.P. and The Talbots, Inc.
Exhibit 9		GE Debt Commitment Letter, dated as of May 30, 2012, by and among General Electric Capital Corporation and TLB Merger Sub Inc.
Exhibit 10		Wells Fargo Debt Commitment Letter, dated as of May 30, 2012, by and among Wells Fargo Bank, National Association, the lenders party thereto, and TLB Merger Sub Inc.

 

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SIGNATURES

 

After reasonable inquiry and to the best of each of the undersigned’s knowledge and belief, each of the undersigned certify that the information set forth in this statement is true, complete and correct.

 

Date: June 1, 2012

 

	SYCAMORE PARTNERS, L.P.
	By:	Sycamore Partners GP, L.L.C.
		its General Partner
	By:	Sycamore Partners MM, L.L.C.
		its Managing Member
	By:	/s/ Stefan L. Kaluzny
		Stefan L. Kaluzny
		Managing Member
	SYCAMORE PARTNERS GP, L.L.C.
	By:	Sycamore Partners MM, L.L.C.
		its Managing Member
	By:	/s/ Stefan L. Kaluzny
		Stefan L. Kaluzny
		Managing Member
	SYCAMORE PARTNERS MM, L.L.C.
	By:	/s/ Stefan L. Kaluzny
		Stefan L. Kaluzny
		Managing Member
	/s/ Stefan L. Kaluzny
	STEFAN L. KALUZNY
	ALLIGATOR INVESTORS, L.L.C.
	By:	Sycamore Partners, L.P.
		its Managing Member
	By:	Sycamore Partners, GP, L.L.C.
		its General Partner
	By:	Sycamore Partners MM, L.L.C.
		its General Partner
	By:	/s/ Stefan L. Kaluzny
		Stefan L. Kaluzny

 

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		Managing Member
	PANTHER INVESTORS, L.L.C.
	By:	Sycamore Partners, L.P.
		its Managing Member
	By:	Sycamore Partners GP, L.L.C.
		its General Partner
	By:	Sycamore Partners MM, L.L.C.
		its General Partner
	By:	/s/ Stefan L. Kaluzny
		Stefan L. Kaluzny
		Managing Member

 

EXHIBIT INDEX

 

Exhibit		Description
6		Agreement and Plan of Merger, dated as of May 30, 2012, by and among The Talbots, Inc., TLB Holdings LLC and TLB Merger Sub Inc. (incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K filed with the Securities and Exchange Commission by The Talbots, Inc. on June 1, 2012).
7		Equity Commitment Letter, dated as of May 30, 2012, by and among Sycamore Partners, L.P., Sycamore Partners A, L.P. and TLB Holdings LLC.
8		Limited Guarantee, dated as of May 30, 2012, by and among Sycamore Partners, L.P., Sycamore Partners A, L.P. and The Talbots, Inc.
9		GE Debt Commitment Letter, dated as of May 30, 2012, by and among General Electric Capital Corporation and TLB Merger Sub Inc.
10		Wells Fargo Debt Commitment Letter, dated as of May 30, 2012, by and among Wells Fargo Bank, National Association, the lenders party thereto, and TLB Merger Sub Inc.

 

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Exhibit 7

 

SYCAMORE PARTNERS, L.P.

SYCAMORE PARTNERS A, L.P.

9 WEST 57TH STREET, 31ST FLOOR

NEW YORK, NEW YORK 10019

 

May 30, 2012

 

TLB Holdings LLC

c/o Sycamore Partners Management, L.L.C.

9 West 57th Street, 31st Floor

New York, New York 10019

Attention: Stefan Kaluzny and Peter Morrow

 

Gentlemen:

 

TLB Holdings LLC, a Delaware limited liability company (“Parent”), has informed us that, pursuant to an Agreement and Plan of Merger, dated on or about the date hereof (as the same may be amended, modified or restated in accordance with the terms thereof, the “Merger Agreement”), by and among Parent, TLB Merger Sub Inc., a Delaware corporation and a wholly owned subsidiary of Parent (“Sub”), and The Talbots, Inc., a Delaware corporation (the “Company”), Sub will make a tender offer (as it may be amended from time to time as permitted under the Merger Agreement, the “Offer”) to purchase all the outstanding shares of Company Common Stock at the Offer Price, net to the seller thereof in cash, and, regardless of whether or not the Offer is completed, will merge with and into the Company, with the Company surviving the merger as a wholly owned subsidiary of Parent (the “Merger”). Capitalized terms used and not otherwise defined in this letter agreement (this “Agreement”) shall have the meanings ascribed to such terms in the Merger Agreement.

 

We are pleased to advise you that Sycamore Partners, L.P., a Delaware limited partnership, and Sycamore Partners A, L.P., a Delaware limited partnership (collectively, the “Investor”), hereby commits, subject only to the terms and conditions set forth in paragraph 3 of this Agreement, immediately prior to the earlier of the Offer Closing or the Merger Closing, to contribute to Parent (in the form of equity other than Disqualified Capital Stock (as defined below)) an aggregate amount equal to $210,000,000 (as may be adjusted pursuant to this paragraph, the “Contribution Obligation”), in cash in immediately available funds solely for the purpose of funding, and to the extent necessary to fund, a portion of the aggregate Offer Price and/or Merger Consideration, as applicable, pursuant to and in accordance with the terms of the Merger Agreement and amounts required to be paid pursuant to Section 3.04 of the Merger Agreement, and in each case, including fees and expenses related to each of the foregoing, and fees and expenses directly related to the Debt Financing required to be paid by Parent, Merger Sub and the Surviving Corporation; provided that under no circumstance shall Investor be obligated, directly or indirectly, to fund an aggregate amount in excess of the Contribution Obligation. Investor may effect the contribution of the Contribution Obligation directly or indirectly through one or more intermediaries or affiliated entities, but the foregoing shall not relieve Investor of its obligations to fund the full amount of the Contribution Obligation. The

 

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amount of the Contribution Obligation to be funded under this Agreement immediately prior to the earlier of the Offer Closing or the Merger Closing may be reduced in an amount specified by Parent but only to the extent that it will nevertheless be possible for Parent and Sub to consummate the transactions contemplated by the Merger Agreement in accordance with all requirements therein (and without breaching the terms of the Debt Commitment Letter or New Debt Commitment Letter, as applicable, or causing the failure of any of the conditions set forth therein) with Investor contributing less than the full amount of its Contribution Obligation.  “Disqualified Capital Stock” shall mean any Equity Interest which, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable), or upon the happening of any event, (a) matures (excluding any maturity as the result of an optional redemption by the issuer thereof) or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable at the option of the holder thereof, in whole or in part, on or prior to the first anniversary of the maturity date of the Debt Financing (or, in the case Alternative Debt Financing has been obtained in accordance with Section 7.08(b) of the Merger Agreement, such Alternative Debt Financing), (b) is convertible into or exchangeable (unless at the sole option of the issuer thereof) for (i) debt securities or (ii) any Equity Interests referred to in (a) above, in each case at any time on or prior to the first anniversary of the maturity date of the Debt Financing (or, in the case Alternative Debt Financing has been obtained in accordance with Section 7.08(b) of the Merger Agreement, such Alternative Debt Financing), or (c) contains any repurchase obligation which may come into effect on or prior to the first anniversary of the maturity date of the Debt Financing (or, in the case Alternative Debt Financing has been obtained in accordance with Section 7.08(b) of the Merger Agreement, such Alternative Debt Financing).

 

The Investor’s obligation to fund the Contribution Obligation is conditioned upon (a) the execution and delivery of the Merger Agreement by the parties thereto, (b) if the Offer Closing shall occur, the satisfaction, or waiver by Parent and Sub (with the prior written approval of Investor), of all the Offer Conditions as of the expiration of the Offer (other than those conditions that by their nature are to be satisfied by actions taken at the Offer Closing, but each of which shall be capable of being satisfied on the Offer Closing Date) or if the Merger Closing shall occur (without the Offer Closing), the satisfaction, or waiver by Parent and Sub (with the prior written approval of Investor), at the Merger Closing of all conditions precedent to the obligations of Parent and Sub to consummate the Merger set forth in Section 8.01 (other than Section 8.01(d)) of the Merger Agreement and Section 8.02 of the Merger Agreement (other than those conditions that by their nature are to be satisfied by actions taken at the Merger Closing, but each of which shall be capable of being satisfied on the Merger Closing Date), (c) the Debt Financing (or, in the case Alternative Debt Financing has been obtained in accordance with Section 7.08(b) of the Merger Agreement, such Alternative Debt Financing) has been funded or would be funded simultaneously in accordance with the terms thereof at the Offer Closing or the Merger Closing, as applicable, with the funding of the Contribution Obligation if the Contribution Obligation is funded immediately prior to the Offer Closing or the Merger Closing, as applicable and (d) the contemporaneous consummation of the Offer Closing, if the Offer Closing shall occur, and the Merger (regardless of whether the Offer Closing occurs).

 

This Agreement shall inure to the benefit of and be binding upon Parent and Investor. Investor acknowledges that the Company has relied on this Agreement and, accordingly, Investor

 

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acknowledges that the Company is an express third party beneficiary hereof, entitled to specifically enforce the obligations of Investor directly against Investor to the full extent hereof in connection with the Company’s exercise of its rights under Section 11.10(b) of the Merger Agreement (subject to the limitations set forth therein) and, in connection therewith, the Company has the right to obtain an injunction, or other appropriate form of specific performance or equitable relief, to cause Parent and Sub to cause, or to directly cause, Investor to fund, directly or indirectly, the Contribution Obligation and to take any and all actions as may be necessary or appropriate to cause the Contribution Obligation to be funded as, and only to the extent permitted by this Agreement, in each case, when all of the conditions set forth in the immediately preceding paragraph have been satisfied and as otherwise contemplated by the exercise of the Company’s rights under Section 11.10(b) of the Merger Agreement, and the Company shall have no other rights or remedies hereunder. Investor accordingly agrees, subject in all respects to Section 11.10(b) of the Merger Agreement, not to raise any objections to the availability of the equitable remedy of specific performance. Investor further agrees that the Company shall not be required to post a bond or undertaking in connection with such order or injunction sought in accordance with the terms of Section 11.10 of the Merger Agreement. Except for the rights of the Company set forth in the third preceding sentence, nothing in this Agreement, express or implied, is intended to confer upon any Person other than Parent, Investor and the Company any rights or remedies under, or by reason of, or any rights to enforce or cause Parent to enforce, the Contribution Obligation or any provisions of this Agreement or to confer upon any Person any rights or remedies against any Person other than Investor (but only at the direction of Investor as contemplated hereby) under or by reason of this Agreement. Without limiting the foregoing, neither Parent’s creditors (other than the Company, but in the case of the Company, only on the terms, and subject to the limitations, set forth in this paragraph and Section 11.10 of the Merger Agreement) nor any Person (other than Parent or the Company, but in the case of the Company, only on the terms, and subject to the limitations, set forth in this paragraph and Section 11.10 of the Merger Agreement) shall have any right to specifically enforce this Agreement or to cause Parent to enforce this Agreement.

 

The Investor reserves the right, prior to or after execution of definitive documentation for the financing transactions contemplated hereby, to assign any portion of the Contribution Obligation hereunder to one or more of its Affiliates, or to one or more other investors, and upon the actual funding of such assigned portion of the Contribution Obligation effective upon the earlier of the Offer Closing or the Merger Closing, the Investor shall have no further obligation to you with respect thereto. Notwithstanding the foregoing, the Investor acknowledges and agrees that, except to the extent otherwise agreed in writing by the Company, any such assignment shall not relieve the Investor of its obligation to fund the full amount of the Contribution Obligation.

 

The Investor’s obligation to fund the Contribution Obligation shall expire on the earliest to occur of (a) the valid termination of the Merger Agreement in accordance with its terms, (b) the Merger Closing so long as Investor shall have funded the Contribution Obligation in connection therewith, (c) any claim by the Company under, or any Action brought by the Company with respect to, the Limited Guarantee (as defined below), the Guarantor or any Guarantor Affiliate (as defined in the Limited Guarantee) thereof (other than in respect of a Guaranteed Obligation (as defined in the Limited Guarantee)) or (d) any other claim under, or

 

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Action against, the Investor or any Affiliate thereof in connection with this Agreement, the Limited Guarantee, the Merger Agreement or any transaction contemplated hereby or thereby or otherwise relating thereto, other than Guarantee Claims, Merger Agreement Claims, Confidentiality Agreement Claims or Equity Commitment Claims (in each case, as defined in the Limited Guarantee).  From and after the expiration of this Agreement in accordance with the preceding sentence, neither the Investor nor any Non-Recourse Parent Party (as defined below) will have any further liability or obligation to any Person as a result of this Agreement.

 

Concurrently with the execution and delivery of this Agreement, Investor is executing and delivering to the Company a Limited Guarantee, dated as of the date hereof (the “Limited Guarantee”), with respect to the Guaranteed Obligations (as defined in the Limited Guarantee), in each case pursuant to the terms and conditions of, and subject to the limitations of, the Merger Agreement and the Limited Guarantee. The Company’s remedies against Investor under the Limited Guarantee, the Company’s rights to specific performance under this Agreement, the Company’s rights and remedies under the Confidentiality Agreement and the Company’s remedies against Parent and Sub under the Merger Agreement shall be, and are intended to be, the sole and exclusive direct or indirect rights of and remedies available to the Company or any of its Affiliates against (i) Investor, Parent or Sub and (ii) any former, current and future equity holders, controlling persons, directors, officers, employees, agents, advisors, Affiliates, members, managers, general or limited partners or assignees of Investor, Parent or Sub or any former, current or future equity holder, controlling person, director, officer, employee, general or limited partner, member, manager, Affiliate, agent, advisor or assignee of any of the foregoing (other than Parent and Sub to the extent provided in the Merger Agreement) (those persons and entities described in clause (ii) but excluding Parent and Sub, each being referred to as a “Non-Recourse Parent Party”) in respect of any liabilities or obligations arising under, or in connection with, this Agreement or the Merger Agreement or any of the transactions contemplated hereby or thereby, including in the event Parent or Sub breaches its obligations under the Merger Agreement, whether or not Parent’s or Sub’s breach is caused by Investor’s breach of its obligations under this Agreement. Notwithstanding anything to the contrary set forth in this paragraph, paragraph 4 or in the Limited Guarantee, the Company, as the express third party beneficiary hereunder on the terms, and subject to the conditions, set forth in the fourth paragraph of this Agreement, may cause Parent and Sub to, or to directly, cause the Contribution Obligation to be funded as, and only to the extent, permitted by the exercise of the Company’s rights under Section 11.10(b) of the Merger Agreement or on the terms, and subject to the conditions, set forth in the fourth paragraph of this Agreement.

 

Except as set forth in paragraph 4, but otherwise notwithstanding anything that may be expressed or implied in this Agreement or any document or instrument delivered in connection herewith, and notwithstanding the fact that Investor is a limited partnership, Parent covenants, agrees and acknowledges that no Person other than Investor shall have any obligation hereunder and that no recourse hereunder or under any documents or instruments delivered in connection herewith shall be had against, and no personal liability whatsoever shall attach to, be imposed on or otherwise be incurred by any Non-Recourse Parent Party for any obligations of the Investor under this Agreement or for any claim based on, in respect of or by reason of any such obligations or their creation, through Parent, Sub or otherwise, whether by or through attempted piercing of the corporate veil, by or through a claim by or on behalf of Parent against any Non-

 

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Recourse Parent Party, by the enforcement of any assessment or by any legal or equitable proceeding, by virtue of any statute, regulation or applicable Law, or otherwise, provided, however, that in the event that prior to the termination of this Agreement in accordance with its terms, Investor (i) consolidates with or merges with any other Person and is not the continuing or surviving entity of such consolidation or merger or (ii) transfers or conveys all or a substantial portion of its properties and other assets to any Person such that the sum of the Investor’s remaining net assets plus the uncalled capital of Investor is less than the unpaid portion of the Contribution Obligation, if any, and the transferee thereof does not assume, directly or indirectly, Investor’s obligations hereunder, then, and in each such case, Parent may seek recourse (and the Company, as an express third party beneficiary, subject to, and in accordance with, the terms and conditions of paragraph 4 hereof, may seek recourse), whether by the enforcement of any judgment or assessment or by any legal or equitable proceeding or by virtue of any applicable Law, against such continuing or surviving entity or such Person, as the case may be, but only to the extent of the liability of Investor under this Agreement, but nothing shall limit the Company’s rights, in each case, specifically enumerated and subject to each of the limitations set forth in paragraph 4 hereunder and Section 11.10(b) of the Merger Agreement. Under no circumstances shall the Investor be liable to the Company or any other Person for consequential, punitive, exemplary, multiple, special or similar damages, or for lost profits.

 

Investor hereby represents and warrants, with respect to itself to Parent and the Company that: (a) it has all limited partnership power and authority to execute, deliver and perform this Agreement, (b) the execution, delivery and performance of this Agreement by the undersigned has been duly and validly authorized and approved by all necessary limited partnership action, and no other proceedings or actions on the part of the undersigned are necessary therefor, (c) this Agreement has been duly and validly executed and delivered by it and constitutes a valid and legally binding obligation of it, enforceable against the undersigned in accordance with its terms, (d) the amount of the Contribution Obligation is equal to or less than the maximum amount that Investor is permitted to invest in any one portfolio investment pursuant to the terms of its constituent documents, (e) it has uncalled capital commitments or otherwise has available funds in excess of the amount of the Contribution Obligation plus the aggregate amount of all other commitments and obligations it currently has outstanding, and its limited partners or other investors have the obligation to fund such capital following the issuance of the capital call, and (f) the execution, delivery and performance by the undersigned of this Agreement do not and will not (i) violate the organizational documents of the undersigned, (ii) violate any applicable Law or Order, or (iii) result in any violation of, or default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancelation or acceleration of any obligation, any Contract to which the undersigned is a party, in any case, for which the violation, default or right would be reasonably likely to prevent or materially impede, interfere with, hinder or delay the consummation by Investor of the transactions contemplated by this Agreement on a timely basis.

 

THIS AGREEMENT AND ANY ACTION (WHETHER AT LAW, IN CONTRACT OR IN TORT) THAT MAY BE DIRECTLY OR INDIRECTLY BASED UPON, RELATING TO ARISING OUT OF THIS AGREEMENT, OR THE NEGOTIATION, EXECUTION OR PERFORMANCE HEREOF, SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE, REGARDLESS OF

 

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THE LAWS THAT MIGHT OTHERWISE GOVERN UNDER APPLICABLE PRINCIPLES OF CONFLICTS OF LAWS THEREOF.

