Contract

EXHIBIT 10.6 SECOND AMENDMENT TO LOAN AND SECURITY AGREEMENT THIS SECOND AMENDMENT TO LOAN AND SECURITY AGREEMENT (the “Amendment”),dated as of November 30, 2000, is entered into between CONGRESS FINANCIALCORPORATION (SOUTHWEST), a Texas corporation (“Lender”), and ALLIED FASHION,INC., a Delaware corporation (“Borrower”). RECITAL A. Borrower and Lender have previously entered into that certain Loan andSecurity Agreement dated April 2, 1999, as amended in the First Amendment toLoan and Security Agreement dated June 22, 2000 (collectively the “LoanAgreement”), pursuant to which Lender has made certain loans and financialaccommodations available to Borrower. Terms used herein without definition shallhave the meanings ascribed to them in the Loan Agreement. B. Lender and Borrower wish to further amend the Loan Agreement under theterms and conditions set forth in this Amendment. Borrower is entering into thisAmendment with the understanding and agreement that, except as specificallyprovided herein, none of Lender’s rights or remedies as set forth in the LoanAgreement is being waived or modified by the terms of this Amendment. NOW, THEREFORE, in consideration of the foregoing and the mutual covenantsherein contained, and for other good and valuable consideration, the receipt andsufficiency of which are hereby acknowledged, the parties hereby agree asfollows: 1. Amendments to Loan Agreement. (a) The following definitions are hereby added to Section 1 in respective alphabetical order: “Adjusted Eurodollar Rate shall mean, with respect to each Interest Period for any Eurodollar Rate Loan, the rate per annum (rounded upwards, if necessary, to the next one-sixteenth (1/16) of one (1%) percent) determined by dividing (a) the Eurodollar Rate for such Interest Period by (b) a percentage equal to: (i) one (1) minus (ii) the Reserve Percentage. For purposes hereof, “Reserve Percentage” shall mean the reserve percentage, expressed as a decimal, prescribed by any United States or foreign banking authority for determining the reserve requirement which is or would be applicable to deposits of United States dollars in a non-United States or an international banking office of Reference Bank used to fund a Eurodollar Rate Loan or any Eurodollar Rate Loan made with the proceeds of such deposit, whether or not the Reference Bank actually holds or has made any such deposits or loans. The Adjusted Eurodollar Rate shall be adjusted on and as of the effective day of any change in the Reserve Percentage.” “Eurodollar Rate Loans shall mean any Loans or portion thereof on which interest is payable based on the Adjusted Eurodollar Rate in accordance with the terms hereof.” “Eurodollar Rate shall mean with respect to the Interest Period for a Eurodollar Rate Loan, the interest rate per annum equal to the arithmetic average of the rates of interest per annum (rounded upwards, if necessary, to the next one-sixteenth (1/16) of one (1%) percent) at which Reference Bank is offered deposits of United States dollars in the London interbank market (or other Eurodollar Rate market selected by Borrower and approved by Lender) on or about 9:00 a.m. (New York time) two (2) Business Days prior to the commencement of such Interest Period in amounts substantially equal to the principal amount of the Eurodollar Rate Loans requested by and available to Borrower in accordance with this Agreement, with a maturity of comparable duration to the Interest Period selected by Borrower.” “Interest Period shall mean for any Eurodollar Rate Loan, a period of approximately one (l), two (2), or three (3) months duration as Borrower may elect, the exact duration to be determined in accordance with the customary practice in the applicable Eurodollar Rate market; provided, that, Borrower may not elect an Interest Period which will end after the last day of the then-current term of this Agreement.” “Interest Rate shall mean, as to Prime Rate Loans, a rate of one quarter of one percent (.25%) per annum in excess of the Prime Rate and, as to Eurodollar Rate Loans, a rate of two and three-quarters of one percent (2.75%) per annum in excess of the Adjusted Eurodollar Rate (based on the Eurodollar Rate applicable for the Interest Period selected by Borrower as in effect three (3) Business Days after the date of receipt by Lender of the request of Borrower for such Eurodollar Rate Loans in accordance with the terms hereof, whether such rate is higher or lower than any rate previously quoted to Borrower); provided, that, the Interest Rate shall mean the rate of two and one quarter of one percent (2.25%) per annum in excess of the Prime Rate as to Prime Rate Loans and the rate of four and three-quarters of one percent (4.75%) per annum in excess of the Adjusted Eurodollar Rate as to Eurodollar Rate Loans, at Lender’s option, without notice, (a) for the period (i) from and after the date of termination or non-renewal hereof until Lender has received full and final payment of all obligations (notwithstanding entry of a judgment against Borrower) and (ii) from and after the date of the occurrence of