EXHIBIT 10.13.7
GMAC COMMERCIAL FINANCE
LLC
1290 Avenue of the Americas
New York, New York 10104
February 24, 2009
TARRANT APPAREL
GROUP
FASHION RESOURCE (TCL), INC.
TAG MEX, INC.
PRIVATE BRANDS, INC.
3151 East Washington Boulevard
Los Angeles, CA 90023
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Re:
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Consent to
Enter Into Merger Agreement and Amendments to
Agreements
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Gentlemen:
Reference is hereby made to that
certain Loan and Security Agreement dated as of June 16, 2006
(as the same may have been amended, modified, supplemented,
extended, renewed, restated or replaced from time to time, the
“ Loan Agreement ”), by and among Tarrant
Apparel Group (“ Holding ”), Fashion Resource
(TCL), Inc. (“ Fashion ”), TAG MEX, Inc.
(“ Tag Inc. ”), and Private Brands, Inc.
(“ Private ” and, together with Holding, Fashion
and Tag Inc., the “ Borrowers ”), the financial
institutions which are now or which hereafter become a party
thereto (each a “ Lender ” and collectively, the
“ Lenders ”) and GMAC Commercial Finance LLC
(“ GMAC CF ”), as agent for the Lenders (GMAC
CF, in such capacity, “ Agent ”) and to all
other documents, instruments and agreements executed and/or
delivered pursuant thereto or in connection therewith (all of the
foregoing, as the same now exist or may hereafter be amended,
modified, supplemented, extended, renewed, restated or replaced,
together with the Loan Agreement, collectively, the “ Loan
Documents ”). All capitalized terms used and not
otherwise defined in this letter agreement (this “
Consent ”) shall have the respective meanings ascribed
to them in the Loan Agreement.
The Borrowers have advised Agent
that Holding desires to enter into that certain Agreement and Plan
of Merger, in the form of Exhibit A hereto, subject to such
changes thereto as are acceptable to Agent (the “ Merger
Agreement ”), by and among Holding, Sunrise Acquisition
Company, LLC (“ Parent ”), Sunrise Merger
Company (“ Merger Sub ”), Gerard Guez and Todd
Kay. Upon the consummation of the transactions contemplated under
the Merger Agreement (the “ Merger ”), Merger
Sub will be merged with and into Holding with Holding surviving as
a wholly-owned subsidiary of Parent (the “ Surviving
Corporation ”). The Borrowers have requested that,
notwithstanding the terms of the Loan Agreement to the contrary,
Agent and the Lenders consent to Holding entering into the Merger
Agreement and the consummation of the transactions contemplated
thereby, which Agent and the Lenders have agreed to do subject to
the terms and provisions hereof.
A. Consent . In consideration of the foregoing, and other
good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, Agent, the Lenders and the Borrowers
hereby agree as follows:
1. Subject to the terms and
conditions set forth herein, Agent and the Lenders hereby consent
to Holding entering into the Merger Agreement, the consummation of
the Merger, and all the other transactions provided for under the
Merger Agreement. Notwithstanding the foregoing, the Borrowers
expressly acknowledge, confirm and agree that the Closing (as
defined in the Merger Agreement) is subject to certain conditions
precedent set forth in the Merger Agreement, and such terms and
conditions shall not be amended, modified or waived without
Agent’s prior written consent, which consent shall not be
unreasonably withheld, conditioned or delayed by Agent.
2. The Borrowers acknowledge,
confirm and agree that (i) Agent and Lenders will not provide
any financing necessary to consummate the Merger and
(ii) nothing contained herein is or shall be construed to be
an expression of interest or a commitment on the part of Agent or
any Lender to provide any working capital financing to Parent, the
Surviving Corporation or any of their respective Subsidiaries
(“ Ongoing Financing ”), which Ongoing Financing
may or may not be provided by Agent and Lenders in their sole and
absolute discretion.