 

Each of the parties hereto irrevocably submits to the exclusive jurisdiction of the Court of Chancery of the State of Delaware or, if such court lacks subject matter jurisdiction, the United States District Court sitting in New Castle County in the State of Delaware, for the purpose of any Action directly or indirectly based upon, relating to arising out of this Agreement or the negotiation, execution or performance hereof, and each of the parties hereto hereby irrevocably agrees that all claims in respect to such action or proceeding shall be brought in, and may be heard and determined, exclusively in such state or federal courts. Each of the parties hereto irrevocably and unconditionally waives any objection to the laying of venue in, and any defense of inconvenient forum to the maintenance of, any action or proceeding so brought. Each of the parties hereto agrees that a final judgment in any action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by Law. Each of the parties hereto hereby irrevocably and unconditionally agrees (i) to the extent such party is not otherwise subject to service of process in the State of Delaware, to appoint and maintain an agent in the State of Delaware as such party’s agent for acceptance of legal process, and (ii) that, to the fullest extent permitted by applicable Law, service of process may also be made on such party by prepaid certified mail with a proof of mailing receipt validated by the U.S. Postal Service constituting evidence of valid service, and that service made pursuant to (i) or (ii) above shall, to the fullest extent permitted by applicable Law, have the same legal force and effect as if served upon such party personally within the State of Delaware. For purposes of implementing the agreement of the parties hereto under this paragraph to appoint and maintain an agent for service of process in the State of Delaware, each such party that has not as of the date hereof duly appointed such an agent does hereby appoint Corporation Trust Company, 1209 Orange Street, in the City of Wilmington, County of New Castle, 19801, as such agent.

 

EACH PARTY HERETO ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN ANY ACTION DIRECTLY OR INDIRECTLY BASED UPON, RELATING TO ARISING OUT OF THIS AGREEMENT OR THE NEGOTIATION, EXECUTION OR PERFORMANCE HEREOF. EACH PARTY HERETO CERTIFIES AND ACKNOWLEDGES THAT (I) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF AN ACTION, SEEK TO ENFORCE THE FOREGOING WAIVER, (II) EACH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATION OF THIS WAIVER, (III) EACH PARTY MAKES THIS WAIVER VOLUNTARILY AND (IV) EACH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS CONTAINED HEREIN.

 

Each party acknowledges and agrees that (a) this Agreement is not intended to, and does not, create any agency, partnership, fiduciary or joint venture relationship between or among any of the parties hereto and neither this Agreement nor any other document or agreement entered into by any party hereto relating to the subject matter hereof shall be

 

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construed to suggest otherwise and (b) the obligations of the Investor under this Agreement are solely contractual in nature.

 

In consideration of the undersigned’s execution and delivery of this Agreement to you, Parent agrees, whether or not definitive documentation with respect to the contemplated financing is executed, (a) to pay and hold the Investor (and the Non-Recourse Parent Parties) harmless from and against any and all liabilities or losses with respect to or arising out of the Offer, the Merger, this Agreement, or the execution, delivery, enforcement and performance, or consummation, of the Merger Agreement or any of the other agreements and financings and other transactions referred to herein or in any agreements executed in connection herewith,  and (b) except as may be limited pursuant to any separate written agreement with the Investor, to pay upon receipt of an invoice the costs and expenses of the Investor (including the fees and disbursements of counsel to the Investor) arising in connection with the preparation, execution and delivery of this Agreement and the definitive documentation for the Merger and the contemplated financing.

 

This Agreement may not be amended, waived or otherwise modified without the prior written consent of Parent, Investor and the Company. Except as set forth in paragraph 5 hereof, no transfer of any rights or obligations hereunder shall be permitted without the consent of Parent, Investor and the Company. Any transfer in violation of the preceding sentence shall be null and void.

 

If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of Law or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party hereto; provided, however, that this Agreement may not be enforced without giving effect to the provisions of paragraph 7 of this Agreement. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible to the fullest extent permitted by applicable Law in an acceptable manner to the end that the transactions contemplated hereby are fulfilled to the extent possible.

 

This Agreement may be signed in two or more counterparts (including via facsimile or other means of electronic transmission), any one of which need not contain the signature of more than one party, but all such counterparts taken together shall constitute one and the same agreement. The rights of Parent under this Agreement may not be assigned in any manner without the Investor’s prior written consent, in its sole discretion; provided that Parent may assign its rights under this Agreement to the Company as contemplated by the Merger Agreement.

 

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If you are in agreement with the terms of this commitment letter, please forward an executed copy of this letter to the undersigned. We appreciate the opportunity to work with you on this transaction.

 

Yours sincerely,
SYCAMORE PARTNERS, L.P.
SYCAMORE PARTNERS A, L.P.
By: Sycamore Partners GP, L.L.C.
Its: General Partner
By: Sycamore Partners MM, L.L.C.
Its: Managing Member
By:		/s/ Stefan Kaluzny
Name:		Stefan Kaluzny
Title:		Managing Member
Accepted and agreed to as of the date first
written above:
TLB HOLDINGS LLC
By:	/s/ Stefan Kaluzny
Name:	Stefan Kaluzny
Title:	President

 

8

Exhibit 8

 

LIMITED GUARANTEE

 

THIS LIMITED GUARANTEE, dated as of May 30, 2012 (this “Limited Guarantee”), is made by Sycamore Partners, L.P., a Delaware limited partnership, and Sycamore Partners A, L.P., a Delaware limited partnership (collectively, the “Guarantor”), in favor of The Talbots, Inc., a Delaware corporation (the “Company”). Reference is hereby made to that certain Agreement and Plan of Merger, dated on or about the date hereof (as the same may be amended, modified or restated in accordance with the terms thereof, the “Merger Agreement”), by and among the Company, TLB Holdings LLC, a Delaware limited liability company (“Parent”), and TLB Merger Sub Inc., a Delaware corporation and a wholly owned Subsidiary of Parent (“Sub”). Capitalized terms used herein but not otherwise defined shall have the meanings ascribed to them in the Merger Agreement.

 

1.                                      Limited Guarantee.  To induce the Company to enter into the Merger Agreement, the Guarantor hereby irrevocably and unconditionally guarantees to the Company the due and punctual payment by Parent to the Company of (i) the Parent Termination Fee on the terms and subject to the conditions set forth in Section 9.03 of the Merger Agreement (the “Parent Termination Fee Obligations”), (ii) all of the liabilities and obligations of Parent or Sub under the Merger Agreement (including Section 7.09(d) and Section 9.03(g), and as otherwise contemplated by Section 9.02) when required to be paid by Parent or Sub pursuant to and in accordance with the Merger Agreement (the “Other Obligations”), or (iii) all of the liabilities and obligations of Sycamore Partners Management, L.L.C. (the “NDA Party”) under the Confidentiality Agreement (the “NDA Obligations” and, together with the Parent Termination Fee Obligations and the Other Obligations, the “Guaranteed Obligations”); provided that, notwithstanding anything to the contrary set forth in this Limited Guarantee, the Merger Agreement, the Equity Commitment Letter or any other agreement contemplated hereby or thereby, the Company and the Guarantor agree that in no event shall the aggregate liability of the Guarantor hereunder exceed the amount of the Parent Termination Fee plus the amount of any liability pursuant to Section 7.09(d) and Section 9.03(g) of the Merger Agreement and the amount of all attorneys’ fees payable by the NDA Party pursuant to the Confidentiality Agreement (the “Maximum Liability Cap”), and that the Guarantor shall in no event be required to pay more than the Maximum Liability Cap under or in respect of this Limited Guarantee, or otherwise have any liability relating to, arising out of or in connection with the Merger Agreement and the transactions contemplated thereby or any other circumstance. The Guarantor shall, upon the written request of the Company (a “Performance Demand”), promptly and in any event within twelve (12) Business Days, pay such Guaranteed Obligations in full.

 

2.                                      Terms of Limited Guarantee.

 

(a)                                 This Limited Guarantee is one of payment, not collection, and a separate action or actions may be brought and prosecuted against the Guarantor to enforce this Limited Guarantee up to the Maximum Liability Cap, irrespective of whether any action is brought against Parent or Sub or any other Person, or whether Parent or Sub or any other Person are joined in any such action or actions.

 

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(b)                                 Except as otherwise provided herein and without amending or limiting the other provisions of this Limited Guarantee (including Section 6 hereof), the liability of the Guarantor under this Limited Guarantee shall, to the fullest extent permitted under applicable Law, be absolute and unconditional irrespective of:

 

(i)                                     the value, genuineness, regularity, illegality or enforceability of the Merger Agreement or any other agreement or instrument referred to herein, including this Limited Guarantee (other than in the case of fraud by the Company);

 

(ii)                                  any release, waiver, forbearance or discharge, in whole or in part, of any obligation of Parent, Sub or the NDA Party contained in the Merger Agreement or the Confidentiality Agreement (other than with respect to any of the Guaranteed Obligations);

 

(iii)                               any change in the corporate existence, structure or ownership of Parent, Sub or the NDA Party, or any other Person now or hereafter liable with respect to the Guaranteed Obligations or otherwise interested in the transactions contemplated by the Merger Agreement;

 

(iv)                              any insolvency, bankruptcy, reorganization or other similar proceeding affecting Parent, Sub or the NDA Party, or any other Person now or hereafter liable with respect to the Guaranteed Obligations or otherwise interested in the transactions contemplated by the Merger Agreement or any of their assets;

 

(v)                                 any compromise, rescission, consolidation, amendment, waiver or modification of the Merger Agreement or the Confidentiality Agreement, or change in the manner, place or terms of payment or performance, or any change or extension of the time of payment or performance of, renewal or alteration of, any Guaranteed Obligation, any escrow arrangement or other security therefor, any liability incurred directly or indirectly in respect thereof, or any amendment or waiver of or any consent to any departure from the terms of the Merger Agreement, the Financing Commitments, the Confidentiality Agreement, or the other documents entered into in connection therewith;

 

(vi)                              the existence of any claim, set-off or other right that the Guarantor may have at any time against Parent, Sub, the NDA Party or the Company, whether in connection with any Guaranteed Obligation or otherwise;

 

(vii)                           the adequacy of any other means the Company may have of obtaining repayment of any of the Guaranteed Obligations;

 

(viii)                        the failure of the Company to assert any claim or demand or to enforce any right or remedy against any of Parent, Sub or the NDA Party;

 

(ix)                              the addition, substitution or release of any Person now or hereafter liable with respect to the Guaranteed Obligations or otherwise interested in the transactions contemplated by the Merger Agreement or the Confidentiality Agreement; or

 

(x)                                 any other occurrence, circumstance, act or omission that may or might in any manner or to any extent vary the risk of the Guarantor or otherwise operate as a discharge of the Guarantor as a matter of law or equity (other than payment of the Guaranteed Obligations);

 

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provided that, notwithstanding any other provision of this Limited Guarantee to the contrary, the Company hereby agrees that the Guarantor may assert any defense that Parent, Sub or the NDA Party could assert against the Company under the terms of the Merger Agreement or the Confidentiality Agreement that would relieve each of Parent and Sub of its obligations under the Merger Agreement or the NDA Party of its obligations under the Confidentiality Agreement.

 

(c)                                  The Guarantor hereby waives any and all notice of the creation, renewal, extension or accrual of any of the Guaranteed Obligations and notice of or proof of reliance by the Company upon this Limited Guarantee or acceptance of this Limited Guarantee. Without expanding the obligations of the Guarantor hereunder, the Guaranteed Obligations, and any of them, shall conclusively be deemed to have been created, contracted or incurred in reliance upon this Limited Guarantee, and all dealings between Parent, Sub, the NDA Party or the Guarantor, on the one hand, and the Company, on the other, shall likewise be conclusively presumed to have been had or consummated in reliance upon this Limited Guarantee. The Guarantor acknowledges that it will receive substantial direct and indirect benefits from the transactions contemplated by the Merger Agreement and that the waivers set forth in this Limited Guarantee are knowingly made in contemplation of such benefits. Except as expressly provided herein, when pursuing its rights and remedies hereunder against the Guarantor, the Company shall be under no obligation to pursue such rights and remedies it may have against Parent, Sub, the NDA Party or any other Person for the Guaranteed Obligations or any right of offset with respect thereto, and any failure by the Company to pursue such other rights or remedies or to collect any payments from Parent, Sub, the NDA Party or any such other Person or to realize upon or to exercise any such right of offset, and any release by the Company of Parent, Sub, the NDA Party or any such other Person or any right of offset, shall not relieve the Guarantor of any liability hereunder, and shall not impair or affect the rights and remedies, whether express, implied or available as a matter of Law, of the Company.

 

(d)                                 The Company shall not be obligated to file any claim relating to any Guaranteed Obligation in the event that Parent, Sub or the NDA Party becomes subject to a bankruptcy, reorganization or similar proceeding, and the failure of the Company to so file any claim shall not affect the Guarantor’s obligations hereunder. In the event that any payment to the Company in respect of any Guaranteed Obligation hereunder is rescinded or must otherwise be returned for any reason whatsoever, the Guarantor shall remain liable hereunder with respect to the Guaranteed Obligation as if such payment had not been made so long as this Limited Guarantee has not been terminated.

 

3.                                      Waiver of Acceptance, Presentment, etc.  Subject to the proviso in Section 2(b)(x), the Guarantor hereby expressly and irrevocably waives any and all rights or defenses arising by reason of any Law which would otherwise require any election of remedies by the Company. The Guarantor waives promptness, diligence, notice of the acceptance of this Limited Guarantee and of any Guaranteed Obligations, presentment, demand for payment, notice of non-performance, default, dishonor and protest, notice of the incurrence of any Guaranteed Obligations and all other notices of any kind (other than notices to be provided in accordance with Section 12 hereof or Section 11.03 of the Merger Agreement), all defenses which may be available by virtue of any valuation, stay, moratorium Law or other similar Law now or hereafter in effect, any right to require the marshalling of assets of Parent or any other Person interested in the transactions contemplated by the Merger Agreement, and all suretyship defenses generally

 

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(other than breach by the Company of this Limited Guarantee).  Subject to the proviso in Section 2(b)(x), the Guarantor hereby unconditionally and irrevocably agrees that it shall not, directly or indirectly, institute any proceeding or make any claim asserting that this Limited Guarantee is illegal, invalid or unenforceable in accordance with its terms. The Guarantor acknowledges that it will receive substantial direct and indirect benefits from the transactions contemplated by the Merger Agreement and that the waivers set forth in this Limited Guarantee are knowingly made in contemplation of such benefits and after the advice of counsel.

 

4.                                      Sole Remedy.

 

(a)                                 The Company acknowledges and agrees that, as of the date hereof, neither Parent nor Sub has any assets, other than their respective rights under the Merger Agreement and the agreements contemplated thereby. Except as specifically contemplated by this Limited Guarantee or the Equity Commitment Letter, the Company acknowledges and agrees that no funds are expected to be contributed to Parent or Sub unless the Offer Closing or Merger Closing occurs, and that, except for rights against Parent and Sub to the extent expressly provided in the fourth paragraph of the Equity Commitment Letter and Section 11.10(b) of the Merger Agreement and subject to all of the terms, conditions and limitations herein and therein, the Company shall not have any right to cause any assets to be contributed to Parent or Sub by the Guarantor, any Guarantor Affiliate (as defined below) or any other Person.

 

(b)                                 Without limiting any obligations of Parent or Sub under the Merger Agreement or Guarantor under the Equity Commitment Letter, the Company agrees that the Guarantor shall not have any obligation or liability to any Person relating to, arising out of or in connection with this Limited Guarantee other than as expressly set forth herein and that the Company has no remedy, recourse or right of recovery against, or contribution from, and no personal liability shall attach to, (i) any former, current or future, direct or indirect director, officer, employee or agent of the Guarantor, Parent, Sub or the NDA Party, (ii) any former, current or future, direct or indirect Affiliate of the Guarantor, Parent, Sub or the NDA Party (other than the Guarantor, Parent, Sub and the NDA Party, but only for Guarantee Claims, Merger Agreement Claims, Equity Commitment Claims and Confidentiality Agreement Claims (each as defined below)), (iii) any lender or prospective lender, lead arranger, arranger, agent or representative of or to the Guarantor, Parent, Sub or the NDA Party, (iv) any former, current or future, direct or indirect holder of any Equity Interests or securities of the Guarantor, Parent, Sub or the NDA Party (whether such holder is a limited or general partner, member, stockholder or otherwise) (other than the Guarantor, Parent, Sub and the NDA Party, but only for Guarantee Claims, Merger Agreement Claims, Equity Commitment Claims and Confidentiality Agreement Claims), or (v) any former, current or future assignee of the Guarantor, Parent, Sub or the NDA Party or any former, current or future director, officer, employee, agent, general or limited partner, manager, member, stockholder, Affiliate, controlling person, representative or assignee of any of the foregoing (other than the Guarantor, Parent, Sub and the NDA Party, but only for Guarantee Claims, Merger Agreement Claims, Equity Commitment Claims and Confidentiality Agreement Claims) (those Persons described in the foregoing clauses (i), (ii), (iii) and (iv), together, with any other Non-Recourse Parent Party (as defined in the Equity Commitment Letter), being referred to herein collectively as “Guarantor Affiliates”), through the Guarantor, Parent, Sub or the NDA Party or otherwise, whether by or through attempted piercing of the corporate veil or similar action, by the enforcement of any assessment or by any legal or equitable proceeding, by

 

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virtue of any statute, regulation or applicable Law, by or through a claim by or on behalf of the Guarantor, Parent, Sub or the NDA Party against the Guarantor, any Guarantor Affiliates, the NDA Party, Parent or Sub or otherwise in respect of any liabilities or obligations relating to, arising out of or in connection with, this Limited Guarantee, except, in each case, for (w) its rights against the Guarantor under this Limited Guarantee, (x) its third party beneficiary rights under the Equity Commitment Letter, (y) its rights and remedies against the NDA Party under the Confidentiality Agreement and (z) its rights against Parent or Sub under, and in accordance with, the terms and conditions of the Merger Agreement; provided that in the event the Guarantor (i) consolidates with or merges with any other Person and is not the continuing or surviving entity of such consolidation or merger or (ii) transfers or conveys all or a substantial portion of its properties and other assets to any Person such that the sum of the Guarantor’s remaining net assets plus its uncalled capital is less than the Maximum Liability Cap (less amounts paid under this Limited Guarantee prior to such event), then, and in each such case, the Company may seek recourse, whether by the enforcement of any judgment or assessment or by any legal or equitable proceeding or by virtue of any applicable Law, against such continuing or surviving entity or such Person (in either case, a “Successor Entity”), as the case may be, but only to the extent of the unpaid liability of the Guarantor hereunder up to the amount of the Guaranteed Obligations for which the Guarantor is liable, as determined in accordance with this Limited Guarantee. Except for Guarantee Claims, Merger Agreement Claims, Equity Commitment Claims and Confidentiality Agreement Claims (each as defined below), recourse against the Guarantor and any Successor Entity under this Limited Guarantee shall be the sole and exclusive remedy (whether at law, in equity, in contract, in tort or otherwise) of the Company and all of its Affiliates and Subsidiaries against the Guarantor and any Guarantor Affiliate in respect of any liabilities or obligations arising under, or in connection with, the Merger Agreement or the transactions contemplated thereby, and such recourse shall be subject to the limitations described herein and therein.