an Event of Default for so long as such Event of Default is continuing as determined by Lender, and (b) on the Revolving Loans at any time outstanding in excess of the amounts available to Borrower under Section 2 (whether or not such 2 excess(es), arise or are made with or without Lender’s knowledge or consent and whether made before or after an Event of Default).” “Prime Rate Loans shall mean any Loans or portion thereof on which interest is payable based on the Prime Rate in accordance with the terms thereof.” “Reference Bank shall mean First Union National Bank, or such other bank as Lender may from time to time designate.” (b) The definition of “Business Day” is hereby replaced in its entirety to read as follows: “Business Day shall mean any day other than a Saturday, Sunday, or other day on which commercial banks are authorized or required to close under the laws of the State of New York or the State of North Carolina, and a day on which the Reference Bank and Lender are open for the transaction of business, except that if a determination of a Business Day shall relate to any Eurodollar Rate Loans, the term Business Day shall also exclude any day on which banks are closed for dealings in dollar deposits in the London interbank market or other applicable Eurodollar Rate market.” (c) Section 1.28 of the Loan Agreement is hereby amended in its entirety to read as follows: “Maximum Credit shall mean, with reference to the Revolving Loans and the Letter of Credit Accommodations, the amount of Fifteen Million Dollars ($15,000,000).” (d) Section 3.1 of the Loan Agreement is hereby replaced in its entirety to read as follows: “Interest. a. Borrower shall pay to Lender interest on the outstanding principal amount of the non-contingent Obligations at the Interest Rate. All interest accruing hereunder on and after the date of any Event of Default or termination or non-renewal hereof shall be payable on demand. b. Borrower may from time to time request that Prime Rate Loans be converted to Eurodollar Rate Loans or that any existing Eurodollar Rate Loans continue for an additional Interest Period. Such request from Borrower shall specify the amount of the Prime Rate Loans which will constitute Eurodollar Rate Loans (subject to the limits set forth below) and the Interest Period to be applicable to such Eurodollar Rate Loans. Subject to the terms and conditions contained herein, three (3) Business Days after receipt by Lender of such a request from Borrower, such Prime Rate Loans shall be converted to Eurodollar 3 Rate Loans or such Eurodollar Rate Loans shall continue, as the case may be, provided, that, (i) no Event of Default, or event which with notice or passage of time or both would constitute an Event of Default exists or has occurred and is continuing, (ii) no party hereto shall have sent any notice of termination or non-renewal of this Agreement, (iii) Borrower shall have complied with such customary procedures as are established by Lender and specified by Lender to Borrower from time to time for requests by Borrower for Eurodollar Rate Loans, (iv) no more than four (4) Interest Periods may be in effect at any one time, (v) the aggregate amount of the Eurodollar Rate Loans must be in an amount not less than $5,000,000 or an integral multiple of $1,000,000 in excess thereof, (vi) the maximum amount of the Eurodollar Rate Loans at any time requested by Borrower shall not exceed the amount equal to eighty (80%) percent of the lowest principal amount of the Loans which it is anticipated will be outstanding during the applicable Interest Period, in each case as determined by Lender (but with no obligation of Lender to make such Loans) and (vii) Lender shall have determined that the Interest Period or Adjusted Eurodollar Rate is available to Lender through the Reference Bank and can be readily determined as of the date of the request for such Eurodollar Rate Loan by Borrower. Any request by Borrower to convert Prime Rate Loans to Eurodollar Rate Loans or to continue any existing Eurodollar Rate Loans shall be irrevocable. Notwithstanding anything to the contrary contained herein, Lender and Reference Bank shall not be required to purchase United States Dollar deposits in the London interbank market or other applicable Eurodollar Rate market to fund any Eurodollar Rate Loans, but the provisions hereof shall be deemed to apply as if Lender and Reference Bank had purchased such deposits to fund the Eurodollar Rate Loans. c. Any Eurodollar Rate Loans shall automatically convert to Prime Rate Loans upon the last day of the applicable Interest Period, unless Lender has received and approved a request to continue such Eurodollar Rate Loan at least three (3) Business Days prior to such last day in accordance with the terms hereof. Any Eurodollar Rate Loans shall, at Lender’s option, upon notice by Lender to Borrower, convert to Prime Rate Loans in the event that (i) an Event of Default or event which, with the notice or passage of time, or both, would constitute an Event of Default, shall exist, (ii) this Agreement shall terminate or not be