Exhibit 10.1

 

[Execution]

 

AMENDMENT NO. 1 TO FOURTH AMENDED
AND RESTATED LOAN AND SECURITY AGREEMENT AND JOINDER

 

AMENDMENT NO. 1 TO FOURTH AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT AND
JOINDER, dated as of October 24, 2019 (this “Amendment No. 1”), is entered into
by and among LERNER NEW YORK, INC., a Delaware corporation (“Lerner”),
LERNCO, INC., a Delaware corporation (“Lernco”), LERNER NEW YORK OUTLET, LLC, a
Massachusetts limited liability company (“Lerner Outlet”), LERNER NEW YORK FTF,
LLC, a Delaware limited liability company (“Lerner FTF”, and together with
Lerner, Lernco and Lerner Outlet, collectively, “Borrowers” and individually
each a “Borrower”), RTW RETAILWINDS, INC., a Delaware corporation (“RTW”),
LERNER NEW YORK HOLDING, INC., a Delaware corporation (“Parent”), NEW YORK &
COMPANY STORES, INC., a New York corporation (“NY &Co Stores”), LERNER NEW YORK
GC, LLC, an Ohio limited liability company (“Lerner GC”), and FTF GC, LLC, an
Ohio limited liability company (“FTF”, and together with RTW, Parent, NY &Co
Stores and Lerner GC, collectively, “Guarantors” and each a “Guarantor”), WELLS
FARGO BANK, NATIONAL ASSOCIATION, in its capacity as administrative and
collateral agent (in such capacity, “Agent”) pursuant to the Loan Agreement (as
hereinafter defined) acting for and on behalf of the financial institutions
which are parties to the Loan Agreement as lenders (individually, each a
“Lender” and collectively, “Lenders”).  Lerner, Lernco and Lerner Outlet are
sometimes referred to herein collectively as “Existing Borrowers” and
individually as an “Existing Borrower” and RTW, Parent, NY &Co Stores and Lerner
GC are sometimes referred to herein collectively as “Existing Guarantors” and
individually, as an “Existing Guarantor”.

 

W I T N E S S E T H:

 

WHEREAS, Agent, Lenders, Existing Borrowers and Existing Guarantors are parties
to financing arrangements pursuant to which Lenders (or Agent on behalf of
Lenders) have made and may make loans and advances and provide other financial
accommodations to Borrowers as set forth in the Fourth Amended and Restated Loan
and Security Agreement, dated October 24, 2014 (as the same now exists and is
amended and supplemented pursuant hereto and may hereafter be further amended,
modified, supplemented, extended, renewed, restated or replaced, the “Loan
Agreement”) and together with all agreements, documents and instruments at any
time executed and/or delivered in connection therewith or related thereto (as
may from time to time be amended, modified, supplemented, extended, renewed,
restated, or replaced, collectively, the “Financing Agreements”);

 

WHEREAS, Existing Borrowers notified Agent that (a) they have formed or have
caused to be formed Lerner FTF (sometimes referred to herein as “New Borrower”)
and FTF (sometimes referred to herein as “New Guarantor”), and (b) they will
cause New Borrower and New Guarantor to execute and deliver this Amendment No. 1
in order to make New Borrower a “Borrower” and New Guarantor a “Guarantor” party
to the Loan Agreement and the other Financing Agreements applicable to a
Borrower or Guarantor as set forth herein (collectively, the “Joinders”);

 

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WHEREAS, New Borrower and New Guarantor will materially benefit directly and
indirectly from the credit facility provided by Agent and Lenders to Borrowers
under the Loan Agreement and the other Financing Agreements;

 

WHEREAS, Borrowers and Guarantors have also formed (a) FTF IP Company, Inc., a
Delaware corporation, (b) Fashion to Figure, LLC, a Delaware limited liability
company, and (c) New York & Company, Inc., a Delaware corporation (collectively,
“IP Holdcos” and individually an “IP Holdco”) and have requested that Agent and
Lenders waive the requirement that the IP Holdcos be joined as  Borrowers or
Guarantors to the Loan Agreement and the other Financing Agreements (the
“Waiver”);

 

WHEREAS, upon the joinder of New Borrower as a “Borrower” and New Guarantor as a
“Guarantor” pursuant to this Amendment No. 1, Borrowers and Guarantors desire to
amend the Loan Agreement and replace it in its entirety in the form of Exhibit A
to this Amendment No. 1 pursuant to the terms and conditions of this Amendment
No. 1;

 

WHEREAS, Agent and Lenders are willing to agree to the Waiver, Joinders and
amendments on the terms and subject to the conditions set forth herein, and by
this Amendment No. 1, Agent, Lenders, Borrowers and Guarantors desire and intend
to evidence such amendments and Joinders;

 

NOW THEREFORE, in consideration of the foregoing and the mutual agreements and
covenants contained herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:

 

1.                                      Definitions.  For purposes of this
Amendment No. 1, unless otherwise defined herein, all capitalized terms used
herein which are defined in the Amended Loan Agreement shall have the meanings
given to such terms in the Amended Loan Agreement.

 

2.                                      Amendment of Loan Agreement.
 Immediately after giving effect to the waiver provided in Section 3 hereof and
the joinders provided in Sections 4 and 5 hereof, the Loan Agreement is hereby
amended in its entirety as set forth in Exhibit A hereto (the “Amended Loan
Agreement”).  All schedules and exhibits to the Loan Agreement, as in effect
immediately prior to the Amendment No. 1 Effective Date, shall constitute
schedules and exhibits to the Amended Loan Agreement, except that those
schedules and exhibits which are attached to the Amended Loan Agreement shall
constitute those respective schedules and exhibits after the Amendment No. 1
Effective Date.  Each reference in the Loan Agreement to “this Agreement,”
“hereunder,” “hereof,” “herein” or words of similar import, and each reference
in the other Financing Agreements to the “Loan Agreement” (including, without
limitation, by means of words such as “thereunder” or “thereof” and words of
similar import), shall mean and be a reference to the Amended Loan Agreement. 
Agent, each of the Lenders signatory hereto, each Borrower and each Guarantor
consent to the amendment of the Loan Agreement pursuant to this Amendment No. 1.

 

3.                                      Waiver.  Notwithstanding anything to the
contrary contained in Section 9.22,

 

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Section 9.7(b) or any other provision of the Loan Agreement or the other
Financing Agreements, Agent and Lenders agree that (i) the IP Holdcos shall not
at any time be required to join, or provide guarantees under, the Loan Agreement
and the other Financing Agreements (in each case, as amended hereby or as may be
amended, restated, or otherwise modified after the date hereof) in any capacity
and (ii) no Default or Event of Default shall be caused or deemed to exist due
to the failure of the IP Holdcos to join, or provide guarantees under, the Loan
Agreement and the other Financing Agreements (in each case, as amended hereby or
as may be amended, restated, or otherwise modified after the date hereof).

 

4.                                      Acknowledgment of Obligations and
Security Interests.

 

(a)                                 Each Borrower and Guarantor hereby
acknowledges, confirms and agrees that, as of the close of business on
October 23, 2019, Borrowers are indebted to Agent and Lenders in respect of
Loans under the Amended Loan Agreement in the aggregate principal amount of $-0-
and Letters of Credit under the Amended Loan Agreement in the aggregate
principal amount of $11,019,410.72, in each case together with all interest
accrued and accruing thereon (to the extent applicable), and all fees, costs,
expenses and other charges relating thereto, all of which are unconditionally
owing by Borrowers to Agent and Lenders and guaranteed by Guarantors, without
offset, defense or counterclaim of any kind, nature or description whatsoever.

 

(b)                                 Each Borrower and Guarantor hereby
acknowledges, confirms and agrees that Agent, for itself and the ratable benefit
of the other Secured Parties, has and shall continue to have a security interest
in and lien upon the Collateral granted to Agent , for itself and the ratable
benefit of the other Secured Parties, pursuant to the Loan Agreement and the
other Financing Agreements as amended hereby to secure the Obligations, as well
as any Collateral granted to  Agent, for itself and the ratable benefit of the
other Secured Parties, under this Amendment No., the Loan Agreement or under any
of the other Financing Agreements or otherwise granted to or held by Agent, for
itself and the ratable benefit of the other Secured Parties.  The liens and
security interests of Agent in the Collateral shall be deemed to be continuously
granted and perfected from the earliest date of the granting and perfection of
such liens and security interests to Agent, whether under the Loan Agreement,
this Amendment No. 1 or any of the other Financing Agreements.

 

5.                                      Joinder of New Guarantor; Assumption of
Obligations; Amendments to Financing Agreements.

 

(a)                                 New Guarantor hereby expressly (i) assumes
and agrees to be directly liable to Agent, the Lender Group and Bank Product
Providers, jointly and severally with the Existing Guarantors, for all
Obligations under, contained in, or arising in connection with the Loan
Agreement or any of the other Financing Agreements to the same extent as if New
Guarantor had originally executed and been an original “Guarantor” signatory to
the Loan Agreement and the other Financing Agreements to which a Guarantor is a
party or that are otherwise applicable to a “Guarantor”, (ii) agrees to perform,
comply with and be bound by all terms, conditions and covenants of the Loan
Agreement and the other Financing Agreements

 

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applicable to a “Guarantor”, with the same force and effect as if New Guarantor
had originally executed and been an original “Guarantor” signatory to the Loan
Agreement and the other Financing Agreements to which a Guarantor is a party or
that are otherwise applicable to a “Guarantor”, (iii) is deemed to make as to
itself, and is in all respects bound by, all representations and warranties made
by a “Guarantor” to Agent, the Lender Group and Bank Product Providers as set
forth in the Loan Agreement and in any of the other Financing Agreements, as
applicable, and (iv) agrees that Agent, for itself and the benefit of the Lender
Group and Bank Product Providers, shall have all rights, remedies and interests,
including security interests in and liens upon the Collateral granted to Agent
pursuant to Section 6 hereof, under and pursuant to the Loan Agreement and the
other Financing Agreements, with respect to New Guarantor and its properties and
assets with the same force and effect as Agent, for itself and the benefit of
the Lender Group and the Bank Product Providers, has with respect to Existing
Guarantors and Existing Borrowers and their respective assets and properties, as
if New Guarantor had originally executed and had been an original “Guarantor”
signatory to the Loan Agreement and the other Financing Agreements to which a
Guarantor is a party or that are otherwise applicable to a “Guarantor”.

 

(b)                                 Each Existing Borrower and Existing
Guarantor under the Loan Agreement and the other Financing Agreements hereby
agrees that the Loan Agreement and the other Financing Agreements to which a
Guarantor is a party are hereby amended to include New Guarantor as an
additional “Guarantor” signatory thereto, and New Guarantor hereby agrees that
the Loan Agreement and the other Financing Agreements to which a Guarantor is a
party are hereby amended to include New Guarantor as an additional “Guarantor”
signatory thereto.  Each Existing Borrower and Existing Guarantor as a grantor
of a security interest in the Collateral hereby agrees that the Loan Agreement
is hereby amended to include New Guarantor as an additional Guarantor grantor of
the security in the Collateral, and New Guarantor hereby agrees that the Loan
Agreement and the other Financing Agreements to which a Guarantor is a party are
hereby amended to include New Guarantor as an additional grantor of a security
interest in the Collateral.

 

(c)                                  Without limiting the provisions of
Section 4(a) and 4(b) hereof, each Existing Guarantor as a guarantor of the
Obligations of Borrowers hereby agrees that the Guarantee is hereby amended to
include New Guarantor as an additional “Guarantor” signatory thereto, and New
Guarantor hereby agrees that the Guarantee is hereby amended to include New
Guarantor as an additional “Guarantor” signatory thereto.  New Guarantor hereby
expressly (i) assumes and agrees to be directly liable to Agent, the Lender
Group and Bank Product Providers, jointly and severally with the Guarantors
signatory thereto, for the payment and performance of all Guaranteed Obligations
(as defined in the Guarantee), (ii) agrees to perform, comply with and be bound
by all terms, conditions and covenants of the Guarantee with the same force and
effect as if New Guarantor had originally  executed and been an original party
signatory to the Guarantee as a “Guarantor”, and (iii) agrees that Agent and
Lenders shall have all rights, remedies and interests with respect to New
Guarantor and its property under the Guarantee with the same force and effect as
if New Guarantor had originally executed and been an original party signatory as
a “Guarantor” to the Guarantee.

 

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6.                                      Joinder of New Borrower; Assumption of
Obligations; Amendments to Financing Agreements.

 

(a)                                 New Borrower hereby expressly (i) assumes
and agrees to be directly liable to Agent, the Lender Group and Bank Product
Providers, jointly and severally with the Existing Borrowers, for all
Obligations under, contained in, or arising in connection with the Loan
Agreement or any of the other Financing Agreements to the same extent as if New
Borrower had originally executed and had been an original “Borrower” signatory
to the Loan Agreement and the other Financing Agreements to which a Borrower is
a party or that are otherwise applicable to a “Borrower”, (ii) agrees to
perform, comply with and be bound by all terms, conditions and covenants of the
Loan Agreement and the other Financing Agreements applicable to a “Borrower” and
as applied to New Borrower as a “Borrower”, with the same force and effect as if
New Borrower had originally executed and been an original “Borrower” signatory
to the Loan Agreement and the other Financing Agreements to which a Borrower is
a party or that are otherwise applicable to a “Borrower”, (iii) is deemed to
make as to itself, and is in all respects bound by, all representations and
warranties made by a “Borrower” to Agent, the Lender Group and Bank Product
Providers as set forth in the Loan Agreement and in any of the other Financing
Agreements, as applicable, and (iv) agrees that Agent, for itself and the
benefit of the Lender Group and Bank Product Providers, shall have all rights,
remedies and interests, including security interests in and liens upon the
Collateral granted to Agent pursuant to Section 6 hereof, under and pursuant to
the Loan Agreement and the other Financing Agreements, with respect to New
Borrower and its properties and assets with the same force and effect as Agent,
for itself and the benefit of the Lender Group and Bank Product Providers, has
with respect to “Borrowers” and “Guarantors” and their respective assets and
properties, as if New Borrower had originally executed and had been an original
“Borrower” signatory to the Loan Agreement and the other Financing Agreements to
which a Borrower is a party or that are otherwise applicable to a “Borrower”.

 

(b)                                 Each Existing Borrower and Existing
Guarantor under the Loan Agreement and the other Financing Agreements hereby
agrees that the Loan Agreement and the other Financing Agreements to which a
Borrower is a party are hereby amended to include New Borrower as an additional
“Borrower” signatory thereto, and New Borrower hereby agrees that the Loan
Agreement and the other Financing Agreements to which a Borrower is a party are
hereby amended to include New Borrower as an additional “Borrower” signatory
thereto.  Each Existing Borrower and Existing Guarantor as a grantor of the
security interest in the Collateral hereby agrees that the Loan Agreement is
hereby amended to include New Borrower as an additional “Borrower” grantor of
the security in the Collateral, and New Borrower hereby agrees that the Loan
Agreement and the other Financing Agreements to which a Borrower is a party are
hereby amended to include New Borrower as an additional grantor of a security
interest in the Collateral.

 

7.                                      Grant of Security Interest.

 

(a)                                 Without limiting the provisions of Sections
4 and 5 hereof, the Loan Agreement or the other Financing Agreements, to secure
payment and performance of all

 

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Obligations, New Borrower and New Guarantor hereby grant to Agent (for itself
and the ratable benefit of Secured Parties) a continuing security interest in, a
lien upon, and a right of set off against, all personal property and fixtures,
and interests in personal property and fixtures, of such New Borrower and New
Guarantor, whether now owned or hereafter acquired or existing, and wherever
located (together with all other collateral security for the Obligations at any
time granted to or held or acquired by Agent or any Secured Party, collectively,
the “Collateral”) including, without limitation, the following:

 

(i)                                  all Accounts;

 

(ii)                               all general intangibles;

 

(iii)                            all goods, including, without
limitation, Inventory and Equipment, whether ordered, in progress, finished or
received;

 

(iv)                           all fixtures;

 

(v)                              all chattel paper, including, without
limitation, all tangible and electronic chattel paper;

 

(vi)                           all instruments, including, without limitation,
all promissory notes;

 

(vii)                        all documents;

 

(viii)                     all deposit accounts;

 

(ix)                           all letters of credit, banker’s acceptances and
similar instruments and including all letter-of-credit rights;

 

(x)                              all supporting obligations and all present and
future liens, security interests, rights, remedies, title and interest in, to
and in respect of Receivables and other Collateral, including (A) rights and
remedies under or relating to guaranties, contracts of suretyship, letters of
credit and other insurance related to the Collateral, (B) rights of stoppage in
transit, replevin, repossession, reclamation and other rights and remedies of an
unpaid vendor, lienor or secured party, (C) goods described in invoices,
documents, contracts or instruments with respect to, or otherwise representing
or evidencing, Receivables or other Collateral, including returned, repossessed
and reclaimed goods, and (D) deposits by and property of account debtors or
other persons securing the obligations of account debtors;

 

(xi)                           all (A) investment property (including
securities, whether certificated or uncertificated, securities accounts,
security entitlements, commodity contracts or commodity accounts) and
(B) monies, credit balances, deposits and other property of such New Borrower or
New Guarantor now or hereafter held or received by or in transit to Agent, any
Secured Party or its Affiliates or at any other depository or other institution
from or for the account of such New Borrower or New Guarantor, whether for
safekeeping, pledge, custody, transmission, collection or otherwise;

 

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(xii)                        all commercial tort claims, including, without
limitation, those identified on Schedule 5.2(h) to the Amended Loan Agreement;

 

(xiii)                     to the extent not otherwise described above, all
Receivables;

 

(xiv)                    all Records; and

 

(xv)                       all products and proceeds of the foregoing, in any
form, including insurance proceeds (including any proceeds of business
interruption insurance) and all claims against third parties for loss or damage
to or destruction of or other involuntary conversion of any kind or nature of
any or all of the other Collateral.

 

(b)                                 Notwithstanding anything herein to the
contrary, in no event shall the Collateral include, and New Borrower or New
Guarantor shall not be deemed to have granted a security interest in, (i) any
Intellectual Property, other than any licenses of Intellectual Property by
another Person (including a Borrower or Guarantor) in favor of a New Borrower or
New Guarantor (provided, that, the foregoing exclusions in clause (i) shall in
no way be construed to limit the IP Use Rights of Agent), (ii) the Equity
Interests of any Foreign Subsidiary that is a “controlled foreign corporation”
(as such term is defined in Section 957(a) of the Code), to the extent such
Foreign Subsidiary is not treated as a “disregarded entity” by the Code, or the
Equity Interests of any Foreign Holdco Subsidiary in excess of sixty five (65%)
percent of all of the issued and outstanding shares of Equity Interests of such
Subsidiary entitled to vote (within the meaning of Treasury Regulation
Section 1.956-2); provided, that, if the pledge of one hundred (100%) percent of
the Equity Interests of such Foreign Subsidiary or Foreign Holdco Subsidiary
would not have an adverse tax impact on New Borrower or New Guarantor for
purposes of Section 956 of the Code as determined by Agent in its good faith
discretion in consultation with New Borrower or New Guarantor, New Borrower or
New Guarantor shall pledge to Agent one hundred (100%) percent of the Equity
Interests of such Foreign Subsidiary or such Foreign Holdco Subsidiary; 
(iii) any rights or interest in any contract, lease, permit, license, or license
agreement covering real or personal property of New Borrower or New Guarantor if
under the terms of such contract, lease, permit, license, or license agreement,
or applicable law with respect thereto, the grant of a security interest or lien
therein is prohibited as a matter of law or under the terms of such contract,
lease, permit, license, or license agreement and such prohibition or restriction
has not been waived or the consent of the other party to such contract, lease,
permit, license, or license agreement has not been obtained (provided, that
(A) the foregoing exclusions of this clause (iii) shall in no way be construed
(1) to apply to the extent that any described prohibition or restriction is
ineffective under Section 9-406, 9-407, 9-408, or 9-409 of the Code or other
applicable law, or (2) to apply to the extent that any consent or waiver has
been obtained that would permit Agent’s security interest or lien to attach
notwithstanding the prohibition or restriction on the pledge of such contract,
lease, permit, license, or license agreement and (B) the foregoing exclusions of
clauses (i), (ii) or (iii) shall in no way be construed to limit, impair, or
otherwise affect any of Agent’s, any other member of the Lender Group’s or any
Bank Product Provider’s continuing security interests in and liens upon any
rights or interests of New Borrower or New Guarantor in or to (1) monies due or
to become due under or in connection with any described contract, lease, permit,
license, license agreement, or Equity Interests (including any

 

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Accounts or Equity Interests), or (2) any proceeds from the sale, license,
lease, or other dispositions of any such contract, lease, permit, license,
license agreement, or Equity Interests).

 

8.                                      Agent and Lender Group Releases of
Intellectual Property; Release Documents.

 

(a)                                 Subject to the terms and conditions herein,
as of the Amendment No. 1 Effective Date, Agent, on behalf of itself and the
Lender Group and Bank Product Providers, hereby releases the security interest
granted by Borrowers and Guarantors in the Collateral consisting of Intellectual
Property in accordance with the Amended Loan Agreement.

 

(b)                                 Subject to the satisfaction of the
conditions precedent set forth in Section 10 hereof, Agent will, at Borrowers’
and Guarantors’ expense, take all reasonable actions to effect, evidence or
confirm the release of the security interest in the Collateral with respect to
the Intellectual Property, including, the filing of a release and termination of
the Lerner Trademark Agreement and the Lernco Trademark Agreement with the
United State Patent and Trademark Office.

 

9.                                      Representations and Warranties.  Each
Borrower (including New Borrower) and each Guarantor (including New Guarantor),
jointly and severally, represents and warrants with and to Agent, the other
members of the Lender Group and Bank Product Providers as follows:

 

(a)                                 No Default or Event of Default exists or has
occurred and is continuing as of the date hereof;

 

(b)                                       The execution, delivery and
performance of this Amendment No. 1 and any other agreements, documents and
instruments executed or delivered by any Borrower or Guarantor in connection
herewith (together with this Amendment No. 1, the “Amendment Documents”) and the
consummation of the transactions contemplated hereby or thereby, and compliance
with the provisions hereof or thereof by each Borrower and Guarantor (i) are all
within such Borrower’s or Guarantor’s corporate or limited liability company
powers, (ii) have been duly authorized, (iii) are not in contravention of law or
the terms of such Borrower’s or Guarantor’s certificate of incorporation,
certificate of formation, bylaws, operating agreement or other organizational
documentation, or any indenture, agreement or undertaking to which such Borrower
or Guarantor is a party or by which such Borrower or Guarantor or its property
are bound, except for those lease agreements of Lerner for which Lerner did not
obtain consents from the parties thereto with respect to this Amendment No. 1,
and (iv) will not result in the creation or imposition of, or require or give
rise to any obligation to grant, any lien, security interest, charge or other
encumbrance upon any property of such Borrower or Guarantor other than liens in
favor of Agent or any Lender as contemplated by the Financing Agreements;

 

(c)                                  Each of the Amendment Documents to which
each Borrower and Guarantor is a party constitute legal, valid and binding
obligations of such Borrower or Guarantor enforceable in accordance with their
respective terms;

 

(d)                                 All of the representations and warranties
set forth in the Amended Loan Agreement, and the other Financing Agreements, are
true and correct in all material respects

 

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after giving effect to the provisions of this Amendment No. 1, except to the
extent any such representations and warranties expressly relate solely to an
earlier date (in which case such representations and warranties shall have been
true and accurate in all material respects on and as of such earlier date); and

 

(e)                                  No action of, or filing with, or consent of
any Governmental Authority, and no approval or consent of any other party, is
required to authorize, or is otherwise required in connection with, the
execution, delivery and performance of any of the Amendment Documents by any
Borrower or Guarantor, except for any actions or filings already made or taken
and approvals or consents previously obtained.

 

10.                               Conditions Precedent.  The effectiveness of
this Amendment No. 1 shall be subject to the satisfaction of each of the
following conditions precedent in a manner satisfactory to Agent:

 

(a)                                 after giving effect to the Waiver set forth
in Section 3 hereof and the Joinders set forth in Sections 4 and 5 hereof, no
Default or Event of Default shall exist or have occurred and be continuing;

 

(b)                                 Agent shall have received counterparts of
this Amendment No. 1, duly authorized, executed and delivered by Borrowers,
Guarantors, and the Lenders;

 

(c)                                  Agent shall have received (i) the Amended
and Restated Revolving Loan Fee Letter, duly authorized, executed and delivered
by Borrowers and Guarantors and (ii) in immediately available funds (or Agent
shall have charged the loan account of Borrowers for) the full amount of the
fees referred to in the Amended and Restated Revolving Loan Fee Letter which are
due and payable on the Amendment No. 1 Effective Date;

 

(d)                                 Agent shall have received, in form and
substance reasonably satisfactory to Agent, (i) an amendment to the Second
Amended and Restated Stock Pledge Agreement with respect to the Equity Interest
of New Borrower and New Guarantor, duly authorized, executed and delivered by
Lerner, (ii) an Acknowledgement and Consent to Amendment No.1 to Second Amended
and Restated Pledge Agreement, by the pledged companies therein that are limited
liability companies, as acknowledged by Lerner, and (iii) amendments to the LLC
Agreement of Lerner FTF;

 

(e)                                  Agent shall have received, in form and
substance reasonably satisfactory to Agent, an amendment to the Third Amended
and Restated Guarantee by New Guarantor and Guarantors, duly authorized,
executed and delivered by Lerner;

 

(f)                                   Agent shall have received, in form and
substance reasonably satisfactory to Agent, an Intellectual Property Licensor
Agreement, duly authorized, executed and delivered by FTF IP Company, Inc. and
Lerner FTF;

 

(g)                                  Agent shall have received, in form and
substance reasonably satisfactory to Agent, an amendment to the Intercompany
Subordination Agreement to add New Borrower,

 

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New Guarantor  and IP Holdcos, duly authorized, executed and delivered by
Borrowers, Guarantors and IP Holdcos;

 

(h)           Agent shall have received, in form and substance reasonably
satisfactory to Agent, an Information Certificate duly authorized, executed and
delivered by New Borrower and New Guarantor;

 

(i)            Agent shall have received, in form and substance reasonably
satisfactory to Agent, such opinion letter of Kirkland & Ellis LLP as special
counsel to Borrowers and Guarantors with respect to the Amendment Documents;

 

(j)            Agent shall have received, in form and substance satisfactory to
Agent, an officer’s certificate or secretary’s certificate from each Borrower
and Guarantor, duly authorized, executed and delivered by an appropriate officer
of such Borrower or Guarantor, in form and substance reasonably satisfactory to
Agent, setting forth the incumbency and specified signatures of each applicable
officer and approving the transactions contemplated by this Amendment No. 1,
together with organizational documents and records of all requisite corporate or
limited liability company action and proceedings in connection with this
Amendment No. 1;

 

(k)           Agent shall have received certificates of status (or the
applicable equivalent thereof) with respect to each Borrower and Guarantor,
dated within thirty (30) days of the date hereof, such certificates to be issued
by the appropriate Governmental Authority of the jurisdiction of organization of
such Borrower or Guarantor, as applicable, which certificates shall indicate
that such Borrower or Guarantor, as applicable, is in good standing in such
jurisdiction;

 

(l)            Agent shall have received and reviewed lien and judgment search
results for the jurisdiction of organization or incorporation of each Borrower
and Guarantor, the jurisdiction of the chief executive office (or the
equivalent) of each Borrower and Guarantor, and all jurisdictions in which
material assets of each Borrower and Guarantor are located, which search results
shall be in form and substance reasonably satisfactory to Agent;

 

(m)          Agent shall have received, in form and substance satisfactory to
Agent, evidence that Agent will have a valid perfected security interest in all
of the Collateral of New Borrower and New Guarantor upon the filing of UCC
financing statements naming Agent, as secured party, and each of New Borrower
and New Guarantor, as debtor, to the extent such perfection can be obtained by
the filing of such UCC financing statements, which security interest shall be
prior to all security interests except as otherwise permitted under the
Financing Agreements;

 

(n)           Agent shall have received, in form and substance reasonably
satisfactory to Agent, supplements to each Schedule to the Loan Agreement or the
other Financing Agreements to the extent necessary to include any information in
such Schedule to account for New Borrower and New Guarantor or otherwise to
update the existing information set forth on any Schedules to the Loan Agreement
or the other Financing Agreements;

 

(o)           Agent shall have received, in form and substance reasonably
satisfactory

 

10

--------------------------------------------------------------------------------

 

to Agent, evidence of insurance for New Borrower and New Guarantor and lender
loss payee endorsements required under the Loan Agreement and the other
Financing Agreements with respect to New Borrower and New Guarantor, including
certificates of insurance policies and/or endorsements naming Agent as a lender
loss payee;

 

(p)           Agent shall have received internal Flood Disaster Prevention Act
approval;

 

(q)           At least five Business Days prior to the Amendment No. 1 Effective
Date, with respect to any Loan Party that qualifies as a “legal entity customer”
under the Beneficial Ownership Regulation, Agent shall receive a Beneficial
Ownership Certification in relation to such Loan Party; and

 

(r)            At least five Business Days prior to the Amendment No. 1
Effective Date, Agent shall have received all documentation and other
information about the Borrowers and Guarantors required under applicable “know
your customer” and anti-money laundering rules and regulations (including the
PATRIOT Act) that has been requested by the Agent in writing at least 10
Business Days prior to the Amendment No. 1 Effective Date.

 

11.          Release and Covenant Not to Sue.

 

(a)           Release.

 

(i)           In consideration of the agreements of Agent and Lenders contained
herein and the making of Loans and providing of Letters of Credit by or on
behalf of Agent and Lenders to Borrowers pursuant to the Loan Agreement, and for
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, each Borrower and Guarantor on behalf of itself and its
successors, assigns, and other legal representatives, hereby, jointly and
severally, absolutely, unconditionally and irrevocably releases, remises and
forever discharges Agent and each Lender and their present and former
shareholders, affiliates, subsidiaries, divisions, predecessors, directors,
officers, attorneys, employees, agents and other representatives (Agent, each
Lender and all such other parties being hereinafter referred to collectively as
the “Releasees” and individually as a “Releasee”), of and from all demands,
actions, causes of action, suits, covenants, contracts, controversies,
agreements, promises, sums of money, accounts, bills, reckonings, damages and
any and all other claims, counterclaims, defenses, rights of set-off, demands
and liabilities whatsoever (individually, a “Claim” and collectively, “Claims”)
of every name and nature, known or unknown, suspected or unsuspected, matured or
contingent both at law and in equity, which any Borrower or Guarantor, or any of
its successors, assigns, or other legal representatives may now own, hold, have
or claim to have against the Releasees or any of them for, upon, or by reason of
any nature, cause or thing whatsoever which arises at any time on or prior to
the date of this Amendment No. 1, including, without limitation, for or on
account of, or in relation to, or in any way in connection with the Loan
Agreement, as amended and supplemented through the date hereof and the other
Financing Agreements.

 

11

--------------------------------------------------------------------------------

 

(ii)          Each Borrower and Guarantor understands, acknowledges and agrees
that the release set forth above may be pleaded as a full and complete defense
and may be used as a basis for an injunction against any action, suit or other
proceeding which may be instituted, prosecuted or attempted in breach of the
provisions of such release.

 

(iii)         Each Borrower and Guarantor agrees that no fact, event,
circumstance, evidence or transaction which could now be asserted shall affect
in any manner the final and unconditional nature of the release set forth above.

 

(iv)         Each Borrower and Guarantor represents and warrants that each such
Person is the sole and lawful owner of all right, title and interest in and to
all of the claims released hereby and each such Person has not heretofore
voluntarily, by operation of law or otherwise, assigned or transferred or
purported to assign or transfer to any person any such claim or any portion
thereof.

 

(v)          Nothing contained herein shall constitute an admission of liability
with respect to any Claim on the part of any Releasee.

 

(b)           Covenant Not to Sue.  Each Borrower and Guarantor, on behalf of
itself and its successors, assigns, and other legal representatives, hereby
absolutely, unconditionally and irrevocably, jointly and severally, covenants
and agrees with each Releasee that it will not sue (at law, in equity, in any
regulatory proceeding or otherwise) any Releasee on the basis of any Claim
released, remised and discharged by such Borrower or Guarantor under
Section 11(a) hereof.  If any Borrower or Guarantor violates the foregoing
covenant, each Borrower and Guarantor agrees to pay, in addition to such other
damages as any Releasee may sustain as a result of such violation, all
attorneys’ fees and costs incurred by any Releasee as a result of such
violation.

 

(c)           Waiver of Statutory Provisions.  EACH BORROWER AND GUARANTOR
HEREBY EXPLICITLY WAIVES ALL RIGHTS UNDER AND ANY BENEFITS OF ANY COMMON LAW OR
STATUTORY RULE OR PRINCIPLE WITH RESPECT TO THE RELEASE OF SUCH CLAIMS, AND EACH
BORROWER AND GUARANTOR AGREES THAT NO SUCH COMMON LAW OR STATUTORY RULE OR
PRINCIPLE SHALL AFFECT THE VALIDITY OR SCOPE OR ANY OTHER ASPECT OF THIS
RELEASE.

 

12.          Effect of this Amendment.  Except as expressly set forth herein, no
other amendments, changes or modifications to the Financing Agreements are
intended or implied, and in all other respects the Financing Agreements are
hereby specifically ratified, restated and confirmed by all parties hereto as of
the Amendment No. 1 Effective Date and Borrowers and Guarantors shall not be
entitled to any other or further amendment by virtue of the provisions of this
Amendment No. 1 or with respect to the subject matter of this Amendment No. 1. 
To the extent of conflict between the terms of this Amendment No. 1 and the
other Financing Agreements, the terms of this Amendment No. 1 shall control. 
The Loan Agreement and this Amendment No. 1 shall be read and construed as one
agreement.

 

12

--------------------------------------------------------------------------------

 

13.          No Novation.  The amendment and restatement of the Loan Agreement
pursuant to this Amendment No. 1 and the Amended Loan Agreement shall not, in
any manner, be construed to constitute payment of, or impair, limit, cancel or
extinguish, or constitute a novation in respect of, the Obligations and other
obligations and liabilities of Borrowers and Guarantors evidenced by or arising
under the Loan Agreement as amended by this Amendment No. 1 or any of the other
Financing Agreements.  Except with respect to the release of Agent’s security
interest in the Collateral consisting of the Intellectual Property as set forth
in this Amendment No. 1, the Amended Loan Agreement and the release instruments
by Agent with respect to the Intellectual Property, each Borrower and each
Guarantor confirms and agrees that it continues to remain liable for all such
Obligations and other obligations and liabilities, and the liens and security
interests in the Collateral of Agent securing such Obligations and other
obligations and liabilities shall not in any manner be impaired, limited,
terminated, waived or released, but shall continue in full force and effect in
favor of Agent for the benefit of the Secured Parties.

 

14.          Governing Law.  The validity, interpretation and enforcement of
this Amendment No. 1 and any dispute arising out of the relationship between the
parties hereto, whether in contract, tort, equity or otherwise, shall be
governed by the internal laws of the State of New York but excluding any
principles of conflicts of law or other rule of law that would cause the
application of the law of any jurisdiction other than the laws of the State of
New York.

 

15.          Binding Effect.  This Amendment No. 1 shall be binding upon and
inure to the benefit of each of the parties hereto and their respective
successors and assigns.

 

16.          Headings.  The headings listed herein are for convenience only and
do not constitute matters to be construed in interpreting this Amendment No. 1.

 

17.          Counterparts.  This Amendment No. 1 may be executed in any number
of counterparts, but all of such counterparts shall together constitute but one
and the same agreement.  In making proof of this Amendment No. 1, it shall not
be necessary to produce or account for more than one counterpart thereof signed
by each of the parties hereto.  Delivery of an executed counterpart of this
Amendment No. 1 by telecopier or other electronic means shall have the same
force and effect as delivery of an original executed counterpart of this
Amendment No. 1.  Any party delivering an executed counterpart of this Amendment
No. 1 by telecopier or other electronic means also shall deliver an original
executed counterpart of this Amendment No. 1, but the failure to deliver an
original executed counterpart shall not affect the validity, enforceability, and
binding effect of this Amendment No. 1 as to such party or any other party.

 

18.          Further Assurances.  Borrowers and Guarantors shall execute and
deliver such additional documents and take such additional action as may be
reasonably requested by the Agent to effectuate the provisions and purposes of
this Amendment No. 1.

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

13

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IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 1 to be
duly executed and delivered by their authorized officers as of the day and year
first above written.

 

 

BORROWERS

 

 

 

 

LERNER NEW YORK, INC.

 

 

 

 

By:

/s/ Sheamus Toal

 

Name:

Sheamus Toal

 

Title:

Executive Vice President, Chief Operating Officer, Chief Financial Officer and
Treasurer

 

 

 

 

LERNCO, INC.

 

 

 

 

By:

/s/ Sheamus Toal

 

Name:

Sheamus Toal

 

Title:

President

 

 

 

 

LERNER NEW YORK OUTLET, LLC

 

 

 

 

By:

/s/ Sheamus Toal

 

Name:

Sheamus Toal

 

Title:

Executive Vice President, Chief Operating Officer, Chief Financial Officer and
Treasurer

 

 

 

 

LERNER NEW YORK FTF, LLC

 

 

 

 

By:

 /s/ Sheamus Toal

 

Name:

Sheamus Toal

 

Title:

Executive Vice President and Chief Financial Officer

 

[SIGNATURES CONTINUED ON NEXT PAGE]

 

[Amendment No. 1 to Fourth Amended and Restated Loan and Security Agreement and
Joinder (Lerner)]

 

--------------------------------------------------------------------------------

 

[SIGNATURES CONTINUED FROM PREVIOUS PAGE]

 

 

GUARANTORS

 

 

 

 

RTW RETAILWINDS, INC.

 

 

 

 

By:

/s/ Sheamus Toal

 

Name:

Sheamus Toal

 

Title:

Executive Vice President, Chief Operating Officer, Chief Financial Officer and
Treasurer

 

 

 

 

LERNER NEW YORK HOLDING, INC.

 

 

 

 

By:

/s/ Sheamus Toal

 

Name:

Sheamus Toal

 

Title:

Executive Vice President, Chief Operating Officer, Chief Financial Officer and
Treasurer

 

 

 

 

LERNER NEW YORK GC, LLC

 

 

 

 

By:

/s/ Sheamus Toal

 

Name:

Sheamus Toal

 

Title:

President

 

 

 

 

NEW YORK & COMPANY STORES, INC.

 

 

 

 

By:

/s/ Sheamus Toal

 

Name:

Sheamus Toal

 

Title:

Executive Vice President, Chief Operating Officer, Chief Financial Officer and
Treasurer

 

 

 

 

FTF GC LLC

 

 

 

By:

/s/ Sheamus Toal

 

Name:

Sheamus Toal

 

Title:

President and Chief Executive Officer

 

[SIGNATURES CONTINUED ON NEXT PAGE]

 

[Amendment No. 1 to Fourth Amended and Restated Loan and Security Agreement and
Joinder (Lerner)]

 

--------------------------------------------------------------------------------

 

[SIGNATURES CONTINUED FROM PREVIOUS PAGE]

 

 

WELLS FARGO BANK, NATIONAL ASSOCIATION, as Agent and Revolving Loan Lender

 

 

 

 

By:

/s/ Michele L. Riccobono

 

Name:

Michele L. Riccobono

 

Title:

Authorized Officer

 

[Amendment No. 1 to Fourth Amended and Restated Loan and Security Agreement and
Joinder (Lerner)]

 

--------------------------------------------------------------------------------

 

EXHIBIT A

 

TO

 

AMENDMENT NO. 1 TO FOURTH AMENDED
AND RESTATED LOAN AND SECURITY AGREEMENT AND JOINDER

 

See attached.

 

--------------------------------------------------------------------------------

 

[Conformed Loan Agreement for Amendment No. 1 to Loan Agreement]

 

[Execution]

 

FOURTH AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT

 

by and among

 

LERNER NEW YORK, INC.,
LERNCO, INC.
LERNER NEW YORK OUTLET, LLC., and
LERNER NEW YORK FTF, LLC
as Borrowers,

 

RTW RETAILWINDS, INC.,
LERNER NEW YORK HOLDING, INC.,
LERNER NEW YORK GC, LLC,
NEW YORK & COMPANY STORES, INC., and
FTF GC, LLC

 

as Guarantors,

 

WELLS FARGO BANK, NATIONAL ASSOCIATION,
as Administrative Agent for Lenders,

 

WELLS FARGO CAPITAL FINANCE, LLC
as Sole Lead Arranger and Sole Bookrunner,

 

and

 

WELLS FARGO BANK, NATIONAL ASSOCIATION
AND THE OTHER PERSONS NAMED HEREIN,
as Lenders,

 

Dated:  October 24, 2014

 

--------------------------------------------------------------------------------

 

Table of Contents

 

 

 

Page

 

 

 

SECTION 1.

DEFINITIONS AND CONSTRUCTION

2

 

 

1.1

Definitions

2

1.2

Accounting Terms

48

1.3

UCC

49

1.4

Construction

49

1.5

Time References

50

1.6

Schedules and Exhibits

50

1.7

Divisions

50

 

 

SECTION 2.

CREDIT FACILITIES

50

 

 

2.1

Revolving Loans

50

2.2

Borrowing Procedures and Settlements

51

2.3

Letters of Credit

56

2.4

Revolver Commitments

64

2.5

Revolving Loan Facility Increases

64

2.6

Revolving Loan Facility Decreases

65

2.7

Bank Products

65

2.8

Prepayments

65

 

 

SECTION 3.

INTEREST AND FEES

68

 

 

3.1

Interest

68

3.2

Fees

69

3.3

LIBOR Option

70

3.4

Capital Requirements

72

3.5

Maximum Interest

73

 

 

SECTION 4.

CONDITIONS PRECEDENT

74

 

 

4.1

Conditions Precedent to Effectiveness of Agreement

74

4.2

Conditions Precedent to All Loans and Letters of Credit

75

 

 

SECTION 5.

GRANT AND PERFECTION OF SECURITY INTEREST

76

 

 

5.1

Grant of Security Interest

76

5.2

Perfection of Security Interests

78

5.3

IP Use Rights

81

 

 

SECTION 6.

COLLECTION AND ADMINISTRATION

83

 

 

6.1

Borrowers’ Loan Accounts

83

6.2

Statements

83

6.3

Collection of Accounts

83

6.4

Payments

85

6.5

Authorization to Make Loans

88

6.6

Use of Proceeds

88

 

 

SECTION 7.

COLLATERAL REPORTING AND COVENANTS

88

 

 

7.1

Collateral Reporting

88

 

i

--------------------------------------------------------------------------------

 

7.2

Accounts Covenants

90

7.3

Inventory Covenants

91

7.4

Equipment Covenants

93

7.5

Bills of Lading and Other Documents of Title

93

7.6

[Reserved.]

93

7.7

Power of Attorney

93

7.8

Right to Cure

94

7.9

Access to Premises

95

 

 

SECTION 8.

REPRESENTATIONS AND WARRANTIES

95

 

 

8.1

Corporate Existence, Power and Authority

95

8.2

Name; State of Organization; Chief Executive Office; Collateral Locations

96

8.3

Financial Statements; No Material Adverse Change

96

8.4

Priority of Liens; Title to Properties

96

8.5

Tax Returns

96

8.6

Litigation

97

8.7

Compliance with Other Agreements and Applicable Laws

97

8.8

Environmental Compliance

97

8.9

Employee Benefits

98

8.10

Bank Accounts, etc.

99

8.11

Intellectual Property

99

8.12

Subsidiaries; Affiliates; Capitalization; Solvency

99

8.13

Labor Disputes

100

8.14

Restrictions on Subsidiaries

100

8.15

Material Contracts

100

8.16

Credit Card Agreements

101

8.17

Payable Practices

101

8.18

Accuracy and Completeness of Information

101

8.19

No Defaults

101

8.20

Transition Services

101

8.21

Patriot Act

102

8.22

OFAC

102

8.23

Margin Stock

102

8.24

IP Holdco Subsidiaries

102

8.25

Survival of Warranties; Cumulative

102

 

 

SECTION 9.

AFFIRMATIVE AND NEGATIVE COVENANTS

103

 

 

9.1

Maintenance of Existence

103

9.2

New Collateral Locations

103

9.3

Compliance with Laws, Regulations, Etc.

103

9.4

Payment of Taxes and Claims

104

9.5

Insurance

105

9.6

Financial Statements and Other Information

105

9.7

Sale of Assets, Consolidation, Merger, Dissolution, Etc.

107

9.8

Encumbrances

109

9.9

Indebtedness

111

9.10

Prepayments and Amendments; Loans, Investments, Etc.