 

(c)                                  The Company hereby covenants and agrees that it shall not institute, and shall cause its Affiliates not to institute, any proceeding or bring any other claim arising under, or in connection with, the Merger Agreement, this Limited Guarantee, the Equity Commitment Letter or, in each case, the transactions contemplated thereby, against the Guarantor or any Guarantor Affiliate except for (i) claims by the Company against the Guarantor and any Successor Entity under and in accordance with this Limited Guarantee (“Guarantee Claims”), (ii) claims by the Company against Parent or Sub under and in accordance with the Merger Agreement (“Merger Agreement Claims”), (iii) claims by the Company against the NDA Party under and in accordance with the Confidentiality Agreement (“Confidentiality Agreement Claims”) and (iv) to the extent (but only to the extent) the Company is expressly entitled under the Merger Agreement to cause Parent to enforce the Equity Commitment Letter in accordance with the terms thereof, claims by the Company against Parent seeking to cause Parent to enforce the Equity Commitment Letter in accordance with its terms and subject to the limitations in the Merger Agreement (“Equity Commitment Claims”), and the Company hereby, on behalf of itself and its Affiliates (and to the extent permitted by Law, its Representatives), hereby releases the Guarantor and each Guarantor Affiliate from and with respect to any and all claims, known or unknown, now existing or hereafter arising, under, or in connection with, the Merger Agreement, this Limited Guarantee, the Equity Commitment Letter or, in each case, the transactions contemplated thereby or otherwise relating thereto, whether by or through attempted piercing of the corporate (or limited liability company or partnership) veil, by or through a claim by or on

 

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behalf of the Guarantor, Parent or Sub or any other Person against the Guarantor or any Guarantor Affiliate, or otherwise under any theory of law or equity, in each case, except for Guarantee Claims, Merger Agreement Claims, Confidentiality Agreement Claims or Equity Commitment Claims.

 

(d)                                 For all purposes of this Limited Guarantee, a Person shall be deemed to have pursued a claim against another Person if such first Person brings a legal action against such Person, adds such other Person to an existing legal proceeding, or otherwise asserts in writing a legal claim of any nature relating to the Merger Agreement and the other agreements contemplated hereby against such Person other than such actions as are expressly contemplated and permitted in the Merger Agreement and the other agreements contemplated hereby.

 

5.                                      Subrogation.  The Guarantor will not exercise against Parent, Sub or the NDA Party any rights of subrogation or contribution, whether arising by contract or operation of Law (including, without limitation, any such right arising under bankruptcy or insolvency Laws) or otherwise, by reason of any payment by any of them pursuant to the provisions of Section 1 unless and until the Guaranteed Obligations have been indefeasibly paid in full.

 

6.                                      Termination.

 

(a)                                 This Limited Guarantee shall terminate upon, and the Guarantor shall not have any further liability or obligation under this Limited Guarantee from and after, the earliest of: (i) the Effective Time, (ii) the termination of the Merger Agreement by mutual written consent of Parent and the Company pursuant to Section 9.01(a) thereof, (iii) the termination of the Merger Agreement by the Company pursuant to Section 9.01(f) thereof, (iv) the payment by the Guarantor, Parent or Sub of the entire Parent Termination Fee or an amount of the Guaranteed Obligations equal to the Maximum Liability Cap, and (v) the six-month anniversary following termination of the Merger Agreement in accordance with its terms (other than terminations for which clauses (ii) or (iii) applies), unless prior to such six-month anniversary (A) the Company shall have delivered a written notice with respect to any of the Guaranteed Obligations and (B) the Company shall have commenced an Action against Guarantor, Parent or Sub alleging the Parent Termination Fee is due and owing, or that Parent or Sub are liable for any other payment obligations under the Merger Agreement (including Section 7.09(d) and Section 9.03(g) thereof) or against the Guarantor that amounts are due and owing from the Guarantor pursuant to Section 1, in which case this Limited Guarantee shall survive solely with respect to amounts so alleged to be owing; provided that, with respect to the foregoing clause (v), if the Merger Agreement has been terminated, such notice has been provided and such Action has been commenced, the Guarantor shall have no further liability or obligation under this Limited Guarantee from and after the earliest of (x) a final, non-appealable order of a court of competent jurisdiction in accordance with Section 14 hereof determining that the Guarantor does not owe any amount under this Limited Guarantee and (y) a written agreement among the Guarantor and the Company that specifically references this Section 6(a)(v) in which the Company acknowledges that the obligations and liabilities of the Guarantor pursuant to this Limited Guarantee are terminated.

 

(b)                                 In the event that the Company, directly or indirectly, institutes any Action or makes any claim asserting that the provisions of this Limited Guarantee are illegal, invalid or

 

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unenforceable in whole or in part or that the Guarantor is liable in excess of or to a greater extent than the Maximum Liability Cap (excluding in each case the exercise of the Company’s rights to specific performance under the Equity Commitment Letter and Section 11.10(b) of the Merger Agreement), then (x) the obligations and liabilities of the Guarantor under this Limited Guarantee shall terminate ab initio and be null and void, and (y) none of the Guarantor, Parent, Sub, the NDA Party nor any Guarantor Affiliate shall have any liability to the Company or any of its Affiliates under this Limited Guarantee.

 

7.                                      Continuing Guarantee.  Unless terminated pursuant to the provisions of Section 6, this Limited Guarantee is a continuing one and shall remain in full force and effect until the indefeasible payment and satisfaction in full of the Guaranteed Obligations, shall be binding upon the Guarantor, its successors and assigns, and any Successor Entity, and shall inure to the benefit of, and be enforceable by, the Company and its permitted successors, transferees and assigns. All obligations to which this Limited Guarantee applies or may apply under the terms hereof shall be conclusively presumed to have been created in reliance hereon.

 

8.                                      Entire Agreement.  This Limited Guarantee, the Merger Agreement, the Confidentiality Agreement and the Equity Commitment Letter constitute the entire agreement and supersede all prior agreements and understandings, both written and oral, between the parties with respect to the subject matter hereof.

 

9.                                      Amendment; Waivers, etc.  No amendment, modification or discharge of this Limited Guarantee, and no waiver hereunder, shall be valid or binding unless set forth in writing and duly executed by the party against whom enforcement of the amendment, modification, discharge or waiver is sought. Any such waiver shall constitute a waiver only with respect to the specific matter described in such writing and shall in no way impair the rights of the party granting such waiver in any other respect or at any other time. The waiver by any of the parties hereto of a breach of or a default under any of the provisions of this Limited Guarantee or a failure to or delay in exercising any right or privilege hereunder, shall not be construed as a waiver of any other breach or default of a similar nature, or as a waiver of any of such provisions, rights or privileges hereunder. The rights and remedies herein provided are cumulative and none is exclusive of any other, or of any rights or remedies that any party may otherwise have at Law or in equity.

 

10.                               No Third Party Beneficiaries.  Except for the provisions of this Limited Guarantee which reference Guarantor Affiliates (each of which shall be for the benefit of and enforceable by each Guarantor Affiliate), the parties hereby agree that their respective representations, warranties and covenants set forth herein are solely for the benefit of the other parties hereto, in accordance with and subject to the terms of this Limited Guarantee, and this Limited Guarantee is not intended to, and does not, confer upon any person other than the parties hereto and any Guarantor Affiliate any rights or remedies hereunder, including the right to rely upon the representations and warranties set forth herein.

 

11.                               Counterparts.  This Limited Guaranty may be executed by facsimile or other means of electronic transmission and in one or more counterparts, and by the different parties hereto in separate counterparts, each of which when executed and delivered shall be deemed to be an original but all of which taken together shall constitute one and the same agreement.

 

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12.                                 Notices. All notices, requests, claims, demands, waivers and other communications required or permitted to be given under this Limited Guarantee shall be in writing and shall be deemed given when received if delivered personally; when transmitted if transmitted by facsimile or by electronic mail (with written confirmation of transmission); the Business Day after it is sent, if sent for next day delivery to a domestic address by overnight courier (providing proof of delivery) to the parties at the following addresses (or at such other address for a party as shall be specified by like notice):

 

(a)                                  if to the Company,

 

The Talbots, Inc.
One Talbots Drive
Hingham, MA 02043
Fax No.:		(781) 741-4927
Attention:		Michael Scarpa
	Chief Operating Officer/Chief Financial Officer
Email:  michael.scarpa@talbots.com
with a copy (which shall not constitute notice) to:
White & Case LLP
1155 Avenue of the Americas
New York, NY 10036
Attention:		Morton A. Pierce
		Chang-Do Gong
Facsimile:		(212) 354 8113
Email:		mpierce@whitecase.com
		cgong@whitecase.com
if to the Guarantor,
c/o Sycamore Partners Management, L.L.C.
9 West 57th Street, 31st Floor
New York, New York 10019
Attention: Stefan Kaluzny and Peter Morrow
with a copy (which shall not constitute notice) to:
Winston & Strawn LLP
35 West Wacker Drive
Chicago, IL 60601
Attention:		James P. Faley, Jr.
Facsimile:		(312) 558-5700
Email:		jfaley@winston.com

 

And

 

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Law Offices of Gary M. Holihan, P.C.

2345 Larkdale Drive

Glenview, IL 60025

Attention: Gary M. Holihan

Email:  garyholihan@gmail.com

 

or, in each case, at such other address as may be specified in writing to the other party.

 

All such notices, requests, demands, waivers and other communications shall be deemed to have been received (i) if by personal delivery, on the day after such delivery, (ii) if by certified or registered mail, on the seventh Business Day after the mailing thereof, (iii) if by next-day or overnight mail or delivery, on the day delivered or (iv) if by fax, on the next day following the day on which such fax was sent, provided that a copy is also sent by certified or registered mail.

 

13.                                 Governing Law. THIS LIMITED GUARANTEE AND ANY ACTION (WHETHER AT LAW, IN CONTRACT OR IN TORT) THAT MAY BE DIRECTLY OR INDIRECTLY BASED UPON, RELATING TO ARISING OUT OF THIS LIMITED GUARANTEE, OR THE NEGOTIATION, EXECUTION OR PERFORMANCE HEREOF, SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE, REGARDLESS OF THE LAWS THAT MIGHT OTHERWISE GOVERN UNDER APPLICABLE PRINCIPLES OF CONFLICTS OF LAWS THEREOF.

 

14.                                 Consent to Jurisdiction, etc. Each of the parties hereto irrevocably submits to the exclusive jurisdiction of the Court of Chancery of the State of Delaware or, if such court lacks subject matter jurisdiction, the United States District Court sitting in New Castle County in the State of Delaware, for the purpose of any Action directly or indirectly based upon, relating to arising out of this Limited Guarantee or the negotiation, execution or performance hereof, and each of the parties hereto hereby irrevocably agrees that all claims in respect to such Action shall be brought in, and may be heard and determined, exclusively in such state or federal courts. Each of the parties hereto irrevocably and unconditionally waives any objection to the laying of venue in, and any defense of inconvenient forum to the maintenance of, any Action so brought. Each of the parties hereto agrees that a final judgment in any Action shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by Law. Each of the parties irrevocably consents to the service of the summons and complaint and any other process in any other Action relating to the transactions contemplated by this Limited Guarantee, on behalf of itself or its property, by personal delivery of copies of such process to such party at the addresses set forth in Section 12.  Nothing in this Section 14 shall affect the right of any party to serve legal process in any other manner permitted by Law. Each of the parties hereto hereby irrevocably and unconditionally agrees (i) to the extent such party is not otherwise subject to service of process in the State of Delaware, to appoint and maintain an agent in the State of Delaware as such party’s agent for acceptance of legal process, and (ii) that, to the fullest extent permitted by applicable Law, service of process may also be made on such party by prepaid certified mail with a proof of mailing receipt validated by the U.S. Postal Service constituting evidence of valid service, and that service made pursuant to (i) or (ii) above shall, to the fullest extent permitted by applicable Law, have the same legal force and effect as if served

 

9

 

upon such party personally within the State of Delaware. The Guarantor hereby appoints Corporation Trust Company, 1209 Orange Street, in the City of Wilmington, County of New Castle, 19801, as its agent.

 

15.                                 Waiver of Jury Trial.  EACH PARTY HERETO ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS LIMITED GUARANTEE IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN ANY LITIGATION DIRECTLY OR INDIRECTLY BASED UPON, RELATING TO ARISING OUT OF THIS LIMITED GUARANTEE OR THE NEGOTIATION, EXECUTION OR PERFORMANCE HEREOF. EACH PARTY HERETO CERTIFIES AND ACKNOWLEDGES THAT (I) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (II) EACH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATION OF THIS WAIVER, (III) EACH PARTY MAKES THIS WAIVER VOLUNTARILY AND (IV) EACH PARTY HAS BEEN INDUCED TO ENTER INTO THIS LIMITED GUARANTEE BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS CONTAINED HEREIN.

 

16.                                 Representations and Warranties.  The Guarantor hereby represents and warrants with respect to itself to the Company that: (a) it is duly organized and validly existing under the Laws of its jurisdiction of organization, (b) it has all limited partnership power and authority to execute, deliver and perform this Limited Guarantee, (c) the execution, delivery and performance of this Limited Guarantee by the Guarantor has been duly and validly authorized and approved by all necessary limited partnership action, and no other proceedings or actions on the part of the Guarantor are necessary therefor, (c) this Limited Guarantee has been duly and validly executed and delivered by it and constitutes a valid and legally binding obligation of it, enforceable against the Guarantor in accordance with its terms, subject to the Enforceability Exceptions, (d) the Guarantor has uncalled capital commitments equal to or in excess of the Maximum Liability Cap and its limited partners or other investors have the obligation to fund such capital, (e) the execution, delivery and performance by the Guarantor of this Limited Guarantee do not and will not (i) violate the organizational documents of the Guarantor, (ii) violate any applicable Law or Order, or (iii) result in any violation of, or default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancelation or acceleration of any obligation, any contract to which the Guarantor is a party, in any case, for which the violation, default or right would be reasonably likely to prevent or materially impede, interfere with, hinder or delay the consummation by the Guarantor of the transactions contemplated by this Limited Guarantee on a timely basis and (f) it has the financial capacity to pay and perform all of its obligations under this Limited Guarantee, and all funds necessary to fulfill the Guaranteed Obligations under this Limited Guarantee shall be available to the Guarantor for as long as this Limited Guarantee shall remain in effect.

 

17.                                 No Assignment.  Neither the Guarantor nor the Company may assign their respective rights, interests or obligations hereunder to any other person (except by operation of law) without the prior written consent of the Company (in the case of an assignment by the

 

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Guarantor) or the Guarantor (in the case of an assignment by the Company).

 

18.                                 Severability.  If any provision, including any phrase, sentence, clause, section or subsection, of this Limited Guarantee is invalid, inoperative or unenforceable for any reason, such circumstances shall not have the effect of rendering such provisions in question invalid, inoperative or unenforceable in any other case or circumstance, or of rendering any other provision herein contained invalid, inoperative, or unenforceable to any extent whatsoever; provided, that this Limited Guarantee may not be enforced without giving effect to the limitation of the amount payable hereunder to the Maximum Liability Cap provided in Section 1 hereof and to the provisions of Section 4 and Section 6.  No party shall assert, and each party shall cause its respective Affiliates not to assert, that this Limited Guarantee or any part hereof is invalid, illegal or unenforceable.

 

19.                                 Headings.  The headings contained in this Limited Guarantee are for convenience purposes only and will not in any way affect the meaning or interpretation hereof.

 

20.                                 Relationship of the Parties; Several Liability.  Each party acknowledges and agrees that (a) this Limited Guarantee is not intended to, and does not, create any agency, partnership, fiduciary or joint venture relationship between or among any of the parties hereto and neither this Limited Guarantee nor any other document or agreement entered into by any party hereto relating to the subject matter hereof shall be construed to suggest otherwise and (b) the obligations of the Guarantor under this Limited Guarantee are solely contractual in nature. In no event shall Parent, Sub, the NDA Party or the Guarantor be considered an “Affiliate”, “security holder” or “representative” of the Company for any purpose of this Limited Guarantee.

 

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IN WITNESS WHEREOF, the undersigned have executed and delivered this Limited Guarantee as of the date first written above.

 

	SYCAMORE PARTNERS, L.P.
	SYCAMORE PARTNERS A, L.P.
	By: Sycamore Partners GP, L.L.C.
	Its: General Partner
	By: Sycamore Partners MM, L.L.C.
	Its: Managing Member
	By:	/s/ Stefan Kaluzny
	Name:	Stefan Kaluzny
	Title:	Managing Member
	Accepted and agreed to as of the date first written above:
	THE TALBOTS, INC.
	By:	/s/ Trudy F. Sullivan
	Name:	Trudy F. Sullivan
	Title:	President & Chief Executive Officer

 

Exhibit 9

 

[EXECUTION COPY]

 

 

	General Electric Capital Corporation
	GE Capital Markets, Inc.
	125 Summer Street, 12th Floor
	Boston, Massachusetts 02110

 

 

CONFIDENTIAL

 

May 30, 2012

 

TLB Merger Sub Inc.

c/o Sycamore Partners Management, L.L.C.

9 West 57th Street, 31st Floor

New York, New York 10019

Attention: Peter Morrow and Ryan McClendon

 

Project Boston

$200,000,000 Second Amended and Restated Credit Agreement

Commitment Letter

 

Ladies and Gentlemen:

 

You (“Merger Sub”) have advised General Electric Capital Corporation (“GE Capital”) that Merger Sub, an entity formed by investment funds managed by Sycamore Partners Management, L.L.C. (the “Sponsor”), intends to acquire (the “Acquisition”), directly or indirectly, all of the outstanding shares of capital stock of The Talbots, Inc. (the “Company” or the “Borrower” and, together with its subsidiaries, the “Target”) in accordance with that certain Agreement and Plan of Merger, by and among TLB Holdings LLC, a Delaware limited liability company (“Parent”), Merger Sub and the Company, together with the Company Disclosure Letter and all other Schedules, Exhibits and ancillary agreements thereto (each, in form and substance substantially identical to the Agreement and Plan of Merger dated as of the date hereof and sent by electronic mail by you at 4:16 p.m. (Eastern time) accompanied by the Company Disclosure Letter sent by electronic mail by you at 5:23 p.m. (Eastern time) on the date hereof and, in the case of amendments, waivers or other modifications that are materially adverse to the interests of the Lenders, as such amendments, waivers or other modifications are reasonably approved by the Administrative Agent, the “Acquisition Agreement”), through a merger transaction or by means of the purchase of a majority of the shares of the Company pursuant to a cash tender offer, a subsequent issuance of additional shares by the Company to you (if necessary) and the subsequent consummation of a short-form merger, in each case, as more particularly set forth in the Acquisition Agreement.