renewed, or (iii) the aggregate principal amount of the Prime Rate Loans which have previously been converted to Eurodollar Rate Loans or existing Eurodollar Rate Loans continued, as the case may be, at the beginning of an Interest Period shall at any time during such Interest Period exceed either (A) the aggregate principal amount of the Loans then outstanding, or (B) the Revolving Loans then available to Borrower under Section 2 hereof. Borrower shall pay to Lender, upon demand by Lender (or Lender may, at its option, charge any loan account of Borrower) any amounts required to compensate Lender, the Reference Bank or any participant with Lender for any loss (including loss of anticipated profits), cost or expense incurred by such person, as a result of the conversion of Eurodollar Rate Loans to Prime Rate Loans pursuant to any of the foregoing. 4 d. Interest shall be payable by Borrower to Lender monthly in arrears not later than the first day of each calendar month and shall be calculated on the basis of a three hundred sixty (360) day year and actual days elapsed. The interest rate on non-contingent Obligations (other than Eurodollar Rate Loans) shall increase or decrease by an amount equal to each increase or decrease in the Prime Rate effective on the first day of the month after any change in such Prime Rate is announced based on the Prime Rate in effect on the last day of the month in which any such change occurs. In no event shall charges constituting interest payable by Borrower to Lender exceed the maximum amount or the rate permitted under any applicable law or regulation, and if any such part or provision of this Agreement is in contravention of any such law or regulation, such part or provision shall be deemed amended to conform thereto. e. In the event Borrower’s Tangible Net Worth as defined in Section 1.2 falls below seventy-five percent (75%) of the requisite level as set forth in Section 9.15, the Interest Rate shall increase by one-quarter of one percent (.25%).” (e) Section 3.3 of the Loan Agreement is hereby amended to read in its entirety as follows: “Loan Servicing Fee. In addition to any fees or expenses payable by Borrower under Section 9.16 hereof, Borrower shall pay to Lender an annual loan servicing fee in an amount equal to Five Thousand Dollars ($5,000),in respect of Lender’s services for each year (or part thereof) while this Agreement remains in effect and for so long thereafter as any of the Obligations are outstanding, which fee shall be fully earned as of the date hereof and on each annual anniversary hereafter, such annual loan servicing fee to be payable on a quarterly basis, in advance, with the first such quarterly payment payable on the next scheduled quarterly payment and on the first day of each quarter thereafter.” (f) Section 3.5 is hereby included in the Loan Agreement to read as follows: “Changes in Laws and Increased Costs of Loans. a. Notwithstanding anything to the contrary contained herein, all Eurodollar Rate Loans shall, upon notice by Lender to Borrower, convert to Prime Rate Loans in the event that (i) any change in applicable law or regulation (or the interpretation or administration thereof) shall either (A) make it unlawful for Lender, Reference Bank or any participant to make or maintain Eurodollar Rate Loans or to comply with the terms hereof in connection with the Eurodollar Rate Loans, or (B) shall result in the increase in the costs to Lender, Reference Bank or any participant of making or maintaining any Eurodollar Rate Loans by an amount deemed by Lender to be material, or (C) reduce the amounts received or receivable by Lender in respect thereof, by an amount deemed by Lender to be 5 material or (ii) the cost to Lender, Reference Bank or any participant of making or maintaining any Eurodollar Rate Loans shall otherwise increase by an amount deemed by Lender to be material. Borrower shall pay to Lender, upon demand by Lender (or Lender may, at its option, charge any loan account of Borrower) any amounts required to compensate Lender, the Reference Bank or any participant with Lender for any loss (including loss of anticipated profits), cost or expense incurred by such person as a result of the foregoing, including, without limitation, any such loss, cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such person to make or maintain the Eurodollar Rate Loans or any portion thereof. A certificate of Lender setting forth the basis for the determination of such amount necessary to compensate Lender as aforesaid shall be delivered to Borrower and shall be conclusive, absent manifest error. b. If any payments or prepayments in respect of the Eurodollar Rate Loans are received by Lender other than on the last day of the applicable Interest Period (whether pursuant to acceleration, upon maturity or otherwise), including any payments pursuant to the application of collections under Section 6.3 or any other payments made with the proceeds of Collateral, Borrower shall pay to Lender upon demand by Lender (or Lender may, at its option, charge any loan account of Borrower) any amounts