113

9.11

Dividends and Redemptions

114

9.12

Transactions with Affiliates

116

 

ii

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9.13

Compliance with ERISA

116

9.14

End of Fiscal Years; Fiscal Quarters

116

9.15

Change in Business

116

9.16

Limitation of Restrictions Affecting Subsidiaries

117

9.17

Minimum Excess Availability

117

9.18

IP License Agreements

117

9.19

After Acquired Real Property

118

9.20

Costs and Expenses

118

9.21

Credit Card Agreements

119

9.22

Additional Guaranties and Collateral Security; Further Assurances

120

9.23

Private Label Credit Cards

121

9.24

Termination of Transition Services Agreement

121

9.25

Cash Collateral Account

121

9.26

OFAC; Sanctions; Anti-Corruption Laws; Anti-Money Laundering Laws

122

9.27

ECP Guarantor Keepwell

122

9.28

IP Holdco Subsidiaries

122

 

 

SECTION 10.

EVENTS OF DEFAULT AND REMEDIES

122

 

 

10.1

Events of Default

122

10.2

Remedies

125

 

 

SECTION 11.

JURY TRIAL WAIVER; OTHER WAIVERS AND CONSENTS; GOVERNING LAW

128

 

 

11.1

Governing Law; Choice of Forum; Service of Process; Jury Trial Waiver

128

11.2

Waiver of Notices

129

11.3

Amendments and Waivers

129

11.4

Waiver of Counterclaims

132

11.5

Indemnification

132

 

 

SECTION 12.

THE AGENT

132

 

 

12.1

Appointment, Powers and Immunities

132

12.2

Reliance by Agent

133

12.3

Events of Default

133

12.4

Wells Fargo in its Individual Capacity

133

12.5

Indemnification

134

12.6

Non Reliance on Agent and Other Lenders

134

12.7

Failure to Act

134

12.8

Additional Revolving Loans

134

12.9

Concerning the Collateral and the Related Financing Agreements

135

12.10

Field Audit, Examination Reports and other Information; Disclaimer by Lenders

135

12.11

Collateral Matters

135

12.12

Agency for Perfection

137

12.13

Successor Agent

137

 

 

SECTION 13.

JOINT AND SEVERAL LIABILITY; SURETYSHIP WAIVERS

137

 

 

13.1

Independent Obligations; Subrogation

137

13.2

Authority to Modify Obligations and Security

138

13.3

Waiver of Defenses

138

 

iii

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13.4

Exercise of Agent’s and Lenders’ Rights

138

13.5

Additional Waivers

139

13.6

Additional Indebtedness

139

13.7

Notices, Demands, Etc.

139

13.8

Revival

139

13.9

Understanding of Waivers

140

 

 

SECTION 14.

TERM; MISCELLANEOUS

140

 

 

14.1

Term

140

14.2

Additional Interpretative Provisions

141

14.3

Notices

142

14.4

Partial Invalidity

142

14.5

Confidentiality

143

14.6

Successors

144

14.7

Assignments; Participations

144

14.8

Entire Agreement

147

14.9

Bank Product Providers

147

14.10

Debtor-Creditor Relationship

148

14.11

Patriot Act

148

14.12

Counterparts, Etc.

148

14.13

Acknowledgement and Consent to Bail-In of EEA Financial Institutions

148

14.14

Acknowledgement Regarding Any Supported QFCs

149

 

 

SECTION 15.

WITHHOLDING TAXES

149

 

 

15.1

Payments

149

15.2

Exemptions

150

15.3

Reductions

152

15.4

Refunds

152

 

 

SECTION 16.

ACKNOWLEDGMENT AND RESTATEMENT

153

 

 

16.1

Existing Obligations

153

16.2

Acknowledgment of Security Interests

153

16.3

Existing Financing Agreements

153

16.4

Restatement

153

16.5

Release

153

 

iv

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INDEX OF SCHEDULES AND EXHIBITS

 

Exhibit A

 

Form of Assignment and Acceptance Agreement for Lenders

 

 

 

Exhibit B

 

Form of Borrowing Base Certificate

 

 

 

Exhibit C

 

Form of Compliance Certificate

 

 

 

Exhibit D

 

Information Certificates for Borrowers and Guarantors

 

 

 

Exhibit E

 

Locations of Inventory

 

 

 

Exhibit F

 

Fiscal Year-End; Fiscal Quarter-End; Fiscal Month -End

 

 

 

Schedule A-1

 

Agent Payment Account

Schedule 1

 

Commitments

Schedule 1.87

 

Freight Forwarders

Schedule 5.2(b)

 

Chattel Paper and Instruments

Schedule 5.2(e)

 

Investment Property

Schedule 5.2(g)

 

Letters of Credits

Schedule 5.2(h)

 

Commercial Tort Claims

Schedule 8.8

 

Environmental Compliance

Schedule 8.9(c)

 

ERISA Affiliates Transactions

Schedule 8.13

 

Collective Bargaining Agreements

Schedule 8.15

 

Material Contracts

Schedule 8.16

 

Credit Card Agreements

Schedule 9.9(h)

 

Permitted Intercompany Indebtedness

Schedule 9.10

 

Permitted Loans

Schedule 9.11(d)

 

Permitted Uses of Certain Permitted Dividends

 

v

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FOURTH AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT

 

This Fourth Amended and Restated Loan and Security Agreement (this “Agreement”),
dated as of October 24, 2014, is entered into by and among Lerner New
York, Inc., a Delaware corporation (“Lerner”), Lernco, Inc., a Delaware
corporation (“Lernco”), Lerner New York Outlet, LLC, a Massachusetts limited
liability company (“Lerner Outlet”), and Lerner New York FTF, LLC, a Delaware
limited liability company (“Lerner FTF”, and together with Lerner, Lernco and
Lerner Outlet, each individually a “Borrower” and, collectively with their
respective successors and assigns and those additional Persons that are joined
as a party to this Agreement as a “Borrower” by executing and delivering a
joinder agreement in form and substance reasonably acceptable to Agent, the
“Borrowers”), RTW Retailwinds, Inc. (formerly known as New York &
Company, Inc.), a Delaware corporation (“RTW”), Lerner New York Holding, Inc., a
Delaware corporation (“Parent”), New York & Company Stores, Inc., a New York
corporation (“NY & Co Stores”), Lerner New York GC, LLC, an Ohio limited
liability company (“Lerner GC”), and FTF GC, LC, an Ohio limited liability
company (“FTF”, and together with RTW, Parent, NY & Co Stores and Lerner GC,
each a “Guarantor”, and collectively with their respective successors and
assigns and those additional Persons that are joined as a party to this
Agreement as a “Guarantor” by executing and delivering a joinder agreement in
form and substance reasonably acceptable to Agent, the “Guarantors”), the
Revolving Loan Lenders (as hereinafter defined), Wells Fargo Bank, National
Association, a national banking association, in its capacity as administrative
agent and collateral agent for Lenders and Bank Product Providers (in such
capacity, together with any replacement or successor agent hereunder, “Agent”),
and Wells Fargo Capital Finance, LLC, as sole lead arranger and sole lead
bookrunner.

 

W I T N E S S E T H:

 

WHEREAS, Borrowers, Guarantors, the persons party thereto as lenders (the
“Lenders” as hereinafter further defined), and Agent have previously entered
into the Third Amended and Restated Loan and Security Agreement, dated as of
August 10, 2011 (the “Existing Loan Agreement” as hereinafter further defined),
pursuant to which, among other things, the Lenders have provided certain loans
and other financial accommodations to Borrowers;

 

WHEREAS, Borrowers and Guarantors have requested that Agent and Lenders amend
and extend the Existing Loan Agreement and the other Existing Financing
Agreements by amending and restating the Existing Loan Agreement;

 

WHEREAS, Borrowers and Guarantors (other than Parent) are wholly-owned
Subsidiaries of Parent, and together they are interrelated entities which
collectively constitute an integrated clothing retailer;

 

WHEREAS, the directors of each Borrower view the entities as sufficiently
dependent upon each other and so interrelated that any advance made hereunder to
any Borrower would benefit each of the Borrowers as a result of their
consolidated operations and identity of interests;

 

WHEREAS, each Borrower has requested that Agent (as hereinafter defined) and
Lenders treat them as co-borrowers hereunder, jointly and severally responsible
for the obligations of each other hereunder;

 

WHEREAS, each Revolving Loan Lender (as hereinafter defined) is willing
(severally and not jointly) to continue to make Revolving Loans (as hereinafter
defined) and other financial accommodations to Borrowers, in each case on a pro
rata basis according to its commitments provided for

 

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herein on the terms and conditions set forth herein, and Agent is willing to
continue to act as agent for the Lenders on the terms and conditions set forth
herein; and

 

WHEREAS, the parties hereto have agreed to amend and restate, in their entirety,
the agreements contained in the Existing Loan Agreement on the terms and
conditions set forth herein.

 

NOW, THEREFORE, in consideration of the mutual conditions and agreements set
forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto amend and
restate the Existing Loan Agreement and agree as follows:

 

SECTION 1. DEFINITIONS AND CONSTRUCTION

 

1.1       Definitions.  For purposes of this Agreement, the following terms
shall have the respective meanings given to them below:

 

“Account Party” has the meaning specified therefor in Section 2.3(h) of this
Agreement.

 

“Accounting Changes” means changes in accounting principles required by the
promulgation of any rule, regulation, pronouncement or opinion by the Financial
Accounting Standards Board of the American Institute of Certified Public
Accountants (or successor thereto or any agency with similar functions).

 

“Accounts” means all present and future rights of each Borrower and Guarantor to
payment of a monetary obligation, whether or not earned by performance, which is
not evidenced by chattel paper or an instrument, (a) for property that has been
or is to be sold, leased, licensed, assigned, or otherwise disposed of, (b) for
services rendered or to be rendered, (c) for a secondary obligation incurred or
to be incurred, or (d) arising out of the use of a credit or charge card or
information contained on or for use with any such card.  The term “Accounts” as
used herein shall include, without limitation, all Credit Card Receivables.

 

“Additional Revolving Loans” has the meaning specified therefor in Section 12.8
of this Agreement.

 

“Affected Lender” has the meaning specified therefor in Section 3.4(b) of this
Agreement.

 

“Affiliate” means, with respect to a specific Person, any other Person which
directly or indirectly, through one or more intermediaries, controls or is
controlled by or is under common control with such Person.  For the purposes of
this definition, the term “control” (including with correlative meanings, the
terms “controlled by” and “under common control with”), as used with respect to
any Person, means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of such Person, whether
through the ownership of Equity Interests, by contract or otherwise.

 

“Agent” has the meaning provided to such term in the preamble to this Agreement.

 

“Agent Payment Account” means the deposit account of Agent identified on
Schedule A-1to this agreement (or such other account of Agent as Agent may from
time to time designate to Borrowers as the Agent Payment Account for purposes of
this Agreement and the other Financing Agreements).

 

“Agreement” has the meaning provided to such term in the preamble to this
Agreement.

 

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“Amendment No. 1” means Amendment No. 1 to Fourth Amended and Restated Loan and
Security Agreement, dated as of October 24, 2019, among Agent, Lenders,
Borrowers and Guarantors, as may be amended, modified, supplemented, extended,
renewed, restated or replaced.

 

“Amendment No. 1 Effective Date” means the date on which all of the conditions
precedent to the effectiveness of Amendment No. 1 shall have been satisfied or
shall have been waived by Agent in writing.

 

“Anti-Corruption Laws” means the FCPA, the U.K. Bribery Act of 2010, as amended,
and all other applicable laws and regulations or ordinances concerning or
relating to bribery, money laundering or corruption in any jurisdiction in which
any Loan Party or any of its Subsidiaries or Affiliates is located or is doing
business.

 

“Anti-Money Laundering Laws” means the applicable laws or regulations in any
jurisdiction in which any Loan Party or any of its Subsidiaries or Affiliates is
located or is doing business that relates to money laundering, any predicate
crime to money laundering, or any financial record keeping and reporting
requirements related thereto.

 

“Applicable LC Margin” means

 

(a)         Subject to clause (b) below, at any time as to the Letter of Credit
Rate for documentary Letters of Credit and the Letter of Credit Rate for standby
Letters of Credit, the applicable percentages (on a per annum basis) set forth
below, in each case based on the Average Compliance Excess Availability for the
immediately preceding fiscal quarter, is at or within the amounts indicated for
such percentage as of the last day of the fiscal quarter as follows:

 

Tier

 

Quarterly Average Compliance
Excess Availability

 

Applicable LC Margin for
Standby Letter of Credit

 

Applicable LC Margin for
Documentary Letter of Credit

 

1

 

Greater than or equal to 40% of the Revolving Loan Limit

 

1.25

%

0.625

%

2

 

Less than 40% of the Revolving Loan Limit

 

1.50

%

0.750

%

 

(b)         Notwithstanding anything to the contrary set forth above in clause
(a) above, (i) the Applicable LC Margin shall be calculated and established once
each fiscal quarter and shall remain in effect until adjusted thereafter after
the end of such fiscal quarter, (ii) each adjustment of the Applicable LC Margin
shall be effective as of the first day of a fiscal quarter based on the Average
Compliance Excess Availability for the immediately preceding fiscal quarter,
(iii) the Applicable LC Margin from the Amendment No. 1 Effective Date through
the end of the first full fiscal quarter after the Amendment No. 1 Effective
Date shall be the applicable percentages set forth in Tier 1 set forth above,
and (iv) in the event that at any time after the end of a fiscal quarter, the
Average Compliance Excess Availability for such fiscal quarter used in the
calculation of the Applicable LC Margin was greater than or less than the actual
amount of the Average Compliance Excess Availability for such fiscal quarter,
the Applicable LC Margin shall be adjusted for such prior fiscal quarter and any
additional fee as a result of such recalculation shall promptly paid to Agent.

 

“Applicable Margin” means, at any time, as to the Interest Rate for Base Rate
Loans and the Interest Rate for LIBOR Rate Loans, the applicable percentages (on
a per annum basis) set forth below, in each case based on Borrowers’ Average
Compliance Excess Availability for the immediately preceding

 

3

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fiscal quarter, is at or within the amounts indicated for such percentage as of
the last day of such fiscal quarter as follows:

 

Tier

 

Quarterly Average Compliance
Excess Availability

 

Applicable
Margin for Base Rate Loans
(“Base Rate Margin”)

 

Applicable Margin for
LIBOR Rate Loans
(“LIBOR Rate Margin”)

 

1

 

Greater than or equal to 40% of the Revolving Loan Limit

 

0.25

%

1.25

%

2

 

Less than 40% of the Revolving Loan Limit

 

0.50

%

1.50

%

 

(a)         Notwithstanding anything to the contrary set forth above in clause
(a) above, (i) the Applicable Margin shall be calculated and established once
each fiscal quarter and shall remain in effect until adjusted thereafter after
the end of such fiscal quarter, (ii) each adjustment of the Applicable Margin
shall be effective as of the first day of a fiscal quarter based on the Average
Compliance Excess Availability for the immediately preceding fiscal quarter,
(iii) the Applicable Margin from the Amendment No. 1 Effective Date through the
end of the first full fiscal quarter after the Amendment No. 1 Effective Date
shall be the applicable percentages set forth in Tier 1 set forth above, and
(iv) in the event that at any time after the end of a fiscal quarter, the
Average Compliance Excess Availability for such fiscal quarter used in the
calculation of the Applicable Margin was greater than or less than the actual
amount of the Average Compliance Excess Availability for such fiscal quarter,
the Applicable Margin shall be adjusted for such prior fiscal quarter and any
additional interest as a result of such recalculation shall promptly be paid to
Agent.

 

“Approved Fund” means with respect to any Lender that is a fund or similar
investment vehicle that makes or invests in commercial loans, any fund or
similar investment vehicle that invests in commercial loans which is managed or
advised by the same investment advisor as such Lender or by an Affiliate of such
investment advisor.

 

“Assignment and Acceptance” means an Assignment and Acceptance substantially in
the form of Exhibit A attached hereto (with blanks appropriately completed)
delivered to Agent in connection with an assignment of a Lender’s interest
hereunder in accordance with the provisions of Section 14.7 hereof.

 

“Authorized Officer” means Greg Scott, Sheamus Toal or such other officer of a
Borrower duly appointed and authorized by such Borrower as such Borrower may
designate by written notice to Agent as an authorized officer and authenticated
through Agent’s electronic platform or portal in accordance with its procedures
for such authentication.

 

“Average Compliance Excess Availability” means the average daily amount, as
determined by Agent for the immediately preceding fiscal quarter, of Compliance
Excess Availability.

 

“Bail-In Action” means the exercise of any Write-Down and Conversion Powers by
the applicable EEA Resolution Authority in respect of any liability of an EEA
Financial Institution.

 

“Bail-In Legislation” means, with respect to any EEA Member Country implementing
Article 55 of Directive 2014/59/EU of the European Parliament and of the Council
of the European Union, the implementing law for such EEA Member Country from
time to time which is described in the EU Bail-In Legislation Schedule.

 

4

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“Bank Product” means any one or more of the following financial products or
accommodations extended to any Loan Party or any of its Subsidiaries by a Bank
Product Provider:  (a) credit cards (including commercial cards (including
so-called “purchase cards”, “procurement cards” or “p-cards”)), (b) payment card
processing services, (c) debit cards, (d) stored value cards, (e) Cash
Management Services, or (f) transactions under Hedge Agreements.

 

“Bank Product Agreements” means those agreements entered into from time to time
by any Loan Party with a Bank Product Provider in connection with the obtaining
of any of the Bank Products.

 

“Bank Product Collateralization” means providing cash collateral (pursuant to
documentation reasonably satisfactory to Agent) to be held by Agent for the
benefit of the Bank Product Providers (other than the Hedge Providers) in an
amount determined by Agent as sufficient to satisfy the reasonably estimated
credit exposure, operational risk or processing risk with respect to the then
existing Bank Product Obligations (other than Hedge Obligations).

 

“Bank Product Obligations” means (a) all obligations, liabilities, reimbursement
obligations, fees, or expenses owing by each Loan Party and its Subsidiaries to
any Bank Product Provider pursuant to or evidenced by a Bank Product Agreement
and irrespective of whether for the payment of money, whether direct or
indirect, absolute or contingent, due or to become due, now existing or
hereafter arising, (b) all Hedge Obligations, and (c) all amounts that Agent or
any Lender is obligated to pay to a Bank Product Provider as a result of Agent
or such Lender purchasing participations from, or executing guarantees or
indemnities or reimbursement obligations to, a Bank Product Provider with
respect to the Bank Products provided by such Bank Product Provider to a Loan
Party or its Subsidiaries.

 

“Bank Product Provider” means Wells Fargo or any of its Affiliates, including
each of the foregoing in its capacity, if applicable, as a Hedge Provider.

 

“Bank Product Reserves” means, as of any date of determination, those reserves
that Agent deems necessary or appropriate to establish (based upon the Bank
Product Providers’ determination of the liabilities and obligations of each Loan
Party and its Subsidiaries in respect of Bank Product Obligations) in respect of
Bank Products then provided or outstanding.

 

“Bankruptcy Code” means title 11 of the United States Code, as in effect from
time to time.

 

“Base Rate” means the greatest of (a) the Federal Funds Rate plus ½%, (b) the
LIBOR Rate (which rate shall be calculated based upon an Interest Period of one
month and shall be determined on a daily basis), plus one percentage point, and
(c) the rate of interest announced, from time to time, within Wells Fargo at its
principal office in San Francisco as its “prime rate”, with the understanding
that the “prime rate” is one of Wells Fargo’s base rates (not necessarily the
lowest of such rates) and serves as the basis upon which effective rates of
interest are calculated for those loans making reference thereto and is
evidenced by the recording thereof after its announcement in such internal
publications as Wells Fargo may designate (and, if any such announced rate is
below zero, then the rate determined pursuant to this clause (c) shall be deemed
to be zero).

 

“Base Rate Loan” means each portion of the Revolving Loans that bears interest
at a rate determined by reference to the Base Rate.

 

“Base Rate Margin” has the meaning specified therefor in the definition of
“Applicable Margin”.

 

“Benchmark Replacement” means the sum of: (a) the alternate benchmark rate that
has been selected by Agent and Borrowers giving due consideration to (i) any
selection or recommendation of a

 

5

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replacement rate or the mechanism for determining such a rate by the Relevant
Governmental Body or (ii) any evolving or then-prevailing market convention for
determining a rate of interest as a replacement to LIBOR for US
Dollar-denominated syndicated credit facilities and (b) the Benchmark
Replacement Adjustment; provided, that, if the Benchmark Replacement as so
determined would be less than zero, the Benchmark Replacement will be deemed to
be zero for the purposes of this Agreement.

 

“Benchmark Replacement Adjustment” means, with respect to any replacement of
LIBOR with an Unadjusted Benchmark Replacement for each applicable Interest
Period, the spread adjustment, or method for calculating or determining such
spread adjustment (which may be a positive or negative value or zero) that has
been selected by Agent and Borrowers giving due consideration to (a) any
selection or recommendation of a spread adjustment, or method for calculating or
determining such spread adjustment, for the replacement of LIBOR with the
applicable Unadjusted Benchmark Replacement by the Relevant Governmental Body or
(b) any evolving or then-prevailing market convention for determining a spread
adjustment, or method for calculating or determining such spread adjustment, for
the replacement of LIBOR with the applicable Unadjusted Benchmark Replacement
for US Dollar-denominated syndicated credit facilities at such time.

 

“Benchmark Replacement Conforming Changes” means, with respect to any Benchmark
Replacement, any technical, administrative or operational amendments to any
Financing Agreement (including amendments to the definition of “Base Rate,” the
definition of “Interest Period,” timing and frequency of determining rates and
making payments of interest and other administrative matters) that Agent
determines may be appropriate to reflect the adoption and implementation of such
Benchmark Replacement and to permit the administration thereof by Agent in a
manner substantially consistent with market practice (or, if Agent decides that
adoption of any portion of such market practice is not administratively feasible
or if Agent determines that no market practice for the administration of the
Benchmark Replacement exists, in such other manner of administration as Agent
decides is reasonably necessary in connection with the administration of this
Agreement).

 

“Benchmark Replacement Date” means the earlier to occur of the following events
with respect to LIBOR:

 

(a)         in the case of clause (a) or (b) of the definition of “Benchmark
Transition Event,” the later of (i) the date of the public statement or
publication of information referenced therein and (ii) the date on which the
administrator of LIBOR permanently or indefinitely ceases to provide LIBOR; or

 

(b)         in the case of clause (c) of the definition of “Benchmark Transition
Event,” the date of the public statement or publication of information
referenced therein.

 

“Benchmark Transition Event” means the occurrence of one or more of the
following events with respect to LIBOR:

 

(a)         a public statement or publication of information by or on behalf of
the administrator of LIBOR announcing that such administrator has ceased or will
cease on a specific date to provide LIBOR, permanently or indefinitely, provided
that, at the time of such statement or publication, there is no successor
administrator that is providing LIBOR;

 

(b)         a public statement or publication of information by the regulatory
supervisor for the administrator of LIBOR, the U.S. Federal Reserve System, an
insolvency official with jurisdiction over the administrator for LIBOR, a
resolution authority with jurisdiction over the administrator for LIBOR or a
court or an entity with similar insolvency or resolution authority over the
administrator for LIBOR, which states that the administrator of LIBOR has ceased
or will cease on a specific date to provide

 

6

--------------------------------------------------------------------------------

 

LIBOR permanently or indefinitely, provided that, at the time of such statement
or publication, there is no successor administrator that will continue to
provide LIBOR; or

 

(c)          a public statement or publication of information by the regulatory
supervisor for the administrator of LIBOR announcing that LIBOR is no longer
representative.

 

“Benchmark Transition Start Date” means (a) in the case of a Benchmark
Transition Event, the earlier of (i) the applicable Benchmark Replacement Date
and (ii) if such Benchmark Transition Event is a public statement or publication
of information of a prospective event, the ninetieth (90th) day prior to the
expected date of such event as of such public statement or publication of
information (or if the expected date of such prospective event is fewer than
ninety (90) days after such statement or publication, the date of such statement
or publication) and (b) in the case of an Early Opt-in Election, the date
specified by Agent by notice to Borrowers and Lenders.

 

“Benchmark Unavailability Period” means, if a Benchmark Transition Event and its
related Benchmark Replacement Date have occurred with respect to LIBOR and
solely to the extent that LIBOR has not been replaced with a Benchmark
Replacement, the period (a) beginning at the time that such Benchmark
Replacement Date has occurred if, at such time, no Benchmark Replacement has
replaced LIBOR for all purposes hereunder in accordance with
Section 3.3(f) hereof and (b) ending at the time that a Benchmark Replacement
has replaced LIBOR for all purposes hereunder pursuant to Section 3.3(f) hereof.

 

“Beneficial Ownership Certification” means a certification regarding beneficial
ownership as required by the Beneficial Ownership Regulation.

 

“Beneficial Ownership Regulation” means 31 C.F.R. § 1010.230.

 

“BHC Act Affiliate” of a Person means an “affiliate” (as such term is defined
under and interpreted in accordance with 12 USC 1841(k)) of such Person

 

“Blocked Accounts” has the meaning set forth in Section 6.3(a) of this
Agreement.

 

“Board of Governors” means the Board of Governors of the Federal Reserve System
of the United States (or any successor).

 

“Borrower Materials” has the meaning set forth in Section 14.5(c) of this
Agreement.

 

“Borrowers” has the meaning provided to such term in the preamble of this
Agreement.

 

“Borrowing” means a borrowing consisting of Revolving Loans made on the same day
by the Lenders (or Agent on behalf of Lenders).

 

“Borrowing Base” means, at any time, the amount equal to:

 

(a)         the sum of:

 

(i)                       the lesser of (A) the sum of (1)  ninety percent (90%)
of the Net Amount of Eligible Sell-Off Vendors Receivables of Borrowers, plus
(2) ninety percent (90%) of the Net Amount of Eligible Damaged Goods Vendors
Receivables of Borrowers, and (B) $3,500,000, plus

 

(ii)                    ninety-five percent (95%) of the Net Amount of the
Eligible Credit Card

 

7

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Receivables of Borrowers other than PayPal Receivables, plus

 

(iii)                 the lesser of (A) ninety-five percent (95%) of the Net
Amount of Eligible Credit Card Receivables of Borrowers consisting of PayPal
Receivables and (B) $500,000, plus

 

(iv)                ninety-five percent (95%) of the Net Recovery Percentage
multiplied by the Value of the Eligible Landed Inventory of Borrowers, plus

 

(v)                   the lesser of (A) the sum of (1) ninety-five percent (95%)
of the Net Recovery Percentage multiplied by the Landed Value of Eligible
In-Transit Inventory of Borrowers plus (2) ninety-five percent (95%) of the Net
Recovery Percentage multiplied by the Landed Value of Eligible In-Transit LC
Inventory of Borrowers, and  (B) the amount equal to the lesser of
(1) twenty-five percent (25%) of the Borrowing Base and (2) $20,000,000, plus

 

(vi)                one hundred percent (100%) of Eligible Cash Collateral;
minus,

 

(b)         the Reserves and the Bank Product Reserves.

 

Agent shall have the right to revise the advance rates in, establish Reserves
against or sublimits in the Borrowing Base in such amounts and with respect to
such matters as Agent in its good faith discretion shall deem necessary or
appropriate, at all times and after Agent has completed its updated field
audits, examinations and appraisals of the Collateral; provided, that, (i) so
long as no Default or Event of Default exists or has occurred and is continuing,
Agent shall give to Borrowers ten (10) Business Days’ telephonic or electronic
notice and (ii) if a Default or Event of Default exists or has occurred and is
continuing, Agent shall give to Borrowers three (3) Business Days’ telephonic or
electronic notice if (A) Agent establishes Reserves relating to new categories
of Reserves, (B) Agent changes the methodology of calculating Reserves,
(C) Agent establishes sublimits in the Borrowing Base or (D) Agent revises the
advance rates set forth in subparagraph (a)(iii) and (a)(iv) above based on the
results of appraisals of the Inventory conducted in accordance with Section 7.3
hereof that are on a “going out of business sale” basis, net of liquidation
expenses. The amounts of Eligible Inventory shall be determined based on the
lesser of the amount of Inventory set forth in the general ledgers of Borrowers
or the perpetual inventory records maintained by Borrowers.  The foregoing
notwithstanding, in the event Agent is required to establish Reserves to
preserve or protect or maximize the value of the Collateral, Agent shall only
provide Borrowers with notice at the time such Reserve is established.

 

“Borrowing Base Certificate” means a certificate substantially in the form of
Exhibit B hereto, as such form, subject to the terms hereof, may from time to
time be modified by Agent, which is duly completed (including all schedules
thereto) and executed by the chief executive officer, chief financial officer,
controller or other appropriate financial officer of Borrowers acceptable to
Agent in its good faith determination and delivered to Agent.

 

“Business Day” means any day that is not a Saturday, Sunday, or other day on
which banks are authorized or required to close in the state of New York, except
that, if a determination of a Business Day shall relate to a LIBOR Rate Loan,
the term “Business Day” also shall exclude any day on which banks are closed for
dealings in Dollar deposits in the London interbank market.

 

“Capital Expenditures” means, with respect to any Person and its Subsidiaries,
all expenditures made and liabilities incurred for the acquisition of equipment,
software, fixed assets, real property or improvements, or replacements or
substitutions therefor, which are not, in accordance with GAAP, treated as
expense items for such Person and its Subsidiaries in the year made or incurred
or as a prepaid expense applicable to a future year or years.

 

8

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“Capital Leases” means, as applied to any Person, any lease of (or any agreement
conveying the right to use) any property (whether real, personal or mixed) by
such Person as lessee which in accordance with GAAP, is required to be reflected
as a liability on the balance sheet of such Person.

 

“Cash Collateral Account” means a deposit account: (a) maintained by a Borrower
as a collateral account with either Wells Fargo, and otherwise mutually
satisfactory to Lerner, Agent and Lenders; (b) that is a money market account
which does not contain stocks, bonds, other investment property or interests in
such investment property; (c) used by such Borrower to deposit cash collateral
for the purpose of supporting advances described in clause (a)(v) of the
definition of Borrowing Base; (d) which contains readily available funds
sufficient to support any and all advances that may be requested by Borrowers
pursuant to clause (a)(v) of the definition of Borrowing Base, as determined by
Agent; and (e) which is subject to the Cash Collateral Account Control
Agreement.  For purposes of clarification, there is no dollar limit on the
amount of cash, Cash Equivalents or investment property that may be deposited in
or credited to a Cash Collateral Account at any time.

 

“Cash Collateral Account Control Agreement” means a Deposit Account Control
Agreement, which, among other things, (a) prohibits the Borrowers from
withdrawing or transferring any amounts or investment property from such account
except upon the conditions set forth in Section 9.25(f) hereof, (b) provides
that the bank at which such account is maintained will provide to Agent a daily
report as to the balance of such account, and (c) is otherwise reasonably
satisfactory to Agent in form and substance.

 

“Cash Dominion Event” means a period either (a) commencing on the date that a
Default or Event of Default shall exist or have occurred and be continuing and
ending on the date such Default or Event of Default has been waived or cured in
accordance with Section 11.3 hereof or (b) commencing on the date that
Compliance Excess Availability has been less than twelve and one-half (12.5%)
percent of the Revolving Loan Limit for a period of one (1) Business Day as
calculated by Agent hereunder and ending on the date that Compliance Excess
Availability has been greater than twelve and one-half (12.5%) percent of the
Revolving Loan Limit for any thirty (30) consecutive day period thereafter. 
Notwithstanding anything to the contrary contained herein, except as Agent and
Required Lenders may otherwise agree in writing, a Cash Dominion Event may no
longer be terminated following the second (2nd) such termination during the term
of this Agreement and in either such case, the Cash Dominion Event shall
continue until the payment in full of the Obligations (other than contingent
Obligations as to which Agent shall have received such cash collateral, or
letter of credit, as is provided for pursuant to the terms of Section 14.1
hereof) and the termination of the Commitments.

 

“Cash Equivalents” means, at any time, (a) any evidence of Indebtedness with a
maturity date of ninety (90) days or less issued or directly and fully
guaranteed or insured by the United States of America or any agency or
instrumentality thereof; provided, that, the full faith and credit of the United
States of America is pledged in support thereof; (b) certificates of deposit or
bankers’ acceptances with a maturity of ninety (90) days or less of any
financial institution that is a member of the Federal Reserve System having
combined capital and surplus and undivided profits of not less than
$250,000,000; (c) commercial paper (including variable rate demand notes) with a
maturity of ninety (90) days or less issued by a corporation (except an
Affiliate of any Borrower) organized under the laws of any State of the United
States of America or the District of Columbia and rated at least A-1 by
Standard & Poor’s Ratings Service, a division of The McGraw-Hill Companies, Inc.
or at least P-1 by Moody’s Investors Service, Inc.; (d) repurchase obligations
with a term of not more than thirty (30) days for underlying securities of the
types described in clause (a) above entered into with any financial institution
having combined capital and surplus and undivided profits of not less than
$250,000,000; (e) repurchase agreements and reverse repurchase agreements
relating to marketable direct obligations issued or unconditionally guaranteed
by the United States of America or issued by any governmental agency thereof and
backed by the full faith and credit of the United States of America, in each
case maturing within ninety (90) days or less from the

 

9

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date of acquisition; provided, that, the terms of such agreements comply with
the guidelines of the Federal Deposit Insurance Corporation and the Comptroller
of the Currency; (f) investments in money market funds and mutual funds which
invest substantially all of their assets in securities of the types described in
clauses (a) through (e) above; and (g) other investments as agreed by Agent in
writing.

 

“Cash Management Services” means any cash management or related services
including treasury, depository, return items, overdraft, controlled
disbursement, merchant store value cards, e-payables services, electronic funds
transfer, interstate depository network, automatic clearing house transfer
(including the Automated Clearing House processing of electronic funds transfers
through the direct Federal Reserve Fedline system) and other cash management
arrangements.

 

“Central Collection Deposit Account” means any deposit account established by
Borrowers that is used by Borrowers to receive deposits from local retail store
deposit accounts or from sales of Inventory or other proceeds of Collateral
arising from transactions other than sales at local retail stores.

 

“Change in Law” means the occurrence after the date of this Agreement of: 
(a) the adoption or effectiveness of any law, rule, regulation, judicial ruling,
judgment or treaty after November 27, 2002, (b) any change in any law, rule,
regulation, judicial ruling, judgment or treaty or in the administration,
interpretation, implementation or application by any Governmental Authority of
any law, rule, regulation, guideline or treaty after November 27, 2002, or
(c) the making or issuance by any Governmental Authority of any request, rule,
guideline or directive, whether or not having the force of law after
November 27, 2002; provided, that notwithstanding anything in this Agreement to
the contrary, (i) the Dodd-Frank Wall Street Reform and Consumer Protection Act
and all requests, rules, guidelines or directives thereunder or issued in
connection therewith, and (ii) all requests, rules, guidelines or directives
concerning capital adequacy promulgated by the Bank for International
Settlements, the Basel Committee on Banking Supervision (or any successor or
similar authority) or the United States or foreign regulatory authorities shall,
in each case, be deemed to be a “Change in Law,” regardless of the date enacted,
adopted or issued.

 

“Change of Control” means, as of any date of determination, the occurrence of
any of the following: (a) if IPC and/or one or more of its Affiliates is the
beneficial owner of any Equity Interests of RTW entitled to vote for the
election of the Board of Directors of RTW, any Person and/or one or more of its
Affiliates, other than IPC and/or one or more of its Affiliates, or group
(within the meaning of the Exchange Act) of Persons shall have acquired
beneficial ownership (within the meaning of Rule 13d-3 of the Securities and
Exchange Commission under the Exchange Act) of forty percent (40%) or more of
the issued and outstanding Equity Interests of RTW entitled to vote for the
election of the Board of Directors of RTW, unless either (i) IPC and/or one or
more of its Affiliates, collectively, own more of the Equity Interests of RTW
than such Person and/or its Affiliates or (ii) IPC and/or one or more of its
Affiliates has the right to elect, or cause to be elected, and has elected, or
caused to be elected, a majority of the members of the Board of Directors of
RTW; (b)  if IPC and/or one or more of its Affiliates is not the beneficial
owner of any Equity Interests of RTW entitled to vote for the election of the
Board of Directors of RTW, any Person and/or one or more of its Affiliates or
group (within the meaning of the Exchange Act of Persons shall have acquired
beneficial ownership (within the meaning of Rule 13d-3 of the Securities and
Exchange Commission under the Exchange Act) of thirty percent (30%) or more of
the issued and outstanding Equity Interests of RTW entitled to vote for the
election of the Board of Directors of RTW; (c) during any period of 24
consecutive months commencing on or after the Closing Date, the occurrence of a
change in the composition of the Board of Directors of RTW such that a majority
of the members of such Board of Directors are not Continuing Directors;
(d) except as permitted under the terms of Section 9.7 hereof, RTW shall cease
to own (directly or indirectly) one hundred percent (100%) of the Equity
Interest of each Borrower and each other Guarantor; or (e) except as permitted
under the terms of

 

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Section 9.7 hereof, any Borrower or Guarantor other than RTW does not own one
hundred percent (100%) of the Equity Interests of any of its Subsidiaries.

 

“Closing Date” means October 24, 2014.

 

“Code” means the Internal Revenue Code of 1986, as the same now exists or may
from time to time hereafter be amended, modified, recodified or supplemented,
together with all rules, regulations and interpretations thereunder or related
thereto.

 

“Collateral” has the meaning specified therefor in Section 5 of this Agreement.

 

“Collateral Access Agreement” means an agreement in writing, in form and
substance reasonably satisfactory to Agent, from any lessor of premises to any
Borrower or Guarantor, or any other person to whom any Collateral is consigned
or who has custody, control or possession of any such Collateral or is otherwise
the owner or operator of any premises on which any of such Collateral is
located, pursuant to which such lessor, consignee or other person, among other
things, acknowledges the first priority security interest of Agent, for itself
and the ratable benefit of the Lenders and the Bank Product Providers, in such
Collateral, agrees to waive or subordinate any and all claims such lessor,
consignee or other person may, at any time, have against such Collateral,
whether for processing, storage or otherwise, and agrees to permit Agent access
to, and the right to remain on, the premises of such lessor, consignee or other
person so as to exercise Agent’s rights and remedies and otherwise deal with
such Collateral and in the case of any consignee or other person who at any time
has custody, control or possession of any Collateral, acknowledges that it holds
and will hold possession of the Collateral for the benefit of Agent, the Lenders
and the Bank Product Providers and agrees to follow all instructions of Agent
with respect thereto.

 

“Comenity Bank” means Comenity Bank, a Delaware State FDIC-insured bank and a
limited-purpose credit card bank located in Delaware.

 

“Commitment” means, as to each Lender, the aggregate of such Lender’s Revolver
Commitment sometimes being referred to herein collectively as “Commitments”.

 

“Commodity Exchange Act” means the Commodity Exchange Act (7 U.S.C. § 1 et
seq.), as amended from time to time, and any successor statute.

 

“Compliance Certificate” means a certificate substantially in the form of
Exhibit C to this Agreement delivered by the chief financial officer, treasurer
or chief accounting officer of each Borrower to Agent.

 

“Compliance Excess Availability” means the amount, as determined by Agent,
calculated at any date, equal to (a) the lesser of:  (i) the Borrowing Base and
(ii) the Revolving Loan Limit, minus (b) the sum of all then outstanding and
unpaid Obligations in respect of the Revolving Loans and outstanding Letters of
Credit.

 

“Confidential Information” has the meaning specified therefor in
Section 14.5(a) of this Agreement.

 

“Continuing Director” means (a) any member of the Board of Directors who was a
director (or comparable manager) of RTW on the Closing Date, and (b) any
individual who becomes a member of the Board of Directors after the Closing Date
if such individual was approved, appointed or nominated for election to the
Board of Directors by the then current majority of the Board of Directors.

 

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“Covered Entity” means any of the following:

 

(a)         a “covered entity” as that term is defined in, and interpreted, in
accordance with 12 C.F.R. § 252.82(b).

 

(b)         a “covered bank” as that term is defined in, and interpreted in
accordance with 17 CFR § 47.3(b); or

 

(c)          a “covered FSI” as that term is defined in, and interpreted in
accordance with 12 CFR § 382.2(b).

 

“Covered Party” has the meaning specified therefor in Section 14.14 of this
Agreement.

 

“Credit Card Acknowledgments” means, collectively, the following as determined
by Agent in its good faith discretion (as the same now exist or may hereafter be
amended, modified, supplemented, extended, renewed, restated or replaced):
(a) the agreements by Credit Card Issuers or Credit Card Processors who are
parties to Credit Card Agreements in favor of Agent acknowledging Agent’s first
priority security interest, for and on behalf of Lenders, in the monies due and
to become due to any Borrower or Guarantor (including, without limitation,
credits and reserves) under the Credit Card Agreements, and agreeing to transfer
all such amounts to the Blocked Accounts, and (b) the written notices to Credit
Card Issuers or Credit Card Processors who are parties to Credit Card Agreements
notifying such Credit Card Issuers or Credit Card Processors of Agent’s first
priority security interest, for and on behalf of Lenders, in the monies due and
to become due to any Borrower or Guarantor (including, without limitation,
credits and reserves) under the Credit Card Agreements, and instructing such
Credit Card Issuer or Credit Card Processor to transfer all such amounts to the
Blocked Accounts, each sometimes being referred to herein individually as a
“Credit Card Acknowledgment”.

 

“Credit Card Agreements” means all agreements now or hereafter entered into by
any Borrower or Guarantor with any Credit Card Issuer or any Credit Card
Processor, as the same now exist or may hereafter be amended, modified,
supplemented, extended, renewed, restated or replaced, including, but not
limited to, the agreements set forth on Schedule 8.16 hereto.

 

“Credit Card Issuer” means any person (other than a Borrower or Guarantor) who
issues or whose members issue credit cards, including, without limitation,
MasterCard or VISA bank credit or debit cards or other bank credit or debit
cards issued through MasterCard International, Inc., Visa, U.S.A., Inc. or Visa
International and American Express, Discover, Diners Club, Carte Blanche,
Comenity Bank and other non-bank credit or debit cards, including, without
limitation, credit or debit cards issued by or through American Express Travel
Related Services Company, Inc.

 

“Credit Card Processor” means any servicing or processing agent or any factor or
financial intermediary who facilitates, services, processes or manages the
credit authorization, billing transfer and/or payment procedures with respect to
any Borrower’s or Guarantor’s sales transactions involving credit card or debit
card purchases by customers using credit cards or debit cards issued by any
Credit Card Issuer.

 

“Credit Card Receivables” means all domestic Accounts consisting of the present
and future rights of any Borrower or Guarantor, including the Private Label
Credit Card Receivables and PayPal Receivables, to payment by any Credit Card
Processor or Credit Card Issuer and all information contained on or for use with
a credit, charge or debit card issued by a Credit Card Issuer.

 

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“Credit Facility” means the Revolving Loans (including all Special Agent
Advances and Additional Revolving Loans) and all Letters of Credit provided to
or for the benefit of Borrowers and Guarantors as set forth in this Agreement.

 

“Default” means an act, condition or event that with notice or passage of time
or both would constitute an Event of Default.

 

“Default Right” has the meaning assigned to that term in, and shall be
interpreted in accordance with, 12 C.F.R. §§ 252.81, 47.2 or 382.1 as
applicable.

 

“Defaulting Lender” means any Lender that (a) has failed to (i) fund all or any
portion of its Loans within two Business Days of the date such Loans were
required to be funded hereunder unless such Lender notifies Agent and Borrowers
in writing that such failure is the result of such Lender’s determination that
one or more conditions precedent to funding (each of which conditions precedent,
together with any applicable Default or Event of Default, shall be specifically
identified in such writing) has not been satisfied, or (ii) pay to
Agent, Issuing Bank, or any other Lender any other amount required to be paid by
it hereunder (including in respect of its participation in Letters of Credit)
within two Business Days of the date when due, (b) has notified any Borrower,
Agent or Issuing Bank in writing that it does not intend to comply with its
funding obligations hereunder, or has made a public statement to that effect
(unless such writing or public statement relates to such Lender’s obligation to
fund a Loan hereunder and states that such position is based on such Lender’s
determination that a condition precedent to funding (which condition precedent,
together with any applicable Default or Event of Default, shall be specifically
identified in such writing or public statement) cannot be satisfied), (c) has
failed, within three Business Days after written request by Agent or Borrowers,
to confirm in writing to Agent and Borrowers that it will comply with its
prospective funding obligations hereunder (provided, that such Lender shall
cease to be a Defaulting Lender pursuant to this clause (c) upon receipt of such
written confirmation by Agent and Borrowers), or (d) has, or has a direct or
indirect parent company that has, (i) become the subject of any Insolvency
Event, (ii) had appointed for it a receiver, custodian, conservator, trustee,
administrator, assignee for the benefit of creditors or similar Person charged
with reorganization or liquidation of its business or assets, including the
Federal Deposit Insurance Corporation or any other state or federal regulatory
authority acting in such a capacity, or (iii) become the subject of a Bail-In
Action; provided, that a Lender shall not be a Defaulting Lender solely by
virtue of the ownership or acquisition of any equity interest in that Lender or
any direct or indirect parent company thereof by a Governmental Authority so
long as such ownership interest does not result in or provide such Lender with
immunity from the jurisdiction of courts within the United States or from the
enforcement of judgments or writs of attachment on its assets or permit such
Lender (or such Governmental Authority) to reject, repudiate, disavow or
disaffirm any contracts or agreements made with such Lender.  Any determination
by Agent that a Lender is a Defaulting Lender under any one or more of clauses
(a) through (d) above shall be conclusive and binding absent manifest error, and
such Lender shall be deemed to be a Defaulting Lender upon delivery of written
notice of such determination to Borrowers, Issuing Bank, and each Lender.