 

GE Capital is pleased to commit to provide (directly and/or through one or more of its direct or indirect subsidiaries) a $200,000,000 senior secured credit facility (the “Credit Facility”) in connection with the Acquisition and to act as administrative agent (in such capacity, the “Administrative Agent”) for the Credit Facility with GE Capital Markets, Inc. (the “Lead Arranger” and, together with GE Capital, the “Commitment Parties”) acting as the sole lead arranger and sole bookrunner for the Credit Facility, in each case, subject solely to the terms expressly set forth or referred to in this letter (together with the schedule of closing conditions attached as Schedule I hereto and the schedule of modifications to the

 

 

Existing Credit Agreement (as defined below) attached as Schedule II hereto (such schedules together with this letter, collectively, the “Commitment Letter”) and in the fee letter between you and GE Capital of even date herewith and acknowledged and agreed as to paragraphs D and E thereof by Sycamore Partners, L.P. and Sycamore Partners A, L.P. (the “Fee Letter”).

 

The Transaction.

 

You have also advised the Commitment Parties that you intend to finance the Acquisition and costs and expenses related to the Transaction (as hereinafter defined) solely from (i) a cash equity investment of not less than $84,000,000 by Sponsor and/or its affiliates (such contribution, the “Equity Contribution”) , (ii) the Term Facility (as such term is defined below), and (iii) to the extent the Acquisition and costs and expenses of the Transaction are not funded by the sources in the preceding clauses (i) and (ii), one or more of the following sources:  (A)  the proceeds of a subordinated secured term loan facility in an aggregate amount equal to $25,000,000 with the Sponsor or an affiliate of Sponsor as lender and on terms and conditions (including an intercreditor agreement) reasonably satisfactory to the Administrative Agent (the “Sycamore Third Lien Facility”), (B) the net proceeds of the Real Estate Sale transaction contemplated by paragraph 15 on Schedule I hereto and (C) the net proceeds of the Vendor Financing transaction contemplated by paragraph 16 on Schedule I hereto in an amount not to exceed $50 million; it being understood and agreed that (x) no proceeds from the loans or other credit extensions under the Credit Facility shall be used to finance the Acquisition (but, for the avoidance of doubt, the Credit Facility may be used to pay restructuring and operating expenses of the Company (other than any fees and expenses specifically relating to the Transactions) which have accrued as of the Effective Date (“Accrued Company Expenses”)) and (y) solely to the extent that the Credit Facility shall be consummated pursuant to a New Credit Agreement (as defined below), proceeds from the loans under the Credit Facility on the Effective Date, may be used solely to refinance outstanding indebtedness under the Existing Credit Agreement (as defined below) and for payment of any Accrued Company Expenses.  The Acquisition, the entering into and funding of the Credit Facility, the receipt of proceeds from (and the consummation of the transactions related to) the Equity Contribution, the entering into of an amended and restated term loan facility with Wells Fargo Bank, National Association acting as administrative agent in an initial aggregate principal amount of at least $85,000,000 (representing approximately $11 million in incremental financing in addition to the current outstanding principal amount of the Term Facility) and on terms and conditions meeting the requirements of Section 3 of Schedule I hereto (the “Term Facility”), the entering into and funding of the Sycamore Third Lien Facility, the Real Estate Sale and the Vendor Financing referred to above, together with all other transactions related to the financing and consummation of the Acquisition are hereinafter collectively referred to as the “Transaction.”

 

Reference is made to that certain Amended and Restated Credit Agreement dated as of February 16, 2012 entered into by and among The Talbots, Inc., The Talbots Group Limited Partnership and Talbots Classics Finance Company, Inc. as borrowers (collectively the “Existing Borrowers”), certain other credit parties designated therein (together with the Existing Borrowers, the “Credit Parties”), GE Capital, as administrative agent (the “Existing Administrative Agent”) for itself and the other financial institutions from time to time party thereto as lenders (collectively, the “Existing Lenders”) (as amended and in effect on the date hereof, the “Existing Credit Agreement”).  Pursuant to the terms and conditions of the Existing Credit Agreement, upon the closing of the Acquisition, a “Change in Control” (as defined in the Existing Credit Agreement) will occur.  It is anticipated that the Credit Facility shall take the form of a second amended and restated credit agreement with the Existing Borrowers, the other Credit Parties and Parent (the “Second A&R Credit Agreement”), which shall be on the terms set forth in this Commitment Letter (including those terms described under “Credit Documentation” on Schedule I hereto and the modifications set forth on Schedule II hereto) and the Fee Letter (solely with respect to pricing terms and other matters not affecting the availability of the Credit Facility) and pursuant to which such Change in

 

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Control default in respect of the Transaction and any default arising out of (i) the breach of any representation or warranty, or reporting or notice requirement, under the Existing Credit Agreement (solely to the extent made or required to be made under the Existing Credit Agreement and not made or required to be made under the Second A&R Credit Agreement) and (ii) any merger occurring pursuant to the Acquisition Agreement shall be waived (the “Waiver”).  The Credit Documentation will provide that all representations and warranties, affirmative and negative covenants and defaults (which term, as used herein, shall include events of default) will apply only from and after the Effective Date after giving effect to the Acquisition and the Merger (notwithstanding the amendment or amendment and restatement of the Existing Credit Agreement) with the effect that no violation or breach of any representation, warranty or covenant or default that existed under the Existing Credit Agreement prior to the Effective Date shall constitute or give rise to a violation, breach or default under the Second A&R Credit Agreement unless such violation, breach or default continues, and constitutes a default under the Credit Documentation, on and after the Effective Date.

 

The Existing Administrative Agent and Existing Lenders shall have received an omnibus release, in form and substance reasonably satisfactory to the Administrative Agent (the “Existing Lender Release”), from each of the Existing Credit Parties in favor of the Existing Administrative Agent and Existing Lenders providing for, among other things, a release of all liabilities and potential liabilities arising under, in connection with or otherwise relating to the Existing Credit Agreement, the extensions of credit thereunder or any transaction contemplated thereby.  It is understood and agreed that GE Capital will use its best efforts to arrange the Credit Facility pursuant to the Second A&R Credit Agreement as set forth above; provided, however, that notwithstanding anything to the contrary contained herein, there is no assurance whatsoever that such arrangement will be successful and that the requisite number of Existing Lenders under the Existing Credit Agreement (the “Required Existing Lenders”) will consent to the Waiver and otherwise consummating the Transaction under the Credit Facility pursuant to a Second A&R Credit Agreement.  As such, if the Required Existing Lenders under the Existing Credit Agreement (giving effect to assignments occurring thereunder on or prior to the Effective Date) shall not have approved the Second A&R Credit Agreement, then the Credit Facility shall instead take the form of a new credit agreement (the “New Credit Agreement”) which (along with related guarantee and security documentation) shall refinance the Existing Credit Agreement and shall be on the same terms as the Second A&R Credit Agreement and references herein or on Schedules I and II to the Second A&R Credit Agreement shall (as appropriate) be deemed to be references to the New Credit Agreement.

 

Conditions Precedent.

 

GE Capital’s commitment hereunder and the undertaking of GE Capital Markets, Inc. to provide the services described herein are subject only to the satisfaction of each of the following conditions precedent (the date and time on which such conditions are satisfied, the “Effective Date”): (a) the accuracy and completeness in all material respects of all Acquisition Agreement Representations and all Specified Representations (each, as defined below); (b) the satisfaction of the Conditions to Closing set forth on Schedule I attached hereto; (c) (i) from January 28, 2012 to the date of this Commitment Letter, except as (x) disclosed in the Company SEC Filings (as defined in the Acquisition Agreement) filed after January 28, 2012 and prior to the date hereof (other than disclosure in the Company SEC Filings referred to in the “Risk Factors” and “Forward Looking Statements” sections thereof or any statements included in such Company SEC Filings that are forward-looking in nature), (y) set forth in Section 4.09 of the Company Disclosure Letter (as defined in the Acquisition Agreement) or (z) disclosed in the Acquisition Agreement, there shall not have been any Company Material Adverse Effect (as defined in the Acquisition Agreement) and (ii) since the date of this Commitment Letter, there shall not have been a Company Material Adverse Effect, in each case in clauses (i) and (ii) that would result in the failure of a condition precedent to your (or your affiliate’s) obligations to consummate the Acquisition under the Acquisition Agreement, and (d) solely to the extent the Credit Facility is provided pursuant to the Second

 

3

 

A&R Credit Agreement, the receipt of the consent of the Required Existing Lenders under the Existing Credit Agreement to the Transaction contemplated hereby.  It is understood and agreed that there are no conditions (implied or otherwise) to the commitments hereunder (including compliance with the terms of the Commitment Letter, the Fee Letter and the Credit Documentation) other than as set forth in the foregoing clauses (a) through (d), and upon satisfaction (or waiver by the Administrative Agent) of such conditions, the Credit Documentation (including the Waiver) shall be effective and any funding requested to repay outstanding indebtedness under the Existing Credit Agreement (if applicable) and for payment of any Accrued Company Expenses, in either case, on the Effective Date under the Credit Facility shall occur; provided that the Administrative Agent agrees that it shall not waive any such condition (and no such condition of the Commitment Letter shall be amended or modified) without the consent of the Merger Sub.  Notwithstanding anything in this Commitment Letter, the Fee Letter or any other agreement or other understanding concerning the Credit Facility to the contrary, GE Capital’s commitment herein shall not become effective unless and until the Acquisition Agreement shall have been executed by Parent, you and the Company.

 

Notwithstanding anything in this Commitment Letter, the Fee Letter or any other agreement or other understanding concerning the Credit Facility to the contrary, (a) the only representations and warranties relating to Parent, Merger Sub, the Company, the Borrower and their respective subsidiaries and their business and assets the accuracy of which shall be a condition to the closing or availability of the Second A&R Credit Agreement on the Effective Date shall be: (i) such of the representations made by or on behalf of the Target in the Acquisition Agreement as are material to the interests of the Administrative Agent and the Lenders (as hereinafter defined), but solely to the extent that you have (or an affiliate of yours has) the right to terminate your (or such affiliate’s) obligations under the Acquisition Agreement or the right not to consummate the Acquisition as a result of a breach of such representations and warranties in the Acquisition Agreement (collectively, the “Acquisition Agreement Representations”) and (ii) the Specified Representations (as defined below) and (b) the terms of the Credit Documentation for the Second A&R Credit Agreement shall not impair the availability of the Second A&R Credit Agreement on the Effective Date if the conditions set forth in this Commitment Letter are satisfied on the Effective Date, it being understood that, to the extent any perfected security interest in Collateral (as defined in the Existing Credit Agreement), the security interest in respect of which cannot be perfected by means of filing a Uniform Commercial Code financing statement (“UCC Financing Statements”), the making of a federal intellectual property filing (“IP Filings”), or the delivery of possession of certificated securities together with appropriate transfer powers (collectively, “Pledged Collateral”), is not able to be provided on the Effective Date after your use of commercially reasonable efforts to do so, the delivery of documents and instruments for the perfection of such security interests in such Collateral shall not constitute a condition precedent to the Second A&R Credit Agreement on the Effective Date but shall be required to be delivered after the Effective Date pursuant to arrangements to be mutually agreed.  “Specified Representations” means the representations and warranties set forth in the Second A&R Credit Agreement relating to (i) legal existence of the Target, the Credit Parties, Merger Sub and Parent, (ii) corporate power and authority and due authorization, execution and delivery, in each case as they relate to the entering into and performance of the Credit Documentation, (iii) the legality, validity and enforceability of the Credit Documentation, (iv) Federal Reserve margin regulations, (v) the Patriot Act, OFAC and other anti terrorism laws, (vi) the Investment Company Act, (vii) no conflicts between the Credit Documentation and applicable laws, material agreements (to the extent arranged by the Sponsor or any of its affiliates or relating to the Acquisition and entered into at the direction or with the consent of the Sponsor or any of its affiliates) and the organization documents of the Company, its subsidiaries, Parent or you, in each case as they relate to the entering into and performance of the Credit Documentation; (viii) solvency of Parent, the Borrowers and their subsidiaries on a consolidated basis after giving effect to the Acquisition, and (ix) the creation, perfection and priority of security interests in

 

4

 

the Pledged Collateral and in Collateral constituting personal property perfected by filing UCC Financing Statements and IP Filings.  This paragraph shall be referred to herein as the “Certain Funds Provision”.

 

Syndication.

 

The Lead Arranger may syndicate, prior to and/or after the execution of the Credit Documentation, all or a portion of the loans and commitments to one or more other lenders reasonably satisfactory to the Sponsor, it being agreed that each of the Existing Lenders is satisfactory to Sponsor, (collectively with GE Capital and any Existing Lender participating in the Credit Facility, the “Lenders”) pursuant to a syndication managed by the Lead Arranger (the “Syndication Process”) on the terms set forth in this Commitment Letter and in the Fee Letter.

 

The Lead Arranger will commence the Syndication Process promptly after your acceptance of this Commitment Letter and the Fee Letter.  The Lead Arranger will, in consultation with you, control all aspects of the Syndication Process, including timing, selection of prospective Lenders, the awarding of any titles, the determination of allocations and the amount of fees.  You agree that no Lender will be permitted to receive compensation of any kind for its participation in the Credit Facility, except as expressly provided for in this Commitment Letter or the Fee Letter, without the prior written consent of the Lead Arranger.

 

You agree to assist (and use commercially reasonable efforts to cause the Target, each of its and your respective affiliates and all other necessary persons to assist) the Lead Arranger with the Syndication Process including, without limitation, (i) participation in meetings, (ii) preparation of information including a confidential information memorandum, presentations and other offering materials to be used in connection with the Syndication Process (such information, the “Marketing Materials”), and (iii) confirmation of the completeness and accuracy and, if applicable, “PUBLIC” nature of, and the signing of an authorization letter with respect to, such materials.  Your obligations under this “Syndication” section shall terminate upon the earlier of the completion of the Syndication Process and the date 60 days after the consummation of the Acquisition.

 

Notwithstanding the foregoing, neither the commencement nor the completion of the Syndication Process shall be a condition to our commitments and undertakings hereunder.

 

Evaluation Material.

 

You hereby represent (but only to the best of your knowledge with respect to any of the information referred to below that is provided by another person that is not your affiliate) and covenant that (a) all information other than projections (“Projections”) and general economic or specific industry information developed by, and obtained from, third-party sources (the “Information”) that has been or will be made available to the Administrative Agent and/or the Lenders by you, the Target or any of your or its respective affiliates (which, for purposes of this letter, includes Sponsor) or representatives is or will be complete and correct in all material respects and does not or will not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements contained therein not materially misleading in light of the circumstances under which such statements are made, in each case giving effect to any supplements contemplated by the following sentence, and (b) the Projections that have been or will be made available to the Administrative Agent by you, the Target or any of your or their respective affiliates or representatives have been or will be prepared in good faith based upon reasonable assumptions (it being understood and agreed that financial projections are not a guarantee of financial performance and actual results may differ from financial projections and such differences may be material).  You agree that if at any time prior to the later of the closing of the Credit Facility and the completion of the Syndication Process, any of the representations in the preceding sentence would be

 

5

 

incorrect if the Information or Projections were being furnished, and such representations were being made at such time then you will promptly supplement the Information or the Projections, as the case may be, so that such representations will be correct under those circumstances.  You understand that in arranging and syndicating the Credit Facility the Lead Arranger may use and rely on the Information and Projections without independent verification thereof.

 

You hereby authorize and agree, on behalf of yourself, the Borrower and your and their respective affiliates, that the Information, the Projections and all other information (including third party reports) provided by or on behalf of you, the Borrower and your and its respective subsidiaries to the Lenders and the Administrative Agent regarding you, the Borrower, the Company and your and its respective subsidiaries, the Transaction and the other transactions contemplated hereby in connection with the Credit Facility may be disseminated by or on behalf of the Administrative Agent, and made available, to prospective Lenders and other persons, who have agreed to be bound by customary confidentiality undertakings (including “click-through” agreements), all in accordance with the Lead Arranger’s standard loan syndication practices (whether transmitted electronically by means of a website, e-mail or otherwise, or made available orally or in writing, including at prospective Lender or other meetings).  You hereby further authorize the Lead Arranger to download copies of your and Sponsor’s logos and to use commercially reasonable efforts to obtain authorization to permit the Lead Arranger to download copies of the Target’s logos, from their respective websites and post copies thereof on an IntraLinks® or similar workspace and use such logos on any materials prepared in connection with the Syndication Process.

 

If any securities of you or any of your affiliates involved in the Acquisition or of the Target are or are expected to be publicly traded or if Lead Arranger intends to approach public side investors, the Information, Projections and all other information (including third party reports) referenced in the immediately preceding paragraph (collectively, the “Evaluation Material”) shall include a version of the confidential information memorandum, presentation and other information materials consisting exclusively of information that is either publicly available with respect to you, such affiliate or the Target and their respective subsidiaries and parent companies, or that is not material with respect to you, such affiliate or the Target and their respective securities for purposes of U.S. federal and state securities laws.  You also hereby agree that you will (a) identify in writing (and cause such affiliate or the Target to identify in writing) and (b) clearly and conspicuously mark such Evaluation Material that does not contain any such material non-public information referred to in the prior sentence as “PUBLIC”.  You hereby agree that by identifying and/or marking such Evaluation Material pursuant to the preceding sentence and/or publicly filing any Evaluation Material with the Securities and Exchange Commission, the Administrative Agent, Lenders and prospective Lenders shall be entitled to treat such Evaluation Material as PUBLIC with respect to you, such affiliate or the Target and their respective subsidiaries and parent companies for purposes of U.S. federal and state securities laws.  You further acknowledge and agree that the following documents and materials shall be deemed to be PUBLIC, whether or not so marked: term sheets with respect to the Credit Facility and the Transaction, and administrative materials of a customary nature prepared by the Administrative Agent for prospective Lenders, such as a lender meeting invitation, bank allocation, if any, and funding and closing memorandum.

 

Expenses.

 

Regardless of whether the Credit Facility closes, you hereby agree to pay upon demand (together with reasonably detailed documentation supporting such demand) to GE Capital all fees and expenses (including, but not limited to, all reasonable documented and invoiced costs and out-of-pocket expenses of one primary legal counsel for the Administrative Agent and the Lenders as a whole and, if reasonably necessary, of one firm of special counsel and one firm of local counsel in each relevant jurisdiction retained by the Administrative Agent) incurred by the Commitment Parties in connection with this Commitment Letter, the Fee Letter, the Transaction, and the Credit Facility.

 

6

 

Confidentiality.