3. The Borrowers further
acknowledge, confirm and agree that, if Agent and Lenders elect not
to provide Ongoing Financing (the “ Opt-Out Election
”), which Opt-Out Election shall be made in the sole
discretion of Agent and Lenders and shall not be made until after
the consummation of the Merger, then, on the Business Day that is
sixty (60) Business Days following Agent’s delivery of
written notice (the “ Opt-Out Notice ”) of the
Opt-Out Election to the Surviving Corporation (such Business Day,
the “ Opt-Out Date ”), all Obligations shall be
immediately due and payable, without offset, defense or
counterclaim of any kind or nature, all of which are hereby
expressly waived. If Agent and Lenders exercise the Opt-Out
Election and so long as no Event of Default has occurred and is
continuing on the Opt-Out Date, the obligation, if any, of the
Borrowers to pay (i) the Early Termination Fee (as defined in
the Fee Letter) and (ii) the amount payable under Paragraph
9(c) of the Factoring Agreement (the “ Factoring Agreement
Early Termination Fee ”) shall be waived by Agent and
Lenders. Nothing herein shall be construed to limit Agent’s
and Lenders’ rights and remedies, including, without
limitation, the right to receive the Early Termination Fee and the
Factoring Agreement Early Termination Fee, as applicable, in the
event that the Loan Agreement or the Factoring Agreement is
terminated other than pursuant to the exercise of the Opt-Out
Election.
4. The Borrowers further
acknowledge, confirm and agree that, if (a) the Borrowers
request that Agent and Lenders provide Ongoing Financing and
provide to Agent a business plan, in form and substance
satisfactory to Agent and Lenders, and a summary of the proposed
terms and conditions of such requested Ongoing Financing (a “
Term Sheet ”), and (b) Agent and Lenders elect to
provide such Ongoing Financing upon substantially the same terms
and conditions as set forth in the Term Sheet and deliver to the
Borrowers a signed commitment letter therefor, Parent or the
Surviving Corporation shall obtain, or shall cause such
Subsidiaries
2
to obtain, such Ongoing Financing from Agent and
Lenders; provided, that, so long as no Event of Default has
occurred and is continuing at the time of the consummation of such
Ongoing Financing, the obligation, if any, of the Borrowers to pay
the Early Termination Fee and the Factoring Agreement Early
Termination Fee shall be waived by Agent and Lenders. In the event
that Agent and Lenders elect not to provide such Ongoing Financing,
the right to receive the Early Termination Fee and the Factoring
Agreement Early Termination Fee, as applicable, shall not be waived
unless a bona fide commitment letter signed by an Other Lender (as
hereinafter defined) has been provided to Agent in accordance with
Paragraph B below and all of the terms and provisions of such
Paragraph B have been complied with by Parent, the Surviving
Corporation and their respective Subsidiaries. Nothing herein shall
be construed to limit Agent’s and Lenders’ rights and
remedies, including, without limitation, the right to receive the
Early Termination Fee and the Factoring Agreement Early Termination
Fee, as applicable, in the event that Agent and Lenders offer
Ongoing Financing pursuant to a signed commitment letter and
Parent, the Surviving Corporation or such Subsidiaries do not
consummate such Ongoing Financing with Agent and
Lenders.
5. The failure of Borrowers to
promptly provide Agent and the Lenders with such information as
Agent and the Lenders may reasonably request from time to time as
Agent and the Lenders deem necessary to consider providing any
Ongoing Financing shall constitute an Event of Default under the
Loan Documents.
B. Right of First
Refusal . If, at any
time (including after receipt of an Opt-Out Notice) in which the
Loan Documents are in effect, Parent, the Surviving Corporation or
any of their respective Subsidiaries receives from a third party
(an “ Other Lender ”) a bona fide commitment
letter signed by such Other Lender (each, an “ Offer
”), which provides for working capital financing to Parent,
the Surviving Corporation or any of their respective Subsidiaries,
the Surviving Corporation, on behalf of Parent, itself or such
Subsidiaries, shall immediately notify Agent of the Offer in
writing, including a copy of such commitment letter and all
material terms of the Offer, including the pricing, structure,
personal and corporate guarantees, collateral, side collateral and
other credit enhancements provided by any Person. Agent and Lenders
shall have forty-five (45) calendar days after receipt of such
notice (the “ Option Period ”) to agree to
provide similar financing in the place of such Other Lender upon
substantially the same terms and conditions (or terms more
favorable to Parent, the Surviving Corporation or such
Subsidiaries) as set forth in the Offer. The failure of Borrowers
to promptly provide Agent and the Lenders with such in