 

“Defaulting Lender Rate” means (a) for the first three days from and after the
date the relevant payment is due, the Base Rate, and (b) thereafter, the
interest rate then applicable to Revolving Loans that are Base Rate Loans
(inclusive of the Base Rate Margin applicable thereto).

 

“Deferred Billing Program” means any program of any Borrower or Guarantor with a
Credit Card Issuer or Credit Card Processor under a Credit Card Agreement or
other arrangement of Borrowers or Guarantors pursuant to which any Borrower or
Guarantor defers the submission of the sales receipt, invoice or credit card
slips to a Credit Card Processor or Credit Card Issuer or the payment of any
amounts due from any account debtor is deferred.

 

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“Deferred Billing Receivables” means Receivables of any Borrower or Guarantor
arising from any Deferred Billing Program of any Borrower or Guarantor.

 

“Deposit Account Control Agreement” means an agreement in writing, in form and
substance reasonably satisfactory to Agent, by and among Agent, a Borrower or
Guarantor with a deposit account at any bank, and the bank at which such deposit
account is at any time maintained which provides that such bank will comply with
instructions originated by Agent directing disposition of the funds in the
deposit account without further consent by such Borrower or Guarantor and such
other terms and conditions as Agent may require, including as to any such
agreement with respect to any Blocked Account, providing that all items received
or deposited in the Blocked Accounts are the property of Agent, for itself and
the ratable benefit of the Lenders and the Bank Product Providers, that the bank
has no lien upon, or right to setoff against, the Blocked Accounts, the items
received for deposit therein, or the funds from time to time on deposit therein
and that the bank will wire, or otherwise transfer, in immediately available
funds, on a daily basis to the Agent Payment Account all funds received or
deposited into the Blocked Accounts.

 

“Designated Account” means the Deposit Account(s) of Borrowers maintained at a
Designated Account Bank identified by Borrowers to Agent in writing and
designated by Borrowers as such by Borrowers to Agent.

 

“Designated Account Bank” means Wells Fargo Bank, National Association (or such
other bank that is located within the United States that has been designated as
such, in writing, by Borrowers to Agent).

 

“Domestic In-Transit Inventory” means Inventory owned by a Borrower that is
located in the continental United States of America which is in transit to one
of the locations set forth on Exhibit E (as such schedule may be updated from
time to time by Borrowers to exclude locations which have been closed and/or
include additional locations of Inventory which Borrowers are permitted to
establish under the terms of this Agreement) being the premises of such Borrower
in the United States of America which are either owned and controlled by such
Borrower or leased by such Borrower.

 

“Early Opt-in Election” means the occurrence of:

 

(a)         (i) a determination by Agent or (ii) a notification by Required
Lenders to Agent (with a copy to Borrowers) that Required Lenders have
determined that U.S. dollar-denominated syndicated credit facilities being
executed at such time, or that include language similar to that contained in
Section 3.3(f) titled “Effect of Benchmark Transition Event,” are being executed
or amended, as applicable, to incorporate or adopt a new benchmark interest rate
to replace LIBOR, and

 

(b)         (i) the election by Agent or (ii) the election by Required Lenders
to declare that an Early Opt-in Election has occurred and the provision, as
applicable, by Agent of written notice of such election to Borrowers and Lenders
or by Required Lenders of written notice of such election to Agent.

 

“EBITDA” means, for any Measurement Period, without duplication, the total of
the following for the Borrowers and Guarantors on a consolidated basis, each
calculated for such period:  Net Income plus (a) preferred dividends, plus
(b) income tax expense, plus (c) Interest Expense (including all charges owed
with respect to letters of credit), plus (d) depreciation expense, plus
(e) amortization expense, plus (f) management fees and expenses, as permitted
hereunder, paid or accrued, plus (g) non-cash losses from any sale or
disposition of assets, and minus (h) non-cash gains from any sale or disposition
of assets, plus (i) one-time expenses incurred in connection with the relocation
of the headquarters of Borrowers and Guarantors to 330 West 34th Street, New
York, New York not to exceed $5,000,000 for the fiscal period of Borrowers and
Guarantors ending April 30, 2015, plus (j) any other non-cash charges, non-cash

 

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expenses (including non-cash straight line rent), non-cash losses or non-cash
restructuring charges, plus (k) one-time expenses incurred in connection with
the closing of this Agreement and the transactions contemplated to occur on the
date hereof, plus (l) non-cash compensation expenses, including, but not limited
to, those arising from or relating to the issuance of stock, restricted stock,
options to purchase stock, stock appreciation rights (i.e., phantom stock) and
deferred compensation to the officers, employees and directors of the Borrowers
and Obligors, plus (m) without duplication, amortization of intangibles, plus
(n) employee compensation incurred prior to the date hereof in connection with
the transactions contemplated hereby, minus (o) the amortization of construction
or landlord tenant allowances of the Borrowers or any Subsidiary of a Borrower
for such period, all of the foregoing determined in accordance with GAAP.  For
purposes of calculating EBITDA for any Measurement Period, (i) acquisitions that
have been made by such Person and its Subsidiaries, including through mergers or
consolidated and including any related financing transactions, during the
Measurement Period shall be deemed to have occurred on the first day of the
Measurement Period; provided, however, that only the actual historical results
of operations of the Persons so acquired, without adjustment for pro forma
expense savings or revenue increases, shall be used for such calculation; and
(ii) the EBITDA of such Person and its Subsidiaries attributable to discontinued
operations, as determined in accordance with GAAP, and operations or businesses
disposed of prior to the end of such Measurement Period, shall be excluded.

 

“EEA Financial Institution” means (a) any credit institution or investment firm
established in any EEA Member Country which is subject to the supervision of an
EEA Resolution Authority, (b) any entity established in an EEA Member Country
which is a parent of an institution described in clause (a) of this definition,
or (c) any financial institution established in an EEA Member Country which is a
subsidiary of an institution described in clauses (a) or (b) of this definition
and is subject to consolidated supervision with its parent.

 

“EEA Member Country” means any of the member states of the European
Union, Iceland, Liechtenstein, and Norway.

 

“EEA Resolution Authority” means any public administrative authority or any
person entrusted with public administrative authority of any EEA Member Country
(including any delegee) having responsibility for the resolution of any EEA
Financial Institution.

 

“Eligible Accounts” means Eligible Credit Card Receivables, Eligible Damaged
Goods Vendors Receivables and Eligible Vendor Sell-Off Receivables.

 

“Eligible Cash Collateral” means the cash or Cash Equivalents, in each case
denominated in US Dollars, of a Borrower which are: (a) pledged by such Borrower
to Agent pursuant to the Cash Collateral Account Control Agreement, in form and
substance reasonably satisfactory to Agent and duly authorized, executed and
delivered by such bank or financial intermediary and such Borrower; (b) free and
clear of any lien, security interest, claim or other encumbrance or restriction,
except for (i) liens in favor of Agent and (ii) liens of the financial
intermediary holding such cash or Cash Equivalents that are expressly permitted
by the Cash Collateral Account Control Agreement; (c) subject to the first
priority, valid and perfected security interest and pledge in favor of Agent,
except (as to priority) for liens in favor of the financial intermediary holding
such cash or Cash Equivalents to the extent such liens are expressly permitted
to have priority by the Cash Collateral Account Control Agreement; and
(d) available to such Borrower without condition or restriction except those
arising pursuant to the pledge in favor of Agent; provided, that, no cash or
Cash Equivalents shall constitute Eligible Cash Collateral prior to the date (if
any) on which Agent shall have consented to the request by Borrowers to include
Eligible Cash Collateral in the Borrowing Base.

 

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“Eligible Credit Card Receivables” means, as to any Borrower, the Credit Card
Receivables of such Borrower which are and continue to be acceptable to Agent
based on the criteria set forth below.  Credit Card Receivables of a Borrower
shall be Eligible Credit Card Receivables if:

 

(a)         such Credit Card Receivables arise from the actual and bona fide
sale and delivery of goods or rendition of services by such Borrower in the
ordinary course of the business of such Borrower which transactions are
completed in accordance with the terms and provisions contained in any
agreements binding on such Borrower or the other party or parties related
thereto;

 

(b)         such Credit Card Receivables are not past due (beyond any stated
applicable grace period, if any, therefor) pursuant to the terms set forth in
the Credit Card Agreements with the Credit Card Issuer or Credit Card Processor
of the credit card or debit card used in the purchase which give rise to such
Credit Card Receivables;

 

(c)          such Credit Card Receivables are not unpaid more than ten (10) days
after the date of the sale of Inventory giving rise to such Credit Card
Receivables;

 

(d)         such Credit Card Receivables did not consist of Deferred Billing
Receivables or Private Label Credit Card Receivables arising pursuant to a
“Lerner catalog card”;

 

(e)          all procedures required by the Credit Card Issuer or the Credit
Card Processor of the credit card or debit card used in the purchase which gave
rise to such Credit Card Receivables shall have been followed in all material
respects by such Borrower and all documents required for the authorization and
approval by such Credit Card Issuer or Credit Card Processor shall have been
obtained in connection with the sale giving rise to such Credit Card
Receivables;

 

(f)           the required authorization and approval by such Credit Card Issuer
or Credit Card Processor shall have been obtained for the sale giving rise to
such Credit Card Receivables;

 

(g)          such Borrower shall have submitted all sales slips, drafts, charges
and other reports and other materials required by the Credit Card Issuer or
Credit Card Processor obligated in respect of such Credit Card Receivables in
order for such Borrower to be entitled to payment in respect thereof;

 

(h)         such Credit Card Receivables comply with the applicable terms and
conditions contained in Section 8.16 hereof;

 

(i)             the Credit Card Issuer or Credit Card Processor with respect to
such Credit Card Receivables has not asserted a counterclaim, defense or dispute
and does not have any right of setoff against such Credit Card Receivables
(other than transactions in the ordinary course of the business of such
Borrower) and such Credit Card Issuer or Credit Card Processor has not setoff
against amounts otherwise payable by such Credit Card Issuer or Credit Card
Processor to a Borrower for the purpose of establishing a reserve or collateral
for obligations of a Borrower to such Credit Card Issuer or Credit Card
Processor (notwithstanding that the Credit Card Issuer or Credit Card Processor
may have setoffs for fees and chargebacks consistent with the practices of such
Credit Card Issuer or Credit Card Processor with a Borrower as of the date
hereof or as such practices may hereafter change as a result of changes to the
policies of such Credit Card Issuer or Credit Card Processor applicable to its
customers generally and unrelated to the circumstances of a Borrower);

 

(j)            there are no facts, events or occurrences which to the best
knowledge of Borrowers would impair in any material respect the validity,
enforceability or collectability of such Credit Card Receivables or reduce the
amount payable or delay payment thereunder (other than for setoffs for fees and

 

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chargebacks consistent with the practices of such Credit Card Issuer or Credit
Card Processor with such Borrower as of the date hereof or as such practices may
hereafter change as a result of changes to the policies of such Credit Card
Issuer or Credit Card Processor applicable to its customers generally and
unrelated to the circumstances of a Borrower);

 

(k)         such Credit Card Receivables are subject to the first priority,
valid and perfected security interest and lien of Agent, for and on behalf of
Lenders, as to such Credit Card Receivables of a Borrower and any goods giving
rise thereto are not, and were not at the time of the sale thereof, subject to
any encumbrances permitted under the terms hereof;

 

(l)             Agent shall have received, in form and substance satisfactory to
Agent in good faith, a Credit Card Acknowledgment for the credit card or debit
card used in the sale which gave rise to such Credit Card Receivable, such
Credit Card Acknowledgment shall be in full force and effect and the Credit Card
Issuer or Credit Card Processor party thereto shall be in compliance with the
terms thereof;

 

(m)     there are no proceedings or actions which are pending or, to the best of
a Borrower’s knowledge, threatened against the Credit Card Issuers or Credit
Card Processors with respect to such Credit Card Receivables which would
reasonably be expected to result in any material adverse change in the continued
collectability of the Credit Card Receivables with respect to the Credit Card
Issuers or Credit Card Processors;

 

(n)         the terms of the sale giving rise to such Credit Card Receivables
and all practices of a Borrower with respect to such Credit Card Receivables
comply in all material respects with applicable Federal, State, and local laws
and regulations;

 

(o)         such Borrower has not received from any Credit Card Issuer or Credit
Card Processor any notice of default and/or notice of its intention to cease or
suspend payments to a Borrower in respect of such Credit Card Receivables or to
establish reserves or collateral for obligations of a Borrower to such Credit
Card Issuer or Credit Card Processor (other than for then current fees and
chargebacks consistent with the current practices of such Credit Card Issuer or
Credit Card Processor as of the date hereof or as such practices may hereafter
change as a result of changes to the policies of such Credit Card Issuer or
Credit Card Processor applicable to its customers generally and unrelated to the
circumstances of a Borrower); and

 

(p)         the customer using the credit card or debit card giving rise to such
Credit Card Receivable shall not have returned the merchandise purchased giving
rise to such Credit Card Receivable.

 

“Eligible Damaged Goods Vendors Receivables” means Accounts, other than Credit
Card Receivables or Eligible Sell-Off Vendors Receivables, created by any
Borrower which are and continue to be acceptable to Agent based on the criteria
set forth below.  In general, Accounts shall be Eligible Damaged Goods Vendors
Receivables if:

 

(a)                                 such Accounts arise from the actual and bona
fide sale and delivery of damaged Inventory by such Borrower to a third-party
off-price wholesaler satisfactory to Agent, in the ordinary course of such
Borrower’s business, which transactions are completed in accordance with the
terms and provisions contained in any documents related thereto;

 

(b)         such Accounts are not unpaid more than ninety (90) days after the
date of the original invoice for them;

 

(c)          such Accounts comply with the terms and conditions contained in
Section 7.2(b) hereof;

 

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(d)         such Accounts do not arise from sales on consignment, guaranteed
sale, sale and return, sale on approval, or other terms under which payment by
the account debtor may be conditional or contingent;

 

(e)          the chief executive office of the account debtor with respect to
such Accounts is located in the United States of America or Canada;

 

(f)           such Accounts do not consist of progress billings (such that the
obligation of the account debtors with respect to such Accounts is conditioned
upon such Borrower’s satisfactory completion of any further performance under
the agreement giving rise thereto), bill and hold invoices or retainage
invoices, except as to bill and hold invoices, if Agent shall have received an
agreement in writing from the account debtor, in form and substance satisfactory
to Agent, confirming the unconditional obligation of the account debtor to take
the goods related thereto and pay such invoice;

 

(g)          the account debtor with respect to such Accounts has not asserted a
counterclaim, defense or dispute and does not have, and does not engage in
transactions which may give rise to any right of setoff or recoupment against
such Accounts (but the portion of the Accounts of such account debtor in excess
of the amount at any time and from time to time owed by such Borrower to such
account debtor or claimed to be owed by such account debtor may be deemed
Eligible Damaged Goods Vendors Receivables);

 

(h)         there are no facts, events or occurrences which would impair the
validity, enforceability or collectability of such Accounts or reduce the amount
payable or delay payment thereunder;

 

(i)             such Accounts are subject to the first priority, valid and
perfected security interest of Agent and any goods giving rise thereto are not,
and were not at the time of the sale thereof, subject to any liens except those
of Agent or those permitted in this Agreement that are subject to an
intercreditor agreement in form and substance satisfactory to Agent between the
holder of such security interest or lien and Agent;

 

(j)            neither the account debtor nor any officer or employee of the
account debtor with respect to such Accounts is an officer, employee, agent or
other Affiliate of any Borrower or Guarantor;

 

(k)         the account debtors with respect to such Accounts are not any
foreign government, the United States of America, any State, political
subdivision, department, agency or instrumentality thereof, unless, if the
account debtor is the United States of America, any State, political
subdivision, department, agency or instrumentality thereof, upon Agent’s
request, the Federal Assignment of Claims Act of 1940, as amended or any similar
State or local law, if applicable, has been complied with in a manner
satisfactory to Agent;

 

(l)             there are no proceedings or actions which are threatened or
pending against the account debtors with respect to such Accounts which are
likely to result in any material adverse change in any such account debtor’s
financial condition (including, without limitation, any bankruptcy, dissolution,
liquidation, reorganization or similar proceeding);

 

(m)     such Accounts are not evidenced by or arising under any instrument or
chattel paper;

 

(n)         such Accounts are not owed by an account debtor who has Accounts
unpaid more than ninety (90) days after the original invoice date for them which
constitute more than thirty-five percent (35%) of the total Accounts of such
account debtor;

 

18

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(o)         the account debtor is not located in a state requiring the filing of
a Notice of Business Activities Report or similar report in order for such
Borrower to seek judicial enforcement in such State of payment of such Account,
unless such Borrower has qualified to do business in such state or has filed a
Notice of Business Activities Report or equivalent report for the then current
year or such failure to file and inability to seek judicial enforcement is
capable of being remedied without any material delay or material cost; and

 

(p)         such Accounts do not constitute amounts which have been invoiced by
such Borrower but with respect to which goods so invoiced have not been
delivered to the account debtor.

 

The criteria for Eligible Damaged Goods Vendors Receivables set forth above may
only be changed and any new criteria for Eligible Damaged Goods Vendors
Receivables may only be established by Agent in good faith based on either: 
(i) an event, condition or other circumstance arising after the date hereof, or
(ii) an event, condition or other circumstance existing on the date hereof to
the extent Agent has no written notice thereof from Borrowers prior to the date
hereof, in either case under clause (i) or (ii) which adversely affects or could
reasonably be expected to adversely affect the Accounts in the good faith
determination of Agent.  Any Accounts which are not Eligible Damaged Goods
Vendors Receivables shall nevertheless be part of the Collateral.

 

“Eligible In-Transit Inventory” means Domestic In-Transit Inventory and Foreign
In-Transit Inventory owned by a Borrower that otherwise satisfies the criteria
for Eligible Landed Inventory; provided, that:

 

(a)         as to any such Domestic In-Transit Inventory or Foreign In-Transit
Inventory:

 

(i)                       title to such Inventory has passed to such Borrower;

 

(ii)                    such Inventory is not then subject to a Letter of
Credit;

 

(iii)                 such Inventory is insured against types of loss, damage,
hazards, and risks, and in amounts, satisfactory to Agent in its discretion and
Agent shall have received a copy of the certificate of evidence of property
insurance in the case of Domestic In-Transit Inventory and the certificate of
evidence of marine cargo insurance in the case of Foreign In-Transit Inventory,
in each case, in which Agent has been named as an additional insured and
lender’s loss payee in a manner acceptable to Agent;

 

(iv)                the applicable Borrower has provided a certificate to Agent
that certifies that, to the best knowledge of such Borrower, such Inventory
meets all of such Borrower’s representations and warranties contained herein
concerning Eligible Inventory, that it knows of no reason why such Inventory
would not be accepted by such Borrower when it arrives and that the shipment as
evidenced by the documents conforms to the related order documents;

 

(v)                   Agent has a first priority perfected security interest in
and lien upon such Inventory and all documents of title with respect thereto;
and

 

(vi)                such Inventory is not subject to (i) any Person’s right of
reclamation, repudiation, stoppage in transit or diversion or (ii) any other
right or claim of any other Person which is (or is capable of being) senior to,
or pari passu with, the security interest and lien of Agent or Agent determines
that any Person’s right or claim impairs, or interferes with, directly or
indirectly, the ability of Agent to realize on, or reduces the amount that Agent
may realize from the sale or other disposition of such Inventory;

 

(b)         in addition to and not in limitation of the criteria set forth in
clause (a) of this definition,

 

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as to any such Domestic In-Transit Inventory,

 

(i)                       such Inventory shall not have been in transit for more
than fourteen (14) days, without the prior written consent of Agent; and

 

(ii)                    such Inventory, and if requested by Agent, any documents
of title related thereto, is in the possession of a Person who has executed, in
form and substance acceptable to Agent, a Collateral Access Agreement in favor
of Agent;

 

(c)          in addition to and not in limitation of the criteria set forth in
clause (a) of this definition, as to any such Foreign In-Transit Inventory,

 

(i)                       as to any such Inventory of a Borrower, such Inventory
satisfies one of the following criteria in subsections (A), (B) or (C) below:

 

(A)       such Inventory either (1) is the subject of a negotiable bill of
lading (I) in which Agent is named as the consignee (either directly or by means
of endorsements), (II) that was issued by the carrier respecting such Inventory
that is subject to such bill of lading, and (III) that is in the possession of
Agent or the Freight Forwarder handling the importing, shipping and delivery of
such Inventory, in all cases, acting on Agent’s behalf subject to a Collateral
Access Agreement, duly authorized, executed and delivered by such Freight
Forwarder, or (2) is the subject of a negotiable forwarder’s cargo receipt and
such cargo receipt on its face indicates the name of the freight forwarder as a
carrier or multimodal transport operator and has been signed or otherwise
authenticated by it in such capacity or as a named agent for or on behalf of the
carrier or multilmodal transport operator, in any case respecting such Inventory
and either (I) names Agent as the consignee (either directly or by means of
endorsements), or (II) is in the possession of Agent or the Freight Forwarder
handling the importing, shipping and delivery of such Inventory, in all cases,
acting on Agent’s behalf subject to a Collateral Access Agreement, duly
authorized, executed and delivered by such Freight Forwarder; such Inventory
currently is in the possession or control of a bailee signatory to a Collateral
Access Agreement and is in transit (whether by vessel, air, or land);

 

(B)       such Inventory either (1) is the subject of a non-negotiable bill of
lading (I) in which Agent is directly named as the consignee, (II) that was
issued by the carrier respecting such Inventory that is subject to such bill of
lading, and (III) that is in the possession of Agent or the Freight Forwarder
handling the importing, shipping and delivery of such Inventory, in all cases,
acting on Agent’s behalf subject to a Collateral Access Agreement, duly
authorized, executed and delivered by such Freight Forwarder, or (2) is the
subject of a non-negotiable forwarder’s cargo receipt and such cargo receipt on
its face indicates the name of the freight forwarder as a carrier or multimodal
transport operator and has been signed or otherwise authenticated by it in such
capacity or as a named agent for or on behalf of the carrier or multilmodal
transport operator, in any case respecting such Inventory and (I) directly names
Agent as the consignee, and (II) is in the possession of Agent or the Freight
Forwarder handling the importing, shipping and delivery of such Inventory, in
all cases, acting on Agent’s behalf subject to a Collateral Access Agreement,
duly authorized, executed and delivered by such Freight Forwarder; such
Inventory currently is in the possession or control of a bailee signatory to a
Collateral Access Agreement and is in transit (whether by vessel, air, or land);

 

(C)       such Inventory either (1) is the subject of a non-negotiable bill of
lading (I) in which such Borrower is named as the consignee, (II) that was
issued by the carrier respecting such Inventory that is subject to such bill of
lading, and (III) that is in the possession of Agent or the Freight Forwarder
handling the importing, shipping and delivery of such Inventory, in all cases,
acting on Agent’s behalf subject to a Collateral Access Agreement, duly
authorized, executed and delivered by such

 

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Freight Forwarder, or (2) is the subject of a non-negotiable forwarder’s cargo
receipt and such cargo receipt on its face indicates the name of the freight
forwarder as a carrier or multimodal transport operator and has been signed or
otherwise authenticated by it in such capacity or as a named agent for or on
behalf of the carrier or multilmodal transport operator, in any case respecting
such Inventory and (I) names such Borrower as the consignee, and (II) is in the
possession of Agent or the Freight Forwarder handling the importing, shipping
and delivery of such Inventory, in all cases, acting on Agent’s behalf subject
to a Collateral Access Agreement, duly authorized, executed and delivered by
such Freight Forwarder; such Inventory currently is in the possession or control
of a bailee signatory to a Collateral Access Agreement and is in transit
(whether by vessel, air, or land);

 

(ii)                    the bills of lading and other documents of title with
respect to such Inventory complies with the terms and conditions of Section 7.5
hereof; and

 

(iii)                 such Inventory shall not have been in transit for more
than forty-five (45) days, without the prior written consent of Agent.

 

General criteria for Eligible In-Transit Inventory may only be made more
restricted and any new criteria for Eligible In-Transit Inventory may only be
established by Agent in good faith, based on either:  (i) an event, condition or
other circumstance arising after the date hereof, or (ii) existing on the date
hereof to the extent Agent has no written notice thereof from Borrowers prior to
the date hereof, in either case under clause (i) or (ii) which adversely affects
or could reasonably be expected to adversely affect the Inventory in the good
faith determination of Agent.  Any Inventory which is not Eligible In-Transit
Inventory shall nevertheless be part of the Collateral.

 

“Eligible In-Transit LC Inventory” means Inventory owned by a Borrower that
otherwise satisfies the criteria for Eligible Landed Inventory and which is in
transit to one of the locations set forth on Exhibit E hereto (as such schedule
may be updated from time to time by Borrowers to exclude locations which have
been closed and/or include additional locations of Inventory which Borrowers are
permitted to establish under the terms of this Agreement) being either the
premises of a Freight Forwarder in the United States of America or the premises
of such Borrower in the United States of America which are either owned and
controlled by such Borrower or leased by such Borrower (but only if Agent has
received a Collateral Access Agreement duly authorized, executed and delivered
by such Freight Forwarder or the owner and lessor of such leased premises, as
the case may be); provided, that:

 

(a)                                 such Inventory is the subject of an
outstanding documentary Letter of Credit issued hereunder for the purchase of
such Inventory;

 

(b)                                 title to such Inventory has passed to such
Borrower,

 

(c)                                  such Inventory is insured against types of
loss, damage, hazards, and risks, and in amounts, satisfactory to Agent in its
discretion and Agent shall have received a copy of the certificate of evidence
of marine cargo insurance in connection therewith in which it has been named as
an additional insured and lender’s loss payee in a manner acceptable to Agent;

 

(d)                                 the applicable Borrower has provided a
certificate to Agent that certifies that, to the best knowledge of such
Borrower, such Inventory meets all of such Borrower’s representations and
warranties contained herein concerning Eligible Inventory, that it knows of no
reason why such Inventory would not be accepted by such Borrower when it arrives
and that the shipment as evidenced by the documents conforms to the related
order documents;

 

(e)                                  Agent has a first priority perfected
security interest in and lien upon such

 

21

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Inventory and all documents of title with respect thereto;

 

(f)                                   such Inventory is not subject to (i) any
Person’s right of reclamation, repudiation, stoppage in transit or diversion or
(ii) any other right or claim of any other Person which is (or is capable of
being) senior to, or pari passu with, the security interest and lien of Agent or
Agent determines that any Person’s right or claim impairs, or interferes with,
directly or indirectly, the ability of Agent to realize on, or reduces the
amount that Agent may realize from the sale or other disposition of such
Inventory;

 

(g)                                  such as to any such Inventory of a
Borrower, such Inventory satisfies one of the following criteria in subsections
(i), (ii) or (ii) below:

 

(i)                                     such Inventory either (A) is the subject
of a negotiable bill of lading (1) in which Agent is named as the consignee
(either directly or by means of endorsements), (2) that was issued by the
carrier respecting such Inventory that is subject to such bill of lading, and
(3) that is in the possession of Agent or the Freight Forwarder handling the
importing, shipping and delivery of such Inventory, in all cases, acting on
Agent’s behalf subject to a Collateral Access Agreement, duly authorized,
executed and delivered by such Freight Forwarder, or (B) is the subject of a
negotiable forwarder’s cargo receipt and such cargo receipt on its face
indicates the name of the freight forwarder as a carrier or multimodal transport
operator and has been signed or otherwise authenticated by it in such capacity
or as a named agent for or on behalf of the carrier or multilmodal transport
operator, in any case respecting such Inventory and either (1) names Agent as
the consignee (either directly or by means of endorsements), or (2) is in the
possession of Agent or the Freight Forwarder handling the importing, shipping
and delivery of such Inventory, in all cases, acting on Agent’s behalf subject
to a Collateral Access Agreement, duly authorized, executed and delivered by
such Freight Forwarder; such Inventory currently is in the possession or control
of a bailee signatory to a Collateral Access Agreement and is in transit;

 

(ii)                                  such Inventory either (A) is the subject
of a non-negotiable bill of lading (1) in which Agent is directly named as the
consignee, (2) that was issued by the carrier respecting such Inventory that is
subject to such bill of lading, and (3) that is in the possession of Agent or
the Freight Forwarder handling the importing, shipping and delivery of such
Inventory, in all cases, acting on Agent’s behalf subject to a Collateral Access
Agreement, duly authorized, executed and delivered by such Freight Forwarder, or
(B) is the subject of a non-negotiable forwarder’s cargo receipt and such cargo
receipt on its face indicates the name of the freight forwarder as a carrier or
multimodal transport operator and has been signed or otherwise authenticated by
it in such capacity or as a named agent for or on behalf of the carrier or
multilmodal transport operator, in any case respecting such Inventory and
(1) directly names Agent as the consignee, and (2) is in the possession of Agent
or the Freight Forwarder handling the importing, shipping and delivery of such
Inventory, in all cases, acting on Agent’s behalf subject to a Collateral Access
Agreement, duly authorized, executed and delivered by such Freight Forwarder;
such Inventory currently is in the possession or control of a bailee signatory
to a Collateral Access Agreement and is in transit; or

 

(iii)                               such Inventory either (A) is the subject of
a non-negotiable bill of lading (1) in which such Borrower is named as the
consignee, (2) that was issued by the carrier respecting such Inventory that is
subject to such bill of lading, and (3) that is in the possession of Agent or
the Freight Forwarder handling the importing, shipping and delivery of such
Inventory, in all cases, acting on Agent’s behalf subject to a Collateral Access
Agreement, duly authorized, executed and delivered by such Freight Forwarder, or
(B) is the subject of a non-negotiable forwarder’s cargo receipt and such cargo
receipt on its face indicates the name of the freight forwarder as a carrier or
multimodal transport operator and has been signed or otherwise authenticated by
it in such capacity or as a named agent for or on behalf of the carrier or
multilmodal transport operator, in any case respecting such Inventory and
(1) names such

 

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Borrower as the consignee, and (2) is in the possession of Agent or the Freight
Forwarder handling the importing, shipping and delivery of such Inventory, in
all cases, acting on Agent’s behalf subject to a Collateral Access Agreement,
duly authorized, executed and delivered by such Freight Forwarder; such
Inventory currently is in the possession or control of a bailee signatory to a
Collateral Access Agreement and is in transit;

 

(h)                                 the bills of lading and other documents of
title with respect to such Inventory complies with the terms and conditions of
Section 7.5 hereof; and

 

(i)                                     the documentary Letter of Credit issued
hereunder for the purchase of such Inventory has not been outstanding more than
seventy-five (75) days from its date of issuance.

 

General criteria for Eligible In-Transit LC Inventory may only be made more
restricted and any new criteria for Eligible In-Transit LC Inventory may only be
established by Agent in good faith, based on either:  (i) an event, condition or
other circumstance arising after the date hereof, or (ii) existing on the date
hereof to the extent Agent has no written notice thereof from Borrowers prior to
the date hereof, in either case under clause (i) or (ii) which adversely affects
or could reasonably be expected to adversely affect the Inventory in the good
faith determination of Agent.  Any Inventory which is not Eligible In-Transit LC
Inventory shall nevertheless be part of the Collateral.

 

“Eligible Inventory” means Eligible Landed Inventory, Eligible In-Transit
Inventory and Eligible In-Transit LC Inventory.

 

“Eligible Landed Inventory” means Inventory consisting of finished goods held
for resale in the ordinary course of the business of Borrowers located in one of
the locations of Borrowers set forth on Exhibit E hereto (as such schedule may
be updated from time to time by Borrowers to exclude locations which have been
closed and/or include additional locations of Inventory which Borrowers are
permitted to establish under the terms of this Agreement) which are acceptable
to Agent based on the criteria set forth below.  In general, Eligible Landed
Inventory shall not include:

 

(a)         work-in-process;

 

(b)         raw materials;

 

(c)          spare parts for equipment;

 

(d)         packaging and shipping materials;

 

(e)          supplies used or consumed in Borrowers’ business;

 

(f)           Inventory at premises other than those owned or leased and
controlled by a Borrower unless Agent has either (i) received a Collateral
Access Agreement in form and substance satisfactory to Agent with respect to
such location or (ii) established a Reserve in an amount in accordance with the
terms hereof with respect to such location;

 

(g)          Inventory subject to a perfected security interest or lien in favor
of any person other than Agent except those permitted in this Agreement
including those that are subordinate to the security interest of Agent pursuant
to an intercreditor agreement in form and substance satisfactory to Agent
between Agent and the holder of such other security interest or lien;

 

(h)         bill and hold goods;

 

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(i)             obsolete, out-of-season or slow moving Inventory;

 

(j)            damaged and/or defective Inventory;

 

(k)         Inventory returned by customers and not held for resale;

 

(l)             Inventory consisting of samples or displays;

 

(m)     Inventory held for return to vendors; and

 

(n)         Inventory purchased or sold on consignment.

 

General criteria for Eligible Landed Inventory may only be made more restricted
and any new criteria for Eligible Landed Inventory may only be established by
Agent in good faith, based on either:  (i) an event, condition or other
circumstance arising after the date hereof, or (ii) existing on the date hereof
to the extent Agent has no written notice thereof from Borrowers prior to the
date hereof, in either case under clause (i) or (ii) which adversely affects or
could reasonably be expected to adversely affect the Inventory in the good faith
determination of Agent.  Any Inventory which is not Eligible Landed Inventory
shall nevertheless be part of the Collateral.

 

“Eligible Sell-Off Vendors Receivables” means Accounts, other than Credit Card
Receivables or Eligible Damaged Goods Vendor Receivables, created by any
Borrower which are and continue to be acceptable to Agent based on the criteria
set forth below.  In general, Accounts shall be Eligible Sell-Off Vendors
Receivables if:

 

(a)         such Accounts arise from the actual and bona fide sale and delivery
of out-of-season or slow moving Inventory by such Borrower to a third-party
off-price wholesaler, including NEJ, Inc. and Global Traders Network (or any
other Person engaged in substantially the same business as NEJ, Inc. and Global
Traders Network and permitted by Agent), in the ordinary course of such
Borrower’s business, which transactions are completed in accordance with the
terms and provisions contained in any documents related thereto;

 

(b)         such Accounts are not unpaid more than ninety (90) days after the
date of the original invoice for them;

 

(c)          such Accounts comply with the terms and conditions contained in
Section 7.2(b) hereof;

 

(d)         such Accounts do not arise from sales on consignment, guaranteed
sale, sale and return, sale on approval, or other terms under which payment by
the account debtor may be conditional or contingent;

 

(e)          the chief executive office of the account debtor with respect to
such Accounts is located in the United States of America or Canada;

 

(f)           such Accounts do not consist of progress billings (such that the
obligation of the account debtors with respect to such Accounts is conditioned
upon such Borrower’s satisfactory completion of any further performance under
the agreement giving rise thereto), bill and hold invoices or retainage
invoices, except as to bill and hold invoices, if Agent shall have received an
agreement in writing from the account debtor, in form and substance satisfactory
to Agent, confirming the unconditional obligation of the account debtor to take
the goods related thereto and pay such invoice;

 

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(g)          the account debtor with respect to such Accounts has not asserted a
counterclaim, defense or dispute and does not have, and does not engage in
transactions which may give rise to any right of setoff or recoupment against
such Accounts (but the portion of the Accounts of such account debtor in excess
of the amount at any time and from time to time owed by such Borrower to such
account debtor or claimed to be owed by such account debtor may be deemed
Eligible Sell-Off Vendors Receivables),

 

(h)         there are no facts, events or occurrences which would impair the
validity, enforceability or collectability of such Accounts or reduce the amount
payable or delay payment thereunder;

 

(i)             such Accounts are subject to the first priority, valid and
perfected security interest of Agent and any goods giving rise thereto are not,
and were not at the time of the sale thereof, subject to any liens except those
permitted in this Agreement that are subject to an intercreditor agreement in
form and substance satisfactory to Agent between the holder of such security
interest or lien and Agent;

 

(j)            neither the account debtor nor any officer or employee of the
account debtor with respect to such Accounts is an officer, employee, agent or
other Affiliate of any Borrower or Guarantor;

 

(k)         the account debtors with respect to such Accounts are not any
foreign government, the United States of America, any State, political
subdivision, department, agency or instrumentality thereof, unless, if the
account debtor is the United States of America, any State, political
subdivision, department, agency or instrumentality thereof, upon Agent’s
request, the Federal Assignment of Claims Act of 1940, as amended or any similar
State or local law, if applicable, has been complied with in a manner
satisfactory to Agent;

 

(l)             there are no proceedings or actions which are threatened or
pending against the account debtors with respect to such Accounts which are
likely to result in any material adverse change in any such account debtor’s
financial condition (including, without limitation, any bankruptcy, dissolution,
liquidation, reorganization or similar proceeding);

 

(m)     such Accounts are not evidenced by or arising under any instrument or
chattel paper;

 

(n)         such Accounts are not owed by an account debtor who has Accounts
unpaid more than ninety (90) days after the original invoice date for them which
constitute more than thirty-five (35%) of the total Accounts of such account
debtor;

 

(o)         the account debtor is not located in a state requiring the filing of
a Notice of Business Activities Report or similar report in order for such
Borrower to seek judicial enforcement in such State of payment of such Account,
unless such Borrower has qualified to do business in such state or has filed a
Notice of Business Activities Report or equivalent report for the then current
year or such failure to file and inability to seek judicial enforcement is
capable of being remedied without any material delay or material cost; and

 

(p)         such Accounts do not constitute amounts which have been invoiced by
such Borrower but with respect to which goods so invoiced have not been
delivered to the account debtor.

 

The criteria for Eligible Sell-Off Vendors Receivables set forth above may only
be changed and any new criteria for Eligible Sell-Off Vendors Receivables may
only be established by Agent in good faith based on either:  (i) an event,
condition or other circumstance arising after the date hereof, or (ii) an event,
condition or other circumstance existing on the date hereof to the extent Agent
has no written notice thereof from Borrowers prior to the date hereof, in either
case under clause (i) or (ii) which adversely affects or could reasonably be
expected to adversely affect the Accounts in the good faith determination

 

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of Agent.  Any Accounts which are not Eligible Sell-Off Vendors Receivables
shall nevertheless be part of the Collateral.

 

“Eligible Transferee” means (a) any Lender; (b) the parent company of any Lender
and/or any Affiliate of such Lender which is at least fifty percent (50%) owned
by such Lender or its parent company; (c) any person (whether a corporation,
partnership, trust or otherwise) that is engaged in the business of making,
purchasing, holding or otherwise investing in bank loans and similar extensions
of credit in the ordinary course of its business and is administered or managed
by a Lender or with respect to any Lender that is a fund which invests in bank
loans and similar extensions of credit, any other fund that invests in bank
loans and similar extensions of credit and is managed by the same investment
advisor as such Lender or by an Affiliate of such investment advisor, and in
each case is approved by Agent; and (d) any other commercial bank, financial
institution or “accredited investor” (as defined in Regulation D under the
Securities Act of 1933) approved by Agent, provided, that, (i) no Borrower,
Guarantor, Affiliate of any Borrower or Guarantor, IPC or any Affiliate of IPC
shall qualify as an Eligible Transferee, (ii) no Person to whom any Indebtedness
which is in any way subordinated in right of payment to any other Indebtedness
of any Borrower or Guarantor shall qualify as an Eligible Transferee, except as
Agent may otherwise specifically agree and (iii) no Person that is organized
under the laws of a jurisdiction other than the United States or any state
thereof shall qualify as an Eligible Transferee.

 

“Environmental Laws” means all foreign, Federal, State and local laws (including
common law), rules, codes, licenses, permits (including any conditions imposed
therein), authorizations, judicial or administrative decisions, injunctions or
agreements between any Borrower or Guarantor and any Governmental Authority,
(a) relating to pollution and the protection, preservation or restoration of the
environment (including air, water vapor, surface water, ground water, drinking
water, drinking water supply, surface land, subsurface land, plant and animal
life or any other natural resource), or to occupational health or safety (as it
relates to Hazardous Materials), (b) relating to the exposure to, or the use,
storage, recycling, treatment, generation, manufacture, processing,
distribution, transportation, handling, labeling, production, release or
disposal, or threatened release, of Hazardous Materials, or (c) relating to all
laws with regard to recordkeeping, notification, disclosure and reporting
requirements respecting Hazardous Materials.  The term “Environmental Laws”
includes (i) the Federal Comprehensive Environmental Response, Compensation and
Liability Act of 1980, the Federal Superfund Amendments and Reauthorization Act,
the Federal Water Pollution Control Act of 1972, the Federal Clean Water Act,
the Federal Clean Air Act, the Federal Resource Conservation and Recovery Act of
1976 (including the Hazardous and Solid Waste Amendments thereto), the Federal
Solid Waste Disposal Act and the Federal Toxic Substances Control Act, the
Federal Insecticide, Fungicide and Rodenticide Act, and the Federal Safe
Drinking Water Act of 1974, (ii) applicable state counterparts to such laws and
(iii) any common law or equitable doctrine that may impose liability or
obligations for injuries or damages due to, or threatened as a result of, the
presence of or exposure to any Hazardous Materials.

 

“Equipment” means all of each Borrower’s and each Guarantor’s now owned and
hereafter acquired equipment, wherever located, including machinery, data
processing and computer equipment (whether owned or licensed and including
embedded software), vehicles, tools, furniture, fixtures, all attachments,
accessions and property now or hereafter affixed thereto or used in connection
therewith, and substitutions and replacements thereof, wherever located.

 

“Equity Interests” means, with respect to a Person, the shares, options,
warrants, interests, participations, or other equivalents (regardless of how
designated) of or in such Person, whether voting or nonvoting, including capital
stock (or other ownership or profit interests or units), preferred stock, or any
other “equity security” (as such term is defined in Rule 3a11-1 of the General
Rules and Regulations promulgated by the SEC under the Exchange Act).

 

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“ERISA” means the United States Employee Retirement Income Security Act of 1974,
as amended, together with all rules, regulations and interpretations thereunder
or related thereto.

 

“ERISA Affiliate” means any person required to be aggregated with any Borrower
or any Guarantor under Sections 414(b), 414(c), 414(m) or 414(o) of the Code.

 

“ERISA Event” means (a) any “reportable event”, as defined in Section 4043(c) of
ERISA or the regulations issued thereunder, with respect to a Pension Plan,
except for any such event with respect to which notice has been waived pursuant
to applicable regulations; (b) the adoption of any amendment to a Pension Plan
that would require the provision of security pursuant to Section 401(a)(29) of
the Code or Section 307 of ERISA; (c) the existence with respect to any Pension
Plan of an “accumulated funding deficiency” (as defined in Section 412 of the
Code or Section 302 of ERISA), whether or not waived; (d) the filing pursuant to
Section 412 of the Code or Section 303(d) of ERISA of an application for a
waiver of the minimum funding standard with respect to any Pension Plan ;
(e) the occurrence of a non-exempt “prohibited transaction” with respect to
which any Borrower or Guarantor, or any of their respective Subsidiaries is a
“disqualified person” (within the meaning of Section 4975 of the Code) with
respect to any Plan; (f) a complete or partial withdrawal by any Borrower, any
Guarantor or any ERISA Affiliate from a Multiemployer Plan or a cessation of
operations which is treated as such a withdrawal or a determination that a
Multiemployer Plan is, or is expected to be, “insolvent” (within the meaning of
Section 4245 of ERISA), or in endangered or critical status (within the meaning
of Section 432 of the Code or Section 305 of ERISA); (g) the filing of a notice
of intent to terminate, the treatment of a Pension Plan amendment as a
termination under Section 4041 or 4041A of ERISA, or the commencement of
proceedings by the Pension Benefit Guaranty Corporation to terminate a Pension
Plan; (h) an event or condition that constitutes or could reasonably be expected
to constitute grounds under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Pension Plan; and (i) the imposition
of any liability under Title IV of ERISA, other than the Pension Benefit
Guaranty Corporation premiums due but not delinquent under Section 4007 of
ERISA, upon any Borrower, any Guarantor or any ERISA Affiliate in an amount that
could reasonably be expected to have a Material Adverse Effect.

 

“EU Bail-In Legislation Schedule” means the EU Bail-In Legislation Schedule
published by the Loan Market Association (or any successor person), as in effect
from time to time.

 

“Event of Default” means the occurrence or existence of any event or condition
described in Section 10.1 hereof.

 

“Excess Availability” means, the amount, as determined by Agent, calculated at
any date, equal to (a) the lesser of:  (i) the Borrowing Base and (ii) the
Revolving Loan Limit, minus (b) the amount of all then outstanding and unpaid
Obligations in respect of the Revolving Loans and outstanding Letters of Credit.