 

You agree that you will not disclose the contents of this Commitment Letter, the Fee Letter or the Commitment Parties’ involvement with, GE Capital’s commitment to provide or the Lead Arranger’s capacity as such under the Credit Facility to any third party (including, without limitation, any financial institution or intermediary) without GE Capital’s prior written consent other than to (a) Sponsor and those individuals who are your and its respective directors, officers, employees, accountants, attorneys or advisors in connection with the Credit Facility or the Transaction; provided that, after your acceptance hereof, this Commitment Letter (but not the Fee Letter) may also be disclosed to your and the Target’s respective equity holders, directors, officers, employees, accountants, attorneys and advisors and to the providers of the Term Facility and their advisors, (b) as may be compelled in a judicial or administrative proceeding or as otherwise required by law (in which case you agree to inform GE Capital promptly thereof) and (c) after your acceptance of this Commitment Letter and the Fee Letter, you may disclose this Commitment Letter but not the Fee Letter in filings with the Securities and Exchange Commission and other applicable regulatory authorities and stock exchanges.  You agree to inform all such persons who receive information concerning the Commitment Parties, this Commitment Letter or the Fee Letter that such information is confidential and may not be used for any purpose other than in connection with the Transaction and may not be disclosed to any other person.  GE Capital reserves the right to review and approve, in advance, all materials, press releases, advertisements and disclosures that contain GE Capital’s or any affiliate’s name or describe GE Capital’s financing commitment or the Lead Arranger’s role and activities.

 

Indemnity.

 

Regardless of whether the Credit Facility closes, you agree to (a) indemnify, defend and hold each of the Commitment Parties, each Lender, and their respective affiliates and the principals, directors, officers, employees, representatives, agents and third party advisors of each of them (each, an “Indemnified Person”), harmless from and against all losses, disputes, claims, investigations, litigation, proceedings, expenses (including, but not limited to, reasonable  out-of-pocket attorneys’ fees (but limited to one counsel to such Indemnified Persons, taken as a whole, one local counsel in any relevant jurisdiction and one regulatory counsel to all such Indemnified Persons, taken as a whole, and, solely, in the event of a conflict of interest, one additional counsel (and, if necessary, one regulatory counsel and one local counsel in each relevant jurisdiction) to each group of similarly situated affected Indemnified Persons)), damages, and liabilities of any kind to which any Indemnified Person may become subject in connection with this Commitment Letter, the Fee Letter, the Credit Facility, the use or the proposed use of the proceeds thereof, the Transaction or any other transaction contemplated by this Commitment Letter (each, a “Claim”, and collectively, the “Claims”), regardless of whether such Indemnified Person is a party thereto (and regardless of whether such matter is initiated by a third party, you, the Sponsor, the Target or any of your or its respective affiliates), and (b) reimburse each Indemnified Person upon demand for all legal and other expenses incurred in connection with investigating, preparing to defend or defending, or providing evidence in or preparing to serve or serving as a witness with respect to, any lawsuit, investigation, claim or other proceeding relating to any of the foregoing (each, an “Expense”); provided that no Indemnified Person shall be entitled to indemnity hereunder in respect of any Claim or Expense to the extent that the same is found by a final, non-appealable judgment of a court of competent jurisdiction to have resulted directly from such Indemnified Party’s gross negligence, willful misconduct or breach in bad faith of such Indemnified Party’s material obligations under this Commitment Letter or the Fee Letter.  No party hereto or any of their respective affiliates shall be liable for any punitive, exemplary, consequential or indirect damages alleged in connection with, arising out of, or relating to, any Claims, this Commitment Letter, the Fee Letter, the Credit Facility, the use or the proposed use of the proceeds thereof, the Transaction, and any other transaction contemplated by this Commitment Letter.

 

7

 

Furthermore, you hereby acknowledge and agree that the use of electronic transmission is not necessarily secure and that there are risks associated with such use, including risks of interception, disclosure and abuse.  You agree to assume and accept such risks and hereby authorize the use of transmission of electronic transmissions, and that no Commitment Parties nor any of their respective affiliates will have any liability for any damages arising from the use of such electronic transmission systems, except to the extent that the same is found by a final, non-appealable judgment of a court of competent jurisdiction to have resulted directly from such Commitment Party’s gross negligence or willful misconduct.

 

Sharing Information; Absence of Fiduciary Relationship.

 

You acknowledge that the Commitment Parties and their affiliates may be providing debt financing, equity capital or other services to other companies with which you may have conflicting interests.  GE Capital agrees that it will not furnish confidential information obtained from you to any parties referred to in the immediately preceding sentence or any of its other customers and that it will treat confidential information relating to you and your affiliates with the same degree of care as it treats its own confidential information.  GE Capital further advises you that it will not make available to you confidential information that it has obtained or may obtain from any other customer.  You further acknowledge and agree that (a) no fiduciary, advisory or agency relationship between you and any of the Commitment Parties has been or will be created in respect of any of the transactions contemplated by this Commitment Letter, irrespective of whether the Commitment Parties and/or their respective affiliates have advised or are advising you on other matters and (b) you will not assert any claim against any of the Commitment Parties for breach or alleged breach of fiduciary duty and agree that none of the Commitment Parties shall have any direct or indirect liability to you in respect of such a fiduciary duty claim or to any person asserting a fiduciary duty claim on behalf of or in right of you, including your stockholders, employees or creditors.

 

Assignments and Amendments.

 

This Commitment Letter shall not be assignable by you without the prior written consent of the Administrative Agent (and any purported assignment without such consent shall be null and void), and is solely for the benefit of the parties hereto and is not intended to confer any benefits upon, or create any rights in favor of, any person other than the parties hereto and the Indemnified Persons.  GE Capital may assign its commitment hereunder, in whole or in part, to any of its affiliates or to any prospective Lender in connection with the Syndication Process or otherwise, provided that notwithstanding such assignment, with respect to amounts to be funded on the Effective Date under the New Credit Agreement, the commitment of GE Capital to fund the Credit Facility on the terms and conditions set forth in this Commitment Letter and the Fee Letter will be reduced solely to the extent such other Lenders actually fund (to the extent applicable) their commitments on the Effective Date. Notwithstanding the right to assign the commitments hereunder, solely with respect to any New Credit Agreement, GE Capital must retain exclusive control over all rights and obligations with respect to the Credit Facility to be provided pursuant to a New Credit Agreement prior to close.  This Commitment Letter may not be amended or waived except in a written instrument signed by you and GE Capital.

 

Other.

 

Each of the parties hereto agrees that this Commitment Letter is a binding and enforceable agreement with respect to the subject matter contained herein, including an agreement to negotiate in good faith the Credit Documentation by the parties hereto in a manner consistent with this Commitment Letter.  Reasonably promptly after the execution of this Commitment Letter, the parties hereto shall proceed with the negotiation of the Credit Documentation as soon as reasonably possible for the purpose of executing

 

8

 

and delivering the Credit Documentation substantially contemporaneously with the consummation of the Acquisition, it being acknowledged and agreed that the commitment provided hereunder is subject only to the conditions precedent expressly described in or referred to in the provisions under the heading “Conditions Precedent”, including the satisfaction of the conditions precedent set forth on Schedule I attached hereto.

 

Counterparts and Governing Law.

 

This Commitment Letter may be executed in counterparts, each of which shall be deemed an original and all of which counterparts shall constitute one and the same document.  Delivery of an executed signature page of this Commitment Letter by facsimile or electronic (including “PDF”) transmission shall be effective as delivery of a manually executed counterpart hereof.

 

The laws of the State of New York shall govern all matters arising out of, in connection with or relating to this Commitment Letter, including, without limitation, its validity, interpretation, construction, performance and enforcement and any claims sounding in contract law or tort law arising out of the subject matter hereof; provided however, that (a) the interpretation of the definition of “Company Material Adverse Effect” and (b) the determination of the accuracy of any Acquisition Agreement Representations and whether as a result thereof you have the right under the Acquisition Agreement not to consummate the Acquisition shall be governed by, and construed in accordance with, the laws of the State of Delaware, regardless of the laws that might otherwise govern under applicable conflicts of laws.

 

Venue and Submission to Jurisdiction.

 

The parties hereto consent and agree that the state or federal courts located in New York County, State of New York, shall have exclusive jurisdiction to hear and determine any claims or disputes between or among any of the parties hereto pertaining to this Commitment Letter, the Fee Letter, the Credit Facility, the Transaction, any other transaction relating hereto or thereto, and any investigation, litigation, or proceeding in connection with, related to or arising out of any such matters, provided that the parties hereto acknowledge that any appeal from those courts may have to be heard by a court located outside of such jurisdiction.  The parties hereto expressly submit and consent in advance to such jurisdiction in any action or suit commenced in any such court, and hereby waive any objection, which each of the parties may have based upon lack of personal jurisdiction, improper venue or inconvenient forum.

 

Waiver of Jury Trial.

 

THE PARTIES HERETO, TO THE EXTENT PERMITTED BY LAW, WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT, OR PROCEEDING ARISING OUT OF, IN CONNECTION WITH OR RELATING TO, THIS COMMITMENT LETTER, THE FEE LETTER, THE CREDIT FACILITY, THE TRANSACTION AND ANY OTHER TRANSACTION RELATED HERETO OR THERETO.  THIS WAIVER APPLIES TO ANY ACTION, SUIT OR PROCEEDING WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE.

 

Survival.

 

The provisions of this letter set forth under this heading and the headings “Syndication”, “Evaluation Material”, “Expenses”, “Confidentiality”, “Indemnity”, “Sharing Information”; Absence of Fiduciary Relationship”, “Assignments and Amendments”, “Counterparts and Governing Law”, “Venue and Submission to Jurisdiction” and “Waiver of Jury Trial” shall survive the termination or expiration of this Commitment Letter and shall remain in full force and effect regardless of whether the Credit Facility closes or the Credit Documentation shall be executed and delivered; provided that if the Credit Facility

 

9

 

closes and the Credit Documentation shall be executed and delivered, (i) the provisions under the heading “Syndication” shall survive only until the completion of the Syndication Process (as determined by Lead Arranger), and (ii) the provisions under the heading “Evaluation Material”, “Expenses”, “Confidentiality”, “Indemnity”, and “Sharing Information; and Absence of Fiduciary Relationship” shall be superseded and deemed replaced by the terms of the Credit Documentation governing such matters.

 

Integration.

 

This Commitment Letter and the Fee Letter supersede any and all discussions, negotiations, understandings or agreements, written or oral, express or implied, between or among the parties hereto and their affiliates as to the subject matter hereof, including, without limitation, that certain Commitment Letter and Fee Letter, each dated May 28, 2012 from GE Capital addressed to you.

 

Patriot Act.

 

GE Capital hereby notifies you that pursuant to the requirements of the USA PATRIOT Act, Title III of Pub. L. 107-56 (signed into law October 26, 2001) (the “PATRIOT Act”), each Lender may be required to obtain, verify and record information that identifies the Borrower and each Guarantor, which information includes the name, address, tax identification number and other information regarding the Borrower and each Guarantor that will allow such Lender to identify the Borrower and each Guarantor in accordance with the PATRIOT Act.  This notice is given in accordance with the requirements of the PATRIOT Act and is effective as to each Lender.  It is hereby acknowledged that the Credit Parties have delivered all documentation required pursuant to this paragraph with respect to such Credit Parties.

 

Expiration of Commitment Letter and Commitments

 

Please indicate your acceptance of the terms hereof and of the Fee Letter by signing in the appropriate space below and in the Fee Letter, and arranging for Sycamore Partners L.P. and Sycamore Partners A, L.P. to sign the Sponsor Acknowledgement to the Fee Letter, and returning to GE Capital on behalf of the Commitment Parties such signature pages by 8:00 p.m., Chicago, Illinois time on June 1, 2012.  Unless extended in writing by the Commitment Parties, the commitments and agreements of the Commitment Parties contained herein (subject to the provisions under the heading “Survival”) shall automatically expire on the first to occur of (a) the date and time referred to in the previous sentence unless you shall have executed and delivered a copy of this Commitment Letter and the Fee Letter as provided above, (b) 5:00 p.m. New York time on October 24, 2012, (c) execution and delivery of the Credit Documentation and funding of the Credit Facility, (d) the closing of the Acquisition without the substantially contemporaneous effectiveness of the Credit Facility, and (e) the acceptance by the existing stockholders of the Target of an offer for all or any substantial part of the capital stock or property and assets of the Target and its subsidiaries other than as part of the Transaction.

 

[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]

 

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We are pleased to have the opportunity to work with you in connection with this important financing.

 

Sincerely,
GENERAL ELECTRIC CAPITAL CORPORATION
By:	/s/ Mark J. Forti
Name: Mark J. Forti
Its: Duly Authorized Signatory

 

Project Boston - Signature Page to Commitment Letter

 

 

AGREED AND ACCEPTED
THIS 30 DAY OF MAY, 2012
TLB MERGER SUB INC.
By:	/s/ Stefan Kaluzny
Name:	Stefan Kaluzny
Title:	President

 

Project Boston - Signature Page to Commitment Letter

 

 

SCHEDULE I

to

Commitment Letter

 

Conditions to Closing

 

The effectiveness of the Second A&R Credit Agreement (including the Waiver) and the availability of the Credit Facility shall be subject solely to the conditions set forth in the “Conditions Precedent” section of the Commitment Letter and the satisfaction of the following additional conditions:

 

1.              Credit Documentation.  The negotiation, execution and delivery of definitive documentation with respect to the Second A&R Credit Agreement, which shall be on terms and conditions substantially identical to the Existing Credit Agreement and the related guarantee and security documentation except (a) as necessary to reflect the Transaction, including to address the Acquisition and effectuate the Waiver, (b) as provided in the Commitment Letter, the Fee Letter (solely with respect to pricing terms and other matters not affecting the availability of the Credit Facility) and on Schedule II hereto, (c) for the addition of the Parent as a “Credit Party” and “Guarantor” thereunder and under the related credit documentation (and, for the avoidance of doubt, as a pledgor of substantially all of its personal property and equity interests in the Target) and (d) for such other changes (if any) as are mutually agreed (collectively, the “Credit Documentation”).

 

2.              Acquisition.  The following conditions shall be satisfied prior to or substantially concurrently with the effectiveness of the Second A&R Credit Agreement and, if requested to be made on the date of such effectiveness, the initial extension of credit under the Second A&R Agreement:

 

(i)            the Acquisition Agreement shall be in form and substance reasonably acceptable to the Administrative Agent (it being acknowledged and agreed that the form of the Acquisition Agreement dated as of the date hereof and sent by electronic mail by you at 4:16 p.m. (Eastern time) accompanied by the Company Disclosure Letter sent by electronic mail by you at 5:23 p.m. (Eastern time) on the date hereof are acceptable); and

 

(ii)           the Acquisition shall have been consummated on the Effective Date in accordance with the terms and conditions of the Acquisition Agreement (it being understood that the terms of the Acquisition Agreement shall not limit the terms contained in the Commitment Letter), and no such terms or conditions that are materially adverse to the interests of the Lenders shall have been waived, amended or otherwise modified other than with the consent of the Administrative Agent (such consent not to be unreasonably withheld, delayed or conditioned).

 

3.              Term Facility.  The terms and conditions of, and documentation for, the Term Facility shall be reasonably satisfactory to the Administrative Agent; it being acknowledged and agreed that the terms and conditions of the “Term Loan B Agreement” (as defined in the Existing Credit Agreement), together with corresponding changes to the Term Facility substantially identical to those provided on Schedule II hereto (other than those relating to paragraph 10 of Schedule II) and providing for a Term Facility in an initial aggregate principal amount of at least $85,000,000 (representing at least $10,000,000, but not more than $11,000,000, in new financing), are acceptable to the Administrative Agent (other than the fact that the “Change in Control” resulting from the Acquisition will have been consented to by the Term Loan B Lenders in an amendment and restatement of the Term Facility).  The Administrative Agent

 

Schedule I-1

 

shall have received evidence that Term Facility shall have been consummated on the Effective Date in accordance with the terms thereof and all incremental proceeds funded on the Effective Date under the Term Facility (i.e., at least $10,000,000, but not more than $11,000,000) shall have been applied to, or reserved for (in a manner reasonably acceptable to the Administrative Agent), the payment of consideration for the Acquisition and costs and expenses related to the Transaction.

 

4.              Equity Proceeds, Etc.  The Administrative Agent shall have received evidence that the Equity Contribution shall have been consummated on the Effective Date in accordance with the terms of the Equity Financing Commitment Letter (as defined Acquisition Agreement) and no such terms or conditions that are materially adverse to the interests of the Lenders shall have been waived, amended or otherwise modified other than with the consent of the Administrative Agent (such consent not to be unreasonably withheld, delayed or conditioned).  All proceeds of such Equity Contribution shall have been applied to the payment of consideration for the Acquisition and costs and expenses related to the Acquisition.  The terms and conditions of, and documentation for, such equity shall be reasonably satisfactory to the Administrative Agent (it being understood that documentation providing for common equity or for non-cash-pay preferred or non-cash-pay participating preferred equity (in each case, which is not redeemable or callable (either mandatorily or at the option of the holder)), shall be acceptable).

 

5.              Receipt of Historical Financial Statements.  The Administrative Agent shall have received (a) interim unaudited quarterly financial statements of the Borrower and its subsidiaries for each fiscal quarter occurring after January 28, 2012 and ended 30 days before the Effective Date and (b) to the extent available, interim unaudited monthly financial statements of the Borrower and its subsidiaries for each month ended after the most recent fiscal quarter for which financial statements were received by the Administrative Agent pursuant to clause (a).

 

6.              Receipt of Pro Forma Financial Statements and Business Plan.   The Administrative Agent shall have received and be satisfied with (a) a pro forma estimated balance sheet of Parent and its subsidiaries at the Effective Date after giving effect to the Transaction and the other transactions contemplated thereby, (b) Parent’s business plan which shall include a financial forecast (including balance sheets, income statements, and statement of cash flows) on a monthly basis through fiscal year 2013 prepared by Parent’s management, (c) projections prepared in good faith by Parent’s management and based upon reasonable assumptions projecting monthly levels of excess Availability (as such term is defined in the Existing Credit Agreement) under the Credit Facility through fiscal year 2013, (d) the capital structure of the Parent and its subsidiaries at the Effective Date after giving effect to the Transaction and the other transactions contemplated thereby and (e) a sources and uses statement at the Effective Date after giving effect to the Transaction and the other transactions contemplated thereby.  This condition has been satisfied based on the materials delivered, and the expected capital structure disclosed, to GE Capital prior to the date hereof.

 

7.              Credit Facility.  The Administrative Agent shall have received a borrowing base certificate under the Second A&R Credit Agreement for the fiscal month of the Borrowers most recently ended at least 10 days prior to the Effective Date (together with updated information regarding gross accounts receivables and the value of inventory as of a date reasonably acceptable to the Administrative Agent), certified by a financial officer of the Borrower, which demonstrates excess Availability (as such term is defined in the Existing Credit Agreement) under the Credit Facility, after giving effect to the Loans to be made and any Letters of Credit to be issued under the Credit Facility on the Effective Date, is at least (i) if the Effective Date occurs on or prior to August 15, 2012, $50,000,000, or (ii) if the Effective Date occurs after

 

Schedule I-2

 

August 15, 2012, $60,000,000 (in each case, Availability shall be determined with trade payables being paid currently in the ordinary course of business, expenses and liabilities being paid in the ordinary course of business and without acceleration of sales and without any material deterioration in working capital).