required to compensate Lender, the Reference Bank or any participant with Lender for any additional loss (including loss of anticipated profits), cost or expense incurred by such person as a result of such prepayment or payment, including, without limitation, any loss, cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such person to make or maintain such Eurodollar Rate Loans or any portion thereof.” (g) Section 12 of the Loan Agreement is replaced in its entirety to read as follows: “Term. (a) This Agreement and the other Financing Agreements shall become effective as of the date set forth on the first page hereof and shall continue in full force and effect for a term ending on April 2, 2003. Regardless of the timing of termination, this Agreement and all other Financing Agreements must be terminated simultaneously. Upon the effective date of termination of the Financing Agreements, Borrower shall pay to Lender, in full, all outstanding and unpaid Obligations and shall furnish cash collateral to Lender in such amounts as Lender determines are reasonably necessary to secure Lender from loss, cost, damage or expense, including reasonable attorneys’ fees and legal expenses, in connection with any contingent Obligations, including issued and outstanding Letter of Credit Accommodations and checks or other payments provisionally 6 credited to the Obligations and/or as to which Lender has not yet received final and indefeasible payment. Such cash collateral shall be remitted by wire transfer in Federal funds to such bank account of Lender, as Lender may, in its discretion, designate in writing to Borrower for such purpose. Interest shall be due until and including the next Business Day, if the amounts so paid by Borrower to the bank account designated by Lender are received in such bank account later than 3:00 p.m., New York time. (b) No termination of this Agreement or the other Financing Agreements shall relieve or discharge Borrower of its respective duties, obligations and covenants under this Agreement or the other Financing Agreements until all Obligations have been fully and finally discharged and paid, and Lender’s continuing security interest in the Collateral and the rights and remedies of Lender hereunder, under the other Financing Agreements and applicable law, shall remain in effect until all such Obligations have been fully and finally discharged and paid. (c) If for any reason this Agreement is terminated prior to the end of the then current term or any agreed upon renewal term of this Agreement, in view of the impracticality and extreme difficulty of ascertaining actual damages and by mutual agreement of the parties as to a reasonable calculation of Lender’s lost profits as a result thereof, Borrower agrees to pay to Lender, upon the effective date of such termination, an early termination fee in the amount set forth below if such termination is effective in the period indicated:

Amount Period (i) 1% of the Maximum Credit from the date of this Agreement to April 2, 2002 (ii) .5% of the Maximum Credit from April 3, 2002 to April 2, 2003

Such early termination fee shall be presumed to be the amount of damagessustained by Lender as a result of such early termination and Borrower agreesthat it is reasonable under the circumstances currently existing. Lender shallbe entitled to such early termination fee upon the occurrence of any Event ofDefault described in Sections 10.2(i) and 10.1(j) hereof, even if Lender doesnot exercise its right to terminate this Agreement, but elects, at its option,to provide financing to Borrower or permit the use of cash collateral under theUnited States Bankruptcy Code; provided, however, if Lender waives such Event ofDefault, does not exercise its rights to terminate this Agreement and continuesfinancing Borrower, such early termination fee shall not be due and payable byBorrower at such time. The early termination fee provided for in this Section12.1 shall be deemed included in the Obligations. 7 Notwithstanding the foregoing, the early termination fee shall be waived (a) if the termination is due to the refinancing of the Obligations by First Union National Bank and if there is no Event of Default or event or circumstance which, with notice or passage of time or both, would become an Event of Default under this Agreement or (b) if Borrower chooses to exercise the right to terminate this Agreement and the other Financing Agreements upon any assignment by Lender of its rights or obligations under or related to this Agreement or the other Financing Agreements to a non-U.S. Lender, defined as any Lender that is not a “United States person,” within the meaning of Section 7701(a)(30) of the Code. 2. Amendment Fee. Borrower shall pay Lender an amendment fee in the amountof Twenty Five Thousand Dollars ($25,000) for the processing and approval ofthis Amendment, which fee will be fully earned on the date of this Amendment. 