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended, together
with all rules, regulations and interpretations thereunder or related thereto.

 

“Excluded Swap Obligation” means, with respect to any Loan Party, any Swap
Obligation if, and to the extent that, all or a portion of the guaranty of such
Loan Party of (including by virtue of the joint and several liability provisions
of Section 2.9 hereof), or the grant by such Loan Party of a security interest
to secure, such Swap Obligation (or any guaranty thereof) is or becomes illegal
under the Commodity Exchange Act or any rule, regulation or order of the
Commodity Futures Trading Commission (or the application or official
interpretation of any thereof) by virtue of such Loan Party’s failure for any
reason to constitute an “eligible contract participant” as defined in the
Commodity Exchange Act and the regulations thereunder at the time the guaranty
of such Loan Party or the grant of

 

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such security interest becomes effective with respect to such Swap Obligation. 
If a Swap Obligation arises under a master agreement governing more than one
swap, such exclusion shall apply only to the portion of such Swap Obligation
that is attributable to swaps for which such guaranty or security interest is or
becomes illegal.

 

“Excluded Taxes” means any of the following Taxes imposed on or with respect to
any Lender or Participant or required to be withheld or deducted from a payment
to a Lender or Participant, (i) any Taxes, or any Tax imposed on or measured by
the net income or net profits (however denominated) of any Lender or any
Participant (including any branch profits taxes), in each case imposed by the
jurisdiction (or by any political subdivision or taxing authority thereof) in
which such Lender or such Participant is organized or the jurisdiction (or by
any political subdivision or taxing authority thereof) in which such Lender’s or
such Participant’s principal office is located in or as a result of a present or
former connection between such Lender or such Participant and the jurisdiction
or taxing authority imposing the tax (other than any such connection arising
solely from such Lender or such Participant having executed, delivered or
performed its obligations or received payment under, or enforced its rights or
remedies under this Agreement or any other Financing Agreement), (ii) United
States federal withholding taxes attributable to a Lender’s or a Participant’s
failure to comply with the requirements of Section 15.2 hereof, (iii) any United
States federal withholding taxes imposed on amounts payable to or for the
account of a Lender at the time such Lender becomes a party to this Agreement
(or designates a new lending office, other than a designation made at the
request of a Loan Party), except that Excluded Taxes shall not include any
amount that such Lender (or its assignor, if any) was previously entitled to
receive pursuant to Section 15.1 hereof, if any, with respect to such
withholding tax at the time such Lender becomes a party to this Agreement (or
designates a new lending office), and (iv) any United States federal withholding
taxes imposed under FATCA.

 

“Existing Financing Agreements” means, collectively, the Existing Loan
Agreement, the Existing Guarantor Security Agreements, and all other documents,
certificates, instruments, notes, guarantees, mortgages and agreements executed
and delivered by Borrowers and Guarantors in connection therewith, whether or
not specifically mentioned herein or therein as heretofore, amended and as in
effect immediately prior to the date hereof.

 

“Existing Guarantor Security Agreements” means, collectively, the Amended and
Restated Guaranty and Security Agreement, dated March 16, 2004, by RTW in favor
of Agent, the Amended and Restated Guaranty and Security Agreement, dated
March 16, 2004, by Parent in favor of Agent, the Amended and Restated Guaranty
and Security Agreement, dated March 16, 2004, by Lerner in favor of Agent, the
Amended and Restated Guaranty and Security Agreement, dated March 16, 2004, by
Associated Lerner in favor of Agent, Associated Lerner, and the Amended and
Restated Guaranty and Security Agreement, dated March 16, 2004, by Lerner GC in
favor of Agent as heretofore amended and as in effect immediately prior to the
date hereof.

 

“Existing Letters of Credit” means, collectively, the letters of credit issued
for the account of Borrowers under the Existing Loan Agreement, as the same now
exist or may hereafter be amended, modified, supplemented, extended, renewed,
restated or replaced.

 

“Existing Loan Agreement” shall have the meaning set forth in the recitals
hereof as heretofore amended and as in effect immediately prior to the date
hereof.

 

“Extraordinary Advances” means, collectively, any Additional Revolving Loans
made pursuant to Section 12.8 and any Special Agent Advances made pursuant to
Section 12.11.

 

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“FATCA” means Sections 1471 through 1474 of the Code, as of the date of this
Agreement (or any amended or successor version that is substantively comparable
and not materially more onerous to comply with), and (a) any current or future
regulations or official interpretations thereof, (b) any agreements entered into
pursuant to Section 1471(b)(1) of the Code, and (c) any intergovernmental
agreement entered into by the United States or any fiscal or regulatory
legislation, rules, or practices adopted pursuant to any such intergovernmental
agreement entered into in connection with the implementation of the foregoing.

 

“FCPA” means the Foreign Corrupt Practices Act of 1977, as amended, and the
rules and regulations thereunder.

 

“Federal Funds Rate” means, for any period, a fluctuating interest rate per
annum equal to, for each day during such period, the weighted average of the
rates on overnight Federal funds transactions with members of the Federal
Reserve System, as published on the next succeeding Business Day by the Federal
Reserve Bank of New York, or, if such rate is not so published for any day which
is a Business Day, the average of the quotations for such day on such
transactions received by Agent from three Federal funds brokers of recognized
standing selected by it (and, if any such rate is below zero, then the rate
determined pursuant to this definition shall be deemed to be zero).

 

“Federal Reserve Bank of New York’s Website” means the website of the Federal
Reserve Bank of New York at http://www.newyorkfed.org or any successor source.

 

“Fee Letters” means, collectively, the Revolving Loan Fee Letter and any other
fee letter executed and delivered in connection with the Financing Agreements;
sometimes being referred to herein individually as a “Fee Letter”.

 

“Financing Agreements” means, collectively, this Agreement, any and all notes,
the Fee Letter, the Guarantee, the Stock Pledge Agreements, the Collateral
Access Agreements, the Credit Card Acknowledgments, the Deposit Account Control
Agreements (together with all other agreements necessary for Agent to take
(conditionally or otherwise) dominion of all cash receipts and payments on
credit card receivables of each Borrower and Guarantor), the Investment Property
Control Agreements, any other security agreements, the Intercompany
Subordination Agreement, and all other agreements, documents and instruments now
or at any time hereafter executed and/or delivered by any Borrower or any
Obligor in connection with this Agreement.

 

“Fiscal Month-End” means the dates denoted as Fiscal Month-End dates on
Exhibit F hereto.

 

“Fiscal Quarter-End” means the dates denoted as Fiscal Quarter-End dates on
Exhibit F hereto.

 

“Fiscal Year-End” means the dates denoted as Fiscal Year-End dates on Exhibit F
hereto.

 

“Fixed Charge Coverage Ratio” means, as to any Person and their Subsidiaries,
calculated on a consolidated basis, for any applicable Measurement Period,
measured as of the end of such, the ratio of: (a) the amount equal to sum of
(i) EBITDA plus (ii) Qualified Cash to (b) Fixed Charges.

 

“Fixed Charges” means, with respect to any Person and its Subsidiaries for any
Measurement Period, the sum of, without duplication, (a) all cash Interest
Expense paid during such period (net of interest income of such Person during
such Measurement Period and excluding, to the extent taken into account in the
calculation of Interest Expense, upfront fees, costs and expenses in respect of
this Agreement and the transactions contemplated hereby and thereby), plus
(b) all regularly scheduled mandatory principal payments with respect to
Indebtedness for borrowed money (excluding payments in

 

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respect of Revolving Loans) paid or payable for such period, and Indebtedness
with respect to Capital Leases paid during such period in cash (excluding the
interest component with respect to Indebtedness under Capital Lease), plus
(c) all income taxes paid during such period in cash (net of refunds or tax
credits to such Person in respect to income taxes, and excluding income tax on
extraordinary or non-recurring gains or gains from asset sales outside of the
ordinary course of business), plus (d) all Capital Expenditures paid in cash
during such period net of applicable construction or landlord tenant allowances
during such period (other than Capital Expenditures of such Person made with the
proceeds of Indebtedness permitted for such purpose hereunder), all of the
foregoing as determined in accordance with GAAP.

 

“Flood Laws” means the National Flood Insurance Act of 1968, Flood Disaster
Protection Act of 1973, and related laws, rules and regulations, including any
amendments or successor provisions.

 

“Foreign Holdco Subsidiary” means any Subsidiary of any Borrower or Guarantor
that is organized or incorporated under the laws of any jurisdiction within the
United States of America which (a) is formed and maintained for the sole purpose
of holding the Equity Interests of any Foreign Subsidiary, (b) owns assets
consisting solely of the Equity Interests (or Equity Interests and debt) of any
Foreign Subsidiary and assets having a de minimis value, and (c) does not have
any creditors.

 

“Foreign In-Transit Inventory” means Inventory owned by a Borrower that is not
located in the continental United States of America and which is in transit to
one of the locations set forth on Exhibit E hereto (as such schedule may be
updated from time to time by Borrowers to exclude locations which have been
closed and/or include additional locations of Inventory which Borrowers are
permitted to establish under the terms of this Agreement) being either the
premises of a Freight Forwarder in the United States of America or the premises
of such Borrower in the United States of America which are either owned and
controlled by such Borrower or leased by such Borrower.

 

“Foreign Lender” means any Lender or Participant that is not a United States
person within the meaning of Code section 7701(a)(30).

 

“Foreign Subsidiary” means any Subsidiary of any Borrower or Guarantor that is
organized or incorporated under the laws of any jurisdiction outside of the
United States of America.

 

“Freight Forwarders” means the persons listed on Schedule 1.87 hereto or such
other person or persons as may be selected by Borrower after the date hereof and
after written notice by Borrower to Agent who are reasonably acceptable to Agent
to handle the receipt of Inventory within the United States of America and/or to
clear Inventory through the Bureau of Customs and Border Protection (formerly
the Customs Service) or other domestic or foreign export control authorities or
otherwise perform port of entry services to process Inventory imported by
Borrower from outside the United States of America (such persons sometimes being
referred to herein individually as a “Freight Forwarder”), provided, that, as to
each such person, (a) Agent shall have received a Collateral Access Agreement by
such person in favor of Agent (in form and substance reasonably satisfactory to
Agent), duly authorized, executed and delivered by such person, (b) such
agreement shall be in full force and effect and (c) such person shall be in
compliance in all material respects with the terms thereof.

 

“FTF” means FTF GC, LC, an Ohio limited liability company, and its successors
and assigns.

 

“Funding Date” means the date on which a Borrowing occurs.

 

“Funding Losses” has the meaning specified therefor in Section 3.3(b)(ii) of
this Agreement.

 

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“GAAP” means generally accepted accounting principles as in effect from time to
time in the United States, consistently applied.

 

“Gift Certificate and Store Credit Reserve” means, as of any date of
determination, a Reserve equal to the amount of fifty percent (50%) of all
(a) accrued and outstanding gift certificates which any Borrower is obligated to
honor and (b) the aggregate amount of outstanding store credit to be honored by
any Borrower.

 

“Governmental Authority” means any nation or government, any state, province, or
other political subdivision thereof, any central bank (or similar monetary or
regulatory authority) thereof, and any entity exercising executive, legislative,
judicial, regulatory or administrative functions of government.

 

“Guarantee” means the Third Amended and Restated Guarantee, dated as of
August 10, 2011, executed and delivered by each Guarantor in favor of Agent, for
itself and the ratable benefit of the Lenders and the Bank Product Providers, in
form and substance satisfactory to Agent, with respect to the Obligations, and
any other guaranty from time to time executed by any Guarantor in favor of
Agent, for itself and the ratable benefit of Lenders and the Bank Product
Providers, with respect to the Obligations, as the same now exist or may
hereafter exist when executed and delivered or may hereafter or thereafter be
amended, modified, supplemented, extended, renewed, restated or replaced.

 

“Guarantors” has the meaning provided to such term in the preamble of this
Agreement.

 

“Hazardous Materials” means any hazardous, toxic or dangerous substances,
materials and wastes, including hydrocarbons (including naturally occurring or
man-made petroleum and hydrocarbons), flammable explosives, asbestos, urea
formaldehyde insulation, radioactive materials, polychlorinated biphenyls,
pesticides, herbicides and any other kind and/or type of pollutants or
contaminants, sewage, sludge, industrial slag, solvents and/or any other similar
substances, materials, or wastes and including any other substances, materials
or wastes that are or become classified as hazardous or toxic under any
Environmental Law.

 

“Hedge Agreement” means a “swap agreement” as that term is defined in
Section 101(53B)(A) of the Bankruptcy Code.

 

“Hedge Obligations” means any and all obligations or liabilities, whether
absolute or contingent, due or to become due, now existing or hereafter arising,
of each Loan Party and its Subsidiaries arising under, owing pursuant to, or
existing in respect of Hedge Agreements entered into with one or more of the
Hedge Providers.

 

“Hedge Provider” means Wells Fargo or any of its Affiliates.

 

“Increased Collateral Reporting Event” means a period either (a) commencing on
the date that a Default or Event of Default shall exist or have occurred and be
continuing and ending on the date such Default or Event of Default is waived or
cured in accordance with Section 11.3 hereof or (b) commencing on the date that
Compliance Excess Availability has been less than fifteen (15%) percent of the
Revolving Loan Limit as calculated by Agent hereunder and ending on the date
that Compliance Excess Availability has been greater than fifteen (15%) percent
of the Revolving Loan Limit for any thirty (30) consecutive day period
thereafter.

 

“Increased Financial Reporting Event” means a period either (a) commencing on
the date that a Default or Event of Default shall exist or have occurred and be
continuing and ending on the date such Default or Event of Default is waived or
cured in accordance with Section 11.3 hereof or (b) commencing

 

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on the date that Compliance Excess Availability has been less than twenty-five
(25%) percent of the Revolving Loan Limit as calculated by Agent hereunder and
ending on the date that Compliance Excess Availability has been greater than
twenty-five (25%) percent of the Revolving Loan Limit for any thirty (30)
consecutive day period thereafter.

 

“Indebtedness” means, with respect to any Person and without duplication, any
liability, whether or not contingent, (a) in respect of borrowed money (whether
or not the recourse of the lender is to the whole of the assets of such Person
or only to a portion thereof) or evidenced by bonds, notes, debentures or
similar instruments; (b) representing the balance deferred and unpaid of the
purchase price of any property or services (except any such balance that
constitutes an account payable to a trade creditor (whether or not an Affiliate)
created, incurred, assumed or guaranteed by such Person in the ordinary course
of business of such Person in connection with obtaining goods, materials or
services that is not overdue by more than ninety (90) days, unless the trade
payable is being contested in good faith); (c) all obligations as lessee under
leases which have been, or should be, in accordance with GAAP recorded as
Capital Leases; (d) any contractual obligation, contingent or otherwise, of such
Person to pay or be liable for the payment of any indebtedness described in this
definition of another Person, including, without limitation, any such
indebtedness, directly or indirectly guaranteed, or any agreement to purchase,
repurchase, or otherwise acquire such indebtedness, obligation or liability or
any security therefor, or to provide funds for the payment or discharge thereof,
or to maintain solvency, assets, level of income, or other financial condition
of another Person; (e) all obligations with respect to redeemable stock and
redemption or repurchase obligations under any Equity Interests or other equity
securities issued by such Person; (f) all reimbursement obligations and other
liabilities of such Person with respect to surety bonds (whether bid,
performance or otherwise), letters of credit, banker’s acceptances, drafts or
similar documents or instruments issued for such Person’s account; (g) all
indebtedness of such Person in respect of indebtedness of another Person for
borrowed money or indebtedness of another Person otherwise described in this
definition which is secured by any consensual lien, security interest,
collateral assignment, conditional sale, mortgage, deed of trust, or other
encumbrance on any asset of such Person, whether or not such obligations,
liabilities or indebtedness are assumed by or are a personal liability of such
Person, all as of such time; (h) all obligations, liabilities and indebtedness
of such Person (marked to market) arising under swap agreements, cap agreements
and collar agreements and other agreements or arrangements designed to protect
such person against fluctuations in interest rates or currency or commodity
values; and (i) all obligations owed by such Person under IP License Agreements
with respect to non-refundable, advance or minimum guarantee royalty payments.

 

“Indemnified Taxes” means, (a) Taxes, other than Excluded Taxes, imposed on or
with respect to any payment made by, or on account of any obligation of, any
Loan Party under any Financing Agreement, and (b) to the extent not otherwise
described in the foregoing clause (a), Other Taxes.

 

“Indemnitee” has the meaning set forth in Section 11.5 of this Agreement.

 

“Information Certificates” means the Information Certificates, dated the date
hereof, of Borrowers and Guarantors collectively constituting Exhibit D hereto,
containing material information with respect to such Person and such Person’s
businesses and assets provided by or on behalf of such Person to Agent in
connection with the preparation of this Agreement and the other Financing
Agreements and the financing arrangements provided for herein.

 

“Insolvency Event” means, the commencement of any of the following with respect
to any Borrower or Guarantor: (a) any case or proceeding with respect to such
person under the Bankruptcy Code, or any other Federal, State or other
bankruptcy, insolvency, reorganization or other law affecting creditors’ rights
or any other or similar proceedings seeking any stay, reorganization,
arrangement, composition or readjustment of all or substantially all of the
obligations and indebtedness of such person

 

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or (b) any proceeding seeking the appointment of any receiver, trustee,
administrator, liquidator, custodian or other insolvency official with similar
powers with respect to such person or all or substantially all of its assets or
(c) any proceeding for liquidation, dissolution or other winding up of the
business of such person or (d) any general assignment for the benefit of
creditors or any general marshaling of all or substantially all of the assets of
such person.

 

“In-Store Payment” has the meaning set forth in the Private Label Credit Card
Agreement.

 

“Intellectual Property” means any Borrower’s or any Guarantor’s now owned and
hereafter arising or acquired:  patents, patent rights, patent applications,
copyrights, works which are the subject matter of copyrights, copyright
registrations, trademarks, trade names, trade styles, and trademark and service
mark applications; all extensions, renewals, reissues, divisions, continuations,
and continuations-in-part of any of the foregoing; all rights to sue for past,
present and future infringement of any of the foregoing; inventions, trade
secrets, formulae, processes, compounds, drawings, designs, blueprints, surveys,
reports, manuals, and operating standards; goodwill (including any goodwill
associated with any trademark or the license of any trademark); customer and
other lists in whatever form maintained; trade secret rights, copyright rights,
rights in works of authorship, domain names and domain name registrations;
software and contract rights relating to computer software programs, in each
case, in whatever form created or maintained, and whether owned or licensed.

 

“Intercompany Subordination Agreement” means the Second Amended and Restated
Intercompany Subordination Agreement, in form and substance reasonably
satisfactory to Agent, dated as of August 22, 2007, by and among Borrowers,
certain of their Affiliates and Agent, as the same now exists or may hereafter
be amended, modified, supplemented, extended, renewed, restated or replaced.

 

“Interest Expense” means, for any period, total interest expense in accordance
with GAAP of Borrowers and Guarantors on a consolidated basis with respect to
all outstanding Indebtedness.

 

“Interest Period” means, with respect to each LIBOR Rate Loan, a period
commencing on the date of the making of such LIBOR Rate Loan (or the
continuation of a LIBOR Rate Loan or the conversion of a Base Rate Loan to a
LIBOR Rate Loan) and ending 1, 2, 3, or 6 months thereafter; provided, that
(a) interest shall accrue at the applicable rate based upon the LIBOR Rate from
and including the first day of each Interest Period to, but excluding, the day
on which any Interest Period expires, (b) any Interest Period that would end on
a day that is not a Business Day shall be extended to the next succeeding
Business Day unless such Business Day falls in another calendar month, in which
case such Interest Period shall end on the next preceding Business Day, (c) with
respect to an Interest Period that begins on the last Business Day of a calendar
month (or on a day for which there is no numerically corresponding day in the
calendar month at the end of such Interest Period), the Interest Period shall
end on the last Business Day of the calendar month that is 1, 2, 3, or 6 months
after the date on which the Interest Period began, as applicable, and
(d) Borrowers may not elect an Interest Period which will end after the Maturity
Date.

 

“Interest Rate” means:

 

(a)         Subject to clause (b) of this definition below:

 

(i)                       as to Revolving Loans that are Base Rate Loans, a per
annum rate equal to the Base Rate plus the Base Rate Margin,

 

(ii)                                  as to Revolving Loans that are LIBOR Rate
Loans, a per annum rate equal to the LIBOR Rate plus the LIBOR Rate Margin.

 

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(b)         Notwithstanding anything to the contrary contained in clause (a) of
this definition, (i)  the Applicable Margin otherwise used to calculate the
Interest Rate for Base Rate Loans and LIBOR Rate Loans shall be the percentage
set forth in the definition of the term Applicable Margin for each category of
Loan that is then applicable plus two (2.00%) percent per annum (A) either
(1) without notice, (x) for the period on and after the date of termination or
non-renewal of this Agreement in accordance with its terms until such time as
all Obligations are indefeasibly paid and satisfied in full in immediately
available funds and (y) upon the occurrence and during the continuance of an
Event of Default under Section 10.1(g) or 10.1(h), or (2) upon the election of
the Required Lenders and notice of such election to Borrowers for the period
from and after the date of the occurrence of any Event of Default (other than an
Event of Default under Section 10.1(g) or 10.1(h)), and for so long as such
Event of Default is continuing as determined by Agent and (B) on Loans at any
time in the aggregate in excess of the Borrowing Base at any time or any other
limitation with respect thereto provided for herein (in each case whether or not
such excess(es) arise or are made with or without any Agent’s or any Lender’s
knowledge or consent and whether made before or after an Event of Default), it
being understood that the Interest Rate on Loans under this clause (b) may be
increased by no more than two (2%) percent even if the events described in each
of subclauses (1) and (2) above have occurred.

 

“Inventory” means all of each Borrower’s and each Guarantor’s now owned and
hereafter existing or acquired goods, wherever located, which (a) are leased by
such Borrower or Guarantor as lessor; (b) are held by such Borrower or Guarantor
for sale or lease or to be furnished under a contract of service; (c) are
furnished by such Borrower or Guarantor under a contract of service; (d) consist
of raw materials, work in process, finished goods or materials used or consumed
in its business; or (e) are goods in transit to such Borrower or Guarantor.

 

“Investment Property Control Agreement” means an agreement in writing, in form
and substance reasonably satisfactory to Agent, by and among Agent, any Borrower
or Guarantor (as the case may be) and any securities intermediary, commodity
intermediary or other person who has custody, control or possession of any
investment property of such Borrower or Guarantor acknowledging that such
securities intermediary, commodity intermediary or other person has custody,
control or possession of such investment property on behalf of Agent, that it
will comply with entitlement orders originated by Agent with respect to such
investment property, or other instructions of Agent, or (as the case may be)
apply any value distributed on account of any commodity contract as directed by
Agent, in each case, without the further consent of such Borrower or Guarantor
and including such other terms and conditions as Agent may require.

 

“IP Holdcos” means, collectively, the following (together with their respective
successors and assigns):  (a) FTF IP Company, Inc., a Delaware corporation,
(b) Fashion to Figure, LLC, a Delaware limited liability company, and (c) New
York & Company, Inc.; each sometimes being referred to herein individually as an
“IP Holdco”.

 

“IP License Agreements” has the meaning specified therefor in Section 8.11(a) of
this Agreement.

 

“IP Use Rights” has the meaning given thereto in Section 5.3 of this Agreement.

 

“IPC” means IPC/NYCG, LLC, a Delaware limited liability company.

 

“ISP” means, with respect to any Letter of Credit, the International Standby
Practices 1998 (International Chamber of Commerce Publication No. 590) and any
version or revision thereof accepted by the Issuing Bank for use.

 

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“Issuer Document” means, with respect to any Letter of Credit, a letter of
credit application, a letter of credit agreement, or any other document,
agreement or instrument entered into (or to be entered into) by a Borrower in
favor of Issuing Bank and relating to such Letter of Credit.

 

“Issuing Bank” means Wells Fargo or any other Lender that, at the request of
Borrowers and with the consent of Agent, agrees, in such Lender’s sole
discretion, to become an Issuing Bank for the purpose of issuing Letters of
Credit pursuant to Section 2.3 hereof, and Issuing Bank shall be a Lender.

 

“Landed Value” means, with respect to Eligible In-Transit Inventory or Eligible
In-Transit LC Inventory, the sum of (a) the face amount of all documentary
Letters of Credit issued under this Agreement for purposes of purchasing such
Inventory from a Person who is not an Affiliate of any Borrower plus (b) the
amount of freight, customs, taxes and duty and other amounts which Agent
estimates must be paid upon the arrival and in connection with the delivery of
such Inventory to a Borrower’s location for Eligible Landed Inventory within the
United States of America.

 

“Lender” means each of the Revolving Loan Lenders and the Issuing Bank, and
shall also include any other Person made a party to this Agreement pursuant to
the provisions of Section 13.1 hereof and “Lenders” means each of the Lenders or
any one or more of them.

 

“Lender Group” means each of the Lenders (including Issuing Bank) and Agent, or
any one or more of them.

 

“Lender Group Representatives” has the meaning specified therefor in
Section 14.5(a) of this Agreement.

 

“Lender Register” has the meaning set forth in Section 14.7(b) of this
Agreement.

 

“Lernco” means Lernco, Inc., a Delaware corporation, and its successors and
assigns.

 

“Lerner” means Lerner New York, Inc., a Delaware corporation, successor by
merger of Nevada Receivables Factoring, Inc. with and into Lerner New
York, Inc., and its successors and assigns.

 

“Lerner FTF” means Lerner New York FTF, LLC, a Delaware limited liability
company, and its successors and assigns.

 

“Lerner GC” means Lerner New York GC, LLC, an Ohio limited liability company,
and its successors and assigns.

 

“Lerner Outlet” means Lerner New York Outlet, LLC, a Massachusetts limited
liability company, formerly known as Jasmine Company, Inc., and its successors
and assigns.

 

“Lerner Stock Pledge Agreement” means the Second Amended and Restated Stock
Pledge Agreement, dated as of August 22, 2007, by Lerner in favor of Agent, for
itself and the ratable benefit of the Lenders and the Bank Product Providers,
with respect to the pledge of 100% of the Equity Interests of Associated Lerner,
Lernco, Lerner GC and Lerner Outlet, owned by Lerner, as the now exists or may
hereafter be amended, modified, supplemented, extended, renewed, restated or
replaced.

 

“Letter of Credit” means a letter of credit (as that term is defined in the
Code) issued by Issuing Bank.

 

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“Letter of Credit Collateralization” means either (a) providing cash collateral
(pursuant to documentation reasonably satisfactory to Agent (including that
Agent has a first priority perfected security interest and lien in such cash
collateral), including provisions that specify that the Letter of Credit Fees
and all commissions, fees, charges and expenses provided for in
Section 2.3(k) hereof (including any fronting fees) will continue to accrue
while the Letters of Credit are outstanding) to be held by Agent for the benefit
of the Revolving Loan Lenders in an amount equal to 105% of the then existing
Letter of Credit Usage, (b) delivering to Agent documentation executed by all
beneficiaries under the Letters of Credit, in form and substance reasonably
satisfactory to Agent and Issuing Bank, terminating all of such beneficiaries’
rights under the Letters of Credit, or (c) providing Agent with a standby letter
of credit, in form and substance reasonably satisfactory to Agent, from a
commercial bank acceptable to Agent (in its sole discretion) in an amount equal
to 105% of the then existing Letter of Credit Usage (it being understood that
the Letter of Credit Fee and all fronting fees set forth in this Agreement will
continue to accrue while the Letters of Credit are outstanding and that any such
fees that accrue must be an amount that can be drawn under any such standby
letter of credit).

 

“Letter of Credit Disbursement” means a payment made by Issuing Bank pursuant to
a Letter of Credit.

 

“Letter of Credit Exposure” means, as of any date of determination with respect
to any Lender, such Lender’s participation in the Letter of Credit Usage
pursuant to Section 2.3(e) on such date.

 

“Letter of Credit Fee” has the meaning specified therefor in Section 3.2(b) of
this Agreement.

 

“Letter of Credit Indemnified Costs” has the meaning specified therefor in
Section 2.3(f) of this Agreement.

 

“Letter of Credit Rate” has the meaning specified therefor in Section 3.2(b).

 

“Letter of Credit Related Person” has the meaning specified therefor in
Section 2.3(f) of this Agreement.

 

“Letter of Credit Sublimit” means $45,000,000, which amount shall automatically
increase or decrease from time to time proportionally based upon a Revolving
Loan Facility Increase or Revolving Loan Facility Decrease so that, after giving
effect to any such Revolving Loan Facility Increase or Revolving Loan Facility
Decrease, the amount of the Letter of Credit Sublimit shall be equal to the
amount that is 60% of the revised amount of the Revolving Loan Limit.

 

“Letter of Credit Usage” means, as of any date of determination, the sum of
(a) the aggregate undrawn amount of all outstanding Letters of Credit, plus
(b) the aggregate amount of outstanding reimbursement obligations with respect
to Letters of Credit which remain unreimbursed or which have not been paid
through a Revolving Loan.

 

“LIBOR Deadline” has the meaning specified therefor in Section 3.3(b)(i) of this
Agreement.

 

“LIBOR Notice” means a written notice in the form of Exhibit L-1 to this
Agreement.

 

“LIBOR Option” has the meaning specified therefor in Section 3.3(a) of this
Agreement.

 

“LIBOR Rate” means the greater of the rate per annum as published by ICE
Benchmark Administration Limited (or any successor page or other commercially
available source as the Agent may designate from time to time) as of 11:00 a.m.,
London time, two Business Days prior to the

 

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commencement of the requested Interest Period, for a term, and in an amount,
comparable to the Interest Period and the amount of the LIBOR Rate Loan
requested (whether as an initial LIBOR Rate Loan or as a continuation of a LIBOR
Rate Loan or as a conversion of a Base Rate Loan to a LIBOR Rate Loan) by
Borrowers in accordance with this Agreement (and, if any such published rate is
below zero, then the LIBOR Rate shall be deemed to be zero).  Each determination
of the LIBOR Rate shall be made by the Agent and shall be conclusive in the
absence of manifest error.

 

“LIBOR Rate Loan” means each portion of a Revolving Loan that bears interest at
a rate determined by reference to the LIBOR Rate.

 

“LIBOR Rate Margin” has the meaning specified therefor in the definition of
Applicable Margin.

 

“Loan Accounts” has the meaning specified therefor in Section 6.1 of this
Agreement.

 

“Loan Parties” means Borrowers and Guarantors, other than as of the Amendment
No. 1 Effective Date, the IP Holdcos.

 

“Loans” means the Revolving Loans.

 

“Margin Stock” as defined in Regulation U of the Board of Governors as in effect
from time to time.

 

“Material Adverse Effect” means a material adverse effect on (a) the financial
condition, business, performance or operations of the Borrowers taken as a whole
or the Loan Parties taken as a whole; (b) the legality, validity or
enforceability of this Agreement or any of the other Financing Agreements;
(c) the legality, validity, enforceability, perfection or priority of the
security interests and liens of Agent upon the Collateral; (d) the Collateral or
its value; (e) the ability of the Borrowers, taken as a whole, to repay the
Obligations or of the Borrowers, taken as a whole, or the Loan Parties, taken as
a whole, to perform their obligations under this Agreement or any of the other
Financing Agreements as and when to be performed; or (f) the ability of Agent or
any Lender to enforce the Obligations or realize upon the Collateral or
otherwise with respect to the rights and remedies of Agent and Lenders under
this Agreement or any of the other Financing Agreements.

 

“Material Contract” means (a) any contract or other agreement (other than the
Financing Agreements), written or oral, of any Borrower or Obligor involving
liability for $5,000,000 or more of Indebtedness owed to any Person (other than
another Loan Party) or (b) any other contract or other agreement (other than the
Financing Agreements), whether written or oral, to which any Borrower is a party
as to which the breach, nonperformance, cancellation or failure to renew by any
party thereto would have a Material Adverse Effect.

 

“Maturity Date” means October 24, 2024.

 

“Maximum Credit” means the amount equal to the Revolving Loan Limit then in
effect.

 

“Maximum Interest Rate” means the maximum non-usurious rate of interest under
applicable Federal or State law as in effect from time to time that may be
contracted for, taken, reserved, charged or received in respect of the
Obligations of Borrower to Agent or a Lender, or to the extent that at any time
such applicable law may thereafter permit a higher maximum non-usurious rate of
interest, then such higher rate.

 

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“Measurement Period” means the twelve-month period ending on the last day of any
month in which EBITDA is to be measured, taken as a single accounting period.

 

“Multiemployer Plan” means a “multi-employer plan” as defined in
Section 4001(a)(3) of ERISA which is or was at any time during the current year
or the immediately preceding six (6) years contributed to by any Borrower or any
ERISA Affiliate.

 

“Net Amount of Eligible Credit Card Receivables” means, the gross amount of the
Eligible Credit Card Receivables less returns, discounts, claims, credits and
allowances of any nature at any time issued, owing, granted, outstanding,
available or claimed with respect thereto.

 

“Net Amount of Eligible Damaged Goods Vendors Receivables” means the gross
amount of the Eligible Damaged Goods Vendors Receivables less returns,
discounts, claims, credits and allowances of any nature at any time issued,
owing, granted, outstanding, available or claimed with respect thereto.

 

“Net Amount of Eligible Sell-Off Vendors Receivables” means, the gross amount of
the Eligible Sell-Off Vendors Receivables less returns, discounts, claims,
credits and allowances of any nature at any time issued, owing, granted,
outstanding, available or claimed with respect thereto.

 

“Net Cash Proceeds” means the aggregate cash proceeds received by any Borrower
or Guarantor (a) in respect of any sale, lease, transfer or other disposition of
any assets or properties, or interest in assets and properties, in each case
outside the ordinary course of business of such Borrower or Guarantor, or (b) as
proceeds of any loans or other financial accommodations provided to any Borrower
or Guarantor (either of clause (i) or (ii) of this definition, a “Specified
Disposition”), in each case net of (i) the reasonable costs relating to such
Specified Disposition (including, without limitation, legal, accounting and
investment banking fees, and sales commissions), (ii) the portion of such
proceeds deposited in an escrow account or otherwise required to be reserved
pursuant to the purchase agreements related to such Specified Disposition for
purchase price adjustments or indemnification payments payable by such Borrower
or Guarantor to the purchaser thereof (but only until such time as such portion
of such proceeds is received by such Borrower or Guarantor), (iii) taxes paid or
estimated to be payable as a result thereof (after taking into account any
available tax credits or deductions and any tax sharing arrangements), and
(iv) amounts applied to the repayment of Indebtedness secured by a valid and
enforceable lien on the asset or assets that are the subject of such Specified
Disposition required to be repaid in connection with such transaction.  For
purposes of this definition, a Specified Disposition described in clause
(i) above shall exclude (x) sales, leases, transfers and other dispositions of
Inventory permitted under Section 9.7(b)(vii) hereof, and (y) sales and other
dispositions of defective, obsolete, out-of-season or slow moving Inventory to a
third-party off-price wholesaler, including Ben Elias and Value City, or any
other Person engaged in substantially the same business as Ben Elias or Value
City and permitted by Agent.  Net Cash Proceeds shall exclude any non-cash
proceeds received by any Borrower or Guarantor from any Specified Disposition,
but shall include such proceeds when and as converted by any Borrower or
Guarantor to cash or other immediately available funds.

 

“Net Income” means, for any period, the net income (or loss) of the Borrowers
and Obligors on a consolidated basis for such period taken as a single
accounting period as determined in accordance with GAAP; provided, however,
there shall be excluded therefrom (a) unrealized gains and losses due solely to
fluctuations in currency values and the related tax effects according to GAAP
and (b) items classified as a cumulative effect of an accounting change or as
extraordinary items, in accordance with GAAP; provided, further, for
clarification purposes, stores openings and closings in ordinary course shall
not be considered extraordinary for the purposes hereof.

 

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“Net Recovery Percentage” means, as of any date of determination, the percentage
of the book value of Borrowers’ Inventory that is estimated to be recoverable in
an orderly liquidation of such Inventory net of all associated costs and
expenses of such liquidation, such percentage to be determined as to each
category of Inventory and to be as specified in the most recent acceptable
appraisal of Inventory received by Agent in accordance with Section 7.3 hereof.

 

“Non-Consenting Lender” has the meaning specified therefor in
Section 11.3(e)(i) of this Agreement.

 

“Non-Defaulting Lender” means any Lender that is not a Defaulting Lender.

 

“Notice of Default or Failure of Condition” has the meaning specified therefor
in Section 12.3(a) of this Agreement.

 

“NY&Co Stores” means New York & Company Stores, Inc., a New York corporation,
formerly known as Associated Lerner Shops of America, Inc., a New York
corporation, and its successors and assigns.

 

“Obligations” means (a) any and all Loans, Letters of Credit and all other
obligations, liabilities and indebtedness of every kind, nature and description
owing by any Borrower or any Guarantor to Agent, any Lender or any Issuing Bank
and/or any of their Affiliates, whether consisting of principal, interest,
charges, fees, costs and expenses, fees relating to Letters of Credit, however
evidenced, whether as principal, surety, endorser, guarantor or otherwise,
arising under this Agreement or any of the other Financing Agreements, whether
now existing or hereafter arising, in each case under this Agreement or the
other Financing Agreements, whether arising before, during or after the initial
or any renewal term of this Agreement or after the commencement of any case with
respect to any Borrower or any Guarantor or Obligor under the United States
Bankruptcy Code or any similar statute (including the payment of interest and
other amounts which would accrue and become due but for the commencement of such
case, whether or not such amounts are allowed or allowable in whole or in part
in such case), whether direct or indirect, absolute or contingent, joint or
several, due or not due, primary or secondary, liquidated or unliquidated, or
secured or unsecured and (b) all Bank Product Obligations; provided, that,
anything to the contrary contained in the foregoing notwithstanding, the
Obligations shall exclude any Excluded Swap Obligation. Without limiting the
generality of the foregoing, the Obligations of Borrowers under the Financing
Agreements include the obligation to pay (i) the principal of the Revolving
Loans, (ii) interest accrued on the Revolving Loans, (iii) the amount necessary
to reimburse Issuing Bank for amounts paid or payable pursuant to Letters of
Credit, (iv) Letter of Credit commissions, fees (including fronting fees) and
charges, (v) all expenses of the Lender Group payable under the Financing
Agreements, (vi) all fees payable under this Agreement or any of the other
Financing Agreements, and (vii) indemnities and other amounts payable by any
Loan Party under any Financing Agreement.  Any reference in this Agreement or in
the Financing Agreements to the Obligations shall include all or any portion
thereof and any extensions, modifications, renewals, or alterations thereof,
both prior and subsequent to any Insolvency Event.

 

“Obligor” means any guarantor, endorser, acceptor, surety or other person liable
on or with respect to the Obligations or who is the owner of any property which
is security for the Obligations (including, without limitation, Guarantors,
other than Borrowers).

 

“OFAC” means the U.S. Department of the Treasury’s Office of Foreign Assets
Control.

 

“Other Taxes” means all present or future stamp, court, excise, value added, or
documentary, intangible, recording, filing or similar Taxes that arise from any
payment made under, from the execution,

 

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delivery, performance, enforcement or registration of, from the receipt or
perfection of a security interest under, or otherwise with respect to, any
Financing Agreement (except any such taxes that are imposed as a result of a
present or former connection between a Lender or Participant and the
jurisdiction imposing the tax (other than any such connection arising from such
Lender or such Participant having executed, delivered, become a party to,
performed its obligations under, received payments under, received or perfected
a security interest under, engaged in any other transaction pursuant to or
enforced this Agreement or any other Financing Agreement, or sold or assigned an
interest in any Loan or this Agreement or any other Financing Agreement)).

 

“Parent” means Lerner New York Holding, Inc., a Delaware corporation, and its
successors and assigns.

 

“Parent Stock Pledge Agreement” means that certain Second Amended and Restated
Stock Pledge Agreement, dated as of August 22, 2007, by Parent in favor of
Agent, for itself and the ratable benefit of the Lenders and the Bank Product
Providers, with respect to the pledge of 100% of the Equity Interests of Lerner
and Lernco owned by Parent, as the same may be amended, modified or supplemented
from time to time.

 

“Participant” means any Person that acquires and holds a participation in the
interest of any Lender in any of the Revolving Loans or Letters of Credit in
conformity with the provisions of Section 14.7 hereof governing participations.

 

“Patriot Act” has the meaning specified therefor in Section 8.21 of this
Agreement.

 

“PayPal” means PayPal, Inc., a Delaware corporation; and its successors and
assigns.

 

“PayPal Agreements” means, collectively, the Merchant Agreement, dated as of
February 21, 2013, between RTW and PayPal, together with the attachments,
schedules, exhibits, guidelines, rules and other documents incorporated therein,
as the same may be amended from time to time in accordance with the terms
hereof.

 

“PayPal Receivables” means those Accounts of Borrowers arising in connection
with payments received through the PayPal system of sending and receiving
payments pursuant to the PayPal Agreements.

 

“Pension Plan” means a Plan that is subject to Title IV of ERISA, other than a
Multiemployer Plan.

 

“Permitted Acquisitions” means the purchase by a Borrower or Guarantor after the
date hereof of all or substantially all of the assets of any Person or a
business or division of such Person (whether pursuant to a merger or other
transaction) or of all or a majority of the Equity Interests of a Person (such
assets or Person being referred to herein as the “Acquired Business”) in one or
a series of transactions that satisfies each of the following conditions as
determined by Agent:

 

(a)         as of the date of such acquisition and the date of any payment in
respect thereof, and after giving effect thereto, no Event of Default shall
exist or have occurred and be continuing;

 

(b)         as of the date of such acquisition and the date of any payment in
respect thereof, and after giving effect thereto, Borrowers shall have Excess
Availability in an amount equal to not less than twenty (20%) percent of the
Revolving Loan Limit;

 

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(c)          Agent shall have received, in form and substance reasonably
satisfactory to Agent, monthly projections showing that, for the twelve (12)
months immediately after such payment is made, Excess Availability shall be
greater than twenty (20%) percent of the Revolving Loan Limit;

 

(d)         the Acquired Business shall be one or more Persons or a division or
line of business that engages in a line of business that is substantially
similar, reasonably related or incidental to the business that Borrowers and
Guarantors are engaged in on date hereof;

 

(e)          in the case of the acquisition of the Equity Interests of another
Person, the board of directors (or other comparable governing body) of such
other Person to be acquired shall have duly approved such acquisition and such
Person shall not have announced that it will oppose such acquisition and shall
not have commenced any action which alleges that such acquisition will violate
applicable law;

 

(f)           Agent shall have received not less than ten (10) Business Days’
prior written notice of the proposed acquisition and such information with
respect thereto as Agent may reasonably request, to the extent available,
including (i) the parties to such acquisition, (ii) the proposed date and amount
of the acquisition, (iii) a description of the assets or shares intended to be
acquired, and (iv) the proposed total purchase price and other consideration for
the assets to be purchased (and the terms of payment of such purchase price);

 

(g)          Agent shall have received true, correct and complete copies of all
material agreements, documents and instruments relating to such acquisition,
which shall be in form and substance reasonably satisfactory to Agent;

 

(h)         the Acquired Business shall not include a Foreign Subsidiary unless
otherwise agreed to by Agent in writing;

 

(i)             Agent shall have received a certificate of the chief executive
officer or a financial officer of Borrowers to Agent and Lenders that such
transaction complies with this definition.

 

Notwithstanding anything to the contrary contained herein, (i) Borrowers and
Guarantors shall comply with the terms and conditions of Section 9.22 hereof to
the extent applicable to such Acquired Business and (ii) if Borrowers request
that any assets acquired pursuant to any acquisition be included in the
Borrowing Base, Agent shall have (A) completed a field examination with respect
to the business and assets of the Acquired Business and (B) completed its
customary business and legal due diligence, in each case, in accordance with
Agent’s customary procedures and practices and as otherwise required by the
nature and circumstances of the business of the Acquired Business, the scope and
results of which shall be reasonably satisfactory to Agent before such assets
may be included.  Any Accounts or Inventory of the Acquired Business shall only
be Eligible Accounts or Eligible Inventory to the extent that Agent has so
completed such field examination with respect thereto and the criteria for
Eligible Accounts or Eligible Inventory set forth herein are satisfied with
respect thereto (or such other or additional criteria as Agent may, at its
option, establish with respect thereto, and subject to such Reserves as Agent
may establish in connection with the Acquired Business), and, if requested by
Agent, in the case of Eligible Inventory acquired pursuant to a Permitted
Acquisition to the extent that it has been subject to an appraisal that
satisfies the requirements of Section 7.3 hereof.

 

“Person” or “person” means any individual, sole proprietorship, partnership,
corporation (including any corporation which elects subchapter S status under
the Code), limited liability company, limited liability partnership, business
trust, unincorporated association, joint stock corporation, trust, joint venture
or other entity or any government or any agency or instrumentality or political
subdivision thereof.