 

8.              Other Customary Conditions.  The Administrative Agent shall have received (a) customary opinions of counsel to the Parent and the Credit Parties and of appropriate local counsel, (b) such corporate resolutions, officer’s certificates (including certificates of incumbency) and corporate documents (including, documents evidencing the good standing of the Parent and the Credit Parties) as the Administrative Agent shall reasonably require, (c) all reports, certificates and evidence of insurance required under Federal flood hazard regulations, (d) a flow-of-funds memorandum, (e) applicable notices of borrowing with respect to Loans and other extensions of credit to be made on the Effective Date, and (f) the Existing Lender Release; and the closing of the Second A&R Credit Agreement shall not be enjoined or otherwise prohibited by any order, writ, injunction or decree of any court or other governmental authority with proper judicial or administrative power to issue such order, writ, injunction or decree.

 

9.              Security Interest Matters.  Subject to the Certain Funds Provision, all filings, recordations and searches necessary or desirable (as reasonably determined by the Administrative Agent) in connection with the liens and security interests to reflect the valid and perfected liens and security interests (in the priority contemplated under the Existing Credit Agreement) shall have been duly made; and all filing and recording fees and taxes shall have been duly paid.  The Administrative Agent is satisfied with the existing landlord waivers and access letters provided under the Existing Credit Agreement, and no further documentation need be produced in connection therewith (provided that, to the extent that the Credit Facility is provided pursuant to a New Credit Agreement, in the event new such landlord waivers and access letters shall not be executed substantially in the form provided under the Existing Credit Agreement, applicable Borrowing Base reserves may be imposed).  The Administrative Agent shall be satisfied with the amount, types and terms and conditions of all insurance maintained by the Borrowers and their subsidiaries (it being acknowledged that the amount, types and terms and conditions of all insurance currently maintained by the Borrower is satisfactory to the Administrative Agent).

 

10.       Indebtedness.  After giving effect to the Transaction and the other transactions contemplated hereby occurring on the Effective Date, the Parent, the Existing Borrowers, and their subsidiaries shall have no outstanding indebtedness for borrowed money, other than indebtedness under or permitted pursuant to the Existing Credit Agreement as modified pursuant to Schedule II hereto.  The Administrative Agent shall have received evidence that all other indebtedness shall have been (or, is concurrently with the Effective Date, is being) terminated and repaid in full in cash and all collateral therefor shall have been (or, concurrently with the Effective Date, is being) released.

 

11.       Payment of Fees and Expenses.  Payment of all fees and expenses required to be paid on the Effective Date pursuant to the Commitment Letter and Fee Letter shall, to the extent invoiced prior to the Effective Date, have been paid.

 

12.       Customer Information.  The Lenders shall have received all documentation and other information about the Parent and the Credit Parties required under applicable “know your customer” and anti-money laundering rules and regulations, including the Patriot Act, that in each case has been requested reasonably prior to the Effective Date; it being acknowledged

 

Schedule I-3

 

that the current “know your customer” documentation provided by the Credit Parties is sufficient with respect to such Credit Parties.

 

13.       Intercreditor Agreement.  The relative priorities of the security interests and related creditor rights among (i) the term loan lenders under the Term Facility, (ii) the Lenders under the Credit Facility, and (iii) if the Sycamore Third Lien Facility is established on the Effective Date, the Sponsor (or an affiliate of Sponsor) as lender under the Sycamore Third Lien Facility will be set forth in an intercreditor agreement (the “Intercreditor Agreement”) in form and substance reasonably satisfactory to the Administrative Agent and substantially similar to that certain Intercreditor Agreement, dated February 16, 2012, among the Administrative Agent, Wells Fargo Bank, National Association and the other parties thereto (the “Existing Intercreditor”), with such changes as may be reasonably acceptable to the Administrative Agent to reflect the $85 million initial aggregate principal amount under the Term Facility and to reflect the Sycamore Third Lien Facility (it being acknowledged and agreed that provisions relating to the Sycamore Third Lien Facility will provide for full payment and lien subordination in a manner reasonably acceptable to the Administrative Agent (but which shall provide for the cash payment of interest on the Sycamore Third Lien Facility in an amount not to exceed 5% per annum so long as no default has occurred)) and such other changes as may be reasonably acceptable to the Administrative Agent to reflect the Transaction.

 

14.       Sycamore Third Lien Facility.  If the Sycamore Third Lien Facility is established on the Effective Date (it being understood that such establishment is not a condition to the effectiveness of the Second A&R Credit Agreement), then (a) the terms and conditions of, and documentation for, the Sycamore Third Lien Facility shall be reasonably satisfactory to the Administrative Agent (it being acknowledged and agreed that such terms and conditions shall be acceptable if the Sycamore Third Lien Facility is on terms providing for (i) full payment and lien subordination (subordinate to both the Credit Facility and the Term Facility, and the liens in respect of each thereof) in a manner reasonably acceptable to the Administrative Agent, (ii) a principal amount equal to $25,000,000, (iii) non-default pricing not exceeding 15% per annum, with no more than 5% per annum being cash pay, (iv) no amortization (with the entire principal balance due at maturity), (v) a maturity date occurring not sooner than six months after the maturity date of the Credit Facility and (vi) no obligors which are not also obligors under the Credit Facility) and (b) the Administrative Agent shall have received evidence that Sycamore Third Lien Facility shall have been consummated on the Effective Date in accordance with the terms thereof and all proceeds funded on the Effective Date under the Sycamore Third Lien Facility shall have been applied to, or reserved for (in a manner reasonably acceptable to the Administrative Agent), the payment of consideration for the Acquisition and costs and expenses related to the Transaction.

 

15.       Real Estate Sale.  If the Real Estate Sale (as hereinafter defined) is consummated on the Effective Date (it being understood that such consummation is not a condition to the effectiveness of the Second A&R Credit Agreement), then: (a) the terms and conditions of (including, without limitation, the purchase price for any property to be sold pursuant to this paragraph), and documentation for, the sale of certain of the Target’s and its subsidiaries’ owned real property (including furniture, fixtures and equipment located thereon, other than any equipment used in connection with the production or manufacturing of catalogs or the production of the internet site) to a newly-formed affiliate of Sponsor (“TLB Property Company”) shall be reasonably satisfactory to the Administrative Agent and no less favorable to the Target and its subsidiaries than would be obtained in a comparable arm’s length transaction with a non-affiliate (the “Real Estate Sale”), (b) the Administrative Agent (i) shall be reasonably satisfied with the terms and conditions of (including, without limitation, the amount of the rent payments and other payments obligations), and documentation for, the

 

Schedule I-4

 

leases between the Credit Parties and TLB Property Company relating to each of the locations sold pursuant to the Real Estate Sale and that such terms and conditions are no less favorable to the Target and its subsidiaries than would be obtained in a comparable arm’s length transaction with a non-affiliate, and (ii) shall have received a landlord waiver and access letter, in form and substance reasonably acceptable to the Administrative Agent, with respect to each of the locations sold pursuant to the Real Estate Sale and (c) the Administrative Agent shall have received evidence that Real Estate Sale shall have been consummated on the Effective Date in accordance with the terms thereof and the proceeds of the Real Estate Sale funded on the Effective Date shall have been applied to, or reserved for (in a manner reasonably acceptable to the Administrative Agent), the payment of consideration for the Acquisition and costs and expenses related to the Transaction.

 

16.       Vendor Financing.  If the Vendor Financing (as hereinafter defined) is consummated on the Effective Date (it being understood that such financing is not a condition to the effectiveness of the Second A&R Credit Agreement), then (a) the terms and conditions of, and documentation for, an unsecured vendor financing of the Borrower (the “Vendor Financing”) shall be consistent with paragraph 2 of Schedule II hereto and (b) the Administrative Agent shall have received evidence that the Vendor Financing shall have been consummated on the Effective Date in accordance with the terms thereof and proceeds of not more than $50 million funded on the Effective Date under the Vendor Financing shall have been applied to, or reserved for (in a manner reasonably acceptable to the Administrative Agent), the payment of consideration for the Acquisition and costs and expenses related to the Transaction.

 

Schedule I-5

 

SCHEDULE II

to

Commitment Letter

 

Certain Modifications to the Existing Credit Agreement

 

In addition to the changes to the Existing Credit Agreement contemplated in paragraph (1) of Schedule I, the Credit Documentation will contain provisions to (capitalized terms used in the text of this Schedule II without definition shall have the meanings assigned to such terms in the Commitment Letter (including Schedule I thereto) or the Existing Credit Agreement, as applicable):

 

1.              Permit the payment to the Sponsor or its affiliates of management fees and the reimbursement of reasonable and customary ordinary course expenses attributable to the Target, subject in the case of fees, to a maximum amount not to exceed $1,000,000 per year (subject to catch up payments to be agreed) and other customary conditions and limitations to be mutually agreed.

 

2.              Permit not more than $50 million of unsecured Vendor Financing with one or more parties on terms reasonably acceptable to the Administrative Agent (it being agreed that the terms of the Vendor Financing may provide for the use of proceeds consistent with paragraph 16 of Schedule I above and that the terms of Borrowers’ present trade payables agreement with LF Centennial PTE Ltd. relative to pricing, term and repayment obligations are reasonably acceptable to the Administrative Agent).

 

3.              To the extent necessary, provide that proceeds of the Equity Contribution, the Sycamore Third Lien Facility, the Real Estate Sale and the Vendor Financing applied to effect the Transaction on the Effective Date shall not be subject to the mandatory prepayment provisions.

 

4.              Permit the distribution of funds to Parent to repurchase equity of management and for administrative expenses, in each case, subject to amounts and conditions to be mutually and reasonably agreed.

 

5.              Add a $100,000 general lien basket (other than Liens with respect to assets of the type included in the Borrowing Base).

 

6.              Add a $250,000 general investment basket; provided that such investments are with non-affiliates and shall be on arm’s length terms.

 

7.              Remove the Term Loan Push Down Reserve, subject to the agreement of the term loan lenders under the Term Facility and reasonably acceptable corresponding amendments to the Term Loan B Agreement and the Intercreditor Agreement referred to in Schedule I above.

 

8.              Modify the indebtedness covenant to allow for (i) an increase in the aggregate outstanding amount of the Term Facility to the outstanding principal amount of the Term Loan on the Effective Date and (ii) the Sycamore Third Lien Facility in the amount of $25 million.

 

9.              Permit the sale of the Target’s private label credit card portfolio (the “PLCC Portfolio Sale”), provided that (a) the PLCC Portfolio Sale shall be consummated on terms and conditions reasonably satisfactory to the Administrative Agent and (b) the proceeds of the PLCC Portfolio Sale shall be applied as follows: first, to repay all credit extensions outstanding (other than undrawn letters of credit) under the Credit Facility; second, to repay the outstanding principal amount of the Term Facility in an amount equal to the result of (i) the outstanding principal amount of the Term Facility on the date that the PLCC Portfolio Sale is

 

Schedule II-1

 

consummated, minus (ii) $50,000,000; and (c) third, to provide working capital to the Borrowers on terms reasonably acceptable to the Administrative Agent .

 

10.       After (i) the PLCC Portfolio Sale shall have been consummated and all credit extensions outstanding (other than undrawn letters of credit) under the Credit Facility shall have been repaid and (ii) the aggregate revolving loan commitments under the Credit Facility shall have been reduced to an amount equal to $125,000,000 and, so long as no event of default shall have occurred and be continuing, the definition of “Applicable Margin” shall provide for a 0.50% per annum reduction in the “LIBOR Rate Loan Margin” and the “Base Rate Loan Margin” at all Levels of the pricing grid.

 

11.       Permit the Sycamore Third Lien Facility on the Effective Date; provided that the conditions set forth in paragraph 14 of Schedule I above are satisfied on the Effective Date.

 

12.       Permit the Real Estate Sale on the Effective Date, provided that (i) the conditions set forth in paragraph 15 of Schedule I are satisfied on the Effective Date and (ii) TLB Property Company shall be an affiliate of Sponsor and shall not engage in any other business than the owning of real property and the leasing of the same to Target and its subsidiaries.

 

13.       .Permit the Vendor Financing on the Effective Date; provided that (i) the conditions set forth in paragraph 16 of Schedule I above are satisfied on the Effective Date and (ii) advances under the Vendor Financing subsequent to the Effective Date may be used to finance trade payables and for other permitted corporate purposes.

 

14.       In the event that the Credit Facility takes the form of a New Credit Agreement, then the “Revolving Termination Date” shall be extended to the date 5 years after the Effective Date, but not later than the maturity date of the Term Facility.

 

15.       Provide that the Real Estate Sale, the Vendor Financing, and the Sycamore Third Lien Facility shall be subject to the Credit Agreement provisions applicable to other Indebtedness as reasonably determined by the Administrative Agent (including, without limitation, restrictions on modifications and prepayments, representations and warranties and cross-defaults).

 

16.       After (i) the PLCC Portfolio Sale shall have been consummated and all credit extensions outstanding (other than undrawn letters of credit) under the Credit Facility shall have been repaid and (ii) the aggregate revolving loan commitments under the Credit Facility shall have been reduced to an amount equal to $125,000,000, provide that the Term Loan Reserve Amount may be removed, subject to the agreement of the term loan lenders under the Term Facility and reasonably acceptable corresponding amendments to the Term Loan B Agreement and the Intercreditor Agreement referred to in Schedule I above.

 

17.       After (i) the PLCC Portfolio Sale shall have been consummated and all credit extensions outstanding (other than undrawn letters of credit) under the Credit Facility shall have been repaid and (ii) the aggregate revolving loan commitments under the Credit Facility shall have been reduced to an amount equal to $125,000,000, provided that (a) the maximum permitted aggregate amount of an Overadvance shall be reduced from 10% to 5% of the aggregate revolving loan commitments, and (b) the Intercreditor Agreement referenced in paragraph 13 of Schedule I above, shall provide that the “Post Insolvency Increase Amount” (as defined in therein) shall be reduced from 10% to 5% of the “ABL Borrowing Base” (as defined therein).

 

18.       Modify the definition of “Availability” to delete the second sentence of such definition in its entirety and replace such sentence with the following: “Availability shall at all times be

 

Schedule II-2

 

calculated based on trade payables being paid currently in the ordinary course of business, expenses and liabilities being paid in the ordinary course of business and without acceleration of sales.”, subject to the agreement of the term loan lenders under the Term Facility and reasonably acceptable corresponding amendments to the Term Loan B Agreement and the Intercreditor Agreement referred to in Schedule I above.

 

Schedule II-3

Exhibit 10

 

Execution Version

 

May 30, 2012

 

TLB Merger Sub Inc.

c/o Sycamore Partners Management, L.L.C.

9 West 57th Street, 31st Floor

New York, New York 10019

Attention: Peter Morrow and Ryan McClendon

 

$85,000,000 Amended and Restated Term Loan Agreement

 

Ladies and Gentlemen:

 

You (“Merger Sub”) have advised Wells Fargo Bank, National Association (“Wells Fargo”) that Merger Sub, an entity formed by investment funds managed by Sycamore Partners Management, L.L.C. (“Sponsor”) intends to acquire (“Acquisition”), directly or indirectly, all of the outstanding shares of capital stock of The Talbots, Inc. (the “Company”) and, together with its subsidiaries, the “Acquired Business”) in accordance with that certain Agreement and Plan of Merger, by and among TLB Holdings LLC, a Delaware limited liability company (“Parent”), Merger Sub and the Company dated as of May 30, 2012 (the “Acquisition Agreement”), through a merger transaction (the “Long-Form Merger”) or by means of the purchase of a majority of the shares of the Company pursuant to a cash tender offer, a subsequent issuance of additional shares by the Company to you (if necessary) and the subsequent consummation of a short-form merger (the “Short-Form Merger”, and together with the Long-Form Merger, each a “Merger”).

 

Reference is made to that certain Term Loan Agreement dated as of February 16, 2012 entered into by and among The Talbots, Inc., The Talbots Group Limited Partnership and Talbots Classics Finance Company, Inc., as borrowers (collectively the “Borrowers”), certain other credit parties designated therein (together with the Existing Borrowers, the “Credit Parties”), Wells Fargo, as Agent (the “Agent”), Wells Fargo, Tennenbaum Opportunities Fund VI, LLC, 1903 OnShore Funding, LLC (“1903”), 1903 OffShore Loans SPV Limited and Stone Tower Credit Solutions Master Fund Ltd, as lenders (collective the “Lenders”) (as amended and in effect on the date hereof, the “Existing Term Loan Agreement”).

 

Pursuant to the terms and conditions of the Existing Term Loan Agreement, upon the closing of the Acquisition, a “Change in Control” (as defined in the Existing Term Loan Agreement) will occur.  The Agent and the Lenders subject to the terms and conditions set forth in this letter (this “Commitment Letter”) hereby agree to consent to the Change in Control resulting from the Acquisition and enter into an amended and restated term loan agreement with the Borrowers (“A&R Term Loan Agreement”) in an aggregate principal amount equal to $85,000,000 (the “Aggregate Commitments”).  Each Lender agrees to maintain outstanding the existing Term Loans owing to it under the Existing Term Loan Agreement pursuant to the A&R Term Loan Agreement (the “Existing Term Loan Amount”).  In addition, 1903 is pleased to advise you of its commitment to provide, directly or through an affiliate, a last out term loan in the amount equal to the lesser of (x) $11,000,000; and (y) the difference between the Aggregate Commitments and the Existing Term Loan Amount (the “Last Out Tranche”), upon the terms set forth in this Commitment Letter.  The commitments of the Lenders hereunder are several and not joint.

 

The commitments of the Lenders hereunder are subject only to the satisfaction of each of the following conditions precedent: (a) the accuracy and completeness in all material respects of all Specified Representations (as defined in Exhibit A); (b) satisfaction of the Conditions Precedent set forth on Exhibit A annexed hereto; (c) since January 28, 2012 to the date of this Commitment Letter, except as

 

 

(i) disclosed in the Company SEC Filings (as defined in the Acquisition Agreement) filed after January 28, 2012 and prior to the date of the Acquisition Agreement, (ii) contemplated by, or as disclosed pursuant to, the Acquisition Agreement or (iii) set forth in Section 4.09 of the Company Disclosure Letter (as defined in the Acquisition Agreement), there has not been any Company Material Adverse Effect (as defined in the Acquisition Agreement); and (d) since the date of this Commitment Letter there has not been a Company Material Adverse Effect in each case in clauses (c) and (d) that would result in the failure of a condition precedent to your (or your affiliate’s) obligation to consummate the Acquisition; provided that each of the Agent and each Lender agrees that it shall not waive any such condition (and no term or condition of this Commitment Letter (including any exhibit or schedule hereto) shall be amended or modified) without your consent.