3. Effectiveness of this Amendment. Lender must have received thefollowing items, in form and content acceptable to Lender, before this Amendmentis effective and before Lender is required to extend any credit to Borrower asprovided for by this Amendment. (a) Amendment. This Amendment fully executed in a sufficient number of counterparts for distribution to Lender and Borrower. (b) Representations and Warranties. The representations and warranties set forth herein and in the Loan Agreement must be true and correct. (c) Payment of Fee. Borrower shall pay the Amendment Fee required by Section 2. (d) Other Required Documentation. All other documents and legal matters in connection with the transaction contemplated by this Amendment shall have been delivered or executed or recorded and shall be in form and substance satisfactory to Lender. 4. Representations and Warranties. The Borrower represents and warrants asfollows: (a) Authority. The Borrower has the requisite corporate power and authority to execute and deliver this Amendment, and to perform its obligations hereunder and under the Financing Agreements (as amended or modified hereby) to which it is a party. The execution, delivery and performance by the Borrower of this Amendment have been duly approved by all necessary corporate action, have received all necessary governmental approval, if any, and do not contravene any law or any contractual restrictions binding on Borrower. No other corporate proceedings are necessary to consummate such transactions. (b) Enforceability. This Amendment has been duly executed and delivered by the Borrower. This Amendment and each Financing Agreement (as amended or modified hereby) is the legal, valid and binding obligation of Borrower, enforceable against 8 Borrower in accordance with its terms, and is in full force and effect. (c) Representations and Warranties. The representations and warranties contained in each Financing Agreement (other than any such representations or warranties that, by their terms, are specifically made as of a date other than the date hereof) are correct on and as of the date hereof as though made on and as of the date hereof. 5. Choice of Law. The validity of this Amendment, its construction,interpretation and enforcement, the rights of the parties hereunder, shall bedetermined under, governed by, and construed in accordance with the internallaws of the State of New York governing contracts only to be performed in thatState. 6 . Counterparts. This Amendment may be executed in any number ofcounterparts and by different parties and separate counterparts, each of whichwhen so executed and delivered, shall be deemed an original, and all of which,when taken together, shall constitute one and the same instrument. Delivery ofan executed counterpart of a signature page to this Amendment by telefacsimileshall be effective as delivery of a manually executed counterpart of thisAmendment. 7. Reference to and Effect on the Financing Agreements. (a) Upon and after the effectiveness of this Amendment, each reference in the Loan Agreement to “this Agreement”, “hereunder”, “hereof” or words of like import referring to the Loan Agreement, and each reference in the other Financing Agreements to “the Loan Agreement”, “thereof” or words of like import referring to the Loan Agreement, shall mean and be a reference to the Loan Agreement as modified and amended hereby. (b) Except as specifically amended above, the Loan Agreement and all other Financing Agreements, are and shall continue to be in full force and effect and are hereby in all respects ratified and confirmed and shall constitute the legal, valid, binding and enforceable obligations of Borrower to Lender. (c) The execution, delivery and effectiveness of this Amendment shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of Lender under any of the Financing Agreements, nor constitute a waiver of any provision of any of the Financing Agreements. (d) To the extent that any terms and conditions in any of the Financing Agreements shall contradict or be in conflict with any terms or conditions of the Loan Agreement, after giving effect to this Amendment, such terms and conditions are hereby deemed modified or amended accordingly to reflect the terms and conditions of the Loan Agreement as modified or amended hereby. 8. Ratification. Borrower hereby restates, ratifies and reaffirms each andevery term and condition set forth in the Loan Agreement, as amended hereby, andthe Financing Agreements effective as of the date hereof. 9 9. Estoppel. To induce Lender to enter into this Amendment and to continueto make advances to Borrower under the Loan Agreement, Borrower herebyacknowledges and agrees that, after giving effect to this Amendment, as of thedate hereof, there exists no Event of Default and no right of offset, defense,counterclaim or objection in favor of Borrower as against Lender with respect tothe Obligations. 10 IN WITNESS WHEREOF, the parties have entered into this Amendment as of thedate first above written. “BORROWER” ALLIED FASHION INC., a Delaware corporation By: /s/ G. BELLINO ———————————— Title: President ———————————— “LENDER” CONGRESS FINANCIAL CORPORATION (SOUTHWEST), a Texas corporation By: /s/ JOE T. CURDY ———————————— Title: AVP ———————————— 11