 

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“Plan” means an employee benefit plan (as defined in Section 3(3) of ERISA)
which any Borrower or Guarantor or, solely with respect to an employee benefit
plan subject to Title IV of ERISA, an ERISA Affiliate sponsors or to which it
contributes, other than a Multiemployer Plan.

 

“Platform” has the meaning specified therefor in Section 14.5(c) of this
Agreement.

 

“Priority Event” means the occurrence of any one or more of the following:
(a) the occurrence and continuance of an Event of Default under
Section 10.1(a)(i) hereof with respect to any Borrower’s failure to pay any of
the Obligations related to the Loans (including principal, interest, fees and
expenses attributable thereto); (b) the occurrence and continuance of an Event
of Default under Sections 10.1(e), 10.1(f), 10.1(g) or 10.1(h) hereof; or
(c) the occurrence of any other Event of Default and the acceleration by Agent
of the payment of all or a material portion of the Obligations related to any
Revolving Loans.

 

“Private Label Credit Card Agreement” means the Second Amended and Restated
Private Label Credit Card Program Agreement, dated as of July 14, 2016, by and
among RTW, Lerner and Comenity Bank, as amended, restated, amended and restated,
supplemented or otherwise modified from time to time.

 

“Private Label Credit Card Receivables” means those Accounts of Lerner arising
under Lerner’s private label credit card program and sold or otherwise assigned
or transferred by Lerner to Comenity Bank pursuant to the Private Label Credit
Card Agreement.

 

“Pro Rata Share” means, in each case as the context requires, with respect to
any Revolving Loan Lender at any time, the percentage of the aggregate Revolver
Commitments represented by such Revolving Loan Lender’s Revolver Commitment at
such time, provided, that, if the Revolver Commitments have been terminated, the
numerator shall be the unpaid amount of such Revolving Loan Lender’s Revolving
Loans and its interest in Special Agent Advances and Letters of Credit and the
denominator shall be the aggregate amount of all unpaid Revolving Loans, Special
Agent Advances and outstanding Letters of Credit.

 

“Public Lender” has the meaning specified therefor in Section 14.5(c) of this
Agreement.

 

“QFC” has the meaning assigned to the term “qualified financial contract” in,
and shall be interpreted in accordance with, 12 U.S.C. § 5390(c)(8)(D).

 

“QFC Credit Support” has the meaning specified therefor in Section 14.14 of this
Agreement.

 

“Qualified Cash” means, as of any date of determination, the amount of cash
carried by any Borrower on its balance sheet, other than cash in the Cash
Collateral Account, cash constituting Eligible Cash Collateral or cash in any
Blocked Account, which is in an account subject to a Deposit Account Control
Agreement and with respect to which Agent has received statements of the
available balances thereof from the bank or other financial institution at which
such account is maintained which confirm such amounts.

 

“Qualified ECP Guarantor” means, in respect of any Swap Obligation, each
Borrower and Guarantor that has total assets exceeding $10,000,000 at the time
the relevant guarantee, keepwell, or grant of the relevant security interest
becomes effective with respect to such Swap Obligation or such other person as
constitutes an “eligible contract participant” under the Commodity Exchange Act
or any regulations promulgated thereunder and can cause another person to
qualify as an “eligible contract participant” at such time by entering into a
keepwell under Section 1a(18)(A)(v)(II) of the Commodity Exchange Act.

 

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“Rating Agencies” has the meaning set forth in Section 14.7(f) of this
Agreement.

 

“Real Property” means all now owned and hereafter acquired real property of any
Borrower and Guarantor, including leasehold interests, together with all
buildings, structures, and other improvements located thereon and all licenses,
easements and appurtenances relating thereto, wherever located.

 

“Receivables” means all of the following now owned or hereafter arising or
acquired property of each Borrower and Guarantor: (a) all Accounts; (b) all
interest, fees, late charges, penalties, collection fees and other amounts due
or to become due or otherwise payable in connection with any Account; (c) all
payment intangibles; (d) letters of credit, indemnities, guarantees, security or
other deposits and proceeds thereof issued payable to such Borrower or Guarantor
or otherwise in favor of or delivered to such Borrower or Guarantor in
connection with any Account; or (e) all other accounts, contract rights, chattel
paper, instruments, notes, general intangibles and other forms of obligations
owing to such Borrower or Guarantor, whether from the sale and lease of goods or
other property, licensing of any property (including the licenses of
Intellectual Property by another Person (including a Borrower, Guarantor or one
of their Subsidiaries) in favor of a Borrower or Guarantor and other general
intangibles), rendition of services or from loans or advances by such Borrower
or Guarantor or to or for the benefit of any third person (including loans or
advances to any Affiliates or Subsidiaries of any Borrower or Guarantor) or
otherwise associated with any Accounts, Inventory or general intangibles of such
Borrower or Guarantor (including, without limitation, choses in action, causes
of action, tax refunds, tax refund claims, any funds which may become payable to
such Borrower or Guarantor in connection with the termination of any Plan or
other employee benefit plan and any other amounts payable to such Borrower or
Guarantor from any Plan or other employee benefit plan, rights and claims
against carriers and shippers, rights to indemnification, business interruption
insurance and proceeds thereof, casualty or any similar types of insurance and
any proceeds thereof and proceeds of insurance covering the lives of employees
on which such Borrower or Guarantor is a beneficiary).

 

“Records” means all of each Borrower’s or Guarantor’s present and future books
of account of every kind or nature, purchase and sale agreements, invoices,
ledger cards, bills of lading and other shipping evidence, statements,
correspondence, memoranda, credit files and other data relating to the
Collateral or any account debtor, together with the tapes, disks, diskettes and
other data and software storage media and devices, file cabinets or containers
in or on which the foregoing are stored (including any rights of such Borrower
or Guarantor with respect to the foregoing maintained with or by any other
person).

 

“Register” has the meaning set forth in Section 14.7(b) of this Agreement.

 

“Relevant Governmental Body” means the Federal Reserve Board and/or the Federal
Reserve Bank of New York, or a committee officially endorsed or convened by the
Federal Reserve Board and/or the Federal Reserve Bank of New York or any
successor thereto.

 

“Replacement Lender” has this meaning specified therefor in Section 3.4(b) of
this Agreement.

 

“Report” or “Reports” has the meaning set forth in Section 12.10(a) hereof of
this Agreement.

 

“Required Lenders” means, at any time, Lenders having or holding more than 50%
of the aggregate Revolving Loan Exposure of all Lenders; provided, that (i) the
Revolving Loan Exposure of any Defaulting Lender shall be disregarded in the
determination of the Required Lenders, and (ii) at any time there are two or
more Lenders (who are not Affiliates of one another or Defaulting Lenders),
“Required Lenders” must include at least two Lenders (who are not Affiliates of
one another).

 

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“Reserves” means as of any date of determination, such amounts as Agent may from
time to time, subject to the provisions dealing with Reserves in the definition
of the “Borrowing Base”, upon three (3) Business Days’ prior notice, establish
and revise in good faith reducing the amount of Revolving Loans and Letters of
Credit which would otherwise be available to Borrowers under the lending
formula(s) provided for herein:  (a) to reflect events, conditions,
contingencies or risks which, as determined by Agent in good faith, adversely
affect, or would have a reasonable likelihood of adversely affecting, either
(i) the Collateral or any other property which is security for the Obligations
or its value or (ii) the assets or business of any Borrower or any Obligor or
(iii) the security interests and other rights of Agent or any Lender in the
Collateral (including the enforceability, perfection and priority thereof) or
(b) to reflect Agent’s good faith belief that any collateral report or financial
information furnished by or on behalf of any Borrower or any Obligor to Agent is
or may have been incomplete, inaccurate or misleading in any material respect. 
To the extent Agent may decrease the lending formulas used to determine the
Borrowing Base or establish new criteria or revise existing criteria for
Eligible Sell-Off Vendors Receivables, Eligible Damaged Goods Vendors
Receivables, Eligible Credit Card Receivables or Eligible Inventory so as to
address any circumstances, condition, event or contingency in a manner
satisfactory to Agent, Agent shall not establish a Reserve for the same
purpose.  The amount of any Reserve established by Agent shall have a reasonable
relationship to the event, condition or other matter which is the basis for such
reserve as determined by Agent in good faith.  Without limiting the generality
of the foregoing, Reserves may be established to reflect any of the following:
(i) the Gift Certificate and Store Credit Reserve, (ii) such amounts, as
determined by Agent, for amounts at any time due or to become past due in the
good faith judgment of Agent to the owner, lessor or operator of any facility at
which Eligible Inventory may be located with respect to which Agent has not
received a Collateral Access Agreement, in form and substance satisfactory to
Agent; provided, that, with respect to facilities leased by a Borrower or
Guarantor which are located in a jurisdiction which affords the lessor thereof a
lien, or other such rights, on any of the Collateral for unpaid rent or other
amounts, which lien may have priority over Agent’s liens on or rights to the
Collateral, such amount shall equal two (2) months’ rent for such facility plus
any amounts past due, (iii) such amounts, as determined by Agent, for sales,
excise or similar taxes that are (A) past due and (B) not being contested in
good faith and not subject to liens filed against any Borrower or Guarantor with
respect thereto, (iv) such amounts, as determined by Agent, for payments owed by
any Borrower or Guarantor to bailees, customs brokers or freight forwarders for
the services provided by such bailees, customs brokers or freight forwarders,
plus such freight, customs, taxes and duty and other amounts which Agent
estimates must be paid upon the arrival and in connection with the delivery to a
Borrower’s location for Eligible Inventory within the United States of America
of any Inventory ordered or purchased by any Borrower under a documentary Letter
of Credit or which constitutes any portion of the Borrowing Base, (v) upon an
Event of Default or if Compliance Excess Availability is less than $10,000,000,
such amounts, as determined by Agent, for Service Costs owed to Limited
Brands, Inc. or any of its Affiliates and payable by any Borrower or any of
their Affiliates arising from logistic or information technology services to be
provided by Limited Brands, Inc. for the benefit of any Borrower or its
Affiliates pursuant to the Transition Services Agreement in an amount not to
exceed $1,000,000, and (vi) such amounts due or to become due under any IP
License Agreements or to owners and licensors trademarks and other Intellectual
Property used by a Borrower or Guarantor to the extent such amounts are not paid
within forty-five (45) days past the due date.

 

“Revolver Commitment” means, with respect to each Revolving Loan Lender, its
Revolver Commitment, and, with respect to all Revolving Loan Lenders, their
Revolver Commitments, in each case as such Dollar amounts are set forth beside
such Revolving Loan Lender’s name under the applicable heading on Schedule C-1
to this Agreement or in the Assignment and Acceptance pursuant to which such
Revolving Loan Lender became a Revolving Loan Lender under this Agreement, as
such amounts may be reduced or increased from time to time pursuant to
assignments made in accordance with the provisions of Section 13.1 hereof, and
as such amounts may be increased by the amount of increases in the Revolver

 

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Commitments made in accordance with Section 2.5 hereof and as such amounts may
be decreased by the amount of reductions in the Revolver Commitments made in
accordance with Section 2.6 hereof.

 

“Revolving Loan Exposure” means, with respect to any Revolving Loan Lender, as
of any date of determination (a) prior to the termination of the Revolver
Commitments, the amount of such Lender’s Revolver Commitment, and (b) after the
termination of the Revolver Commitments, the aggregate outstanding principal
amount of the Revolving Loans of such Lender.

 

“Revolving Loan Facility Decrease” has the meaning specified therefor in
Section 2.6.

 

“Revolving Loan Facility Increase” has the meaning specified therefor in
Section 2.5.

 

“Revolving Loan Lender” means a Lender that has a Revolving Loan Exposure or
Letter of Credit Exposure.

 

“Revolving Loan Limit” means the amount equal to $75,000,000, as may from time
to time be in effect and as may from time to time be increased in accordance
with the terms of a Revolving Loan Facility Increase or be decreased in
accordance with the terms of a Revolving Loan Facility Decrease.

 

“Revolving Loans” means the loans now or hereafter made by or on behalf of any
Lender or by Agent for the account of any Lender on a revolving basis (involving
advances, repayments and readvances) as set forth in Section 2.1 hereof,
including, any Additional Revolving Loans or Special Agent Advances.

 

“RTW” means RTW Retailwinds, Inc., formerly known as New York & Company, Inc., a
Delaware corporation, and its successors and assigns.

 

“RTW Stock Pledge Agreement” means that certain Second Amended and Restated
Stock Pledge Agreement, dated as of August 22, 2007, by RTW in favor of Agent,
for itself and the ratable benefit of the Lenders and the Bank Product
Providers, with respect to the pledge of 100% of the Equity Interests of Parent
owned by RTW, as the same may be amended, modified, supplemented, extended,
renewed, restated or replaced.

 

“Sanctioned Entity” means (a) a country or territory or a government of a
country or territory, (b) an agency of the government of a country or territory,
(c) an organization directly or indirectly controlled by a country or territory
or its government, or (d) a Person resident in or determined to be resident in a
country or territory, in each case of clauses (a) through (d) that is a target
of Sanctions, including a target of any country sanctions program administered
and enforced by OFAC (including, as of the date of this Agreement, Iran, Syria,
North Korea, Cuba, and the Crimea Region of Ukraine).

 

“Sanctioned Person” means, at any time (a) any Person named on the list of
Specially Designated Nationals and Blocked Persons maintained by OFAC, OFAC’s
consolidated Non-SDN list or any other Sanctions-related list maintained by any
Governmental Authority, (b) a Person or legal entity that is a target of
Sanctions, (c) any Person operating, organized or resident in a Sanctioned
Entity, or (d) any Person directly or indirectly owned or controlled
(individually or in the aggregate) by or acting on behalf of any such Person or
Persons described in clauses (a) through (c) above.

 

“Sanctions” means individually and collectively, respectively, any and all
economic sanctions, trade sanctions, financial sanctions, sectoral sanctions,
secondary sanctions, trade embargoes anti-terrorism laws and other sanctions
laws, regulations or embargoes, including those imposed, administered or
enforced from time to time by:  (a) the United States of America, including
those administered by

 

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OFAC, the U.S. Department of State, the U.S. Department of Commerce, or through
any existing or future executive order, (b) the United Nations Security Council,
(c) the European Union or any European Union member state, (d) Her Majesty’s
Treasury of the United Kingdom, or (e) any other Governmental Authority with
jurisdiction over any member of Lender Group or any Loan Party or any of their
respective Subsidiaries or Affiliates.

 

“Secured Parties” means, collectively, (a) Agent, (b) Issuing Bank, (c) Lenders
and (d) Bank Product Providers; provided, that, as to any Bank Product Provider,
only to the extent of the Obligations owing to such Bank Product Provider.

 

“Securitization” has the meaning set forth in Section 14.7(f) of this Agreement.

 

“Securitization Parties” has the meaning set forth in Section 14.7(f) of this
Agreement.

 

“Service Costs” has the meaning specified therefor the Transition Services
Agreement.

 

“Settlement” has the meaning specified therefor Section 2.2(c)(i) of this
Agreement.

 

“Settlement Date” has the meaning specified therefor in Section 2.2(c)(i) of
this Agreement.

 

“SOFR” with respect to any day means the secured overnight financing rate
published for such day by the Federal Reserve Bank of New York, as the
administrator of the benchmark, (or a successor administrator) on the Federal
Reserve Bank of New York’s Website.

 

“Solvent” means, at any time with respect to any Person, that at such time such
Person (a) is able to pay its debts as they mature and has (and has a reasonable
basis to believe it will continue to have) sufficient capital (and not
unreasonably small capital) to carry on its business consistent with its
practices as of the date hereof, and (b) the assets and properties of such
Person at a fair valuation (and including as assets for this purpose at a fair
valuation all rights of subrogation, contribution or indemnification arising
pursuant to any guarantees given by such Person) are greater than the
Indebtedness of such Person, and including subordinated and contingent
liabilities computed at the amount which, such person has a reasonable basis to
believe, represents an amount which can reasonably be expected to become an
actual or matured liability (and including as to contingent liabilities arising
pursuant to any guarantee the face amount of such liability as reduced to
reflect the probability of it becoming a matured liability).

 

“Special Agent Advances” has the meaning therefor in Section 12.11(a) of this
Agreement.

 

“Specified Amounts” has the meaning specified therefor in Section 6.4(c)(i) of
this Agreement.

 

“Standard Letter of Credit Practice” means, for Issuing Bank, any domestic or
foreign law or letter of credit practices applicable in the city in which
Issuing Bank issued the applicable Letter of Credit or, for its branch or
correspondent, such laws and practices applicable in the city in which it has
advised, confirmed or negotiated such Letter of Credit, as the case may be, in
each case, (a) which letter of credit practices are of banks that regularly
issue letters of credit in the particular city, and (b) which laws or letter of
credit practices are required or permitted under ISP or UCP, as chosen in the
applicable Letter of Credit.

 

“Stock Pledge Agreements” means, collectively, the RTW Stock Pledge Agreement,
the Parent Stock Pledge Agreement, the Lerner Stock Pledge Agreement and any
other stock pledge agreement at any time made in favor of Agent, for itself and
the ratable benefit of the Lenders and the Bank Product Providers, in connection
with this Agreement.

 

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“Subsidiary” or “subsidiary” means, with respect to any Person, any corporation,
limited liability company, limited liability partnership or other limited or
general partnership, trust, association or other business entity of which an
aggregate of at least a majority of the outstanding Equity Interests or other
interests entitled to vote in the election of the board of directors of such
corporation (irrespective of whether, at the time, Equity Interests of any other
class or classes of such corporation shall have or would have voting power by
reason of the happening of any contingency), managers, trustees or other
controlling persons, or an equivalent controlling interest therein, of such
Person is, at the time, directly or indirectly, owned by such Person and/or one
or more subsidiaries of such Person.

 

“Supported QFC” has the meaning specified therefor in Section 14.14 of this
Agreement.

 

“Swap Obligation” means, with respect to any Borrower or Guarantor, any
obligation to pay or perform under any agreement, contract or transaction that
constitutes a “swap” within the meaning of section 1a(47) of the Commodity
Exchange Act.

 

“Tax Indemnitee” has the meaning specified therefor in Section 15.1 of this
Agreement.

 

“Tax Lender” has the meaning specified therefor in Section 11.3(e)(i) of this
Agreement.

 

“Taxes” means any present or future taxes, levies, imposts, duties, deductions,
withholdings (including backup withholding), fees, assessments or other charges
of whatever nature now or hereafter imposed by any jurisdiction or by any
political subdivision or taxing authority thereof or therein, and all interest,
penalties or similar liabilities with respect thereto.

 

“Term SOFR” means the forward-looking term rate based on SOFR that has been
selected or recommended by the Relevant Governmental Body.

 

“Transition Services Agreement” means, collectively, those certain transition
services agreements, dated as of November 27, 2002, and entered into by and
among Seller, RTW and Lerner, as amended by Amendment to Transition Services
Agreement, dated April 19, 2006, Amendment to Transition Services Agreement,
dated October 10, 2007, Amendment to Transition Services Agreement, dated
July 8, 2008, Fourth Amendment to Transition Services Agreement, dated April 6,
2009, Fifth Amendment to Transition Services Agreement, dated March 16, 2010,
and Sixth Amendment to Transition Services Agreement, dated September 14, 2010.

 

“U.S. Special Resolution Regimes” has the meaning specified therefor in
Section 14.14 of this Agreement.

 

“UCC” means the Uniform Commercial Code as in effect in the State of New York
and any successor statute, as in effect from time to time (except that terms
used herein which are defined in the Uniform Commercial Code as in effect in the
State of New York on the date hereof shall continue to have the same meaning
notwithstanding any replacement or amendment of such statute except as Agent may
otherwise determine); provided, that, if, with respect to any financing
statement or by reason of any provisions of law, the perfection or the effect of
perfection or non-perfection of the security interests granted to Agent pursuant
to the applicable Financing Agreement is governed by the Uniform Commercial Code
as in effect in a jurisdiction of the United States other than the State of New
York, then “UCC” means the Uniform Commercial Code as in effect from time to
time in such other jurisdiction for purposes of the provisions of each Financing
Agreement and any financing statement relating to such perfection or effect of
perfection or non-perfection.

 

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“UCP” means, with respect to any Letter of Credit, the Uniform Customs and
Practice for Documentary Credits 2007 Revision, International Chamber of
Commerce Publication No. 600 and any version or revision thereof accepted by
Issuing Bank for use.

 

“Unadjusted Benchmark Replacement” means the Benchmark Replacement excluding the
Benchmark Replacement Adjustment.

 

“United States” means the United States of America.

 

“Unused Line Fee” has the meaning specified therefor in Section 3.2(a) of this
Agreement.

 

“US Dollars”, “US$” and “$” shall each mean lawful currency of the United States
of America.

 

“Value” means, as determined by Agent in good faith, with respect to Inventory,
the lower of (a) cost computed on a specific identification basis in accordance
with GAAP or (b) market value; provided, that, for purposes of the calculation
of the Borrowing Base, (i) the Value of the Inventory shall not include: 
(A) the portion of the value of Inventory equal to the profit earned by a
Borrower or any Affiliate of any Borrower on the sale thereof to any Borrower or
(B) write-ups or write-downs in value with respect to currency exchange rates
and (ii) notwithstanding anything to the contrary contained herein, the cost of
the Inventory shall be computed in the same manner and consistent with the most
recent appraisal of the Inventory received and accepted by Agent prior to the
date hereof, if any.

 

“Wells” means Wells Fargo Capital Finance, LLC, a Delaware limited liability
company, in its individual capacity, and its successors and assigns.

 

“Wells Fargo” means Wells Fargo Bank, National Association, a national banking
association, in its individual capacity, and its successors and assigns.

 

“Write-Down and Conversion Powers” means, with respect to any EEA Resolution
Authority, the write-down and conversion powers of such EEA Resolution Authority
from time to time under the Bail-In Legislation for the applicable EEA Member
Country, which write-down and conversion powers are described in the EU Bail-In
Legislation Schedule.

 

1.2       Accounting Terms.  All accounting terms not specifically defined
herein shall be construed in accordance with GAAP; provided, that, if Borrowers
notify Agent that Borrowers request an amendment to any provision hereof to
eliminate the effect of any Accounting Change occurring after the Closing Date
or in the application thereof on the operation of such provision (or if Agent
notifies Borrowers that the Required Lenders request an amendment to any
provision hereof for such purpose), regardless of whether any such notice is
given before or after such Accounting Change or in the application thereof, then
Agent and Borrowers agree that they will negotiate in good faith amendments to
the provisions of this Agreement that are directly affected by such Accounting
Change with the intent of having the respective positions of the Lenders and
Borrowers after such Accounting Change conform as nearly as possible to their
respective positions immediately before such Accounting Change took effect and,
until any such amendments have been agreed upon and agreed to by the Required
Lenders, the provisions in this Agreement shall be calculated as if no such
Accounting Change had occurred.  When used herein, the term “financial
statements” shall include the notes and schedules thereto.  Whenever the term
“Borrowers” is used in respect of a financial covenant or a related definition,
it shall be understood to mean the Loan Parties and their Subsidiaries on a
consolidated basis, unless the context clearly requires otherwise. 
Notwithstanding anything to the contrary contained herein, (a) all financial
statements delivered hereunder shall be prepared, and all financial covenants
contained herein shall be calculated, without giving effect to any election
under the Statement of Financial Accounting Standards Board’s

 

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Accounting Standards Codification Topic 825 (or any similar accounting
principle) permitting a Person to value its financial liabilities or
Indebtedness at the fair value thereof, and (b) the term “unqualified opinion”
as used herein to refer to opinions or reports provided by accountants shall
mean an opinion or report that is (i) unqualified, and (ii) does not include any
explanation, supplemental comment, or other comment concerning the ability of
the applicable Person to continue as a going concern or concerning the scope of
the audit.

 

1.3       UCC.  Any terms used in this Agreement that are defined in the UCC
shall be construed and defined as set forth in the UCC unless otherwise defined
herein; provided, that, to the extent that the UCC is used to define any term
herein and such term is defined differently in different Articles of the UCC,
the definition of such term contained in Article 9 of the UCC shall govern.

 

1.4       Construction.  Unless the context of this Agreement or any other
Financing Agreement clearly requires otherwise, references to the plural include
the singular, references to the singular include the plural, the terms
“includes” and “including” are not limiting, and the term “or” has, except where
otherwise indicated, the inclusive meaning represented by the phrase “and/or.” 
The words “hereof,” “herein,” “hereby,” “hereunder,” and similar terms in this
Agreement or any other Financing Agreement refer to this Agreement or such other
Financing Agreement, as the case may be, as a whole and not to any particular
provision of this Agreement or such other Financing Agreement, as the case may
be.  Section, subsection, clause, schedule, and exhibit references herein are to
this Agreement unless otherwise specified.  Any reference in this Agreement or
in any other Financing Agreement to any agreement, instrument, or document shall
include all alterations, amendments, changes, extensions, modifications,
renewals, replacements, substitutions, joinders, and supplements, thereto and
thereof, as applicable (subject to any restrictions on such alterations,
amendments, changes, extensions, modifications, renewals, replacements,
substitutions, joinders, and supplements set forth herein).  The words “asset”
and “property” shall be construed to have the same meaning and effect and to
refer to any and all tangible and intangible assets and properties.  Any
reference herein or in any other Financing Agreement to the satisfaction,
repayment, or payment in full of the Obligations shall mean (a) the payment or
repayment in full in immediately available funds of (i) the principal amount of,
and interest accrued and unpaid with respect to, all outstanding Loans, together
with the payment of any premium applicable to the repayment of the Loans,
(ii) all costs and expenses of the Lender Group that have accrued and are unpaid
regardless of whether demand has been made therefor, and (iii) all fees or
charges that have accrued hereunder or under any other Financing Agreement
(including the Letter of Credit Fee and the Unused Line Fee) and are unpaid,
(b) in the case of contingent reimbursement obligations with respect to Letters
of Credit, providing Letter of Credit Collateralization, (c) in the case of
obligations with respect to Bank Products (other than Hedge Obligations),
providing Bank Product Collateralization, (d) the receipt by Agent of cash
collateral in order to secure any other contingent Obligations for which a claim
or demand for payment has been made on or prior to such time or in respect of
matters or circumstances known to Agent or a Lender at such time that are
reasonably expected to result in any loss, cost, damage, or expense (including
attorneys’ fees and legal expenses), such cash collateral to be in such amount
as Agent reasonably determines is appropriate to secure such contingent
Obligations, (e) the payment or repayment in full in immediately available funds
of all other outstanding Obligations (including the payment of any termination
amount then applicable (or which would or could become applicable as a result of
the repayment of the other Obligations) under Hedge Agreements provided by Hedge
Providers) other than (i) unasserted contingent indemnification Obligations,
(ii) any Bank Product Obligations (other than Hedge Obligations) that, at such
time, are allowed by the applicable Bank Product Provider to remain outstanding
without being required to be repaid or cash collateralized, and (iii) any Hedge
Obligations that, at such time, are allowed by the applicable Hedge Provider to
remain outstanding without being required to be repaid, and (f) the termination
of all of the Commitments of the Lenders.  Any reference herein to any Person
shall be construed to include such Person’s successors and assigns.  Any
requirement of a writing contained herein or in any other Financing Agreement
shall be satisfied by the transmission

 

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of a Record.

 

1.5       Time References.  Unless the context of this Agreement or any other
Financing Agreement clearly requires otherwise, all references to time of day
refer to Eastern Standard Time or Eastern Standard Time daylight saving time, as
in effect in New York, New York on such day.  For purposes of the computation of
a period of time from a specified date to a later specified date, unless
otherwise expressly provided, the word “from” means “from and including” and the
words “to” and “until” each means “to and including”; provided, that with
respect to a computation of fees or interest payable to Agent or any Lender,
such period shall in any event consist of at least one full day.

 

1.6       Schedules and Exhibits.  All of the schedules and exhibits attached to
this Agreement shall be deemed incorporated herein by reference.

 

1.7       Divisions.  For all purposes under the Financing Agreements, in
connection with any division or plan of division under Delaware law (or any
comparable event under a different jurisdiction’s laws): (a) if any asset,
right, obligation or liability of any Person becomes the asset, right,
obligation or liability of a different Person, then it shall be deemed to have
been transferred from the original Person to the subsequent Person, and (b) if
any new Person comes into existence, such new Person shall be deemed to have
been organized on the first date of its existence by the holders of its Equity
Interests at such time.

 

SECTION 2. CREDIT FACILITIES

 

2.1       Revolving Loans.

 

(a)         Subject to and upon the terms and conditions contained herein, each
Revolving Loan Lender severally (and not jointly) agrees to fund its Pro Rata
Share of Revolving Loans to Borrowers from time to time in amounts requested by
any Borrower up to the amount outstanding for all Revolving Loan Lenders at any
time equal to the lesser of: (i) the Borrowing Base and (ii) the Revolving Loan
Limit.

 

(b)         Agent may, in its discretion, from time to time, (i) if no Default
or Event of Default exists or has occurred and is continuing, upon ten
(10) Business Days’ telephonic or electronic notice to Borrowers and (ii) if a
Default or Event of Default exists or has occurred and is continuing, upon three
(3) Business Days’ telephonic or electronic notice to Borrowers, (A) reduce the
lending formula(s) with respect to Eligible Inventory to the extent that Agent
determines in good faith that:  (1) the number of days of the turnover of the
Inventory for any period has adversely changed or (2) the liquidation value of
the Eligible Inventory, or any category thereof, has decreased, including any
decrease attributable to a material change in the nature, quality or mix of the
Inventory or (B) reduce the lending formula(s) with respect to Eligible Sell-Off
Vendors Receivables, Eligible Damaged Goods Vendors Receivables, Eligible Credit
Card Receivables to the extent that Agent determines in good faith that an event
of condition or other circumstance exists which could adversely affect the
ability to collect such Receivables.  The amount of any decrease in the lending
formulas shall have a reasonable relationship to the event, condition or
circumstance which is the basis for such decrease as determined by Agent in good
faith.  In determining whether to reduce the lending formula(s), Agent may
consider events, conditions, contingencies or risks which are also considered in
determining Eligible Sell-Off Vendors Receivables, Eligible Damaged Goods
Vendors Receivables, Eligible Credit Card Receivables, Eligible Inventory or in
establishing Reserves.

 

(c)          Each Extraordinary Advance shall be deemed to be a Revolving Loan
hereunder, except that no Extraordinary Advance shall be eligible to be a LIBOR
Rate Loan.  Prior to Settlement of any Extraordinary Advance, all payments with
respect thereto, including interest thereon, shall be payable to Agent solely
for its own account. Each Revolving Loan Lender shall be obligated to settle
with Agent as

 

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provided in Section 2.3(c) or Section 2.3(e), as applicable, for the amount of
such Lender’s Pro Rata Share of any Extraordinary Advance.  The Extraordinary
Advances shall be repayable on demand, secured by Agent’s security interests or
liens, constitute Obligations hereunder, and bear interest at the rate
applicable from time to time to Revolving Loans that are Base Rate Loans.  The
provisions of this Section 2.1(c) are for the exclusive benefit of Agent and
Lenders and are not intended to benefit Borrowers (or any other Loan Party) in
any way.

 

(d)         Except with the consent of all Revolving Loan Lenders or as
otherwise provided in Sections 12.8 and 12.11 hereof with respect to
Extraordinary Advances, (i) the aggregate amount of the Revolving Loans and
Letters of Credit outstanding at any time shall not exceed the Revolving Loan
Limit, and (ii) the aggregate principal amount of the Revolving Loans and
Letters of Credit outstanding at any time to Borrowers shall not exceed the
Borrowing Base or the sublimits established within the Borrowing Base.

 

(e)          In the event that (i) the aggregate amount of Revolving Loans and
Letter of Credit Obligations outstanding at any time exceeds the Revolving Loan
Limit, or (ii) the aggregate amount of Revolving Loans and Letters of Credit
outstanding at any time exceeds the Borrowing Base or the sublimits established
within the Borrowing Base, such event shall not limit, waive or otherwise affect
any rights of Agent or Lenders in such circumstances or on any future occasions
and Borrowers shall immediately repay to Agent the entire amount of any such
excess(es), in cash without any prepayment premium or penalty, other than any
breakage or similar costs or other amounts payable in accordance with the terms
of this Agreement.

 

2.2       Borrowing Procedures and Settlements.

 

(a)         Procedure for Borrowing Revolving Loans.  Each Borrowing shall be
made by a written request by an Authorized Officer delivered to Agent (which may
be delivered through Agent’s electronic platform or portal) and received by
Agent no later than 1:00 p.m. (i) on the Business Day that is one Business Day
prior to the requested Funding Date in the case of a request for a Base Rate
Loan, and (ii) on the Business Day that is three (3) Business Days prior to the
requested Funding Date in the case of all other requests, specifying (A) the
amount of such Borrowing, and (B) the requested Funding Date (which shall be a
Business Day); provided, that, Agent may, in its sole discretion, elect to
accept as timely requests that are received later than 1:00 p.m. on the
applicable Business Day.  All Borrowing requests which are not made on-line via
Agent’s electronic platform or portal shall be subject to (and unless Agent
elects otherwise in the exercise of its sole discretion, such Borrowings shall
not be made until the completion of) Agent’s authentication process (with
results satisfactory to Agent) prior to the funding of any such requested
Revolving Loan.

 

(b)         Making of Revolving Loans.

 

(i)                       After receipt of a request for a Borrowing pursuant to
Section 2.2(a), Agent shall notify the Lenders by telecopy, telephone, email, or
other electronic form of transmission, of the requested Borrowing; such
notification to be sent on the Business Day that is (A) in the case of a Base
Rate Loan, at least one Business Day prior to the requested Funding Date, or
(B) in the case of a LIBOR Rate Loan, prior to 11:00 a.m. at least three
Business Days prior to the requested Funding Date.  If Agent has notified the
Lenders of a requested Borrowing on the Business Day that is one Business Day
prior to the Funding Date, then each Lender shall make the amount of such
Lender’s Pro Rata Share of the requested Borrowing available to Agent in
immediately available funds, to Agent’s Account, not later than 1:00 p.m. on the
Business Day that is the requested Funding Date.  After Agent’s receipt of the
proceeds of such Revolving Loans from the Lenders, Agent shall make the proceeds
thereof available to Borrowers on the applicable Funding Date by transferring
immediately available funds equal to such

 

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proceeds received by Agent to the Designated Account; provided, that, subject to
the provisions of Section 12.8, no Lender shall have an obligation to make any
Revolving Loan, if (1) one or more of the applicable conditions precedent set
forth in Section 4 will not be satisfied on the requested Funding Date for the
applicable Borrowing unless such condition has been waived, or (2) the requested
Borrowing would exceed the amount Revolving Loans available based on the lending
formulas pursuant to the terms hereof on such Funding Date.

 

(ii)                    Unless Agent receives notice from a Lender prior to 9:30
a.m. on the Business Day that is the requested Funding Date relative to a
requested Borrowing as to which Agent has notified the Lenders of a requested
Borrowing that such Lender will not make available as and when required
hereunder to Agent for the account of Borrowers the amount of that Lender’s Pro
Rata Share of the Borrowing, Agent may assume that each Lender has made or will
make such amount available to Agent in immediately available funds on the
Funding Date and Agent may (but shall not be so required), in reliance upon such
assumption, make available to Borrowers a corresponding amount.  If, on the
requested Funding Date, any Lender shall not have remitted the full amount that
it is required to make available to Agent in immediately available funds and if
Agent has made available to Borrowers such amount on the requested Funding Date,
then such Lender shall make the amount of such Lender’s Pro Rata Share of the
requested Borrowing available to Agent in immediately available funds, to
Agent’s Account, no later than 10:00 a.m. on the Business Day that is the first
Business Day after the requested Funding Date (in which case, the interest
accrued on such Lender’s portion of such Borrowing for the Funding Date shall be
for Agent’s separate account).  If any Lender shall not remit the full amount
that it is required to make available to Agent in immediately available funds as
and when required hereby and if Agent has made available to Borrowers such
amount, then that Lender shall be obligated to immediately remit such amount to
Agent, together with interest at the Defaulting Lender Rate for each day until
the date on which such amount is so remitted.  A notice submitted by Agent to
any Lender with respect to amounts owing under this Section 2.3(c)(ii) shall be
conclusive, absent manifest error.  If the amount that a Lender is required to
remit is made available to Agent, then such payment to Agent shall constitute
such Lender’s Revolving Loan for all purposes of this Agreement.  If such amount
is not made available to Agent on the Business Day following the Funding Date,
Agent will notify Borrowers of such failure to fund and, upon demand by Agent,
Borrowers shall pay such amount to Agent for Agent’s account, together with
interest thereon for each day elapsed since the date of such Borrowing, at a
rate per annum equal to the interest rate applicable at the time to the
Revolving Loans composing such Borrowing.

 

(c)          Settlement.  It is agreed that each Lender’s funded portion of the
Revolving Loans is intended by the Lenders to equal, at all times, such Lender’s
Pro Rata Share of the outstanding Revolving Loans.  Such agreement
notwithstanding, Agent, and the other Lenders agree (which agreement shall not
be for the benefit of Borrowers) that in order to facilitate the administration
of this Agreement and the other Financing Agreements, settlement among the
Lenders as to the Revolving Loans (including Extraordinary Advances) shall take
place on a periodic basis in accordance with the following provisions:

 

(i)                       Agent shall request settlement (“Settlement”) with the
Lenders on a weekly basis, or on a more frequent basis if so determined by Agent
in its sole discretion (1) for itself, with respect to the outstanding Special
Agent Advances or Additional Revolving Loans, and (2) with respect to any Loan
Party’s or any of their Subsidiaries’ payments or other amounts received, as to
each by notifying the Lenders by telecopy, telephone, or other similar form of
transmission, of such requested Settlement, no later than 2:00 p.m. on the
Business Day immediately prior to the date of such requested Settlement (the
date of such requested Settlement being the “Settlement Date”).  Such notice of
a Settlement Date shall include a summary statement of the amount of outstanding
Revolving Loans (including Extraordinary Advances) for the period since the
prior Settlement Date.  Subject to the terms and conditions contained herein
(including Section 2.3(g)):  (y) if the amount of the Revolving Loans (including
Extraordinary Advances) made by a Lender that is not a Defaulting Lender exceeds
such Lender’s Pro Rata Share of the

 

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Revolving Loans (including Extraordinary Advances) as of a Settlement Date, then
Agent shall, by no later than 12:00 p.m. on the Settlement Date, transfer in
immediately available funds to a deposit account of such Lender (as such Lender
may designate), an amount such that each such Lender shall, upon receipt of such
amount, have as of the Settlement Date, its Pro Rata Share of the Revolving
Loans (including Extraordinary Advances), and (z) if the amount of the Revolving
Loans (including Extraordinary Advances) made by a Lender is less than such
Lender’s Pro Rata Share of the Revolving Loans (including Extraordinary
Advances) as of a Settlement Date, such Lender shall no later than 12:00 p.m. on
the Settlement Date transfer in immediately available funds to Agent’s Account,
an amount such that each such Lender shall, upon transfer of such amount, have
as of the Settlement Date, its Pro Rata Share of the Revolving Loans (including
Extraordinary Advances).  Such amounts made available to Agent under clause
(z) of the immediately preceding sentence shall be applied against the amounts
of the applicable Extraordinary Advances and, together with the portion of such
Extraordinary Advances representing Agent’s Pro Rata Share thereof, shall
constitute Revolving Loans of such Lenders.  If any such amount is not made
available to Agent by any Lender on the Settlement Date applicable thereto to
the extent required by the terms hereof, Agent shall be entitled to recover for
its account such amount on demand from such Lender together with interest
thereon at the Defaulting Lender Rate.

 

(ii)                    In determining whether a Lender’s balance of the
Revolving Loans (including Extraordinary Advances) is less than, equal to, or
greater than such Lender’s Pro Rata Share of the Revolving Loans (including
Extraordinary Advances) as of a Settlement Date, Agent shall, as part of the
relevant Settlement, apply to such balance the portion of payments actually
received in good funds by Agent with respect to principal, interest, fees
payable by Borrowers and allocable to the Lenders hereunder, and proceeds of
Collateral.

 

(iii)                 Between Settlement Dates, Agent, to the extent
Extraordinary Advances are outstanding, may pay over to Agent any payments or
other amounts received by Agent, that in accordance with the terms of this
Agreement would be applied to the reduction of the Revolving Loans, for
application to the Extraordinary Advances.  During the period between Settlement
Dates, Agent with respect to Extraordinary Advances, and each Lender with
respect to the Revolving Loans other than Extraordinary Advances, shall be
entitled to interest at the applicable rate or rates payable under this
Agreement on the daily amount of funds employed by Agent, or the Lenders, as
applicable.

 

(iv)                Anything in this Section 2.2(c) to the contrary
notwithstanding, in the event that a Lender is a Defaulting Lender, Agent shall
be entitled to refrain from remitting settlement amounts to the Defaulting
Lender and, instead, shall be entitled to elect to implement the provisions set
forth in Section 2.2(e).

 

(d)         Notation.  Consistent with Section 14.7(b), Agent, as a
non-fiduciary agent for Borrowers, shall maintain a register showing the
principal amount and stated interest of the Revolving Loans, owing to each
Lender and any Extraordinary Advances owing to Agent, and the interests therein
of each Lender, from time to time and such register shall, absent manifest
error, conclusively be presumed to be correct and accurate.

 

(e)          Defaulting Lenders.

 

(i)                       Notwithstanding the provisions of Section 6.4, Agent
shall not be obligated to transfer to a Defaulting Lender any payments made by
Borrowers to Agent for the Defaulting Lender’s benefit or any proceeds of
Collateral that would otherwise be remitted hereunder to the Defaulting Lender,
and, in the absence of such transfer to the Defaulting Lender, Agent shall
transfer any such payments (A) first, to Agent to the extent of any
Extraordinary Advances that were made by Agent and that were required to be, but
were not, paid by Defaulting Lender, (B) second, to Issuing Bank, to the

 

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extent of the portion of a Letter of Credit Disbursement that was required to
be, but was not, paid by the Defaulting Lender, (C) third, to each
Non-Defaulting Lender ratably in accordance with their Commitments (but, in each
case, only to the extent that such Defaulting Lender’s portion of a Revolving
Loan (or other funding obligation) was funded by such other Non-Defaulting
Lender), (D) fourth, in Agent’s sole discretion, to a suspense account
maintained by Agent, the proceeds of which shall be retained by Agent and may be
made available to be re-advanced to or for the benefit of Borrowers (upon the
request of Borrowers and subject to the conditions set forth in Section 4.2) as
if such Defaulting Lender had made its portion of Revolving Loans (or other
funding obligations) hereunder, and (E) fifth, from and after the date on which
all other Obligations have been paid in full, to such Defaulting Lender in
accordance with Section 6.4(a)(ix) and 6.4(b)(ix), as applicable.  Subject to
the foregoing, Agent may hold and, in its discretion, re-lend to Borrowers for
the account of such Defaulting Lender the amount of all such payments received
and retained by Agent for the account of such Defaulting Lender.  Solely for the
purposes of voting or consenting to matters with respect to the Financing
Agreements (including the calculation of Pro Rata Share in connection therewith)
and for the purpose of calculating the fee payable under Section 3.2(a), such
Defaulting Lender shall be deemed not to be a “Lender” and such Lender’s
Commitment shall be deemed to be zero; provided, that, the foregoing shall not
apply to any of the matters governed by Section 11.3(b)(ii)(C) and (D) hereof. 
The provisions of this Section 2.3(g) shall remain effective with respect to
such Defaulting Lender until the earlier of (y) the date on which all of the
Non-Defaulting Lenders, Agent, Issuing Bank, and Borrowers shall have waived, in
writing, the application of this Section 2.3(g) to such Defaulting Lender, or
(z) the date on which such Defaulting Lender makes payment of all amounts that
it was obligated to fund hereunder, pays to Agent all amounts owing by
Defaulting Lender in respect of the amounts that it was obligated to fund
hereunder, and, if requested by Agent, provides adequate assurance of its
ability to perform its future obligations hereunder (on which earlier date, so
long as no Event of Default has occurred and is continuing, any remaining cash
collateral held by Agent pursuant to Section 2.3(g)(ii) shall be released to
Borrowers).  The operation of this Section 2.3(g) shall not be construed to
increase or otherwise affect the Commitment of any Lender, to relieve or excuse
the performance by such Defaulting Lender or any other Lender of its duties and
obligations hereunder, or to relieve or excuse the performance by any Borrower
of its duties and obligations hereunder to Agent, Issuing Bank, or to the
Lenders other than such Defaulting Lender.  Any failure by a Defaulting Lender
to fund amounts that it was obligated to fund hereunder shall constitute a
material breach by such Defaulting Lender of this Agreement and shall entitle
Borrowers, at their option, upon written notice to Agent, to arrange for a
substitute Lender to assume the Commitment of such Defaulting Lender, such
substitute Lender to be reasonably acceptable to Agent.  In connection with the
arrangement of such a substitute Lender, the Defaulting Lender shall have no
right to refuse to be replaced hereunder, and agrees to execute and deliver a
completed form of Assignment and Acceptance in favor of the substitute Lender
(and agrees that it shall be deemed to have executed and delivered such document
if it fails to do so) subject only to being paid its share of the outstanding
Obligations (other than Bank Product Obligations, but including (1) all
interest, fees, and other amounts that may be due and payable in respect
thereof, and (2) an assumption of its Pro Rata Share of its participation in the
Letters of Credit); provided, that any such assumption of the Commitment of such
Defaulting Lender shall not be deemed to constitute a waiver of any of the
Lender Groups’ or Borrowers’ rights or remedies against any such Defaulting
Lender arising out of or in relation to such failure to fund.  In the event of a
direct conflict between the priority provisions of this Section 2.3(g) and any
other provision contained in this Agreement or any other Financing Agreement, it
is the intention of the parties hereto that such provisions be read together and
construed, to the fullest extent possible, to be in concert with each other.  In
the event of any actual, irreconcilable conflict that cannot be resolved as
aforesaid, the terms and provisions of this Section 2.3(g) shall control and
govern.