 

You represent, warrant and covenant that (a) all financial projections concerning the Borrowers (which, for the avoidance of doubt, shall include the Company) and its subsidiaries that have been or are hereafter made available to Wells Fargo or the Lenders by you or any of your representatives (or on your or their behalf) (the “Projections”) have been or will be prepared in good faith based upon assumptions you believed to be reasonable at the time made and (b) all written information, other than Projections and general economic and industry information, which has been or is hereafter made available to Wells Fargo or the Lenders by you or any of your representatives (or on your or their behalf) in connection with any aspect of the transactions contemplated hereby (the “Information”), as and when furnished (after giving effect to any supplements and updates thereto from time to time), is and will be complete and correct in all material respects and does not and will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements contained therein not misleading (which information shall be to your knowledge to the extent it relates to the Company and its subsidiaries and their respective businesses).  You agree to furnish us with further and supplemental Information from time to time until the date of the closing of the A&R Term Loan Agreement (the “Effective Date”) so that the representation, warranty and covenant in the immediately preceding sentence are correct on the Effective Date as if the Information were being furnished, and such representation, warranty and covenant were being made, on such date (provided that to the extent such additional and supplemental information relates to the Company and its subsidiaries and their respective businesses, your obligations will be limited to using commercially reasonable efforts to provide such information).  In issuing this commitment, the Lenders and Wells Fargo are and will be using and relying on the Information without independent verification thereof.

 

By executing this Commitment Letter, you agree to reimburse the Agent from time to time on demand for all reasonable documented and invoiced out-of-pocket fees and expenses (including, but not limited to, (a) the reasonable fees, disbursements and other charges of Choate, Hall & Stewart LLP, as counsel to the Agent and (b) due diligence expenses) incurred in connection with the A&R Term Loan Agreement, the preparation of the definitive documentation therefor and the other transactions contemplated hereby.

 

You agree to indemnify and hold harmless Wells Fargo, each Lender and each of their affiliates and their respective officers, directors, employees, agents, advisors and other representatives (each, an “Indemnified Party”) from and against (and will reimburse each Indemnified Party promptly upon demand therefor (together with reasonably detailed documentation supporting such demand)) any and all claims, damages, losses, liabilities and expenses (including, without limitation, the reasonable out-of-pocket fees, disbursements and other charges of one primary counsel to all Indemnified Parties, taken as a whole (and, in the case of an actual conflict of interest, additional counsel for each affected Indemnified Person) and, if necessary, one local counsel in any applicable jurisdiction) that may be incurred by or asserted or awarded against any Indemnified Party, in each case arising out of or in connection with or by reason of (including, without limitation, in connection with any investigation, litigation or proceeding or preparation of a defense in connection therewith) (a) any matters contemplated by this Commitment

 

2

 

Letter or any related transaction or (b) the A&R Term Loan Agreement and any other financings, or any use made or proposed to be made with the proceeds thereof, except to the extent such claim, damage, loss, liability or expense is found in a final, nonappealable judgment by a court of competent jurisdiction to have resulted from (i) such Indemnified Party’s gross negligence or willful misconduct or (ii) a material breach in bad faith of the obligations of such Indemnified Party under this Commitment Letter.  In the case of an investigation, litigation or proceeding to which the indemnity in this paragraph applies, such indemnity shall be effective whether or not such investigation, litigation or proceeding is brought by you, your equity holders or creditors or an Indemnified Party, whether or not an Indemnified Party is otherwise a party thereto and whether or not the transactions contemplated hereby are consummated.  None of any Indemnified Party, you, the Company, their affiliates and their respective officers, directors, employees, agents, advisors and other representatives shall have any liability (whether direct or indirect, in contract or tort or otherwise) arising out of, related to or in connection with any aspect of the transactions contemplated hereby, except to the extent of direct, as opposed to special, indirect, consequential or punitive, damages; it being understood that nothing contained in this sentence shall limit your indemnification obligations to the extent set forth above.  Notwithstanding any other provision of this Commitment Letter, no Indemnified Party shall be liable for any damages arising from the use by others of information or other materials obtained through electronic telecommunications or other information transmission systems, other than for direct or actual damages resulting from the gross negligence or willful misconduct of such Indemnified Party as determined by a final and non-appealable judgment of a court of competent jurisdiction.

 

This Commitment Letter and the fee letter among you and Wells Fargo of even date herewith (the “Fee Letter”) and the contents hereof and thereof are confidential and, except for disclosure hereof or thereof on a confidential basis to your officers, directors, accountants, attorneys and other professional advisors retained by you in connection with the A&R Term Loan Agreement, the transactions contemplated hereby or as otherwise required by law, may not be disclosed in whole or in part to any person or entity without our prior written consent; provided, however, it is understood and agreed that (a) you may disclose this Commitment Letter but not the Fee Letter on a confidential basis to the Company and its officers, employees, directors, accountants and other advisors retained in connection with the Acquisition Agreement and the other transactions contemplated hereby, and (b) after your acceptance of this Commitment Letter and the Fee Letter, you may disclose this Commitment Letter but not the Fee Letter in filings with the Securities and Exchange Commission and other applicable regulatory authorities and stock exchanges.

 

You acknowledge that Wells Fargo and each Lender or their respective affiliates may be providing financing or other services to parties whose interests may conflict with yours.  Wells Fargo and each Lender agree that they will not furnish confidential information obtained from you to any parties referred to above or any of their other customers and that they will treat confidential information relating to you and your affiliates with the same degree of care as they treat their own confidential information.  Wells Fargo and the Lenders further advise you that they will not make available to you confidential information that they have obtained or may obtain from any other customer.  In connection with the services and transactions contemplated hereby, you agree that Wells Fargo and each Lender are permitted to access, use and share with any of their affiliates, agents, advisors (legal or otherwise) or representatives any information concerning you or any of your affiliates that is or may come into the possession of Wells Fargo, any Lender or any of such affiliates so long as each such affiliate, agent, advisor or representative agrees to be bound by the confidentiality obligations of Wells Fargo hereunder.

 

In connection with all aspects of each transaction contemplated by this Commitment Letter, you acknowledge and agree, and acknowledge your affiliates’ understanding, that: (a) (i) the commitments and other services described herein regarding the A&R Term Loan Agreement are arm’s-length commercial transactions between you and your affiliates, on the one hand, and Wells Fargo and each

 

3

 

Lender on the other hand, (ii) you have consulted your own legal, accounting, regulatory and tax advisors to the extent you have deemed appropriate, and (iii) you are capable of evaluating, and understand and accept, the terms, risks and conditions of the transaction contemplated hereby; (b) (i) each of Wells Fargo and the Lenders has been, is, and will be acting solely as a principal and, except as otherwise expressly agreed in writing by the relevant parties, has not been, is not, and will not be acting as an advisor, agent or fiduciary for you, any of your affiliates or any other person or entity and (ii) neither Wells Fargo nor any Lender has any obligation to you or your affiliates with respect to the transaction contemplated hereby except those obligations expressly set forth herein; and (c) Wells Fargo and each Lender and their respective affiliates may be engaged in a broad range of transactions that involve interests that differ from yours and those of your affiliates, and Wells Fargo and each Lender have no obligation to disclose any of such interests to you or your affiliates. To the fullest extent permitted by law, you hereby waive and release any claims that you may have against Wells Fargo and each Lender with respect to any breach or alleged breach of agency or fiduciary duty in connection with any aspect of any transaction contemplated by this Commitment Letter.

 

The provisions of the immediately preceding five paragraphs shall remain in full force and effect regardless of whether any definitive documentation for the A&R Term Loan Agreement shall be executed and delivered (except that, upon the occurrence of the Closing Date, the provisions relating to indemnification, reimbursement and confidentiality hereunder shall automatically terminate and be superseded by the indemnification, reimbursement and confidentiality provisions set forth in the A&R Term Loan Agreement and related documentation), and notwithstanding the termination of this Commitment Letter or any commitment of any Lender or undertaking of Wells Fargo hereunder.

 

This Commitment Letter and the Fee Letter may be executed in counterparts which, taken together, shall constitute an original.  Delivery of an executed counterpart of this Commitment Letter or the Fee Letter by telecopier, facsimile or electronic mail shall be effective as delivery of a manually executed counterpart thereof.

 

Each of the parties hereto agrees that this Commitment Letter is a binding and enforceable agreement with respect to the subject matter contained herein, including an agreement to negotiate in good faith the A&R Term Loan Agreement credit documentation in respect thereof (the “Credit Documentation”) by the parties hereto in a manner consistent with this Commitment Letter, it being acknowledged and agreed that the commitment provided hereunder is subject only to conditions precedent expressly described in the third paragraph hereof and Exhibit A hereto. Reasonably promptly after the execution of this Commitment Letter, the parties hereto shall proceed with the negotiation of the Credit Documentation as soon as reasonably possible for the purpose of executing and delivering the Credit Documentation substantially contemporaneously with the consummation of the Acquisition.

 

This Commitment Letter and the Fee Letter shall be governed by, and construed in accordance with, the laws of the State of New York, without giving effect to the conflicts of laws principles thereof, but including section 5-1401 of the New York General Obligations Law; provided however, that (a) the interpretation of the definition of “Company Material Adverse Effect” and (b) the determination of the accuracy of any Acquisition Agreement Representations and whether as a result thereof you have the right under the Acquisition Agreement not to consummate the Acquisition shall be governed by, and construed in accordance with, the laws of the State of Delaware, regardless of the laws that might otherwise govern under applicable conflicts of laws.  Each of you, Wells Fargo and each Lender hereby irrevocably waives any and all right to trial by jury in any action, proceeding or counterclaim (whether based on contract, tort or otherwise) arising out of or relating to this Commitment Letter, the Fee Letter, the transactions contemplated hereby and thereby or the actions of Wells Fargo or any Lender in the negotiation, performance or enforcement hereof.  Each of you, Wells Fargo and the Lenders consents to the exclusive jurisdiction and venue of the federal and/or state courts located in New York, New York in

 

4

 

connection with any action, proceeding or counterclaim (whether based on contract, tort or otherwise) arising out of or relating to this Commitment Letter, the Fee Letter, the transactions contemplated hereby and thereby or the actions of Wells Fargo or any Lender in the negotiation, performance or enforcement hereof.  The commitments of the Lenders and undertakings of Wells Fargo may be terminated by us if you fail to perform in all material respects your obligations under this Commitment Letter or the Fee Letter on a timely basis.

 

This Commitment Letter and the Fee Letter embody the entire agreement and understanding among Wells Fargo and each Lender, you and your affiliates with respect to the A&R Term Loan Agreement and supersedes all prior agreements and understandings relating to the specific matters hereof.  No party has been authorized by Wells Fargo or any Lender to make any oral or written statements that are inconsistent with this Commitment Letter.  This Commitment Letter is not assignable by you without our prior written consent and is intended to be solely for the benefit of the parties hereto and the Indemnified Parties.  Wells Fargo and the Lenders hereby notify you that pursuant to the requirements of the USA PATRIOT Act, Title III of Pub. L. 107-56 (signed into law October 26, 2001) (the “PATRIOT Act”), Wells Fargo and the other Lenders may be required to obtain, verify and record information that identifies the Parent, the Borrowers and all other Credit Parties, which information includes the name, address, tax identification number and other information regarding the Parent, the Borrowers and Credit Parties (including the Company and its subsidiaries) that will allow the Lenders to identify the Parent, the Borrowers and Credit Parties (including the Company and its subsidiaries) in accordance with the PATRIOT Act.  This notice is given in accordance with the requirements of the PATRIOT Act.  You shall provide, and agree to cause Parent and the Company to provide, Wells Fargo and Lenders, prior to the Effective Date, with all documentation and other information required by bank regulatory authorities under “know your customer” and anti-money laundering rules and regulations, including, without limitation, the PATRIOT Act; it being agreed that all documentation required pursuant to this paragraph has been delivered with respect to the Credit Parties.

 

This Commitment Letter and all commitments and undertakings of Wells Fargo and the Lenders hereunder will expire at 8:00 p.m. (central time) on June 1, 2012 unless you execute this Commitment Letter and the Fee Letter and return them to us prior to that time (which may be by facsimile transmission or electronic mail).  Thereafter, all commitments of the Lenders and undertakings of Wells Fargo hereunder will expire on the Outside Date (as defined in the Acquisition Agreement) unless definitive documentation for the A&R Term Loan Agreement is executed and delivered prior to such date.

 

THIS WRITTEN AGREEMENT, EXHIBIT A HERETO, SCHEDULE I HERETO AND THE FEE LETTER REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.  THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

 

[THE BALANCE OF THIS PAGE IS INTENTIONALLY LEFT BLANK]

 

5

 

We are pleased to have the opportunity to work with you in connection with this important financing.

 

	Very truly yours,
	WELLS FARGO BANK NATIONAL ASSOCIATION, as Agent and Lender
	By:	/s/ Adam D. Salter
	Name:	Adam D. Salter
	Title:	Managing Director

 

[Signature Page to Commitment Letter]

 

 

	TENNENBAUM OPPORTUNITIES FUND VI, LLC, as Lender
	By:	Tennenbaum Capital Partners, LLC
	Its:	Investment Manager
	By:	/s/ Howard Levkowitz
	Name:	Howard Levkowitz
	Title:	Managing Partner

 

[Signature Page to Commitment Letter]

 

 

	1903 ONSHORE FUNDING, LLC, as a Lender
	By:	GB Merchant Partners, LLC
		Its Investment Manager
	By:	/s/ Ronald C. Street IV
	Name:	Ronald C. Street IV
	Title:	CFO

 

[Signature Page to Commitment Letter]

 

 

	1903 OFFSHORE LOANS SPV LIMITED, as a Lender
	By:	GB Merchant Partners, LLC
		Its Investment Manager
	By:	/s/ Lawrence Ciaff
	Name:	Lawrence Ciaff
	Title:	MD

 

[Signature Page to Commitment Letter]

 

 

	STONE TOWER CREDIT SOLUTIONS MASTER FUND LTD
	By Stone Tower Fund Management LLC
	By:	/s/ Joseph Moroney
	Name:	Joseph Moroney
	Title:	Authorized Signatory

 

[Signature Page to Commitment Letter]

 

 

ACCEPTED AND AGREED TO

AS OF THE DATE FIRST ABOVE WRITTEN:

 

TLB MERGER SUB INC.
	By:	/s/ Stefan Kaluzny
	Name:	Stefan Kaluzny
	Title:	President

 

[Signature Page to Commitment Letter]

 

 

EXHIBIT A

 

The closing of the A&R Term Loan Agreement and the funding of the Last Out Tranche thereunder will be subject to satisfaction of only the conditions set forth in the Commitment Letter to which this Exhibit A is attached and only the following additional conditions precedent:

 

(i)            The negotiation, execution and delivery of definitive documentation with respect to the A&R Term Loan Agreement, which shall be on terms and conditions substantially identical to the Existing Term Loan Agreement, except (a) as necessary to address the Acquisition and consent to the “Change of Control”, (b) as provided in the Commitment Letter and the Fee Letter (solely with respect to pricing terms and fees) or on Schedule I hereto, (c) for the addition of the Parent as a “Credit Party” and “Guarantor” thereunder and under the related credit documentation (and, for the avoidance of doubt, as a pledgor of substantially all of its personal property) and (d) for such other changes as are mutually agreed.  Furthermore, the A&R Term Loan Agreement will, from and after the Effective Date, (x) prior to the occurrence of a Specified Event of Default (as defined below) prohibit the assignment or participation of the Loans or any interest therein to those entities listed on Schedule A-1 to the Fee Letter and (y) prohibit the assignment or participation of the Loans or any interest therein to those entities listed on Schedule A-2 to the Fee Letter.  “Specified Event of Default” means an Event of Default occurring pursuant to Section 7.1(a), 7.1(f) or, to the extent relating to bankruptcy, insolvency or similar proceedings, 7.1(g) of the Existing Term Loan Agreement.

 

(ii)           The joinder by Parent to the A&R Term Loan Agreement and the Guaranty and Security Agreement and any other Loan Document (as defined in the Existing Term Loan Agreement) reasonably requested by the Agent; it being understood that Parent’s obligations thereunder shall be limited to a guarantee of the Borrowers’ obligations under the Loan Documents and other obligations and agreements customary for holding companies.

 

(iii)          Subject to clause (xiii) below, all filings, recordations and searches necessary or desirable (as reasonably determined by the Agent) in connection with the liens and security interests to reflect the valid and perfected liens and security interests (in the priority contemplated under the Existing Term Loan Agreement) shall have been duly made; and all filing and recording fees and taxes shall have been duly paid.  Agent is satisfied with the existing landlord waivers and access letters provided under the Existing Term Loan Agreement, and no further documentation need be produced in connection therewith.  The Agent shall be satisfied with the amount, types and terms and conditions of all insurance maintained by the Borrowers and their subsidiaries (it being acknowledged that the amount, types and terms and conditions of all insurance currently maintained by the Borrowers is satisfactory to Agent). The Agent shall have received endorsements naming the Agent, on behalf of the Lenders, as an additional insured or loss payee, as the case may be, under all insurance policies (it being acknowledged that the endorsements issued to the Agent under the Existing Term Loan Agreement are satisfactory to Agent).

 

(iv)          The Agent shall have received (A) customary opinions of counsel to the Borrowers and the Credit Parties (which shall cover, among other things, authority, legality, validity, binding effect and enforceability of the documents for the A&R Term Loan Agreement and, to the extent applicable subject to clause (xiii) below, real estate related matters) and of appropriate local counsel and such corporate resolutions, certificates and other documents as the Agent shall reasonably require and (B) such corporate resolutions, certificates and other documents as the Agent shall reasonably require, in each case reasonably satisfactory to the Agent.

 

(v)           All material governmental consents and approvals required for the Borrowers and Credit Parties to consummate the Acquisition and financing shall have been obtained by Borrowers and Credit Parties.

 

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(vi)          The Agent shall have received, not less than five business days prior to the Effective Date, the documentation and other information that is required by regulatory authorities under applicable “know your customer” and anti-money laundering rules and regulation, including the Patriot Act, in each case to the extent requested by the Agent or any Lender at least 15 business days prior to the Effective Date; it being agreed that all documentation required pursuant to this paragraph has been delivered with respect to the Credit Parties.

 

(vii)         All accrued fees and expenses of the Agent and Lenders (including the fees and expenses of counsel to the Agent (including any local counsel)) shall, to the extent required to be paid on the Effective Date pursuant to the Commitment Letter and the Fee Letter and invoiced prior to the Effective Date, have been paid.