 

(ii)                    If any Letter of Credit is outstanding at the time that
a Lender becomes a Defaulting Lender then:

 

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(A)       such Defaulting Lender’s Letter of Credit Exposure shall be
reallocated among the Non-Defaulting Lenders in accordance with their respective
Pro Rata Share but only to the extent (x) the sum of each Non-Defaulting
Lender’s Pro Rata Share of its outstanding Revolving Loans and Letter of Credit
Exposure plus such Defaulting Lender’s Letter of Credit Exposure does not exceed
the total of all Non-Defaulting Lenders’ Revolver Commitments and (y) the
conditions set forth in Section 4.2 are satisfied at such time;

 

(B)       if the reallocation described in clause (A) above cannot, or can only
partially, be effected, Borrowers shall within one Business Day following notice
by Agent cash collateralize such Defaulting Lender’s Letter of Credit Exposure
(after giving effect to any partial reallocation pursuant to clause (A) above),
pursuant to a cash collateral agreement to be entered into in form and substance
reasonably satisfactory to the Agent, for so long as such Letter of Credit
Exposure is outstanding; provided, that, Borrowers shall not be obligated to
cash collateralize any Defaulting Lender’s Letter of Credit Exposure if such
Defaulting Lender is also Issuing Bank;

 

(C)       if Borrowers cash collateralize any portion of such Defaulting
Lender’s Letter of Credit Exposure pursuant to this Section 2.3(g)(ii),
Borrowers shall not be required to pay any Letter of Credit Fees to Agent for
the account of such Defaulting Lender pursuant to Section 2.6(b) with respect to
such cash collateralized portion of such Defaulting Lender’s Letter of Credit
Exposure during the period such Letter of Credit Exposure is cash
collateralized;

 

(D)       to the extent the Letter of Credit Exposure of the Non-Defaulting
Lenders is reallocated pursuant to this Section 2.3(g)(ii), then the Letter of
Credit Fees payable to the Non-Defaulting Lenders pursuant to
Section 2.6(b) shall be adjusted in accordance with such Non-Defaulting Lenders’
Letter of Credit Exposure;

 

(E)        to the extent any Defaulting Lender’s Letter of Credit Exposure is
neither cash collateralized nor reallocated pursuant to this Section 2.3(g)(ii),
then, without prejudice to any rights or remedies of Issuing Bank or any Lender
hereunder, all Letter of Credit Fees that would have otherwise been payable to
such Defaulting Lender under Section 2.6(b) with respect to such portion of such
Letter of Credit Exposure shall instead be payable to Issuing Bank until such
portion of such Defaulting Lender’s Letter of Credit Exposure is cash
collateralized or reallocated;

 

(F)         so long as any Lender is a Defaulting Lender, Issuing Bank shall not
be required to issue, amend, or increase any Letter of Credit, in each case, to
the extent (x) the Defaulting Lender’s Pro Rata Share of such Letter of Credit
cannot be reallocated pursuant to this Section 2.3(g)(ii), or (y) the Issuing
Bank has not otherwise entered into arrangements reasonably satisfactory to the
Issuing Bank and Borrowers to eliminate the Issuing Bank’s risk with respect to
the Defaulting Lender’s participation in Letters of Credit; and

 

(G)       Agent may release any cash collateral provided by Borrowers pursuant
to this Section 2.3(g)(ii) to Issuing Bank and Issuing Bank may apply any such
cash collateral to the payment of such Defaulting Lender’s Pro Rata Share of any
Letter of Credit Disbursement that is not reimbursed by Borrowers pursuant to
Section 2.3(d).  Subject to Section 17.14, no reallocation hereunder shall
constitute a waiver or release of any claim of any party hereunder against a
Defaulting Lender arising from that Lender having become a Defaulting Lender,
including any claim of a Non-Defaulting Lender as a result of such
Non-Defaulting Lender’s increased exposure following such reallocation.

 

(f)           Independent Obligations.  All Revolving Loans (other than
Additional Revolving Loans) shall be made by the Lenders contemporaneously and
in accordance with their Pro Rata Shares.  It is understood that (i) no Lender
shall be responsible for any failure by any other Lender to perform its

 

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obligation to make any Revolving Loan (or other extension of credit) hereunder,
nor shall any Commitment of any Lender be increased or decreased as a result of
any failure by any other Lender to perform its obligations hereunder, and
(ii) no failure by any Lender to perform its obligations hereunder shall excuse
any other Lender from its obligations hereunder.

 

2.3       Letters of Credit.

 

(a)         Subject to the terms and conditions of this Agreement, upon the
request of Borrowers made in accordance herewith, and prior to the Maturity
Date, Issuing Bank agrees to issue a requested Letter of Credit for the account
of Borrowers.  By submitting a request to Issuing Bank for the issuance of a
Letter of Credit, Borrowers shall be deemed to have requested that Issuing Bank
issue the requested Letter of Credit.  Each request for the issuance of a Letter
of Credit, or the amendment, renewal, or extension of any outstanding Letter of
Credit, shall be (i) irrevocable and made in writing by an Authorized Officer,
(ii) delivered to Agent and Issuing Bank via telefacsimile or other electronic
method of transmission reasonably acceptable to Agent and Issuing Bank and
reasonably in advance of the requested date of issuance, amendment, renewal, or
extension, and (iii) subject to Issuing Bank’s authentication procedures with
results satisfactory to Issuing Bank.  Each such request shall be in form and
substance reasonably satisfactory to Agent and Issuing Bank and (i) shall
specify (A) the amount of such Letter of Credit, (B) the date of issuance,
amendment, renewal, or extension of such Letter of Credit, (C) the proposed
expiration date of such Letter of Credit, (D) the name and address of the
beneficiary of the Letter of Credit, and (E) such other information (including,
the conditions to drawing, and, in the case of an amendment, renewal, or
extension, identification of the Letter of Credit to be so amended, renewed, or
extended) as shall be necessary to prepare, amend, renew, or extend such Letter
of Credit, and (ii) shall be accompanied by such Issuer Documents as Agent or
Issuing Bank may request or require, to the extent that such requests or
requirements are consistent with the Issuer Documents that Issuing Bank
generally requests for Letters of Credit in similar circumstances.  Issuing
Bank’s records of the content of any such request will be conclusive.  Anything
contained herein to the contrary notwithstanding, Issuing Bank may, but shall
not be obligated to, issue a Letter of Credit that supports the obligations of a
Loan Party or one of its Subsidiaries in respect of (x) a lease of real
property, or (y) an employment contract.

 

(b)         Issuing Bank shall have no obligation to issue a Letter of Credit if
any of the following would result after giving effect to the requested issuance:

 

(i)                       the Letter of Credit Usage would exceed the Letter of
Credit Sublimit, or

 

(ii)                    the Letter of Credit Usage would exceed the Revolving
Loan Limit less the outstanding amount of Revolving Loans, or

 

(iii)                 the Letter of Credit Usage would exceed the Borrowing Base
at such time less the outstanding principal balance of the Revolving Loans at
such time.

 

(c)          In the event there is a Defaulting Lender as of the date of any
request for the issuance of a Letter of Credit, Issuing Bank shall not be
required to issue or arrange for such Letter of Credit to the extent (i) the
Defaulting Lender’s Letter of Credit Exposure with respect to such Letter of
Credit may not be reallocated pursuant to Section 2.3(g)(ii), or (ii) Issuing
Bank has not otherwise entered into arrangements reasonably satisfactory to it
and Borrowers to eliminate Issuing Bank’s risk with respect to the participation
in such Letter of Credit of the Defaulting Lender, which arrangements may
include Borrowers cash collateralizing such Defaulting Lender’s Letter of Credit
Exposure in accordance with Section 2.3(g)(ii).  Additionally, Issuing Bank
shall have no obligation to issue or extend a Letter of Credit if (A) any order,
judgment, or decree of any Governmental Authority or arbitrator shall, by its
terms, purport to enjoin or restrain Issuing Bank from issuing such Letter of
Credit, or any law applicable

 

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to Issuing Bank or any request or directive (whether or not having the force of
law) from any Governmental Authority with jurisdiction over Issuing Bank shall
prohibit or request that Issuing Bank refrain from the issuance of letters of
credit generally or such Letter of Credit in particular, or (B) the issuance of
such Letter of Credit would violate one or more policies of Issuing Bank
applicable to letters of credit generally, or (C) if amounts demanded to be paid
under any Letter of Credit will not or may not be in US Dollars.

 

(d)         Any Issuing Bank (other than Wells Fargo or any of its Affiliates)
shall notify Agent in writing no later than the Business Day prior to the
Business Day on which such Issuing Bank issues any Letter of Credit.  In
addition, each Issuing Bank (other than Wells Fargo or any of its Affiliates)
shall, on the first Business Day of each week, submit to Agent a report
detailing the daily undrawn amount of each Letter of Credit issued by such
Issuing Bank during the prior calendar week.  Borrowers and the Lenders hereby
acknowledge and agree that all Existing Letters of Credit shall constitute
Letters of Credit under this Agreement on and after the Closing Date with the
same effect as if such Existing Letters of Credit were issued by Issuing Bank at
the request of Borrowers on the Closing Date.  Each Letter of Credit shall be in
form and substance reasonably acceptable to Issuing Bank, including the
requirement that the amounts payable thereunder must be payable in US Dollars. 
If Issuing Bank makes a payment under a Letter of Credit, Borrowers shall pay to
Agent an amount equal to the applicable Letter of Credit Disbursement on the
Business Day such Letter of Credit Disbursement is made and, in the absence of
such payment, the amount of the Letter of Credit Disbursement immediately and
automatically shall be deemed to be a Revolving Loan hereunder (notwithstanding
any failure to satisfy any condition precedent set forth in Section 4) and,
initially, shall bear interest at the rate then applicable to Revolving Loans
that are Base Rate Loans. If a Letter of Credit Disbursement is deemed to be a
Revolving Loan hereunder, Borrowers’ obligation to pay the amount of such Letter
of Credit Disbursement to Issuing Bank shall be automatically converted into an
obligation to pay the resulting Revolving Loan.  Promptly following receipt by
Agent of any payment from Borrowers pursuant to this paragraph, Agent shall
distribute such payment to Issuing Bank or, to the extent that Revolving Loan
Lenders have made payments pursuant to Section 2.3(e) to reimburse Issuing Bank,
then to such Revolving Loan Lenders and Issuing Bank as their interests may
appear.

 

(e)          Promptly following receipt of a notice of a Letter of Credit
Disbursement pursuant to Section 2.3(d), each Revolving Loan Lender agrees to
fund its Pro Rata Share of any Revolving Loan deemed made pursuant to
Section 2.3(d) on the same terms and conditions as if Borrowers had requested
the amount thereof as a Revolving Loan and Agent shall promptly pay to Issuing
Bank the amounts so received by it from the Revolving Loan Lenders.  By the
issuance of a Letter of Credit (or an amendment, renewal, or extension of a
Letter of Credit) and without any further action on the part of Issuing Bank or
the Revolving Loan Lenders, Issuing Bank shall be deemed to have granted to each
Revolving Loan Lender, and each Revolving Loan Lender shall be deemed to have
purchased, a participation in each Letter of Credit issued by Issuing Bank, in
an amount equal to its Pro Rata Share of such Letter of Credit, and each such
Revolving Loan Lender agrees to pay to Agent, for the account of Issuing Bank,
such Revolving Loan Lender’s Pro Rata Share of any Letter of Credit Disbursement
made by Issuing Bank under the applicable Letter of Credit.  In consideration
and in furtherance of the foregoing, each Revolving Loan Lender hereby
absolutely and unconditionally agrees to pay to Agent, for the account of
Issuing Bank, such Revolving Loan Lender’s Pro Rata Share of each Letter of
Credit Disbursement made by Issuing Bank and not reimbursed by Borrowers on the
date due as provided in Section 2.3(d), or of any reimbursement payment that is
required to be refunded (or that Agent or Issuing Bank elects, based upon the
advice of counsel, to refund) to Borrowers for any reason.  Each Revolving Loan
Lender acknowledges and agrees that its obligation to deliver to Agent, for the
account of Issuing Bank, an amount equal to its respective Pro Rata Share of
each Letter of Credit Disbursement pursuant to this Section 2.3(e) shall be
absolute and unconditional and such remittance shall be made notwithstanding the
occurrence or continuation of an Event of Default or Default or the failure to
satisfy any condition set

 

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forth in Section 3.  If any such Revolving Loan Lender fails to make available
to Agent the amount of such Revolving Loan Lender’s Pro Rata Share of a Letter
of Credit Disbursement as provided in this Section, such Revolving Loan Lender
shall be deemed to be a Defaulting Lender and Agent (for the account of Issuing
Bank) shall be entitled to recover such amount on demand from such Revolving
Loan Lender together with interest thereon at the Defaulting Lender Rate until
paid in full.

 

(f)           Each Borrower agrees to indemnify, defend and hold harmless each
member of the Lender Group (including Issuing Bank and its branches, Affiliates,
and correspondents) and each such Person’s respective directors, officers,
employees, attorneys and agents (each, including Issuing Bank, a “Letter of
Credit Related Person”) (to the fullest extent permitted by law) from and
against any and all claims, demands, suits, actions, investigations,
proceedings, liabilities, fines, costs, penalties, and damages, and all
reasonable and documented out-of-pocket fees and disbursements of attorneys,
experts, or consultants and all other costs and expenses actually incurred in
connection therewith or in connection with the enforcement of this
indemnification (as and when they are incurred and irrespective of whether suit
is brought), which may be incurred by or awarded against any such Letter of
Credit Related Person (other than Taxes, which shall be governed by Section 15)
(the “Letter of Credit Indemnified Costs”), and which arise out of or in
connection with, or as a result of:

 

(i)                       any Letter of Credit or any pre-advice of its
issuance;

 

(ii)                    any transfer, sale, delivery, surrender or endorsement
(or lack thereof) of any Drawing Document at any time(s) held by any such Letter
of Credit Related Person in connection with any Letter of Credit;

 

(iii)                 any action or proceeding arising out of, or in connection
with, any Letter of Credit (whether administrative, judicial or in connection
with arbitration), including any action or proceeding to compel or restrain any
presentation or payment under any Letter of Credit, or for the wrongful dishonor
of, or honoring a presentation under, any Letter of Credit;

 

(iv)                any independent undertakings issued by the beneficiary of
any Letter of Credit;

 

(v)                   any unauthorized instruction or request made to Issuing
Bank in connection with any Letter of Credit or requested Letter of Credit, or
any error, omission, interruption or delay in such instruction or request,
whether transmitted by mail, courier, electronic transmission, SWIFT, or any
other telecommunication including communications through a correspondent;

 

(vi)                an adviser, confirmer or other nominated person seeking to
be reimbursed, indemnified or compensated;

 

(vii)             any third party seeking to enforce the rights of an applicant,
beneficiary, nominated person, transferee, assignee of Letter of Credit proceeds
or holder of an instrument or document;

 

(viii)          the fraud, forgery or illegal action of parties other than the
Letter of Credit Related Person;

 

(ix)                any prohibition on payment or delay in payment of any amount
payable by Issuing Bank to a beneficiary or transferee beneficiary of a Letter
of Credit arising out of Anti-Corruption Laws, Anti-Money Laundering Laws, or
Sanctions;

 

(x)                   Issuing Bank’s performance of the obligations of a
confirming institution or entity that wrongfully dishonors a confirmation;

 

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(xi)                any foreign language translation provided to Issuing Bank in
connection with any Letter of Credit;

 

(xii)             any foreign law or usage as it relates to Issuing Bank’s
issuance of a Letter of Credit in support of a foreign guaranty including the
expiration of such guaranty after the related Letter of Credit expiration date
and any resulting drawing paid by Issuing Bank in connection therewith; or

 

(xiii)          the acts or omissions, whether rightful or wrongful, of any
present or future de jure or de facto governmental or regulatory authority or
cause or event beyond the control of the Letter of Credit Related Person;

 

provided, that, such indemnity shall not be available to any Letter of Credit
Related Person claiming indemnification under clauses (i) through (x) above to
the extent that such Letter of Credit Indemnified Costs may be finally
determined in a final, non-appealable judgment of a court of competent
jurisdiction to have resulted directly from the gross negligence or willful
misconduct of the Letter of Credit Related Person claiming indemnity.  Borrowers
hereby agree to pay the Letter of Credit Related Person claiming indemnity on
demand from time to time all amounts owing under this Section 2.3(f).  If and to
the extent that the obligations of Borrowers under this Section 2.3(f) are
unenforceable for any reason, Borrowers agree to make the maximum contribution
to the Letter of Credit Indemnified Costs permissible under applicable law. 
This indemnification provision shall survive termination of this Agreement and
all Letters of Credit.

 

(g)          The liability of Issuing Bank (or any other Letter of Credit
Related Person) under, in connection with or arising out of any Letter of Credit
(or pre-advice), regardless of the form or legal grounds of the action or
proceeding, shall be limited to direct damages suffered by Borrowers that are
caused directly by Issuing Bank’s gross negligence or willful misconduct in
(i) honoring a presentation under a Letter of Credit that on its face does not
at least substantially comply with the terms and conditions of such Letter of
Credit, (ii) failing to honor a presentation under a Letter of Credit that
strictly complies with the terms and conditions of such Letter of Credit, or
(iii) retaining Drawing Documents presented under a Letter of Credit. 
Borrowers’ aggregate remedies against Issuing Bank and any Letter of Credit
Related Person for wrongfully honoring a presentation under any Letter of Credit
or wrongfully retaining honored Drawing Documents shall in no event exceed the
aggregate amount paid by Borrowers to Issuing Bank in respect of the honored
presentation in connection with such Letter of Credit under Section 2.3(d), plus
interest at the rate then applicable to Base Rate Loans hereunder.  Borrowers
shall take commercially reasonable action to avoid and mitigate the amount of
any damages claimed against Issuing Bank or any other Letter of Credit Related
Person, including by enforcing its rights against the beneficiaries of the
Letters of Credit.  Any claim by Borrowers under or in connection with any
Letter of Credit shall be reduced by an amount equal to the sum of (x) the
amount (if any) saved by Borrowers as a result of the breach or alleged wrongful
conduct complained of, and (y) the amount (if any) of the loss that would have
been avoided had Borrowers taken all commercially reasonable steps to mitigate
any loss, and in case of a claim of wrongful dishonor, by specifically and
timely authorizing Issuing Bank to effect a cure.

 

(h)         Borrowers are responsible for the final text of the Letter of Credit
as issued by Issuing Bank, irrespective of any assistance Issuing Bank may
provide such as drafting or recommending text or by Issuing Bank’s use or
refusal to use text submitted by Borrowers. Borrowers understand that the final
form of any Letter of Credit may be subject to such revisions and changes as are
deemed necessary or appropriate by Issuing Bank, and Borrowers hereby consent to
such revisions and changes not materially different from the application
executed in connection therewith. Borrowers are solely responsible for the
suitability of the Letter of Credit for Borrowers’ purposes.  If Borrowers
request Issuing Bank to issue a Letter of Credit for an affiliated or
unaffiliated third party (an “Account Party”), (i) such Account Party

 

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shall have no rights against Issuing Bank; (ii) Borrowers shall be responsible
for the application and obligations under this Agreement; and
(iii) communications (including notices) related to the respective Letter of
Credit shall be among Issuing Bank and Borrowers.  Borrowers will examine the
copy of the Letter of Credit and any other documents sent by Issuing Bank in
connection therewith and shall promptly notify Issuing Bank (not later than
three (3) Business Days following Borrowers’ receipt of documents from Issuing
Bank) of any non-compliance with Borrowers’ instructions and of any discrepancy
in any document under any presentment or other irregularity.  Borrowers
understand and agree that Issuing Bank is not required to extend the expiration
date of any Letter of Credit for any reason. With respect to any Letter of
Credit containing an “automatic amendment” to extend the expiration date of such
Letter of Credit, Issuing Bank, in its sole and absolute discretion, may give
notice of nonrenewal of such Letter of Credit and, if Borrowers do not at any
time want the then current expiration date of such Letter of Credit to be
extended, Borrowers will so notify Agent and Issuing Bank at least 30 calendar
days before Issuing Bank is required to notify the beneficiary of such Letter of
Credit or any advising bank of such non-extension pursuant to the terms of such
Letter of Credit.

 

(i)             Borrowers’ reimbursement and payment obligations under this
Section 2.3 are absolute, unconditional and irrevocable and shall be performed
strictly in accordance with the terms of this Agreement under any and all
circumstances whatsoever, including:

 

(i)                       any lack of validity, enforceability or legal effect
of any Letter of Credit, any Issuer Document, this Agreement, or any Financing
Agreement, or any term or provision therein or herein;

 

(ii)                    payment against presentation of any draft, demand or
claim for payment under any Drawing Document that does not comply in whole or in
part with the terms of the applicable Letter of Credit or which proves to be
fraudulent, forged or invalid in any respect or any statement therein being
untrue or inaccurate in any respect, or which is signed, issued or presented by
a Person or a transferee of such Person purporting to be a successor or
transferee of the beneficiary of such Letter of Credit;

 

(iii)                 Issuing Bank or any of its branches or Affiliates being
the beneficiary of any Letter of Credit;

 

(iv)                Issuing Bank or any correspondent honoring a drawing against
a Drawing Document up to the amount available under any Letter of Credit even if
such Drawing Document claims an amount in excess of the amount available under
the Letter of Credit;

 

(v)                   the existence of any claim, set-off, defense or other
right that any Loan Party or any of its Subsidiaries may have at any time
against any beneficiary or transferee beneficiary, any assignee of
proceeds, Issuing Bank or any other Person;

 

(vi)                Issuing Bank or any correspondent honoring a drawing upon
receipt of an electronic presentation under a Letter of Credit requiring the
same, regardless of whether the original Drawing Documents arrive at Issuing
Bank’s counters or are different from the electronic presentation;

 

(vii)             any other event, circumstance or conduct whatsoever, whether
or not similar to any of the foregoing that, but for this Section 2.3(i),
constitutes or could reasonably be expected to constitute a legal or equitable
defense to or discharge of, or provide a right of set-off against, any
Borrower’s or any of its Subsidiaries’ reimbursement and other payment
obligations and liabilities, arising under, or in connection with, any Letter of
Credit, whether against Issuing Bank, the beneficiary or any other Person; or

 

(viii)          the fact that any Default or Event of Default shall have
occurred and be continuing;

 

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provided; that, subject to Section 2.3(g) above, the foregoing shall not release
Issuing Bank from such liability to Borrowers as may be finally determined in a
final, non-appealable judgment of a court of competent jurisdiction against
Issuing Bank following reimbursement or payment of the obligations and
liabilities, including reimbursement and other payment obligations, of Borrowers
to Issuing Bank arising under, or in connection with, this Section 2.3 or any
Letter of Credit.

 

(j)            Without limiting any other provision of this Agreement, Issuing
Bank and each other Letter of Credit Related Person (if applicable) shall not be
responsible to Borrowers for, and Issuing Bank’s rights and remedies against
Borrowers and the obligation of Borrowers to reimburse Issuing Bank for each
drawing under each Letter of Credit shall not be impaired by:

 

(i)                       honor of a presentation under any Letter of Credit
that on its face substantially complies with the terms and conditions of such
Letter of Credit, even if the Letter of Credit requires strict compliance by the
beneficiary;

 

(ii)                    honor of a presentation of any Drawing Document that
appears on its face to have been signed, presented or issued (A) by any
purported successor or transferee of any beneficiary or other Person required to
sign, present or issue such Drawing Document or (B) under a new name of the
beneficiary;

 

(iii)                 acceptance as a draft of any written or electronic demand
or request for payment under a Letter of Credit, even if nonnegotiable or not in
the form of a draft or notwithstanding any requirement that such draft, demand
or request bear any or adequate reference to the Letter of Credit;

 

(iv)                the identity or authority of any presenter or signer of any
Drawing Document or the form, accuracy, genuineness or legal effect of any
Drawing Document (other than Issuing Bank’s determination that such Drawing
Document appears on its face substantially to comply with the terms and
conditions of the Letter of Credit);

 

(v)                   acting upon any instruction or request relative to a
Letter of Credit or requested Letter of Credit that Issuing Bank in good faith
believes to have been given by a Person authorized to give such instruction or
request;

 

(vi)                any errors, omissions, interruptions or delays in
transmission or delivery of any message, advice or document (regardless of how
sent or transmitted) or for errors in interpretation of technical terms or in
translation or any delay in giving or failing to give notice to any Borrower;

 

(vii)             any acts, omissions or fraud by, or the insolvency of, any
beneficiary, any nominated person or entity or any other Person or any breach of
contract between any beneficiary and any Borrower or any of the parties to the
underlying transaction to which the Letter of Credit relates;

 

(viii)          assertion or waiver of any provision of the ISP or UCP that
primarily benefits an issuer of a letter of credit, including any requirement
that any Drawing Document be presented to it at a particular hour or place;

 

(ix)                payment to any presenting bank (designated or permitted by
the terms of the applicable Letter of Credit) claiming that it rightfully
honored or is entitled to reimbursement or indemnity under Standard Letter of
Credit Practice applicable to it;

 

(x)                   acting or failing to act as required or permitted under
Standard Letter of Credit Practice applicable to where Issuing Bank has issued,
confirmed, advised or negotiated such Letter of

 

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Credit, as the case may be;

 

(xi)                honor of a presentation after the expiration date of any
Letter of Credit notwithstanding that a presentation was made prior to such
expiration date and dishonored by Issuing Bank if subsequently Issuing Bank or
any court or other finder of fact determines such presentation should have been
honored;

 

(xii)             dishonor of any presentation that does not strictly comply or
that is fraudulent, forged or otherwise not entitled to honor; or

 

(xiii)          honor of a presentation that is subsequently determined by
Issuing Bank to have been made in violation of international, federal, state or
local restrictions on the transaction of business with certain prohibited
Persons.

 

(k)         Borrowers shall pay immediately upon demand to Agent for the account
of Issuing Bank as non-refundable fees, commissions, and charges (it being
acknowledged and agreed that any charging of such fees, commissions, and charges
to any of the Loan Accounts pursuant to the provisions of Section 6.4 hereof
shall be deemed to constitute a demand for payment thereof for the purposes of
this Section 2.3(k)):  (i) a fronting fee which shall be imposed by Issuing Bank
equal to 0.125% per annum times the average amount of the Letter of Credit Usage
during the immediately preceding month (or portion thereof), plus (ii) any and
all other customary commissions, fees and charges then in effect imposed by, and
any and all expenses incurred by, Issuing Bank, or by any adviser, confirming
institution or entity or other nominated person, relating to Letters of Credit,
at the time of issuance of any Letter of Credit and upon the occurrence of any
other activity with respect to any Letter of Credit (including transfers,
assignments of proceeds, amendments, drawings, renewals or cancellations).

 

(l)             If by reason of (x) any Change in Law, or (y) compliance by
Issuing Bank or any other member of the Lender Group with any direction,
request, or requirement (irrespective of whether having the force of law) of any
Governmental Authority or monetary authority including, Regulation D of the
Board of Governors as from time to time in effect (and any successor thereto):

 

(i)                       any reserve, deposit, or similar requirement is or
shall be imposed or modified in respect of any Letter of Credit issued or caused
to be issued hereunder or hereby, or any Loans or obligations to make Loans
hereunder or hereby, or

 

(ii)                    there shall be imposed on Issuing Bank or any other
member of the Lender Group any other condition regarding any Letter of Credit,
Loans, or obligations to make Loans hereunder,

 

(iii)                 and the result of the foregoing is to increase, directly
or indirectly, the cost to Issuing Bank or any other member of the Lender Group
of issuing, making, participating in, or maintaining any Letter of Credit or to
reduce the amount receivable in respect thereof, then, and in any such case,
Agent may, at any time within a reasonable period after the additional cost is
incurred or the amount received is reduced, notify Borrowers, and Borrowers
shall pay within 30 days after demand therefor, such amounts as Agent may
specify to be necessary to compensate Issuing Bank or any other member of the
Lender Group for such additional cost or reduced receipt, together with interest
on such amount from the date of such demand until payment in full thereof at the
rate then applicable to Base Rate Loans hereunder; provided, that (A) Borrowers
shall not be required to provide any compensation pursuant to this
Section 2.3(l) for any such amounts incurred more than 180 days prior to the
date on which the demand for payment of such amounts is first made to Borrowers,
and (B) if an event or circumstance giving rise to such amounts is retroactive,
then the 180-day period referred to above shall be extended to include the
period of retroactive effect thereof.  The determination by Agent of any amount

 

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due pursuant to this Section 2.3(l), as set forth in a certificate setting forth
the calculation thereof in reasonable detail, shall, in the absence of manifest
or demonstrable error, be final and conclusive and binding on all of the parties
hereto.

 

(m)     Each standby Letter of Credit shall expire not later than the date that
is 12 months after the date of the issuance of such Letter of Credit; provided,
that any standby Letter of Credit may provide for the automatic extension
thereof for any number of additional periods each of up to one year in duration;
provided further, that with respect to any Letter of Credit which extends beyond
the Maturity Date, Letter of Credit Collateralization shall be provided therefor
on or before the date that is five Business Days prior to the Maturity Date. 
Each commercial Letter of Credit shall expire on the earlier of (i) 120 days
after the date of the issuance of such commercial Letter of Credit and (ii) five
Business Days prior to the Maturity Date.

 

(n)         If (i) any Event of Default shall occur and be continuing, or
(ii) the amount of Revolving Loans and Letters of Credit available under the
terms of this Agreement shall at any time be less than zero, then on the
Business Day following the date when the Borrowers receive notice from Agent or
the Required Lenders (or, if the maturity of the Obligations has been
accelerated, Revolving Loan Lenders with Letter of Credit Exposure representing
greater than 50% of the total Letter Credit Exposure) demanding Letter of Credit
Collateralization pursuant to this Section 2.3(n) upon such demand, Borrowers
shall provide Letter of Credit Collateralization with respect to the then
existing Letter of Credit Usage.  If Borrowers fail to provide Letter of Credit
Collateralization as required by this Section 2.3(n), the Revolving Loan Lenders
may (and, upon direction of Agent, shall) advance, as Revolving Loans the amount
of the cash collateral required pursuant to the Letter of Credit
Collateralization provision so that the then existing Letter of Credit Usage is
cash collateralized in accordance with the Letter of Credit Collateralization
provision (whether or not the Revolver Commitments have terminated, any
Additional Revolving Loans exists or the conditions in Section 4 are satisfied).

 

(o)         Unless otherwise expressly agreed by Issuing Bank and Borrowers when
a Letter of Credit is issued (including any such agreement applicable to an
Existing Letter of Credit), (i) the rules of the ISP shall apply to each standby
Letter of Credit, and (ii) the rules of the UCP shall apply to each commercial
Letter of Credit.

 

(p)         Issuing Bank shall be deemed to have acted with due diligence and
reasonable care if Issuing Bank’s conduct is in accordance with Standard Letter
of Credit Practice or in accordance with this Agreement.

 

(q)         In the event of a direct conflict between the provisions of this
Section 2.3 and any provision contained in any Issuer Document, it is the
intention of the parties hereto that such provisions be read together and
construed, to the fullest extent possible, to be in concert with each other.  In
the event of any actual, irreconcilable conflict that cannot be resolved as
aforesaid, the terms and provisions of this Section 2.3 shall control and
govern.

 

(r)            The provisions of this Section 2.3 shall survive the termination
of this Agreement and the repayment in full of the Obligations with respect to
any Letters of Credit that remain outstanding.

 

(s)           At Borrowers’ costs and expense, Borrowers shall execute and
deliver to Issuing Bank such additional certificates, instruments and/or
documents and take such additional action as may be reasonably requested by
Issuing Bank to enable Issuing Bank to issue any Letter of Credit pursuant to
this Agreement and related Issuer Document, to protect, exercise and/or enforce
Issuing Banks’ rights and interests under this Agreement or to give effect to
the terms and provisions of this Agreement or any Issuer Document.  Each
Borrower irrevocably appoints Issuing Bank as its attorney-in-fact and
authorizes

 

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Issuing Bank, upon prior written notice to Borrowers, to execute and deliver
ancillary documents and letters customary in the letter of credit business that
may include but are not limited to advisements, indemnities, checks, bills of
exchange and issuance documents.  The power of attorney granted by the Borrowers
is limited solely to such actions related to the issuance, confirmation or
amendment of any Letter of Credit and to ancillary documents or letters
customary in the letter of credit business.  This appointment is coupled with an
interest.

 

2.4       Revolver Commitments.  The aggregate amount of each Revolving Loan
Lender’s Pro Rata Share of the Revolving Loans and Letters of Credit shall not
exceed the amount of such Revolving Loan Lender’s Revolver Commitment, as the
same may from time to time be amended in accordance with the provisions hereof.

 

2.5       Revolving Loan Facility Increases.

 

(a)         Borrowers may, at their option, request an increase in the Revolving
Loan Limit (each a “Revolving Loan Facility Increase”) in an aggregate amount
not to exceed $25,000,000 by delivering a written request to Agent that
specifies the amount of such increase in the Revolving Loan Limit; provided,
that, (i) the aggregate amount of any such increase shall not cause the
Revolving Loan Limit to exceed $100,000,000, (ii) the amount of any such initial
Revolving Loan Facility Increase shall be for an increase in the amount equal to
not less than $10,000,000 or an integral multiple of $500,000 in excess thereof,
(iii) the amount of any additional Revolving Loan Facility Increase shall be for
an increase in the amount equal to not less than $5,000,000 or an integral
multiple of $500,000 in excess thereof, (iv) any such request shall be
irrevocable (unless such Revolving Loan Facility Increase is being requested in
connection with a Permitted Acquisition and Agent receives written notice prior
to the effective date of such Revolving Loan Facility Increase that such
Permitted Acquisition will not be consummated), (v) after the initial Revolving
Loan Facility Increase, there shall be no more than two (2) additional Revolving
Loan Facility Increases, (vi) Agent shall have received a Revolving Loan
Facility Increase fee in accordance with the terms and conditions of the
Revolving Loan Fee Letter, (vii) Agent shall have received such written request
at least two (2) Business Days’ before the proposed effective date of such
increase, and (viii) at the time Agent receives notice of such request for a
Revolving Loan Facility Increase and on the date of and after giving effect to
such Revolving Loan Facility Increase, no Default or Event of Default shall
exist or have occurred and be continuing. If the conditions set forth in this
Section 2.5(a) are satisfied as determined by Agent, then the requested amount
of the Revolving Loan Facility Increase shall become effective on the proposed
effective date of such increase. Wells Fargo agrees to increase its Commitment
up to the full amount of any such Revolving Loan Facility Increase to the extent
that any other Revolving Loan Lender declines to increase its Revolver
Commitment as provided in this Section 2.5(a) hereof.

 

(b)         Upon the receipt by Agent of any such written request, Agent shall
promptly notify each Revolving Loan Lender of such request and each Revolving
Loan Lender shall have the option (but not the obligation, other than Wells
Fargo) to increase the amount of its Commitment by an amount up to its Pro Rata
Share of the amount of the increase in the Revolving Loan Limit requested by
Borrowers as set forth in the notice from Agent to such Revolving Loan Lender. 
Each Revolving Loan Lender shall notify Agent within ten (10) days after the
receipt of such notice from Agent whether such Revolving Loan Lender will so
increase its Revolver Commitment, and if so, the amount of such increase.  The
minimum increase in the Commitments of each such Revolving Loan Lender providing
the additional Revolver Commitments shall equal such Revolving Loan Lender’s Pro
Rata Share unless otherwise agreed to by Agent.  If the aggregate amount of the
increases in the Revolver Commitments received from Revolving Loan Lenders does
not equal or exceed the amount of the increase in the Revolving Loan Limit
requested by Borrowers, Agent may seek additional increases from Lenders or
Revolver Commitments from such Eligible Transferees as it may determine, after
consultation with Borrowers.  In the event Revolving Loan

 

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Lenders (or Revolving Loan Lenders and any such Eligible Transferees, as the
case may be) have committed in writing to provide increases in their Revolver
Commitments or new Revolver Commitments in an aggregate amount in excess of the
increase in the Revolving Loan Limit requested by Borrowers or permitted
hereunder, Agent shall then have the right to allocate such commitments, first
to Revolving Loan Lenders and then to Eligible Transferees, in such amounts and
manner as Agent may determine, after consultation with Borrowers.  Any new
Revolving Loan Lender that is an Eligible Transferee shall execute and deliver
an Assignment and Acceptance as modified to provide for the sale by Agent of
such Revolver Commitment to such Eligible Transferee.

 

2.6       Revolving Loan Facility Decreases.

 

(a)         Borrowers may, at their option, request a decrease in the Revolving
Loan Limit (each a “Revolving Loan Facility Decrease”) by delivering a written
request to Agent that specifies the amount of the decrease in the Revolving Loan
Limit and a corresponding decrease in the Revolver Commitments; provided, that,
(i) the aggregate amount of any such decrease shall not cause the Revolving Loan
Limit to be less than $60,000,000, (ii) the amount of any such Revolving Loan
Facility Decrease shall be in a minimum amount of not less than $5,000,000 or an
integral multiple of $500,000 in excess thereof, (iii) any such request shall be
irrevocable (unless such Revolving Loan Facility Decrease is being requested in
connection with a permitted asset disposition and Agent receives written notice
prior to the effective date of such Revolving Loan Facility Decrease that such
permitted asset disposition will not be consummated), (iv) Agent shall have
received such written request at least two (2) Business Days’ before the
proposed effective date of such Revolving Loan Facility Decrease, and (v) at the
time Agent receives notice of such request for a Revolving Loan Facility
Decrease and on the date of and after giving effect to such Revolving Loan
Facility Decrease, no Default or Event of Default shall exist or have occurred
and be continuing.

 

(b)         Upon the receipt by Agent of any such Revolving Loan Facility
Decrease, Agent shall notify each Revolving Loan Lender of such request and each
Revolving Loan Lender shall decrease the amount of its Revolver Commitment by an
amount up to its Pro Rata Share of the amount of the Revolving Loan Facility
Decrease requested by Borrowers as set forth in the notice from Agent to such
Revolving Loan Lender.  Such Revolving Loan Facility Decrease shall be effective
on the date that is two (2) Business Days after each of the conditions set forth
in Section 2.6(a) hereof have been satisfied or such earlier date after such
conditions have been satisfied as Agent may agree.

 

2.7       Bank Products.  Any Borrower or Guarantor may (but no such Person is
required to) request that Agent provide or arrange for such Person to obtain
Bank Products from Agent or its Affiliates, and Agent may, in its sole
discretion, provide or arrange for such Person to obtain the requested Bank
Products.  Any Borrower or Guarantor that obtains Bank Products shall indemnify
and hold Agent, each Lender and their respective Affiliates harmless from any
and all obligations now or hereafter owing to any other Person by Agent or its
Affiliates in connection with any Bank Products.  Each Borrower and Guarantor
acknowledges and agrees that the obtaining of Bank Products from Agent and its
Affiliates (a) is in the sole discretion of Agent or such Affiliate, as the case
may be, and (b) is subject to all rules and regulations of the Person that
provides the Bank Product.

 

2.8       Prepayments.  Borrowers may, at their option, upon notice to Agent
pursuant to Section 14.3 hereof, at any time or from time to time, make a
prepayment of all or any portion of the outstanding balance of Revolving Loans
(without a related reduction in Revolver Commitments), in whole or in part,
without premium or penalty, other than any breakage or similar costs or other
amounts payable in accordance with this Agreement.  On and after the occurrence
and during the continuance or existence of a Cash Dominion Event, the
outstanding Loans and other Obligations shall be repaid in accordance with
Section 6.4 hereof.

 

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2.9       Joint and Several Liability of Borrowers.

 

(a)         Each Borrower is accepting joint and several liability hereunder and
under the other Financing Agreements in consideration of the financial
accommodations to be provided by the Lender Group under this Agreement, for the
mutual benefit, directly and indirectly, of each Borrower and in consideration
of the undertakings of the other Borrowers to accept joint and several liability
for the Obligations.

 

(b)         Each Borrower, jointly and severally, hereby irrevocably and
unconditionally accepts, not merely as a surety but also as a co-debtor, joint
and several liability with the other Borrowers, with respect to the payment and
performance of all of the Obligations (including any Obligations arising under
this Section 2.9), it being the intention of the parties hereto that all the
Obligations shall be the joint and several obligations of each Borrower without
preferences or distinction among them.  Accordingly, each Borrower hereby waives
any and all suretyship defenses that would otherwise be available to such
Borrower under applicable law.

 

(c)          If and to the extent that any Borrower shall fail to make any
payment with respect to any of the Obligations as and when due, whether upon
maturity, acceleration, or otherwise, or to perform any of the Obligations in
accordance with the terms thereof, then in each such event the other Borrowers
will make such payment with respect to, or perform, such Obligations until such
time as all of the Obligations are paid in full, and without the need for
demand, protest, or any other notice or formality.

 

(d)         The Obligations of each Borrower under the provisions of this
Section 2.9constitute the absolute and unconditional, full recourse Obligations
of each Borrower enforceable against each Borrower to the full extent of its
properties and assets, irrespective of the validity, regularity or
enforceability of the provisions of this Agreement (other than this
Section 2.9(d)) or any other circumstances whatsoever.

 

(e)          Without limiting the generality of the foregoing and except as
otherwise expressly provided in this Agreement, each Borrower hereby waives
presentments, demands for performance, protests and notices, including notices
of acceptance of its joint and several liability, notice of any Revolving Loans
or any Letters of Credit issued under or pursuant to this Agreement, notice of
the occurrence of any Default, Event of Default, notices of nonperformance,
notices of protest, notices of dishonor, notices of acceptance of this
Agreement, notices of the existence, creation, or incurring of new or additional
Obligations or other financial accommodations or of any demand for any payment
under this Agreement, notice of any action at any time taken or omitted by Agent
or Lenders under or in respect of any of the Obligations, any right to proceed
against any other Borrower or any other Person, to proceed against or exhaust
any security held from any other Borrower or any other Person, to protect,
secure, perfect, or insure any security interest or lien on any property subject
thereto or exhaust any right to take any action against any other Borrower, any
other Person, or any collateral, to pursue any other remedy in any member of the
Lender Group’s or any Bank Product Provider’s power whatsoever, any requirement
of diligence or to mitigate damages and, generally, to the extent permitted by
applicable law, all demands, notices and other formalities of every kind in
connection with this Agreement (except as otherwise provided in this Agreement),
any right to assert against any member of the Lender Group or any Bank Product
Provider, any defense (legal or equitable), set-off, counterclaim, or claim
which each Borrower may now or at any time hereafter have against any other
Borrower or any other party liable to any member of the Lender Group or any Bank
Product Provider, any defense, set-off, counterclaim, or claim, of any kind or
nature, arising directly or indirectly from the present or future lack of
perfection, sufficiency, validity, or enforceability of the Obligations or any
security therefor, and any right or defense arising by reason of any claim or
defense based upon an election of remedies by any member of the Lender Group or
any Bank Product Provider including any defense based upon an impairment or

 

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elimination of such Borrower’s rights of subrogation, reimbursement,
contribution, or indemnity of such Borrower against any other Borrower.  Without
limiting the generality of the foregoing, each Borrower hereby assents to, and
waives notice of, any extension or postponement of the time for the payment of
any of the Obligations, the acceptance of any payment of any of the Obligations,
the acceptance of any partial payment thereon, any waiver, consent or other
action or acquiescence by Agent or Lenders at any time or times in respect of
any default by any Borrower in the performance or satisfaction of any term,
covenant, condition or provision of this Agreement, any and all other
indulgences whatsoever by Agent or Lenders in respect of any of the Obligations,
and the taking, addition, substitution or release, in whole or in part, at any
time or times, of any security for any of the Obligations or the addition,
substitution or release, in whole or in part, of any Borrower.  Without limiting
the generality of the foregoing, each Borrower assents to any other action or
delay in acting or failure to act on the part of any Agent or Lender with
respect to the failure by any Borrower to comply with any of its respective
Obligations, including any failure strictly or diligently to assert any right or
to pursue any remedy or to comply fully with applicable laws or regulations
thereunder, which would, but for the provisions of this Section 2.9 affords or
could reasonably be expected to afford grounds for terminating, discharging or
relieving any Borrower, in whole or in part, from any of its Obligations under
this Section 2.9, it being the intention of each Borrower that, so long as any
of the Obligations hereunder remain unsatisfied, the Obligations of each
Borrower under this Section 2.9 shall not be discharged except by performance
and then only to the extent of such performance.  The Obligations of each
Borrower under this Section 2.9 shall not be diminished or rendered
unenforceable by any winding up, reorganization, arrangement, liquidation,
reconstruction or similar proceeding with respect to any other Borrower or Agent
or any Lender.  Each of the Borrowers waives, to the fullest extent permitted by
law, the benefit of any statute of limitations affecting its liability hereunder
or the enforcement hereof.  Any payment by any Borrower or other circumstance
which operates to toll any statute of limitations as to any Borrower shall
operate to toll the statute of limitations as to each of the Borrowers.  Each of
the Borrowers waives any defense based on or arising out of any defense of any
Borrower or any other Person, other than payment of the Obligations to the
extent of such payment, based on or arising out of the disability of any
Borrower or any other Person, or the validity, legality, or unenforceability of
the Obligations or any part thereof from any cause, or the cessation from any
cause of the liability of any Borrower other than payment of the Obligations to
the extent of such payment.  Agent may, at the election of the Required Lenders,
foreclose upon any Collateral held by Agent by one or more judicial or
nonjudicial sales or other dispositions, whether or not every aspect of any such
sale is commercially reasonable or otherwise fails to comply with applicable law
or may exercise any other right or remedy Agent, any other member of the Lender
Group, or any Bank Product Provider may have against any Borrower or any other
Person, or any security, in each case, without affecting or impairing in any way
the liability of any of the Borrowers hereunder except to the extent the
Obligations have been paid.

 

(f)           Each Borrower represents and warrants to Agent and Lenders that
such Borrower is currently informed of the financial condition of Borrowers and
of all other circumstances which a diligent inquiry would reveal and which bear
upon the risk of nonpayment of the Obligations.  Each Borrower further
represents and warrants to Agent and Lenders that such Borrower has read and
understands the terms and conditions of the Financing Agreements.  Each Borrower
hereby covenants that such Borrower will continue to keep informed of Borrowers’
financial condition and of all other circumstances which bear upon the risk of
nonpayment or nonperformance of the Obligations.

 

(g)          The provisions of this Section 2.9 are made for the benefit of
Agent, each member of the Lender Group, each Bank Product Provider, and their
respective successors and assigns, and may be enforced by it or them from time
to time against any or all Borrowers as often as occasion therefor may arise and
without requirement on the part of Agent, any member of the Lender Group, any
Bank Product Provider, or any of their successors or assigns first to marshal
any of its or their claims or to exercise any of its or their rights against any
Borrower or to exhaust any remedies available to it or them against any

 

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Borrower or to resort to any other source or means of obtaining payment of any
of the Obligations hereunder or to elect any other remedy.  The provisions of
this Section 2.9 shall remain in effect until all of the Obligations shall have
been paid in full or otherwise fully satisfied.  If at any time, any payment, or
any part thereof, made in respect of any of the Obligations, is rescinded or
must otherwise be restored or returned by Agent or any Lender upon the
insolvency, bankruptcy or reorganization of any Borrower, or otherwise, the
provisions of this Section 2.9 will forthwith be reinstated in effect, as though
such payment had not been made.

 

(h)         Each Borrower hereby agrees that it will not enforce any of its
rights that arise from the existence, payment, performance or enforcement of the
provisions of this Section 2.9,  including rights of subrogation, reimbursement,
exoneration, contribution or indemnification and any right to participate in any
claim or remedy of Agent, any other member of the Lender Group, or any Bank
Product Provider against any Borrower, whether or not such claim, remedy or
right arises in equity or under contract, statute or common law, including the
right to take or receive from any Borrower, directly or indirectly, in cash or
other property or by set-off or in any other manner, payment or security solely
on account of such claim, remedy or right, unless and until such time as all of
the Obligations have been paid in full in cash.  Any claim which any Borrower
may have against any other Borrower with respect to any payments to any Agent or
any member of the Lender Group hereunder or under any of the Bank Product
Agreements are hereby expressly made subordinate and junior in right of payment,
without limitation as to any increases in the Obligations arising hereunder or
thereunder, to the prior payment in full in cash of the Obligations and, in the
event of any insolvency, bankruptcy, receivership, liquidation, reorganization
or other similar proceeding under the laws of any jurisdiction relating to any
Borrower, its debts or its assets, whether voluntary or involuntary, all such
Obligations shall be paid in full in cash before any payment or distribution of
any character, whether in cash, securities or other property, shall be made to
any other Borrower therefor.  If any amount shall be paid to any Borrower in
violation of the immediately preceding sentence, such amount shall be held in
trust for the benefit of Agent, for the benefit of the Lender Group and the Bank
Product Providers, and shall forthwith be paid to Agent to be credited and
applied to the Obligations and all other amounts payable under this Agreement,
whether matured or unmatured, in accordance with the terms of this Agreement, or
to be held as Collateral for any Obligations or other amounts payable under this
Agreement thereafter arising.  Notwithstanding anything to the contrary
contained in this Agreement, no Borrower may exercise any rights of subrogation,
contribution, indemnity, reimbursement or other similar rights against, and may
not proceed or seek recourse against or with respect to any property or asset
of, any other Borrower (the “Foreclosed Borrower”), including after payment in
full of the Obligations, if all or any portion of the Obligations have been
satisfied in connection with an exercise of remedies in respect of the Equity
Interests of such Foreclosed Borrower whether pursuant to this Agreement or
otherwise.

 

SECTION 3. INTEREST AND FEES

 

3.1       Interest.

 

(a)                                 Borrower shall pay to Agent, for the ratable
benefit of Lenders, interest on the outstanding principal amount of the Loans at
the applicable Interest Rate.  Interest shall accrue from the date the Loan is
made or the Obligation is incurred until paid by Borrower.  All interest
accruing hereunder on and after the date of any Event of Default or termination
hereof shall be payable on demand.

 

(b)                                 At any time an Event of Default shall exist
or have occurred and be continuing, at the election of Agent or the Required
Lenders, upon notice from Agent to Borrower, notwithstanding anything to the
contrary set forth in this Section 3.1, the principal of, and all accrued and
unpaid interest on, all Loans, fees, indemnities, or any other outstanding
Obligations of Borrower and any Guarantor under this Agreement and the other
Financing Agreements, shall bear interest, from the date such Event

 

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of Default occurred until the date such Event of Default is cured or waived in
writing in accordance herewith, at a rate per annum equal at all times to the
default rate provided for in the definition of Interest Rate.  At any time an
Event of Default shall exist or have occurred and be continuing, all interest
shall be payable on demand.

 

(c)                                  Except as provided in Section 3.2,
Section 2.3(k) or Section 3.3(a), interest shall be payable by Borrowers to
Agent, for the account of Lenders, 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 LIBOR Rate Loans) shall increase or
decrease by an amount equal to each increase or decrease in the Base Rate
effective on the first day of the month after any change in such Base Rate is
announced based on the Base Rate in effect on the last day of the month in which
any such change occurs. The Interest Rate on LIBOR Rate Loans shall increase or
decrease as provided for in Sections 3.3.

 

3.2       Fees.

 

(a)         Unused Line Fee. Borrowers shall pay to Agent, for the Pro Rata
Share of each Revolving Loan Lender, monthly an unused line fee at a rate equal
to one fifth percent (0.20%) per annum in the aggregate of the difference
between (i) the average daily principal balance of the outstanding Revolving
Loans and Letters of Credit during the immediately preceding month (or part
thereof) while this Agreement is in effect and for so long thereafter as any of
the Obligations are outstanding and (ii) the Revolving Loan Limit then in effect
(the “Unused Line Fee”).  The Unused Line Fee shall be payable on the first day
of each month in arrears.

 

(b)         Letter of Credit Fee.  In the case of the issuance of any Letter of
Credit, Borrowers shall pay to Agent, for the benefit of Revolving Loan Lenders
on a Pro Rata Basis, monthly a fee (the “Letter of Credit Fee”) at the
applicable rate determined as provided in accordance with the Applicable LC
Margin on a per annum basis on the average daily maximum amount available to be
drawn under such Letter of Credit for the immediately preceding month (or part
thereof), payable in arrears as of the first day of each succeeding month,
computed for each day from the date of issuance to the date of expiration (the
“Letter of Credit Rate”).  The Letter of Credit Fee shall be in addition to the
fronting fees and commissions, other fees, charges and expenses set forth in
Section 2.3(k).  The Letter of Credit Rate for standby Letters of Credit shall
be a rate equal to the Applicable LC Margin for standby Letters of Credit.  The
Letter of Credit Rate for documentary Letters of Credit shall be a rate equal to
the Applicable LC Margin for documentary Letters of Credit.  At the Required
Lenders’ option, Borrowers shall pay such Letter of Credit Fee at a Letter of
Credit Rate equal to two (2.00%) percent per annum greater than the otherwise
applicable Letter of Credit Rate on such average daily maximum amount for:
(i) the period from and after the date of termination or non-renewal of this
Agreement in accordance with its terms until Agent and Revolving Loan Lenders
have received full and final payment of all Obligations (notwithstanding entry
of a judgment against any Borrower or Guarantor) and (ii) the period 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 Agent.  The Letter of Credit
Fees shall be calculated on the basis of a three hundred sixty (360) day year
and actual days elapsed and the obligation of Borrowers to pay any portion of
the Letter of Credit Fees shall survive the termination or non-renewal of this
Agreement.

 

(c)          Revolving Loan Fee Letter.  Borrowers and Guarantors shall pay or
cause to be paid to Agent, for its own account and the account of Revolving Loan
Lenders, the other fees set forth in the Revolving Loan Fee Letter in the
amounts and at the times specified therein.  To the extent payment in full of
the applicable fees are received by Agent from or on behalf of Borrowers on or
about the date hereof, Agent shall pay to each Revolving Loan Lender its share
of such fees in accordance with the terms of the agreements between Agent and
such Revolving Loan Lender.

 

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3.3       LIBOR Option.

 

(a)         Interest and Interest Payment Dates.  In lieu of having interest
charged at the rate based upon the Base Rate, Borrowers shall have the option,
subject to Section 3.3(b) hereof (the “LIBOR Option”) to have interest on all or
a portion of the Revolving Loans be charged (whether at the time when made
(unless otherwise provided herein), upon conversion from a Base Rate Loan to a
LIBOR Rate Loan, or upon continuation of a LIBOR Rate Loan as a LIBOR Rate Loan)
at a rate of interest based upon the LIBOR Rate.  Interest on LIBOR Rate Loans
shall be payable on the earliest of (i) the last day of the Interest Period
applicable thereto; provided, that, subject to the following clauses (ii) and
(iii), in the case of any Interest Period greater than three months in duration,
interest shall be payable at three month intervals after the commencement of the
applicable Interest Period and on the last day of such Interest Period),
(ii) the date on which all or any portion of the Obligations are accelerated
pursuant to the terms hereof, or (iii) the date on which this Agreement is
terminated pursuant to the terms hereof.  On the last day of each applicable
Interest Period, unless Borrowers have properly exercised the LIBOR Option with
respect thereto, the interest rate applicable to such LIBOR Rate Loan
automatically shall convert to the rate of interest then applicable to Base Rate
Loans of the same type hereunder.  At any time that an Event of Default has
occurred and is continuing, and notice has been provided to Borrowers by Agent,
Borrowers no longer shall have the option to request that Revolving Loans bear
interest at a rate based upon the LIBOR Rate.

 

(b)         LIBOR Election.

 

(i)                       Borrowers may, at any time and from time to time, so
long as no Event of Default has occurred and is continuing, elect to exercise
the LIBOR Option by notifying Agent prior to 11:00 a.m. at least three Business
Days prior to the commencement of the proposed Interest Period (the “LIBOR
Deadline”).  Notice of Borrowers’ election of the LIBOR Option for a permitted
portion of the Revolving Loans and an Interest Period pursuant to this
Section shall be made by delivery to Agent of a LIBOR Notice received by Agent
before the LIBOR Deadline.  Promptly upon its receipt of each such LIBOR Notice,
Agent shall provide a copy thereof to each of the affected Lenders.

 

(ii)                    Each LIBOR Notice shall be irrevocable and binding on
Borrowers.  In connection with each LIBOR Rate Loan, each Borrower shall
indemnify, defend, and hold Agent and the Lenders harmless against any loss,
cost, or expense (excluding loss of anticipated profits) actually incurred by
Agent or any Lender as a result of (A) the payment or required assignment of any
principal of any LIBOR Rate Loan other than on the last day of an Interest
Period applicable thereto (including as a result of an Event of Default),
(B) the conversion of any LIBOR Rate Loan other than on the last day of the
Interest Period applicable thereto, or (C) the failure to borrow, convert,
continue or prepay any LIBOR Rate Loan on the date specified in any LIBOR Notice
delivered pursuant hereto (such losses, costs, or expenses, “Funding Losses”). 
A certificate of Agent or a Lender delivered to Borrowers setting forth in
reasonable detail any amount or amounts that Agent or such Lender is entitled to
receive pursuant to this Section 3.3 shall be conclusive absent manifest error. 
Borrowers shall pay such amount to Agent or the Lender, as applicable, within 30
days of the date of its receipt of such certificate.

 

(iii)                 Unless Agent, in its sole discretion, agrees otherwise,
Borrowers shall have not more than six LIBOR Rate Loans in effect at any given
time.  The aggregate amount of the LIBOR Rate Loans must be in an amount not
less than $1,000,000 or an integral multiple of $500,000 in excess thereof.

 

(c)          Conversion; Prepayment.  Borrowers may convert LIBOR Rate Loans to
Base Rate Loans or prepay LIBOR Rate Loans at any time; provided, that, in the
event that LIBOR Rate Loans are converted or prepaid on any date that is not the
last day of the Interest Period applicable thereto, including

 

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as a result of any prepayment through the required application by Agent of any
payments or proceeds of Collateral in accordance with any mandatory prepayment
provided for in this Agreement or for any other reason, including early
termination of the term of this Agreement or acceleration of all or any portion
of the Obligations pursuant to the terms hereof, each Borrower shall indemnify,
defend, and hold Agent and the Lenders and their Participants harmless against
any and all Funding Losses in accordance with Section 3.3(b)(ii).

 

(d)         Special Provisions Applicable to LIBOR Rate.

 

(i)                       The LIBOR Rate may be adjusted by Agent with respect
to any Lender on a prospective basis to take into account any additional or
increased costs to such Lender of maintaining or obtaining any eurodollar
deposits or increased costs (other than Taxes which shall be governed by
Section 15), in each case, due to changes in applicable law occurring subsequent
to the commencement of the then applicable Interest Period, including any
Changes in Law and changes in the reserve requirements imposed by the Board of
Governors, which additional or increased costs would increase the cost of
funding or maintaining loans bearing interest at the LIBOR Rate.  In any such
event, the affected Lender shall give Borrowers and Agent notice of such a
determination and adjustment and Agent promptly shall transmit the notice to
each other Lender and, upon its receipt of the notice from the affected Lender,
Borrowers may, by notice to such affected Lender (A) require such Lender to
furnish to Borrowers a statement setting forth in reasonable detail the basis
for adjusting such LIBOR Rate and the method for determining the amount of such
adjustment, or (B) repay the LIBOR Rate Loans of such Lender with respect to
which such adjustment is made (together with any amounts due under
Section 3.3(b)(ii)).

 

(ii)                    In the event that any change in market conditions or any
Change in Law shall at any time after the date hereof, in the reasonable opinion
of any Lender, make it unlawful or impractical for such Lender to fund or
maintain LIBOR Rate Loans or to continue such funding or maintaining, or to
determine or charge interest rates at the LIBOR Rate, such Lender shall give
notice of such changed circumstances to Agent and Borrowers and Agent promptly
shall transmit the notice to each other Lender and (y) in the case of any LIBOR
Rate Loans of such Lender that are outstanding, the date specified in such
Lender’s notice shall be deemed to be the last day of the Interest Period of
such LIBOR Rate Loans, and interest upon the LIBOR Rate Loans of such Lender
thereafter shall accrue interest at the rate then applicable to Base Rate Loans,
and (z) Borrowers shall not be entitled to elect the LIBOR Option until such
Lender determines that it would no longer be unlawful or impractical to do so.

 

(e)          No Requirement of Matched Funding.  Anything to the contrary
contained herein notwithstanding, neither Agent, nor any Lender, nor any of
their Participants, is required actually to acquire eurodollar deposits to fund
or otherwise match fund any Obligation as to which interest accrues at the LIBOR
Rate.

 

(f)           Effect of Benchmark Transition Event.

 

(i)                       Benchmark Replacement. Notwithstanding anything to the
contrary herein or in any other Financing Agreement, upon the occurrence of a
Benchmark Transition Event or an Early Opt-in Election, as applicable, Agent and
Borrowers may amend this Agreement to replace LIBOR with a Benchmark
Replacement. Any such amendment with respect to a Benchmark Transition Event
will become effective at 5:00 p.m. on the fifth (5th) Business Day after Agent
has provided notice to all Lenders of such proposed amendment so long as Agent
has not received, by such time, written notice of objection to such amendment
from the Required Lenders.  No replacement of LIBOR with a Benchmark Replacement
pursuant to this Section 3.3(f) will occur prior to the applicable Benchmark
Transition Start Date.

 

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(ii)                    Benchmark Replacement Conforming Changes. In connection
with a Benchmark Replacement, Agent shall have the right to make Benchmark
Replacement Conforming Changes from time to time and, notwithstanding anything
to the contrary herein or in any other Financing Agreement, any Benchmark
Replacement Conforming Changes will become effective without any further action
or the consent of any other party to this Agreement.

 

(iii)                 Notices; Standards for Decisions and Determinations. Agent
will promptly notify Borrowers and Lenders of (A) any occurrence of a Benchmark
Transition Event or an Early Opt-in Election, as applicable, and its related
Benchmark Replacement Date and Benchmark Transition Start Date, (B) the
implementation of any Benchmark Replacement, (C) the effectiveness of any
Benchmark Replacement Conforming Changes and (D) the commencement or conclusion
of any Benchmark Unavailability Period. Any determination, decision or election
that may be made by Agent or Lenders pursuant to this Section 3.3(f), including
any determination with respect to a tenor, rate or adjustment or of the
occurrence or non-occurrence of an event, circumstance or date and any decision
to take or refrain from taking any action, will be conclusive and binding absent
manifest error and may be made in its or their sole discretion and without
consent from any other party hereto, except, in each case, as expressly required
pursuant to this Section 3.3(f).

 

(iv)                Benchmark Unavailability Period. Upon Borrowers’ receipt of
notice of the commencement of a Benchmark Unavailability Period, Borrowers may,
upon notice to Agent not less than twenty-four (24) hours prior to the date that
such LIBOR Rate Loan is to be made or converted or continued, revoke any request
for a Borrowing of a LIBOR Rate Loan or, conversion to or continuation of a
LIBOR Rate Loan to be made, converted or continued during any Benchmark
Unavailability Period, provided, that, in the event that Borrowers do not revoke
such request or does not revoke such request in the time or manner required, any
such request shall be deemed to be a request for a Borrowing of, or conversion
to, a Base Rate Loan. During any Benchmark Unavailability Period, the component
of the Base Rate based upon LIBOR will not be used in any determination of the
Base Rate.

 

3.4       Capital Requirements.

 

(a)         If Issuing Bank or any Lender determines that (i) any Change in Law
regarding capital, liquidity or reserve requirements for banks or bank holding
companies, or (ii) compliance by Issuing Bank or such Lender, or their
respective parent bank holding companies, with any guideline, request or
directive of any Governmental Authority regarding capital adequacy or liquidity
requirements (whether or not having the force of law), has the effect of
reducing the return on Issuing Bank’s, such Lender’s, or such holding companies’
capital or liquidity as a consequence of Issuing Bank’s or such Lender’s
commitments, Loans, participations or other obligations hereunder to a level
below that which Issuing Bank, such Lender, or such holding companies could have
achieved but for such Change in Law or compliance (taking into consideration
Issuing Bank’s, such Lender’s, or such holding companies’ then existing policies
with respect to capital adequacy or liquidity requirements and assuming the full
utilization of such entity’s capital) by any amount deemed by Issuing Bank or
such Lender to be material, then Issuing Bank or such Lender may notify
Borrowers and Agent thereof.  Following receipt of such notice, Borrowers agree
to pay Issuing Bank or such Lender on demand the amount of such reduction of
return of capital as and when such reduction is determined, payable within 30
days after presentation by Issuing Bank or such Lender of a statement in the
amount and setting forth in reasonable detail Issuing Bank’s or such Lender’s
calculation thereof and the assumptions upon which such calculation was based
(which statement shall be deemed true and correct absent manifest error).  In
determining such amount, Issuing Bank or such Lender may use any reasonable
averaging and attribution methods.  Failure or delay on the part of Issuing Bank
or any Lender to demand compensation pursuant to this Section shall not
constitute a waiver of Issuing Bank’s or such Lender’s right to demand such
compensation; provided, that, Borrowers shall not be required to compensate
Issuing Bank or a Lender pursuant to this Section for

 

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any reductions in return incurred more than 180 days prior to the date that
Issuing Bank or such Lender notifies Borrowers of such Change in Law giving rise
to such reductions and of such Lender’s intention to claim compensation
therefor; provided further, that if such claim arises by reason of the Change in
Law that is retroactive, then the 180-day period referred to above shall be
extended to include the period of retroactive effect thereof.

 

(b)         If Issuing Bank or any Lender requests additional or increased costs
referred to in Section 2.3(l) or Section 3.3(d)(i) or amounts under
Section 3.4(a) or sends a notice under Section 3.3(d)(ii) relative to changed
circumstances (such Issuing Bank or Lender, an “Affected Lender”), then, at the
request of Borrowers, such Affected Lender shall use reasonable efforts to
promptly designate a different one of its lending offices or to assign its
rights and obligations hereunder to another of its offices or branches, if
(i) in the reasonable judgment of such Affected Lender, such designation or
assignment would eliminate or reduce amounts payable pursuant to Section 2.3(l),
Section 3.3(d)(i) or Section 3.4(a), as applicable, or would eliminate the
illegality or impracticality of funding or maintaining LIBOR Rate Loans, and
(ii) in the reasonable judgment of such Affected Lender, such designation or
assignment would not subject it to any material unreimbursed cost or expense and
would not otherwise be materially disadvantageous to it.  Borrowers agree to pay
all reasonable out-of-pocket costs and expenses incurred by such Affected Lender
in connection with any such designation or assignment.  If, after such
reasonable efforts, such Affected Lender does not so designate a different one
of its lending offices or assign its rights to another of its offices or
branches so as to eliminate Borrowers’ obligation to pay any future amounts to
such Affected Lender pursuant to Section 2.3(l), Section 3.3(d)(i) or
Section 3.4(a), as applicable, or to enable Borrowers to obtain LIBOR Rate
Loans, then Borrowers (without prejudice to any amounts then due to such
Affected Lender under Section 2.3(l), Section 3.3(d)(i) or Section 3.4(a), as
applicable) may, unless prior to the effective date of any such assignment the
Affected Lender withdraws its request for such additional amounts under
Section 2.3(l), Section 3.3(d)(i) or Section 3.4(a), as applicable, or indicates
that it is no longer unlawful or impractical to fund or maintain LIBOR Rate
Loans, may designate a different Issuing Bank or substitute a Lender or
prospective Lender, in each case, reasonably acceptable to Agent to purchase the
Obligations owed to such Affected Lender and such Affected Lender’s commitments
hereunder (a “Replacement Lender”), and if such Replacement Lender agrees to
such purchase, such Affected Lender shall assign to the Replacement Lender its
Obligations and commitments, and upon such purchase by the Replacement Lender,
which such Replacement Lender shall be deemed to be “Issuing Bank” or a “Lender”
(as the case may be) for purposes of this Agreement and such Affected Lender
shall cease to be “Issuing Bank” or a “Lender” (as the case may be) for purposes
of this Agreement.

 

(c)          Notwithstanding anything herein to the contrary, the protection of
Sections 2.3(l), 3.3(d), and 3.4 shall be available to Issuing Bank and each
Lender (as applicable) regardless of any possible contention of the invalidity
or inapplicability of the law, rule, regulation, judicial ruling, judgment,
guideline, treaty or other change or condition which shall have occurred or been
imposed, so long as it shall be customary for issuing banks or lenders affected
thereby to comply therewith.  Notwithstanding any other provision herein,
neither Issuing Bank nor any Lender shall demand compensation pursuant to this
Section 3.4 if it shall not at the time be the general policy or practice of
Issuing Bank or such Lender (as the case may be) to demand such compensation in
similar circumstances under comparable provisions of other credit agreements, if
any.

 

3.5       Maximum Interest.  Notwithstanding anything to the contrary contained
in this Agreement or any of the other Financing Agreements, in no event
whatsoever shall the aggregate of all amounts that are contracted for, charged
or received by Agent or any Lender pursuant to the terms of this Agreement or
any of the other Financing Agreements and that are deemed interest under
applicable law exceed the Maximum Interest Rate (including, to the extent
applicable, the provisions of Section 5197 of the Revised Statutes of the United
States of America as amended, 12 U.S.C. Section 85, as amended).  In no event

 

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shall any Borrower or Guarantor be obligated to pay interest or such amounts as
may be deemed interest under applicable law in amounts which exceed the Maximum
Interest Rate.  In the event any interest is charged or received in excess of
the Maximum Interest Rate (the “Excess”), each Borrower and Guarantor
acknowledges and stipulates that any such charge or receipt shall be the result
of an accident and bona fide error, and that any Excess received by Agent or any
Lender shall be applied, first, to the payment of the then outstanding and
unpaid principal hereunder; second to the payment of the other Obligations then
outstanding and unpaid; and third, returned to such Borrower or Guarantor.  All
monies paid to Agent or any Lender hereunder or under any of the other Financing
Agreements, whether at maturity or by prepayment, shall be subject to any rebate
of unearned interest as and to the extent required by applicable law. For the
purpose of determining whether or not any Excess has been contracted for,
charged or received by Agent or any Lender, all interest at any time contracted
for, charged or received from any Borrower or Guarantor in connection with this
Agreement or any of the other Financing Agreements shall, to the extent
permitted by applicable law, be amortized, prorated, allocated and spread during
the entire term of this Agreement in accordance with the amounts outstanding
from time to time hereunder and the Maximum Interest Rate from time to time in
effect in order to lawfully charge the maximum amount of interest permitted
under applicable laws.  The provisions of this Section 3.5 shall be deemed to be
incorporated into each of the other Financing Agreements (whether or not any
provision of this Section is referred to therein).

 

SECTION 4. CONDITIONS PRECEDENT

 

4.1       Conditions Precedent to Effectiveness of Agreement.  Each of the
following is a condition precedent to the effectiveness of this Agreement:

 

(a)         all requisite corporate action and proceedings in connection with
this Agreement and the other matters related hereto shall be satisfactory in
form and substance to Agent, and Agent shall have received all information and
copies of all documents, including records of requisite corporate action and
proceedings which Agent may have requested in connection therewith, such
documents where requested by Agent or its counsel to be certified by appropriate
corporate officers or Governmental Authority;

 

(b)         Agent shall have received, in form and substance satisfactory to
Agent, (i) projected monthly consolidated balance sheets, income statements,
statements of cash flows and availability of Borrowers and Guarantors for the
period through the end of the fiscal year of Borrowers and Guarantors ending
January 31, 2015, (ii) projected annual consolidated balance sheets, income
statements, statements of cash flows and availability of Borrowers and
Guarantors for the period through the end of the fiscal year of Borrowers and
Guarantors ending January 28, 2017, in each case as to the projections described
in the foregoing clauses (i) and (ii) with the assumptions set forth in all of
such projections in form and substance reasonably satisfactory to Agent, and an
opening pro forma balance sheet for Borrowers and Guarantors, (iii) any updates
to the projections described in clauses (i) and (ii), in each case in form and
substance reasonably satisfactory to Agent and (iv) copies of interim unaudited
consolidated financial statements for each quarter and month since the last
audited consolidated financial statements of Borrowers and Guarantors;

 

(c)          no material adverse change shall have occurred in the assets or
business of Borrowers since February 1, 2014 and no change or event shall have
occurred which would impair the ability of any Borrower or Obligor to perform
its obligations hereunder or under any of the other Financing Agreements to
which it is a party or of Agent or any Lender to enforce the Obligations or
realize upon the Collateral;

 

(d)         on the date hereof after giving effect to the transactions
contemplated by this Agreement, Compliance Excess Availability as determined by
Agent, shall be not less than $35,000,000,

 

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(e)          lien and tax lien search results for the location of each Borrower
and Guarantor (determined in accordance with the Uniform Commercial Code of the
applicable jurisdiction and any other applicable law) which search results shall
be in form and substance satisfactory to Agent;

 

(f)           Agent shall have received the Information Certificates, the review
of which shall be satisfactory to Agent in its good faith determination;

 

(g)          Agent shall have received, in form and substance satisfactory to
Agent in good faith, such opinion letters of counsel to Borrowers and Guarantors
with respect to this Agreement and such other matters related hereto as Agent
may request in good faith;

 

(h)         Agent shall have received the Revolving Loan Fee Letter, in form and
substance satisfactory to Agent, duly executed by each Borrower and Guarantor;

 

(i)             Agent shall have received an Amendment No. 1 to Second Amended
and Restated Collateral Assignment of Trademarks (Security Agreement), in form
and substance satisfactory to Agent, duly executed by Lernco and Lerner Outlet;

 

(j)            Agent shall have received an Amendment No. 1 to Amended and
Restated Collateral Assignment of Trademarks (Security Agreement), in form and
substance satisfactory to Agent, duly executed by Lerner;

 

(k)         Agent shall have received the Patent Collateral Assignment and
Security Agreement, in form and substance satisfactory to Agent, duly executed
by Lerner;

 

(l)             Agent shall have received the Copyright Collateral Assignment
and Security Agreement, in form and substance satisfactory to Agent, duly
executed by Lernco;

 

(m)     all fees, costs and expenses payable by Borrowers under the terms of
this Agreement and the other Financing Agreements shall have been paid in full;
and

 

(n)         all other documents and legal matters in connection with the
transactions contemplated by this Agreement shall have been delivered, executed
by all parties hereto or thereto, as applicable, or recorded and shall be in
form and substance satisfactory to Agent in good faith.

 

4.2       Conditions Precedent to All Loans and Letters of Credit.  Each of the
following is an additional condition precedent to the Lenders continuing to
provide Loans and/or providing Letters of Credit to Borrowers:

 

(a)         all representations and warranties contained herein and in the other
Financing Agreements shall be true and correct in all material respects with the
same effect as though such representations and warranties had been made on and
as of the date of the making of each such Loan or providing each such Letter of
Credit and after giving effect thereto, except to the extent that such
representations and warranties expressly relate solely to an earlier date (in
which case such representations and warranties shall have been true and accurate
in all material respects on and as of such earlier date);

 

(b)         no law, regulation, order, judgment or decree of any Governmental
Authority shall exist, and no action, suit, investigation, litigation or
proceeding shall be pending or threatened in any court or before any arbitrator
or Governmental Authority, which (i) purports to enjoin, prohibit, restrain or
otherwise affect (A) the making of the Loans or providing the Letters of Credit,
or (B) the consummation

 

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of the transactions contemplated pursuant to the terms hereof or the other
Financing Agreements or (ii) has a reasonable likelihood of having a Material
Adverse Effect; and

 

(c)          no Default or Event of Default shall exist or have occurred and be
continuing on and as of the date of the making of such Loan or providing each
such Letter of Credit and after giving effect thereto.

 

SECTION 5. GRANT AND PERFECTION OF SECURITY INTEREST

 

5.1       Grant of Security Interest.

 

(a)         To secure payment and performance of all Obligations, each Borrower
and Guarantor hereby grants to Agent, for itself and the ratable benefit of
Secured Parties a continuing security interest in, a lien upon, and a right of
set off against, for itself and the ratable benefit of Secured Parties, as
security, and hereby confirms, reaffirms and restates the prior grant thereof to
Agent, for itself and the ratable benefit of the Secured Parties pursuant to the
Existing Loan Agreement, all personal property and fixtures, and interests in
personal property and fixtures, of such Borrower or Guarantor, whether now owned
or hereafter acquired or existing, and wherever located (together with all other
collateral security for the Obligations at any time granted to or held or
acquired by Agent or any Secured Party, collectively, the “Collateral”)
including, without limitation, the following:

 

(i)                       all Accounts;

 

(ii)                    all general intangibles;

 

(iii)                 all goods, including, without limitation, Inventory and
Equipment, whether ordered, in progress, finished or received;

 

(iv)                all fixtures;

 

(v)                   all chattel paper, including, without limitation, all
tangible and electronic chattel paper;

 

(vi)                all instruments, including, without limitation, all
promissory notes;

 

(vii)             all documents;

 

(viii)          all deposit accounts;

 

(ix)                all letters of credit, banker’s acceptances and similar
instruments and including all letter-of-credit rights;

 

(x)                   all supporting obligations and all present and future
liens, security interests, rights, remedies, title and interest in, to and in
respect of Receivables and other Collateral, including (A) rights and remedies
under or relating to guaranties, contracts of suretyship, letters of credit and
other insurance related to the Collateral, (B) rights of stoppage in transit,
replevin, repossession, reclamation and other rights and remedies of an unpaid
vendor, lienor or secured party, (C) goods described in invoices, documents,
contracts or instruments with respect to, or otherwise representing or
evidencing, Receivables or other Collateral, including returned, repossessed and
reclaimed goods, and (D) deposits by and property of account debtors or other
persons securing the obligations of account debtors;

 

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(xi)                all (A) investment property (including securities, whether
certificated or uncertificated, securities accounts, security entitlements,
commodity contracts or commodity accounts) and (B) monies, credit balances,
deposits and other property of such Borrower or Guarantor now or hereafter held
or received by or in transit to Agent, any Secured Party or its Affiliates or at
any other depository or other institution from or for the account of such
Borrower or Guarantor, whether for safekeeping, pledge, custody, transmission,
collection or otherwise;

 

(xii)             all commercial tort claims, including, without limitation,
those identified on Schedule 5.2(h) hereto;

 

(xiii)          to the extent not otherwise described above, all Receivables;

 

(xiv)         all Records; and

 

(xv)            all products and proceeds of the foregoing, in any form,
including insurance proceeds (including proceeds of any business interruption
insurance) and all claims against third parties for loss or damage to or
destruction of or other involuntary conversion of any kind or nature of any or
all of the other Collateral.

 

(b)         Notwithstanding anything herein to the contrary, in no event shall
the Collateral include, and no Borrower or Guarantor shall be deemed to have
granted a security interest in, (i) any Intellectual Property, other than any
licenses of Intellectual Property by another Person (including a Borrower or
Guarantor) in favor of a Borrower or Guarantor (provided, that, the foregoing
exclusions in clause (i) shall in no way be construed to limit the IP Use Rights
of Agent), (ii) the Equity Interests of any Foreign Subsidiary that is a
“controlled foreign corporation” (as such term is defined in Section 957(a) of
the Code), to the extent such Foreign Subsidiary is not treated as a
“disregarded entity” by the Code, or the Equity Interests of any Foreign Holdco
Subsidiary in excess of sixty five (65%) percent of all of the issued and
outstanding shares of Equity Interests of such Subsidiary entitled to vote
(within the meaning of Treasury Regulation Section 1.956-2); provided, that, if
the pledge of one hundred (100%) percent of the Equity Interests of such Foreign
Subsidiary or Foreign Holdco Subsidiary would not have an adverse tax impact on
such Borrower or Guarantor for purposes of Section 956 of the Code as determined
by Agent in its good faith discretion in consultation with such Borrower or
Guarantor, Borrower or such Guarantor shall pledge to Agent one hundred (100%)
percent of the Equity Interests of such Foreign Subsidiary or such Foreign
Holdco Subsidiary;  (iii) any rights or interest in any contract, lease, permit,
license, or license agreement covering real or personal property of any Borrower
or Guarantor if under the terms of such contract, lease, permit, license, or
license agreement, or applicable law with respect thereto, the grant of a
security interest or lien therein is prohibited as a matter of law or under the
terms of such contract, lease, permit, license, or license agreement and such
prohibition or restriction has not been waived or the consent of the other party
to such contract, lease, permit, license, or license agreement has not been
obtained (provided, that (A) the foregoing exclusions of this clause (iii) shall
in no way be construed (1) to apply to the extent that any described prohibition
or restriction is ineffective under Section 9-406, 9-407, 9-408, or 9-409 of the
Code or other applicable law, or (2) to apply to the extent that any consent or
waiver has been obtained that would permit Agent’s security interest or lien to
attach notwithstanding the prohibition or restriction on the pledge of such
contract, lease, permit, license, or license agreement and (B) the foregoing
exclusions of clauses (i), (ii) or (iii) shall in no way be construed to limit,
impair, or otherwise affect any of Agent’s, any other member of the Lender
Group’s or any Bank Product Provider’s continuing security interests in and
liens upon any rights or interests of any Borrower or Guarantor in or to
(1) monies due or to become due under or in connection with any described
contract, lease, permit, license, license agreement, or Equity Interests
(including any Accounts or Equity Interests), or (2) any proceeds from the sale,
license, lease, or other dispositions of any such contract, lease, permit,
license, license agreement, or Equity Interests).

 

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5.2       Perfection of Security Interests.

 

(a)         Each Borrower and Guarantor irrevocably and unconditionally
authorizes Agent (or its agent) to file at any time and from time to time such
financing statements with respect to the Collateral naming Agent or its designee
as the secured party and such Borrower or Guarantor as debtor, as Agent may
require, and including any other information with respect to such Borrower or
Guarantor or otherwise required by part 5 of Article 9 of the UCC of such
jurisdiction as Agent may determine, together with any amendment and
continuations with respect thereto, which authorization shall apply to all
financing statements filed on, prior to or after the date hereof.  Each Borrower
and Guarantor hereby ratifies and approves all financing statements naming Agent
or its designee as secured party and such Borrower or Guarantor, as the case may
be, as debtor with respect to the Collateral (and any amendments with respect to
such financing statements) filed by or on behalf of Agent prior to the date
hereof and ratifies and confirms the authorization of Agent to file such
financing statements (and amendments, if any).  Each Borrower and Guarantor
hereby authorizes Agent to adopt on behalf of such Borrower or Guarantor any
symbol required for authenticating any electronic filing.  In the event that the
description of the collateral in any financing statement naming Agent or its
designee as the secured party and any Borrower or Guarantor as debtor includes
assets and properties of such Borrower or Guarantor that do not at any time
constitute Collateral, whether hereunder, under any of the other Financing
Agreements or otherwise, the filing of such financing statement shall
nonetheless be deemed authorized by such Borrower or Guarantor to the extent of
the Collateral included in such description and it shall not render the
financing statement ineffective as to any of the Collateral or otherwise affect
the financing statement as it applies to any of the Collateral.  In no event
shall any Borrower or Guarantor at any time file, or permit or cause to be
filed, any correction statement or termination statement with respect to any
financing statement (or amendment or continuation with respect thereto) naming
Agent or its designee as secured party and such Borrower or Guarantor as debtor,
without the prior written consent of Agent.

 

(b)         No Borrower or Guarantor has any chattel paper (whether tangible or
electronic) or instruments as of the date hereof, except as set forth on
Schedule 5.2(b) hereto.  In the event that any Borrower or Guarantor shall be
entitled to or shall receive any chattel paper or instrument after the date
hereof, which together with all other chattel paper and instruments that
Borrowers and Guarantors have become entitled to or have received after the date
hereof has a fair market value in excess of $100,000 individually or in the
aggregate, such Borrower or Guarantor shall promptly notify Agent thereof in
writing.  Promptly upon the receipt thereof by or on behalf of such Borrower or
Guarantor (including by any agent or representative), such Borrower or Guarantor
shall deliver, or cause to be delivered to Agent, all tangible chattel paper and
instruments that such Borrower or Guarantor has or may at any time acquire,
accompanied by such instruments of transfer or assignment duly executed in blank
as Agent may from time to time specify, in each case except as Agent may
otherwise agree.  At Agent’s option, such Borrower or Guarantor shall, or Agent
may at any time on behalf of such Borrower or Guarantor, cause the originals of
any such instruments and chattel paper that have a fair market value in excess
of $100,000 individually or in the aggregate, to be conspicuously marked in a
form and manner reasonably acceptable to Agent with the following legend
referring to chattel paper or instruments as applicable: “This [chattel
paper][instrument] is subject to the security interest of Wells Fargo Bank,
National Association, and any sale, transfer, assignment or encumbrance of this
[chattel paper][instrument] violates the rights of such secured party.”

 

(c)          In the event that any Borrower or Guarantor shall at any time hold
or acquire an interest in any electronic chattel paper or any “transferable
record” (as such term is defined in Section 201 of the Federal Electronic
Signatures in Global and National Commerce Act or in Section 16 of the Uniform
Electronic Transactions Act as in effect in any relevant jurisdiction), which
together with all other electronic chattel paper or “transferable record” that
Borrowers and Guarantors have become entitled to has a fair market value in
excess of $100,000 individually or in the aggregate, such Borrower or

 

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Guarantor shall promptly notify Agent thereof in writing.  Promptly upon Agent’s
request, such Borrower or Guarantor shall take, or cause to be taken, such
actions as Agent may request to give Agent control of such electronic chattel
paper under Section 9-105 of the UCC and control of such transferable record
under Section 201 of the Federal Electronic Signatures in Global and National
Commerce Act or, as the case may be, Section 16 of the Uniform Electronic
Transactions Act, as in effect in such jurisdiction.

 

(d)         No Borrower or Guarantor has any deposit accounts as of the date
hereof, except as set forth in such Borrower’s or Guarantor’s Information
Certificate.  No Borrower or Guarantor shall, directly or indirectly, after the
date hereof open, establish or maintain any Central Collection Deposit Account
unless each of the following conditions is satisfied:  (i) Agent shall have
received not less than five (5) Business Days’ prior written notice of the
intention of such Borrower or Guarantor to open or establish such account which
notice shall specify in reasonable detail and specificity reasonably acceptable
to Agent the name of the Central Collection Deposit Account, the owner of the
Central Collection Deposit Account, the name and address of the bank at which
such Central Collection Deposit Account is to be opened or established, the
individual at such bank with whom such Borrower or Guarantor is dealing and the
purpose of the Central Collection Deposit Account, (ii) the bank where such
Central Collection Deposit Account is opened or maintained shall be reasonably
acceptable to Agent, and (iii) on or before the opening of such Central
Collection Deposit Account, such Borrower or Guarantor shall as Agent may
specify either (A) deliver to Agent a Deposit Account Control Agreement with
respect to such Central Collection Deposit Account duly authorized, executed and
delivered by such Borrower or Guarantor and the bank at which such deposit
account is opened and maintained or (B) arrange for Agent to become the customer
of the bank with respect to the deposit account on terms and conditions
reasonable acceptable to Agent.  The terms of this subsection (d) shall not
apply to (i) deposit accounts specifically and exclusively used for payroll,
payroll taxes and other employee wage and benefit payments to or for the benefit
of such Borrower’s or Guarantor’s salaried employees or (ii) an account
maintained by Borrowers and a management company engaged by Borrowers for the
purpose of paying the real property taxes of Borrowers and Guarantors so long as
(A) Borrowers prefund the amount of taxes to be paid in such account not earlier
than ten (10) Business Days prior to the date such taxes are required to be paid
and (B) at all times other than the time when such account may be prefunded
during such ten (10) day period with the amount of taxes to be so paid, not more
than $5,000 is maintained in such account.  Agent shall not exercise its right
to require amounts in such accounts to be sent to the Agent Payment Account
except as provided by Section 6.3 hereof.

 

(e)          No Borrower or Guarantor owns or holds, directly or indirectly,
beneficially or as record owner or both, any investment property, as of the date
hereof, or has any investment account, securities account, commodity account or
other similar account with any bank or other financial institution or other
securities intermediary or commodity intermediary as of the date hereof, in each
case except as set forth on Schedule 5.2(e) hereto.

 

(i)                       In the event that any Borrower or Guarantor shall be
entitled to or shall at any time after the date hereof hold or acquire any
certificated securities, which together with all other certificated securities
in which Borrowers and Guarantors hold or acquire an interest after the date
hereof have a fair market value in excess of $100,000 individually or in the
aggregate, such Borrower or Guarantor shall promptly endorse, assign and deliver
the same to Agent, accompanied by such instruments of transfer or assignment
duly executed in blank as Agent may from time to time specify.  If any
securities, now or hereafter acquired by any Borrower or Guarantor are
uncertificated and are issued to such Borrower or Guarantor or its nominee
directly by the issuer thereof, and such securities together with all other such
securities acquired by Borrowers and Guarantors have a fair market value in
excess of $100,000 individually or in the aggregate, such Borrower or Guarantor
shall immediately notify Agent thereof and shall as Agent may specify, either
(A) cause the issuer to agree to comply with instructions from Agent as to such
securities, without further consent of such Borrower or Guarantor or such
nominee, or (B) arrange

 

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for Agent to become the registered owner of the securities.