 

(viii)        The following transactions shall have occurred prior to or concurrently with the effectiveness of the A&R Term Loan Agreement:

 

(i)            the Acquisition Agreement and all documents entered into in connection therewith shall be in form and substance reasonably acceptable to the Agent and Lenders (it being acknowledged and agreed that the draft of the Acquisition Agreement and schedules and exhibits thereto provided to the Agent on May 30, 2012 are satisfactory); and

 

(ii)           the Acquisition shall have been consummated on the Effective Date in accordance with the terms and conditions of the Acquisition Agreement, and no such terms or conditions that are materially adverse to the interests of the Lenders shall have been waived other than with the consent of the Agent (such consent not to be unreasonably withheld, delayed or conditioned).

 

(ix)           The closing of a revolving asset based lending credit agreement or an amendment or amendment and restatement thereof  (“ABL Credit Agreement”) upon terms and conditions reasonably acceptable to the Agent and the Lenders shall occur simultaneously with the closing of the A&R Term Loan Agreement, it being acknowledged and agreed that the terms and conditions of the “ABL Credit Agreement” (as defined in the Existing Term Loan Agreement) are acceptable to the Agent and the Lenders (other than the fact that the “Change in Control” resulting from the Acquisition will have been consented to by the ABL Lenders in the ABL Credit Agreement and other than changes consistent with those described on Schedule I hereto).

 

(x)            The Agent and the agent under the ABL Credit Agreement shall have entered into an intercreditor agreement upon terms and conditions acceptable to the Agent and the Lenders, in all material respects, it being acknowledged and agreed the terms and conditions of the “ABL Intercreditor Agreement” (as defined in the Existing Term Loan Agreement) are acceptable to the Agent and the Lenders, provided, however such intercreditor agreement shall permit the incurrence of indebtedness under the A&R Term Loan Agreement in an aggregate principal amount of $85,000,000, the prepayment of the Term Loan in the amount of $35,000,000 upon the consummation of the Permitted Asset Sale (as defined on Schedule I hereto), to add the “Owned Stores” (as defined on Schedule I hereto) to the definition of Term Priority Collateral and to make the amendments contemplated on Schedule I hereto.

 

(xi)           After giving effect to the funding of any loans under the ABL Credit Agreement and the closing of the Acquisition and the applicable amendments set forth on Schedule I hereto, Availability (as defined in the Existing Term Loan Agreement after giving effect to the applicable amendments set forth on Schedule I hereto) shall be not less than $40,000,000.  The Agent shall have received a borrowing base certificate dated as of the Effective Date setting forth the Borrowing Base

 

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based upon the most recent Borrowing Base Certificate delivered in accordance with Section 4.2 of the Existing Term Loan Agreement after giving pro forma effect to the Merger and the transactions contemplated herein, executed by a financial officer of the Borrowers.

 

(xii)          (A) No loans or credit extensions under the ABL Credit Agreement shall be used to fund any portion of the “Offer Price” or the “Merger Consideration” (as each such term is defined in the Acquisition Agreement); and (B) the proceeds of the Last Out Tranche shall be used solely to fund fees and transaction costs in connection with the Merger and not to fund any portion of the “Offer Price” or the “Merger Consideration”.

 

(xiii)         Notwithstanding anything in this Commitment Letter to the contrary, (a) the only representations and warranties relating to Parent, Merger Sub, the Company, the Borrowers and their respective subsidiaries and their business and assets the accuracy of which shall be a condition to the closing of the A&R Term Loan Agreement on the Effective Date shall be (i) such of the representations made by or on behalf of the Company, the Borrowers and their respective subsidiaries in the Acquisition Agreement as are material to the interests of the Agent and the Lenders, but solely to the extent that you have (or an affiliate of yours has) the right to terminate (or such Affiliate’s) obligations under the Acquisition Agreement or the right not to consummate the Acquisition as a result of a breach of such representations in the Acquisition Agreement and (ii) the Specified Representations and (b) the terms of the Loan Documents for the A&R Term Loan Agreement shall be in a form such that they do not impair availability of the A&R Term Loan Agreement on the Effective Date if the conditions set forth in this Commitment Letter required to be satisfied on the Effective Date are satisfied, it being understood that, to the extent any perfected security interest in Collateral (as defined in the A&R Term Loan Agreement), the security interest in respect of which cannot be perfected by means of filing a Uniform Commercial Code financing statement (“UCC Financing Statements”) or the delivery of certificated securities (“Pledged Collateral”), is not able to be provided on the Effective Date after your use of commercially reasonable efforts to do so, the delivery of documents and instruments for the perfection of such security interests in such Collateral shall not constitute a condition precedent to the A&R Term Loan Agreement on the Effective Date but shall be required to be delivered after the Effective Date pursuant to arrangements to be mutually agreed. “Specified Representations” means the representations and warranties set forth in the A&R Term Loan Agreement relating to (i) organization of the Credit Parties, (ii) corporate existence of the Credit Parties, (iii) power and authority and due authorization, execution and delivery, in each case as they relate to the entering into and performance of the Loan Documents, (iv) the enforceability of such documentation, (v) Federal Reserve margin regulations, (vi) the Patriot Act, (vii) the Investment Company Act, (viii) no conflicts between the Loan Documents and the organization documents of Company, its subsidiaries, Parent or you in each case as they relate to the entering into and performance of the Loan Documents; (ix) solvency of Parent, the Company and their subsidiaries on a consolidated basis after giving effect to the Acquisition, and (x) perfection and priority of security interests in the Pledged Collateral and in Collateral perfected by filing UCC Financing Statements.

 

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SCHEDULE I

 

In addition to the changes to the Existing Term Loan Agreement contemplated in paragraph i of Exhibit A,  the Existing Term Loan Agreement will be amended as follows:

 

1.               To extend the Maturity Date to the fifth anniversary of the Effective Date (“Extended Maturity Date”).

 

2.               To require quarterly amortization payments each in the amount of $500,000 per quarter through the Extended Maturity Date.

 

3.               To permit the payment of management fees and the reimbursement of expenses to the Sponsor, subject in the case of fees, to a maximum amount not to exceed $1,000,000 per annum (subject to catch up payments) and other conditions to be mutually agreed.

 

4.               To permit exceptions to mandatory prepayments from the issuance of equity on terms to be agreed which, in any event, will exclude issuances to Sponsor and management.

 

5.               To permit the distribution of funds to Parent to repurchase equity of management subject to amounts and conditions to be mutually agreed and for administrative expenses.

 

6.               To add a $100,000 general lien basket, provided such liens shall not attach to Collateral included in the Term Loan Borrowing Base.

 

7.               To add a $250,000 general investment basket.

 

8.               To modify the indebtedness and lien covenants to allow a secured subordinated term loan facility in an aggregate amount up to $25,000,000 with the Sponsor or an affiliate of Sponsor as lender and on terms and conditions (including a lien and debt subordination agreement) reasonably acceptable to the Agent and Lenders (it being acknowledged and agreed that such terms and conditions shall be acceptable if such facility is on terms substantially identical to those of Existing Term Loan Agreement except for amount (which shall be $25,000,000), pricing (with non-default pricing not exceeding 15% per annum with no more than 5% per annum being cash pay), no scheduled amortization, no mandatory repayments and lien priority (which shall be third priority) (“Third Lien Facility”), provided, that there shall be no cash pay interest at anytime (x) a Default or Event of Default exists or would arise as a result of the making of such payment; or (y) average Availability for the immediately preceding three months prior to the payment is less than greater of (1) $20,000,000; or (2) 20% of the Maximum Borrowing Availability (without giving effect to the Term Loan Push Down Reserve or the Term Loan Reserve Amount).

 

9.               To modify the indebtedness covenant to allow up to $50,000,000 of unsecured vendor financing with one or more parties on terms reasonably acceptable to the Agent and Lenders (it being agreed that such financing may be used on the Effective Date to apply towards payment of the consideration for the Acquisition and, subsequent to the Effective Date, may be used to finance trade payables and for other permitted corporate purposes, and that the terms of the Borrowers’ present trade payables agreement with LF Centennial PTE Ltd. relative to pricing, term and repayment are reasonably acceptable to the Agent) (“Vendor Financing Facility”).

 

10.         To the extent necessary to provide that the proceeds of any equity contribution which are applied to effect the Acquisition or proceeds of the Third Lien Facility, the sale of the HQ and DC (as

 

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defined below) and Vendor Financing Facility not to be subject to the provisions of Section 1.8(c) of the Existing Term Loan Agreement regarding mandatory prepayments.

 

11.         To remove the Term Loan Reserve Amount from the ABL Credit Agreement and the Existing Term Loan Agreement, subject to the agreement of the agent and lenders under the ABL Credit Agreement to modify the definition of Maximum ABL Facility Amount (as defined in the ABL Intercreditor Agreement) to change each reference to “10.00%” in such definition to “5.00%”, together with corresponding amendments to the ABL Credit Agreement and the ABL Intercreditor Agreement, as applicable.

 

12.         To permit a sale lease back transaction of the Owned Properties known and numbered as (i) 1 Churchill Road and 175 Beal Street, Hingham, Massachusetts (also known as One Talbots Drive, Hingham, Massachusetts) and (ii) 175, 180 and 190 Kenneth W. Welch Drive, Lakeville, Massachusetts (the “HQ and DC”) and the furniture and fixtures located thereon, other than any equipment used in connection with the production or manufacturing of catalogs or the production of the internet site on the Effective Date which shall be on market terms and otherwise upon terms and conditions reasonably acceptable to the Agent and Lenders, subject to receipt by the Agent of a collateral access agreement with respect thereto (the “Real Estate Sale”).

 

13.         Schedule 11.1 of the Existing Term Loan Agreement will be amended to (a) on and after the Real Estate Sale, delete the HQ and DC therefrom and (b) add the following Owned Properties: (i) Store No. 3, 164 North Street, Hingham, Massachusetts, (ii) Store No. 4, 447 Washington Street Box 41, Duxbury, Massachusetts, (iii) Store No. 5, 46 Walker Street, Lenox, Massachusetts, (iv) Store No. 9, 31 Bay Road Route 1 A, South Hamilton, Massachusetts and (v) Store No. 25, 1 Essex Square, Essex, Connecticut (collectively the “Owned Stores”). The Agent shall be granted a first priority mortgage on the Owned Stores.

 

14.         To remove the last sentence of the definition of Availability.

 

15.         On the Effective Date, the definition of Term Loan Borrowing Base shall be amended to provide as follows:

 

“Term Loan Borrowing Base” means, as of any date of determination by Agent, from time to time, an amount equal to the sum at such time of:

 

(a)          up to the lesser of (i) 20% of the book value of Eligible Credit Card Accounts at such time, and (ii) the difference between (x) 105% plus, after an Insolvency Proceeding, any increase in the percentage of the book value permitted by Section 5.2(a)(5) of the ABL Intercreditor Agreement and (y) the percentage of the book value included, as of the date of determination, in the Borrowing Base by the ABL Agent with respect to the Eligible Credit Card Accounts at such time;

 

(b)          up to the lesser of (i) 20% of the book value of Eligible PL Credit Card Accounts at such time, multiplied by the NOLV Factor for PL Credit Card Receivables from Private Label Credit Cards, and (ii) the product of (A) the difference between (x) 105% plus, after an Insolvency Proceeding, any increase in the percentage of the book value permitted by Section 5.2(a)(5) of the ABL Intercreditor Agreement and (y) the percentage of the book value for such PL Credit Card Receivables from Private Label Credit Cards, included, as of the date of determination, in the Borrowing Base by the ABL Agent, multiplied by (B) the NOLV Factor for such PL Credit Card Accounts;

 

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(c)           up to the lesser of (i) 20% of the book value of Eligible Inventory, valued at the lower of cost or market on a first-in, first-out basis, multiplied by the NOLV Factor for Inventory, and (ii) the product of (A) the difference between (x) 105% plus, after an Insolvency Proceeding, any increase in the percentage of the book value permitted by Section 5.2(a)(5) of the ABL Intercreditor Agreement and (y) the percentage of the book value of Eligible Inventory, valued at the lower of cost or market on a first-in, first-out basis included, as of the date of determination, in the Borrowing Base by the ABL Agent with respect to the Eligible Inventory, multiplied by (B) the NOLV Factor for such Inventory;

 

(d)          up to the lesser of (i) 30% of the Appraised Value of Eligible Real Estate; and (ii) $15,000,000 (or after consummation of the Real Estate Sale, $2,000,000);

 

(e) up to the lesser of (i) 52.5% of the Appraised Value of Eligible Intellectual Property; and (ii) $20,000,000; and

 

(f)            at any time (A) the ABL Agent has not included any Eligible In-Transit Inventory in the Borrowing Base, up to the lesser of (i) 65% of the book value of Eligible Supplemental Inventory valued at the lower of cost or market on a first-in, first-out basis, multiplied by the NOLV Factor for In-Transit Inventory; and (ii) $10,000,000; and (B) the ABL Agent has included any Eligible In-Transit Inventory in the Borrowing Base, 0% of the book value of Eligible Supplemental Inventory valued at the lower of cost or market on a first-in, first-out basis, multiplied by the NOLV Factor for Supplemental Inventory;

 

in each case less Reserves established by Agent at such time in its Permitted Discretion.

 

16.         On the Effective Date, the definition Term Loan Push-Down Reserve shall be amended to provide as follows:

 

“Term Loan Push-Down Reserve” means the amount, as of any date of determination, equal to the sum o f (x) the difference, if a positive number, between the Term Loan Outstandings (without giving effect to the Last Out Tranche) minus the Term Loan Borrowing Base; and (y) on and after 121 days after the Effective Date the outstanding amount of the Last Out Tranche.

 

17.         On the Effective Date, the “Applicable Margin” shall be increased to 10.25% per annum.

 

18.         The “Applicable Margin” with respect to the Last Out Tranche shall increase by 1.0% per annum on the forty-fifth day (“Trigger Date”) after the Effective Date and each thirty days after the Trigger Date (subject to a maximum of 17.0% per annum).

 

19.         The Credit Documentation will provide that all representations and warranties, affirmative and negative covenants and defaults (which term, as used herein, shall include events of default) will apply only from and after the Effective Date after giving effect to the Acquisition and the Merger (notwithstanding the amendment and restatement of the Existing Term Loan Agreement) with the effect that no violation or breach of any representation, warranty or covenant or default that existed under the Loan Documents (as defined in the Existing Term Loan Agreement) prior to the Effective Date shall constitute or give rise to a violation, breach or default under the Existing Term Loan Agreement unless such violation, breach or default continues, and constitutes a default under the Credit Documentation, after the Effective Date; provided, however, that no

 

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breach of any notice or reporting covenant prior to the Effective Date shall constitute or give rise to a default under the Existing Term Loan Agreement.

 

20.         To modify the disposition of assets covenant to permit the sale of the PL Credit Card Receivables, provided, that (i) no Event of Default exists or would arise as a result of such disposition; (ii) the Term Loan is prepaid upon the consummation of the disposition by the amount equal to $35,000,000, which amounts shall be applied first to reduce the Existing Term Loan Amount to $50,000,000 and then to prepay the Last Out Tranche in full; (iii) the Borrowers pay the Applicable Premium Percentage in connection with the prepayment; (iv) after giving effect to such disposition Availability is greater than or equal to $40,000,000; and (v) all outstanding “Loans” under the ABL Credit Agreement shall be prepaid in full (“Permitted Asset Sale”).

 

21.         To modify Section 4.2(m) of the Existing Term Loan Agreement to add one desk top appraisal of the Intellectual Property per calendar year at the Borrowers’ expense.

 

22.         Upon the consummation of the Permitted Asset Sale, the A&R Term Loan Agreement shall be amended as follows:

 

(a)           The “Applicable Margin” shall be increased to 10.75% per annum;

 

(b)           The Scheduled Installments set forth in Section 1.6 of the A&R Term Loan Agreement shall be revised to equal $450,000 per quarter;

 

(c)           The definition of Term Loan Borrowing Base shall be amended to provide as follows:

 

“Term Loan Borrowing Base” means, as of any date of determination by Agent, from time to time, an amount equal to the sum at such time of:

 

(a)          up to the lesser of (i) 17.5% of the book value of Eligible Credit Card Accounts at such time, and (ii) the difference between (x) 102.5% plus, after an Insolvency Proceeding, any increase in the percentage of the book value permitted by Section 5.2(a)(5) of the ABL Intercreditor Agreement and (y) the percentage of the book value included, as of the date of determination, in the Borrowing Base by the ABL Agent with respect to the Eligible Credit Card Accounts at such time;

 

(b)          up to the lesser of (i) 17.5% of the book value of Eligible Inventory, valued at the lower of cost or market on a first-in, first-out basis, multiplied by the NOLV Factor for Inventory, and (ii) the product of (A) the difference between (x) 102.5% plus, after an Insolvency Proceeding, any increase in the percentage of the book value permitted by Section 5.2(a)(5) of the ABL Intercreditor Agreement and (y) the percentage of the book value of Eligible Inventory, valued at the lower of cost or market on a first-in, first-out basis included, as of the date of determination, in the Borrowing Base by the ABL Agent with respect to the Eligible Inventory, multiplied by (B) the NOLV Factor for such Inventory;

 

(c)           up to the lesser of (i) 30% of the Appraised Value of Eligible Real Estate; and (ii) $15,000,000 (or after consummation of the Real Estate Sale, $2,000,000);

 

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(d)          up to the lesser of (i) 52.5% of the Appraised Value of Eligible Intellectual Property; and (ii) $20,000,000; and

 

(e)           at any time (A) the ABL Agent has not included any Eligible In-Transit Inventory in the Borrowing Base, up to the lesser of (i) 65% of the book value of Eligible Supplemental Inventory valued at the lower of cost or market on a first-in, first-out basis, multiplied by the NOLV Factor for In-Transit Inventory; and (ii) $10,000,000; and (B) the ABL Agent has included any Eligible In-Transit Inventory in the Borrowing Base, 0% of the book value of Eligible Supplemental Inventory valued at the lower of cost or market on a first-in, first-out basis, multiplied by the NOLV Factor for Supplemental Inventory;

 

in each case less Reserves established by Agent at such time in its Permitted Discretion.

 

(d)           Subject to the removal of references to “Term Loan Reserve Amount” as provided in paragraph 11 above, Section 5.26 of the Existing Term Loan Agreement shall be amended to provide as follows:

 

Section 5.26 Excess Availability.  Permit Availability (without giving effect to the Availability Block) at any time to be less than an amount equal to the greater of (A) the lesser of (a) ten percent (10.00%) of the commitments under the ABL Credit Agreement then in effect and (b) ten percent (10.00%) of the Borrowing Base (without giving effect to the Term Loan Push Down Reserve or the Term Loan Reserve Amount), based upon the most recent Borrowing Base Certificate received by Agent; and (B) the sum of (i) $10,000,000 plus (ii) upon the occurrence of a Term Loan Trigger Event the Term Loan Reserve Amount.

 

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