 

(f)           No Borrower or Guarantor shall, directly or indirectly, after the
date hereof open, establish or maintain any investment account, securities
account, commodity account or any other similar account (other than a deposit
account) with any securities intermediary or commodity intermediary unless each
of the following conditions is satisfied: (A) Agent shall have received not less
than five (5) Business Days’ prior written notice of the intention of such
Borrower or Guarantor to open or establish such account which notice shall
specify in reasonable detail and specificity reasonably acceptable to Agent the
name of the account, the owner of the account, the name and address of the
securities intermediary or commodity intermediary at which such account is to be
opened or established, the individual at such intermediary with whom such
Borrower or Guarantor is dealing and the purpose of the account, (B) the
securities intermediary or commodity intermediary (as the case may be) where
such account is opened or maintained shall be reasonably acceptable to Agent,
and (C) on or before the opening of such investment account, securities account
or other similar account with a securities intermediary or commodity
intermediary, such Borrower or Guarantor shall as Agent may specify either
(1) execute and deliver, and cause to be executed and delivered to Agent, an
Investment Property Control Agreement with respect thereto duly authorized,
executed and delivered by such Borrower or Guarantor and such securities
intermediary or commodity intermediary or (2) arrange for Agent to become the
entitlement holder with respect to such investment property on terms and
conditions acceptable to Agent.  Agent shall not exercise its right to require
amounts in such accounts to be sent to the Agent Payment Account except during
the existence of a Cash Dominion Event.

 

(g)          No Borrower or Guarantor is the beneficiary or otherwise entitled
to any right to payment under any letter of credit, banker’s acceptance or
similar instrument as of the date hereof, except as set forth on Schedule
5.2(g) hereto.  In the event that any Borrower or Guarantor shall be entitled to
or shall receive any right to payment under any letter of credit, banker’s
acceptance or any similar instrument, whether as beneficiary thereof or
otherwise after the date hereof, which together with all other letters of
credit, banker’s acceptances and similar instruments that Borrowers and
Guarantors have become entitled to or have received after the date hereof have a
fair market value in excess of $100,000 individually or in the aggregate, such
Borrower or Guarantor shall promptly notify Agent thereof in writing.  Such
Borrower or Guarantor shall immediately, as Agent may specify, either
(i) deliver, or cause to be delivered to Agent, with respect to any such letter
of credit, banker’s acceptance or similar instrument, the written agreement of
the issuer and any other nominated person obligated to make any payment in
respect thereof (including any confirming or negotiating bank), in form and
substance reasonably satisfactory to Agent, consenting to the assignment of the
proceeds of the letter of credit to Agent by such Borrower or Guarantor and
agreeing to make all payments thereon directly to Agent or as Agent may
otherwise direct or (ii) cause Agent to become, at Borrowers’ expense, the
transferee beneficiary of the letter of credit, banker’s acceptance or similar
instrument (as the case may be).

 

(h)         No Borrower or Guarantor has any commercial tort claims with respect
to which the amount claimed exceeds $1,000,000 and either a written demand
therefor has been made or legal action has commenced, except as set forth on
Schedule 5.2(h) hereto.  In the event that any Borrower or Guarantor shall at
any time after the date hereof have any such commercial tort claims, or if an
Event of Default exists, if any Borrower or Guarantor has any commercial tort
claims, such Borrower or Guarantor shall promptly notify Agent thereof in
writing, which notice shall (i) set forth in reasonable detail the basis for and
nature of such commercial tort claim and (ii) include the express grant by such
Borrower or Guarantor to Agent of a security interest in such commercial tort
claim (and the proceeds thereof).  In the event that such notice does not
include such grant of a security interest, the sending thereof by such Borrower
or Guarantor to Agent shall be deemed to constitute such grant to Agent.  Upon
the sending of such notice, any commercial tort claim described therein shall
constitute part of the Collateral and shall be deemed included therein.  Without
limiting the authorization of Agent provided in Section 5.2(a) hereof

 

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or otherwise arising by the execution by such Borrower or Guarantor of this
Agreement or any of the other Financing Agreements, Agent is hereby irrevocably
authorized from time to time and at any time to file such financing statements
naming Agent or its designee as secured party and such Borrower or Guarantor as
debtor, or any amendments to any financing statements, covering any such
commercial tort claim as Collateral.  In addition, such Borrower or Guarantor
shall promptly upon Agent’s request, execute and deliver, or cause to be
executed and delivered, to Agent such other agreements, documents and
instruments as Agent may require in connection with such commercial tort claim.

 

(i)             No Borrower or Guarantor has any goods, documents of title or
other Collateral in the custody, control or possession of a third party as of
the date hereof, except as set forth in such Borrower’s or Guarantor’s
Information Certificate and except for goods located in the United States in
transit to a location of a Borrower or Guarantor permitted herein in the
ordinary course of business of such Borrower or Guarantor in the possession of
any carrier transporting such goods.  In the event that any goods, documents of
title or other Collateral with a fair market value in excess of $100,000 are at
any time after the date hereof in the custody, control or possession of any
other person not referred to in a Borrower’s or Guarantor’s Information
Certificate or such carriers, such Borrower or Guarantor shall promptly notify
Agent thereof in writing.  Promptly upon Agent’s request, such Borrower or
Guarantor shall deliver to Agent a Collateral Access Agreement duly authorized,
executed and delivered by such person and such Borrower or Guarantor.

 

(j)            Each Borrower and Guarantor shall take any other actions
reasonably requested by Agent from time to time to cause the attachment,
perfection and first priority of, and the ability of Agent to enforce, the
security interest of Agent in any and all of the Collateral, including, without
limitation, (i) executing, delivering and, where appropriate, filing financing
statements and amendments relating thereto under the UCC or other applicable
law, to the extent, if any, that such Borrower’s or Guarantor’s signature
thereon is required therefor, (ii) upon Agent’s request after the occurrence and
during the continuance of an Event of Default, causing Agent’s name to be noted
as secured party on any certificate of title for a titled good if such notation
is a condition to attachment, perfection or priority of, or ability of Agent to
enforce, the security interest of Agent in such Collateral, (iii) complying with
any provision of any statute, regulation or treaty of the United States as to
any Collateral if compliance with such provision is a condition to attachment,
perfection or priority of, or ability of Agent to enforce, the security interest
of Agent in such Collateral, (iv) obtaining the consents and approvals required
by any Governmental Authority or third party, including, without limitation, any
consent of any licensor, lessor or other Person obligated on Collateral, and
taking all actions required by other law, as applicable in any relevant
jurisdiction.

 

5.3       IP Use Rights.

 

(a)         Without limiting any rights Agent may otherwise have under
applicable law or by agreement, each Borrower and Guarantor hereby grants, and
shall cause each of its Subsidiaries (including, without limitation, the IP
Holdcos) to grant, to Agent (and its agents or representatives) an irrevocable
license and right to use (for the avoidance of doubt, only to the extent the
applicable Borrower or Guarantors has the right to use), without the obligation
to pay any royalties or any other charges, each Borrower’s and each Guarantor’s,
and each such Subsidiaries’, Intellectual Property, including but not limited
to, any labels, patents, trademarks, trade names, URLs, domain names, industrial
designs, copyrights, and advertising matter, whether owned by any such Borrower
or Guarantor, or any such Subsidiaries, or with respect to which any Borrower or
Guarantor, or any such Subsidiaries, has rights under license, sublicense, or
other agreements (including any license of Intellectual Property in favor of any
Borrower or Guarantor, or any such Subsidiaries) as it pertains to the
Collateral, in connection with any (a) field exam, audit, appraisal or rights to
inspect the Collateral and (b) the preparation for the sale, and advertising for
the sale, of, or the selling of any Collateral (such rights and license being
referred to as

 

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the “IP Use Rights”).

 

(b)         Each Borrower and Guarantor hereby acknowledges and agrees, and
confirms that each of its Subsidiaries acknowledges and confirms (including,
without limitation, the IP Holdcos) that, if an Event of Default exists or has
occurred and is continuing, Agent may exercise the IP Use Rights at any time to
collect any Accounts, assemble, inspect, copy or download information stored on
any Equipment, take actions to preserve and protect its security interest on any
Collateral, process raw materials or work-in-process into finished Inventory,
take possession of, move, package, prepare and advertise for sale or
disposition, sell (by public auction, private sale or a “store closing,” “going
out of business” or similar sale, whether in any store, on the internet or any
website owned or used by Borrowers’ or Guarantors’, and whether in bulk, in lots
or to customers in the ordinary course of business or otherwise and which sale
may include any Inventory of the same type sold in Borrowers’ or Guarantors’
business), store, collect, take reasonable actions to protect, secure and
otherwise enforce the rights of Agent in and to the Collateral, or otherwise
deal with the Collateral, in each case without the involvement of or
interference by, or any liability to, any Borrower or Guarantor or any of their
Subsidiaries.

 

(c)          Borrowers and Guarantors shall, and shall cause each of their
Subsidiaries (including, without limitation, the IP Holdcos) to (i) cooperate
with Agent in its efforts to enforce its security interest in the Collateral,
collect all Accounts and to finish any work-in-process and sell any of the
Collateral, (ii) not hinder or restrict in any respect Agent from enforcing its
security interest in the Collateral, from collecting any Accounts, from
finishing any work-in-process or selling any of the Collateral, and (iii) permit
Agent (its agents and representatives) to exercise the IP Use Rights. Borrowers
and Guarantors shall not, and shall not permit any of their Subsidiaries, to
sell, lease, license or dispose of any of Intellectual Property without the
prior written consent of Agent, except as permitted by Section, 9.7(b)(iii),
9.7(b)(xi) and 9.7(b)(xii). Subject to the terms and conditions hereof, to the
extent that any Borrower or Guarantor, or any of their Subsidiaries, may grant a
security interest in any of the Intellectual Property to the extent provided in,
and in accordance with the terms and conditions of, this Agreement, Borrowers
and Guarantors shall, and shall cause each of their Subsidiaries to, deliver to
Agent, in form and substance reasonably satisfactory to Agent, a use agreement
by such secured party in favor of Agent providing Agent with the IP Use Rights.

 

(d)         If any order or injunction is issued or stay is granted or is
otherwise effective by operation of law that prohibits Agent from exercising any
of its rights hereunder, then the IP Use Rights granted to Agent shall be stayed
during the period of such prohibition and shall continue thereafter.  The IP Use
Rights granted by Borrowers, Guarantors and their Subsidiaries, to Agent shall
be applicable both before and after the filing of any petition by or against any
Borrower, Guarantor or any of their Subsidiaries in any Insolvency Event and all
converted or succeeding cases in respect thereof, and all references herein to
any Borrower, Guarantor or any of their Subsidiaries shall be deemed to apply to
a trustee for any such Borrower, Guarantor or any of their Subsidiaries and any
such Borrower, Guarantor or any of their Subsidiaries as a debtor or debtor in
possession.  It is hereby acknowledged and agreed that Agent shall have the
right to bring an action to enforce the IP Use Rights, including, without
limitation, an action seeking specific performance of any IP Use Rights.

 

(e)          Agent shall be accountable only for amounts that it actually
receives as a result of the exercise of its IP Use Rights, and neither Agent nor
any of their officers, directors, partners, employees, agents, attorneys and
other advisors, attorneys-in-fact or affiliates shall be responsible to any
Borrower or Guarantor, or any Subsidiary of any Borrower or Guarantor, for any
act or failure to act in connection with the exercise of the IP Use Rights,
except to the extent that any such act or failure to act is found by a final and
non-appealable order of a court of competent jurisdiction to have resulted from
Agent’s own gross negligence or willful misconduct in breach of a duty owed to
such Borrower or Guarantor, or such Subsidiary of any Borrower or Guarantor. 
Borrowers and Guarantors hereby agree to defend, indemnify

 

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and hold harmless Agent and its officers, directors, partners, employees,
agents, attorneys and other advisors, attorneys-in-fact or affiliates against: 
(i) all obligations, demands, claims, and liabilities claimed or asserted by any
other party in connection with the exercise by Agent of the IP Use Rights, and
(ii) all losses or expenses in any way suffered, incurred, or paid by Agent as a
result of or in any way arising out of, or a result of the exercise by Agent of
the IP Use Rights (including without limitation, reasonable attorneys’ fees and
reasonable expenses), except for losses resulting from Agent’s gross negligence
or willful misconduct as determined by a final and non-appealable order of a
court of competent jurisdiction.

 

SECTION 6. COLLECTION AND ADMINISTRATION

 

6.1       Borrowers’ Loan Accounts.  Agent shall maintain one or more loan
account(s) on its books in the name of Borrowers (collectively, the “Loan
Accounts”) on which shall be recorded (i)  all Revolving Loans, Letters of
Credit and other Obligations attributable or allocable to the Credit Facility,
including all Special Agent Advances, (ii) all payments made by or on behalf of
a Borrower in respect of the Obligations arising under or related to the
Revolving Loans, including all Special Agent Advances, and all payments in
respect of any Collateral, and (iii) all other appropriate debits and credits as
provided in this Agreement, including, without limitation, fees, charges, costs,
expenses and interest payable hereunder attributable or allocable to the Credit
Facility. All entries in the Loan Accounts shall be made in accordance with
Agent’s customary practices as in effect from time to time.  All Collateral or
other collateral security held by or granted to Agent or Secured Parties by a
Borrower or any third persons shall be security for the payment and performance
of any and all Obligations attributable to the Credit Facility to Agent and
Secured Parties (including, but not limited to, the Revolving Loans and Letters
of Credit), notwithstanding the maintenance of separate accounts for Borrowers
or third persons or the existence of any notes.

 

6.2       Statements.  Agent shall render to Borrowers a monthly statement
setting forth the balance in the Loan Accounts maintained by Agent for Borrowers
pursuant to the provisions of this Agreement, including principal, interest,
fees, costs and expenses as of the end of such month.  Agent shall use its best
efforts to provide such monthly statement to Borrowers by the 15th day of the
next succeeding month.  Each such statement shall be subject to subsequent
adjustment by Agent but shall, absent manifest errors or omissions, be
considered correct and deemed accepted by Borrowers and conclusively binding
upon Borrowers as an account stated except to the extent that Agent receives a
written notice from Borrowers of any specific exceptions of Borrowers thereto
within sixty (60) days after the date such statement has been received by
Borrowers.  Until such time as Agent shall have rendered to Borrowers a written
statement as provided above, the balance in the Loan Accounts shall be
presumptive evidence of the amounts due and owing to Agent, and Revolving Loan
Lenders by Borrowers.

 

6.3       Collection of Accounts.

 

(a)         Borrowers and Guarantors shall establish and maintain, at their
expense, blocked accounts or lockboxes and related blocked accounts (in either
case, “Blocked Accounts”), as Agent may specify, with the banks set forth on
Schedule 31 to the Information Certificates and such other banks as are
reasonably acceptable to Agent; provided, that, not later than sixty (60) days
following the date hereof (or such later date as Agent may agree in its
discretion), each Borrower and Guarantor shall establish and maintain, at its
expense, deposit accounts and cash management services at Wells or one of its
Affiliates (except for certain local deposit accounts agreed to by Agent and
Borrowers which shall be maintained with such other institutions as are
reasonably acceptable to Agent) of a type and on terms reasonably satisfactory
to Agent.  The banks set forth on Schedule 31 of the Information Certificates
constitute all of the banks with which all Borrowers and all Guarantors have
deposit account and cash management arrangements as of the date hereof and
identifies each of the deposit accounts at such banks that are used for
receiving receipts from particular locations of a Borrower or otherwise
describes the nature of the use

 

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of such deposit account by such Borrower or Guarantor.  Such Blocked Accounts
may be Central Collection Deposit Accounts, and the term Blocked Accounts shall
include the Central Collection Deposit Accounts.  Borrowers and Guarantors shall
retain the use of their cash, including payments and proceeds of Collateral;
provided, that, at any time that a Cash Dominion Event exists or has occurred
and is continuing, Agent may, at its option, instruct the banks at which the
Blocked Accounts are maintained to remit the funds therein to Agent for
application to the Obligations and to otherwise comply only with the
instructions of Agent.  If such Cash Dominion Event ceases to exist, Agent
agrees to notify such banks that such banks are no longer required to remit such
funds to the Agent Payment Account or Agent, and that such banks shall transfer
such funds to the operations or disbursement accounts of the applicable Borrower
upon the instructions of such Borrower.  Within sixty (60) days after the date
hereof, each Borrower and Guarantor shall have delivered, or caused to be
delivered to Agent, a Deposit Account Control Agreement duly authorized,
executed and delivered by each bank where a Blocked Account is maintained for
which Agent has not yet received a Deposit Account Control Agreement; provided,
that, Borrowers and Guarantors shall not be required to deliver such Deposit
Account Control Agreements with respect to (i) any deposit account that is
specifically and exclusively used for payroll, payroll taxes and other employee
wage and benefit payments to or for the benefit of any Borrower’s or Guarantor’s
salaried employees, or their fiduciary trust accounts and (ii) an account
maintained by Borrowers and a management company engaged by Borrowers for the
purpose of paying the real property taxes of Borrowers and Guarantors so long as
(A) Borrowers prefund the amount of taxes to be paid in such account not earlier
than ten (10) Business Days prior to the date such taxes are required to be paid
and (B) at all times other than the time when such account may be prefunded
during such five (5) day period with the amount of taxes to be so paid, not more
than $5,000 is maintained in such account. The Deposit Account Control
Agreements shall provide that upon notice from Agent (which shall be given upon
the existence or occurrence of a Cash Dominion Event and shall be revoked
promptly after the expiration of such Cash Dominion Event), such bank will send
funds on a daily basis to the Agent Payment Account and otherwise take
instruction with respect to such Blocked Account only from Agent.  Promptly upon
Agent’s request, each Borrower and Guarantor shall execute and deliver such
agreements or documents as Agent may in good faith require in connection
therewith.  Each Borrower and Guarantor agrees that after notice by Agent to the
bank under the Deposit Account Control Agreement, all payments made to such
Blocked Accounts or other funds received and collected by Agent, whether in
respect of the Receivables, as proceeds of Inventory or other Collateral or
otherwise shall be treated as payments to Agent, for itself and the ratable
benefit of the Lenders and the Bank Product Providers, in respect of the
Obligations and therefore shall constitute the property of Agent, for itself and
the ratable benefit of the Lenders and the Bank Product Providers, to the extent
of the then outstanding Obligations.

 

(b)         For purposes of calculating the amount of the Revolving Loans
available to Borrowers, such payments will be applied (conditional upon final
collection) to the Revolving Loans and other Obligations in respect thereof on
the Business Day of receipt by Agent of immediately available funds in the Agent
Payment Account provided such payments and notice thereof are received in
accordance with Agent’s usual and customary practices as in effect from time to
time and prior to 12:00 p.m., and if not, then on the next Business Day.  For
the purposes of calculating interest on the Revolving Loans and other
Obligations in respect thereof, for the sole and equal benefit of Wells Fargo,
such payments or other funds received will be applied (conditional upon final
collection) to the Obligations on the same day of the receipt of immediately
available funds by Agent in the Agent Payment Account provided such payments or
other funds and notice thereof are prior to 12:00 p.m., and if not, then on the
next Business Day.

 

(c)          Each Borrower and Obligor and its shareholders, directors,
employees, agents, Subsidiaries or other Affiliates shall, acting as trustee for
Agent, receive, as the property of Agent, any monies, checks, notes, drafts or
any other payment relating to and/or proceeds of Accounts or other Collateral
which come into their possession or under their control and promptly, upon
receipt thereof, shall deposit or cause the same to be deposited in the Blocked
Accounts, or if a Cash Dominion Event

 

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exists or has occurred and is continuing, at Agent’s option, remit the same or
cause the same to be remitted, in kind, to the Agent Payment Account.  In no
event shall the same be commingled with any Borrower’s or Obligor’s funds. 
Borrowers and Guarantors agree to reimburse Agent on demand for any amounts owed
or paid to any bank at which a Blocked Account or any other deposit account is
established or any other bank or Person involved in the transfer of funds to or
from the Blocked Accounts arising out of Agent’s payments to or indemnification
of such bank or Person.  The obligation of Borrowers and Guarantors to reimburse
Agent for such amounts pursuant to this Section 6.3(c) shall survive the
termination or non-renewal of this Agreement.

 

6.4       Payments.

 

(a)         Borrowers shall pay all Obligations when due.  Payments on
Obligations shall be made by Borrowers remitting funds to the Agent Payment
Account or, at any time during a Cash Dominion Event, by payments and proceeds
of Collateral being directly remitted to the Agent Payment Account as provided
in Section 6.3 hereof or such other place as Agent may designate from time to
time.  So long as no Priority Event shall have occurred and be continuing or
will result from any of the following payment applications, Agent shall apply
payments received or collected from Borrowers or Obligors or for the account of
Borrowers or Obligors (including the monetary proceeds of collections or of
realization upon any Collateral) to the specific Obligation designated by
Borrowers in connection with such payment in the following order of priority:

 

(i)                       first, to pay in full all indemnities or expense
reimbursements then due to Agent from Borrowers and Obligors (other than fees);

 

(ii)                    second, ratably to pay in full indemnities or expense
reimbursements then due to Lenders from Borrowers and Guarantors (other than
fees);

 

(iii)                 third, ratably to pay in full all fees payable by
Borrowers under the Financing Agreements then due;

 

(iv)                fourth, ratably to pay in full interest due in respect of
the Loans (including Special Agent Advances);

 

(v)                   fifth, to pay or prepay principal in respect of Special
Agent Advances;

 

(vi)                sixth, ratably to pay principal in respect of the Revolving
Loans then outstanding (whether or not then due) until paid in full;

 

(vii)             seventh, to cash collateralize any outstanding Letters of
Credit if required under the terms of this Agreement;

 

(viii)          eighth, to pay any Obligations due in respect of the Bank
Products, if any;

 

(ix)                ninth, to pay any Obligations owed to Defaulting Lenders;
and

 

(x)                   tenth, to pay any other Obligations then due, in such
order and manner as Agent determines.

 

(b)         Notwithstanding anything to the contrary contained in
Section 6.4(a), from and after the commencement of a Priority Event, unless
waived in writing by Agents and Lenders, Agents shall apply payments received or
collected from Borrowers or Obligors or for the account of Borrowers or Obligors

 

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(including the monetary proceeds of collections or of realization upon any
Collateral) as follows:

 

(i)                       first, to pay in full the costs and expenses of Agent
for the collection and enforcement of the Obligations and for the protection,
preservation or sale, disposition or other realization upon the Collateral,
including all expenses, liabilities and advances (including Special Agent
Advances) incurred or made by or on behalf of Agent, in connection therewith
(including attorneys’ fees and legal expenses and other expenses of Agent);

 

(ii)                    second, ratably to pay that portion of the Obligations
constituting indemnities and other amounts (other than principal, interest and
fees) then due to Revolving Loan Lenders and Issuing Bank;

 

(iii)                 third, to the extent not previously reimbursed by the
Revolving Loan Lenders, to pay Agent that portion of the Obligations
constituting principal and accrued and unpaid interest on any Special Agent
Advances;

 

(iv)                fourth, ratably to pay that portion of the Obligations
constituting accrued and unpaid interest on the Revolving Loans and other
Obligations, and fees;

 

(v)                   fifth, to pay that portion of the Obligations constituting
unpaid principal of the Revolving Loans;

 

(vi)                sixth, to cash collateralize any outstanding Letters of
Credit;

 

(vii)             seventh, to pay any Obligations due with respect to the Bank
Products up to the sum of (A) the amount of the Bank Product Reserve then in
effect for such Obligations plus (B) up to $5,000,000 for such Obligations for
which no Bank Product Reserve has been established;

 

(viii)          eighth, to pay any remaining Obligations due in respect of the
Bank Products;

 

(ix)                ninth, to pay any Obligations owed to Defaulting Lenders;
and

 

(x)                   tenth, the balance, if any, after all of the Obligations
have been indefeasibly paid in full, to the Borrowers or as otherwise required
by law.

 

(c)          Notwithstanding anything to the contrary contained in this
Agreement:

 

(i)                       if the payment of any expenses, costs, scheduled
servicing fees (such servicing fees to consist of scheduled servicing fees
existing on the date hereof along with any increases to such servicing fees
which have been consented to by Wells Fargo) and/or interest (other than default
interest charged during the existence of an Event of Default) to Agent for the
account of itself and Lenders would accrue and become due but for the occurrence
of an Insolvency Event and any such amounts are not allowed or allowable in
whole or in part (any such amounts are hereinafter referred to as the “Specified
Amounts”), then Agent and Lenders shall receive payment in full of the Specified
Amounts (but not the items excluded from Specified Amounts above); provided,
that nothing herein shall prevent Agent or the Lenders from recovering any
default interest charged during the existence of an Event of Default from any
Borrower or Guarantor not subject to an Insolvency Event;

 

(ii)                    should any payment or distribution on security or
instrument or proceeds thereof be received by a Lender other than in accordance
with this Section 6.4, such Lender shall receive and hold the same in trust, for
the benefit of Agent, the other Lenders and the Bank Product Providers, and
shall

 

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forthwith deliver the same to Agent (together with any endorsement or assignment
of such Lender where necessary), for application by Agent to the Obligations in
accordance with the terms of this Section 6.4;

 

(iii)                 unless so directed by Borrowers, Agent shall not apply any
payments which it receives to any Loans that are LIBOR Rate Loans except on the
expiration date of the Interest Period applicable to any such Loans that are
LIBOR Rate Loans and if payments are received or collected from Borrowers that
otherwise would be applied to LIBOR Rate Loans, provided no Cash Dominion Event
exists or has occurred and is continuing, Borrowers may instruct Agent to remit
such funds to Borrowers, otherwise, such payments shall be held by Agent and
shall bear interest at the Federal Funds Rate per annum commencing on the second
Business Day following the date such payments are received or collected from
Borrowers and continuing through the date such payments are applied to the
Obligations, which shall be upon the expiration of the first Interest Period
after receipt or collection of such payments, to the extent of the principal
amount of the applicable LIBOR Rate Loan or otherwise, in Agent’s sole
discretion, remitted to Borrowers; and

 

(iv)                to the extent any Borrower uses any proceeds of the Loans or
Letters of Credit to acquire rights in or the use of any Collateral or to repay
any Indebtedness used to acquire rights in or the use of any Collateral,
payments in respect of the obligations shall be deemed applied first to the
Obligations arising from Loans and Letters of Credit that were not used for such
purposes and second to the Obligations arising from Loans and Letters of Credit
the proceeds of which were used to acquire rights in or the use of any
Collateral in the chronological order in which such Borrower acquired such
rights or use.

 

(d)         Except as otherwise expressly provided to the contrary in
Section 3.2, Section 2.3(k) or Section 3.3(a), (i) all interest and all other
fees payable hereunder or under any of the other Financing Agreements (other
than Letter of Credit Fees) shall be due and payable, in arrears, on the first
day of each month, (ii) all Letter of Credit Fees payable hereunder, and all
fronting fees and all commissions, other fees, charges and expenses provided for
in Section 2.3(k) shall be due and payable, in arrears, on the first Business
Day of each month, and (iii) all costs and expenses payable hereunder or under
any of the other Financing Agreements, and all other costs and expenses of the
Lender shall be due and payable on the earlier of (A) the first day of the month
following the date on which the applicable costs and expenses (including the
costs and expenses of the Lender Group) were first incurred, or (B) the date on
which demand therefor is made by Agent (it being acknowledged and agreed that
any charging of such costs or expenses (including the costs and expenses of the
Lender Group) to any of the Loan Accounts pursuant to the provisions this
Section 6.4(d) shall be deemed to constitute a demand for payment thereof for
the purposes of this subclause (B)).  At Agent’s option, all principal,
interest, fees, costs, expenses and other charges provided for in this Agreement
or the other Financing Agreements may be charged directly to the any of the Loan
Accounts.  All amounts (including interest, fees, costs, expenses, including the
expenses of the Lender Group, or other amounts payable hereunder or under any
other Financing Agreement or under any Bank Product Agreement) charged to any of
the Loan Accounts shall thereupon constitute Revolving Loans hereunder, shall
constitute Obligations hereunder, and shall initially accrue interest at the
rate then applicable to Revolving Loans that are Base Rate Loans (unless and
until converted into LIBOR Rate Loans in accordance with the terms of this
Agreement). Borrowers shall make all payments to Agent and Lenders on the
Obligations free and clear of, and without deduction or withholding for or on
account of, any setoff, counterclaim, defense, restrictions or conditions of any
kind.  If after receipt of any payment of, or proceeds of Collateral applied to
the payment of, any of the Obligations, Agent or any Lender is required to
surrender or return such payment or proceeds to any Person for any reason, then
the Obligations intended to be satisfied by such payment or proceeds shall be
reinstated and continue and this Agreement shall continue in full force and
effect as if such payment or proceeds had not been received by Agent or such
Lender.  Borrowers shall be liable to pay to Agent and Lenders, and do hereby
indemnify and hold Agent and Lenders harmless for the amount of any payments or
proceeds surrendered or

 

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returned.  This Section 6.4(d) shall remain effective notwithstanding any
contrary action which may be taken by any Agent or any Lender in reliance upon
such payment or proceeds.  This Section 6.4(d) shall survive the payment of the
Obligations and the termination of this Agreement.

 

6.5       Authorization to Make Loans.  Agent and Lenders are authorized to make
the Revolving Loans and provide the Letters of Credit based upon telephonic or
other instructions received from anyone purporting to be an officer of a
Borrower or other authorized person or, at the discretion of Agent, if such
Revolving Loans are necessary to satisfy any Obligations; provided, however,
that Agent and Lenders shall direct the Revolving Loans only into those accounts
of a Borrower authorized in writing by more than one Authorized Officer.  The
foregoing sentence notwithstanding, if Agent or a Lender makes a Revolving Loan
into an account of a Borrower designated by a Person who no longer is an
Authorized Officer and Agent did not receive notice that such Person is no
longer an Authorized Officer, such Revolving Loan will still be considered an
Obligation hereunder.  All requests for Revolving Loans or Letters of Credit
hereunder shall be made in accordance with Section 2.2.  All Revolving Loans
under this Agreement shall be conclusively presumed to have been made to, and at
the request of and for the benefit of, Borrowers or when deposited to the credit
of any Borrower or otherwise disbursed or established in accordance with the
instructions of Borrowers or in accordance with the terms and conditions of this
Agreement.  Unless otherwise agreed by Agent and Borrowers, any Revolving Loan
requested by Borrowers and made by Agent or the Lenders hereunder shall be made
to the Designated Account.

 

6.6       Use of Proceeds.  Borrowers shall use the proceeds of the Loans
provided by or on behalf of Lenders to Borrowers hereunder only for (a) costs,
expenses and fees in connection with the preparation, negotiation, execution and
delivery of this Agreement and the other Financing Agreements and consummation
of any other permitted transactions contemplated hereby which will take place on
the date hereof, (b) the repurchase of shares of Equity Interests to the extent
permitted by the terms and condition of this Agreement, and (c) for general
operating, working capital and other proper corporate purposes of Borrowers not
otherwise prohibited by the terms hereof.  None of the proceeds of any Loans or
Letters of Credit (i) will be used to purchase or carry any Margin Stock or to
extend credit to others for the purpose of purchasing or carrying any such
Margin Stock or for any purpose that violates the provisions of Regulation T, U
or X of the Board of Governors, (ii) will be used, directly or indirectly, to
make any payments to a Sanctioned Entity or a Sanctioned Person, to fund any
investments, loans or contributions in, or otherwise make such proceeds
available to, a Sanctioned Entity or a Sanctioned Person, to fund any
operations, activities or business of a Sanctioned Entity or a Sanctioned
Person, or in any other manner that would result in a violation of Sanctions by
any Person, and (iii) will be used, directly or indirectly, in furtherance of an
offer, payment, promise to pay, or authorization of the payment or giving of
money, or anything else of value, to any Person in violation of any Sanctions,
Anti-Corruption Laws or Anti-Money Laundering Laws.

 

SECTION 7. COLLATERAL REPORTING AND COVENANTS

 

7.1       Collateral Reporting.

 

(a)         Borrowers shall provide Agent with the following documents in a form
satisfactory to Agent:

 

(i)                       as soon as possible after the end of each month (but
in any event within twenty (20) Business Days after the end thereof), on a
monthly basis, and at any time an Increased Collateral Reporting Event exists or
has occurred and is continuing, more frequently as Agent may request:
(A) Inventory reports by category, (B) a Collateral mix report, in form and
substance satisfactory to Agent; (C) a statement confirming the payment of rent
and other amounts due to owners and lessors of real property used by any
Borrower or Guarantor during the immediately preceding month, subject to year-

 

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end or periodic adjustments; provided, that, if such Increased Collateral
Reporting Event ceases to exist as determined by Agent, Borrowers shall
thereafter deliver such collateral reports described in this
Section 7.1(a)(i) on a monthly basis as provided herein;

 

(ii)                    as soon as possible after the end of each month (but in
any event within twenty (20) Business Days after the end thereof), on a monthly
basis, a Borrowing Base Certificate, certified by the principal accounting
officer, treasurer or principal financial officer of each Borrower as true and
correct, which shall include the calculation of the Compliance Excess
Availability and the calculation of Net Amount of Eligible Credit Card
Receivables, Net Amount of Eligible Damaged Goods Vendors Receivables and Net
Amount of Eligible Sell-Off Vendors Receivables after giving effect to the
assertion of any claims, offsets, defenses or counterclaims by any account
debtor, or any disputes with account debtors, or any settlement, adjustment or
compromise thereof; provided, that, at any time an Increased Collateral
Reporting Event exists or has occurred and is continuing, as soon as possible
after the end of each week (but in any event within three (3) Business Days
after the end thereof), a Borrowing Base Certificate duly executed and together
with all schedules required pursuant to the terms of each such Borrowing Base
Certificate duly completed, and if such Increased Collateral Reporting Event
ceases to exist as determined by Agent, Borrowers shall thereafter deliver a
Borrowing Base Certificate on a monthly basis as provided herein;

 

(iii)                 as soon as possible after the end of each fiscal month
(but in any event within twenty (20) Business Days after the end thereof), on a
monthly basis, and at any time an Increased Collateral Reporting Event exists or
has occurred and is continuing, more frequently as Agent may request,
(A) perpetual Inventory reports by location and category (and including the
amounts of Inventory and the value thereof at any leased locations and at
premises of warehouses, bailees or other third parties in possession of the
Collateral); (B) the addresses of all new retail store locations of any Borrower
or Guarantor opened, and existing retail store locations closed or sold, in each
case during the immediately preceding fiscal month, and (C) a report of all
deposit accounts (including without limitation local retail store deposit
accounts) opened by any Borrower or Guarantor with any bank during the
immediately preceding fiscal month, which report shall include the Borrower or
Guarantor in whose name the account is maintained, the account number of such
account, the name and address of the bank at which such account is maintained,
the purpose of such account and the amount held in such account if any, on or
about the date of such report; provided, that, if such Increased Collateral
Reporting Event ceases to exist as determined by Agent, Borrowers shall
thereafter deliver such collateral reports described in this
Section 7.1(a)(iii) on a monthly basis as provided herein;

 

(iv)                as soon as possible after the end of each fiscal quarter
(but in any event within twenty (20) Business Days after the end thereof), on a
quarterly basis, and at any time an Increased Collateral Reporting Event exists
or has occurred and is continuing, more frequently as Agent may request, a
report detailing Inventory turnover; provided, that, if such Increased
Collateral Reporting Event ceases to exist as determined by Agent, Borrowers
shall thereafter deliver such collateral reports described in this
Section 7.1(a)(iv) on a quarterly basis as provided herein;

 

(v)                   upon the occurrence and during the continuance of an Event
of Default or during such time as Agent performs an audit or examination of the
Borrowers and Guarantors, upon Agent’s reasonable request, (A) amounts owing to
owners and lessors of retail store locations, (B) copies of all bank statements,
(C) copies of shipping and delivery documents, and (D) copies of purchase
orders, invoices and delivery documents for Inventory and Equipment acquired by
any Borrower or Guarantor;

 

(vi)                upon Agent’s reasonable request, (A) reports of sales for
each category of Inventory, (B) reports of aggregate Inventory purchases
(including all costs related thereto, such as freight, duty and taxes) and
identifying items of Inventory in transit to each Borrower related to the

 

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applicable documentary Letter of Credit and/or bill of lading number, (C) copies
of remittance advices and reports, (D) copies of bank statements relating to the
Blocked Accounts, (E) reports by retail store location of sales and operating
profits for each such retail store location, and (F) agings of accounts payable
(and including information indicating the amounts owing to owners and lessors of
leased premises (except for the retail store locations), warehouses, fulfillment
centers, bailees and other third parties from time to time in possession of any
Collateral);

 

(vii)             upon the occurrence and during the continuance of an Event of
Default, as frequently as Agent may request, (A) the monthly statements received
by any Borrower or Guarantor or any of its Affiliates from any Credit Card
Issuers or Credit Card Processors, together with such additional information
with respect thereto as shall be sufficient to enable Agent to monitor the
transactions pursuant to the Credit Card Agreements, (B) a report of credit card
sales during the preceding month, including the amount of the chargebacks, fees,
factored receivables, and credits with respect thereto and providing an aging of
such sales identifying those outstanding more than five (5) days since the sale
date giving rise thereto, and (C) reports on sales and use tax collections,
deposits and payments, including monthly sales and use tax accruals; and

 

(viii)          such other reports as to the Collateral as Agent shall
reasonably request from time to time.

 

(b)         If any Borrower’s or Guarantor’s records or reports of the
Collateral are prepared or maintained by an accounting service, contractor,
shipper or other agent, such Borrower or Guarantor hereby irrevocably authorizes
such service, contractor, shipper or agent to deliver such records, reports, and
related documents to Agent and to follow Agent’s instructions with respect to
further services at any time that an Event of Default exists or has occurred and
is continuing.

 

7.2       Accounts Covenants.

 

(a)         Each Borrower and Guarantor shall notify Agent promptly of the
assertion of any material claims, offsets, defenses or counterclaims by any
account debtor, Credit Card Issuer or Credit Card Processor or any material
disputes with any of such persons or any settlement, adjustment or compromise
thereof and all material adverse information relating to the financial condition
of any account debtor, Credit Card Issuer or Credit Card Processor.  No credit,
discount, allowance or extension or agreement for any of the foregoing shall be
granted to any account debtor, Credit Card Issuer or Credit Card Processor
except in the ordinary course of such Borrower’s or Guarantor’s business in
accordance with the current practices of such Borrower or Guarantor as in effect
on the date hereof.  So long as an Event of Default exists or has occurred and
is continuing, no Borrower or Guarantor shall, without the prior consent of
Agent, settle, adjust or compromise any material claim, offset, counterclaim or
dispute with any account debtor, Credit Card Issuer, Credit Card Processor.  At
any time that an Event of Default exists or has occurred and is continuing,
Agent shall, at its option, have the exclusive right to settle, adjust or
compromise any claim, offset, counterclaim or dispute with account debtors,
Credit Card Issuers or Credit Card Processors or grant any credits, discounts or
allowances.

 

(b)         With respect to each Credit Card Agreement:  (i) no payments shall
be made thereunder except payments delivered to Agent pursuant to the terms of
this Agreement, (ii) there shall be no material setoffs, deductions, contras,
defenses, counterclaims or disputes existing or asserted with respect thereto
except as reported to Agent in accordance with the terms of this Agreement, and
(iii) none of the transactions giving rise thereto will violate any applicable
State or Federal laws or regulations in any material respect, all documentation
relating thereto will be legally sufficient under such laws and regulations in
all material respects and all such documentation will be legally enforceable in
accordance with its terms.

 

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(c)          Each Borrower and Guarantor shall notify Agent promptly of: 
(i) any notice of a material default by such Borrower or Guarantor under any of
the Credit Card Agreements or of any default which has a reasonable likelihood
of resulting in the Credit Card Issuer or Credit Card Processor ceasing to make
payments or suspending payments to such Borrower or Guarantor; (ii) any notice
from any Credit Card Issuer or Credit Card Processor that such person is ceasing
or suspending, or will cease or suspend, any present or future payments due or
to become due to such Borrower or Guarantor from such person, or that such
person is terminating or will terminate any of the Credit Card Agreements; and
(iii) the failure of such Borrower or Guarantor to comply with any material
terms of the Credit Card Agreements or any terms thereof which has a reasonable
likelihood of resulting in the Credit Card Issuer or Credit Card Processor
ceasing or suspending payments to such Borrower or Guarantor.

 

(d)         Upon an Event of Default, Agent shall have the right at any time or
times, in Agent’s name or in the name of a nominee of Agent, to verify the
validity, amount or any other matter relating to any Receivables or other
Collateral, by mail, telephone, facsimile transmission or otherwise.

 

7.3       Inventory Covenants.

 

(a)         Each Borrower and Guarantor shall at all times maintain inventory
records reasonably satisfactory to Agent, keeping correct and accurate records
itemizing and describing the kind, type, quality and quantity of such Borrower’s
or Guarantor’s Inventory, such Borrower’s or Guarantor’s cost therefor and daily
withdrawals therefrom and additions thereto.

 

(b)         Each Borrower and Guarantor shall conduct a physical count of its
Inventory either through periodic cycle counts or wall to wall counts, so that
all Inventory is subject to such counts at least once each year, but at any time
or times as Agent may request on or after an Event of Default, and, promptly
following such physical inventory count (whether through periodic cycle counts
or wall to wall counts) shall supply Agent with a report in the form and with
such specificity as may be reasonably satisfactory to Agent concerning such
physical count.

 

(c)          No Borrower or Guarantor shall remove any Inventory from the
locations set forth or permitted herein, without the prior written consent of
Agent, except for sales of Inventory in the ordinary course of such Borrower’s
or Guarantor’s business and except to move Inventory directly from one location
set forth or permitted herein to another such location and except for Inventory
shipped from the manufacturer thereof to such Borrower or Guarantor which is in
transit to the locations set forth or permitted herein.

 

(d)         Upon Agent’s request, Borrowers and Guarantors shall, at their
expense, deliver or cause to be delivered to Agent written appraisals as to the
Inventory in form, scope and methodology acceptable to Agent and by an appraiser
acceptable to Agent, addressed to Agent and upon which Agent and Lenders are
expressly permitted to rely as follows: (i) if any Revolving Loans have been
outstanding (but, for the avoidance of doubt, without regard to any Letters of
Credit that may be or may have been outstanding) during any twelve (12) month
period ending on the last day of the then current month, no more than one
(1) such written appraisal in any twelve (12) month period, (ii) if Compliance
Excess Availability is at any time less than or equal to twenty (20%) percent of
the Revolving Loan Limit, no more than two (2) such written appraisals in any
twelve (12) month period, or (iii) if a Default or an Event of Default exists or
has occurred and is continuing, such number of written appraisals as Agent may
request; provided, that, at any time or times as Agent may request, at Agent’s
expense, Agent may arrange to have appraisals conducted as to the Inventory.

 

(e)          Upon Agent’s request, Borrowers and Guarantors shall, at their
expense, deliver or cause to be delivered to Agent field examinations as to the
Inventory in form, scope and methodology

 

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acceptable to Agent and by a field examiner acceptable to Agent, addressed to
Agent and upon which Agent and Lenders are expressly permitted to rely as
follows: (i) if any Revolving Loans have been outstanding (but, for the
avoidance of doubt, without regard to any Letters of Credit that may be or may
have been outstanding) during any twelve (12) month period ending on the last
day of the then current month, no more than one (1) such field exam in any
twelve (12) month period, (ii) if Compliance Excess Availability is at any time
less than or equal to twenty (20%) percent of the Revolving Loan Limit, no more
than two (2) such field examinations in any twelve (12) month period, or
(iii) if a Default or an Event of Default exists or has occurred and is
continuing, such number of field examinations as Agent may request; provided,
that, at any time or times as Agent may request, at Agent’s expense, Agent may
arrange to have field examinations conducted as to the Inventory.

 

(f)           Upon Agent’s request, Borrowers and Guarantors shall, at their
expense, conduct through Washington Inventory Service or another inventory
counting service acceptable to Agent, a physical count of the Inventory in form,
scope and methodology acceptable to Agent, the results of which shall be
reported directly by such inventory counting service to Agent and Borrowers and
Guarantors shall promptly deliver confirmation in a form reasonably satisfactory
to Agent that appropriate adjustments have been made to the inventory records of
Borrowers and Guarantors to reconcile the inventory count to Borrowers’ and
Guarantors’ inventory records, as follows: (i) if any Revolving Loans have been
outstanding (but, for the avoidance of doubt, without regard to any Letters of
Credit that may be or may have been outstanding) during any twelve (12) month
period ending on the last day of the then current month, no more than one
(1) such written appraisal in any twelve (12) month period, and at a time to
coincide with Borrowers’ and or Guarantors’ physical count of the Inventory,
(ii) if Compliance Excess Availability is at any time less than or equal to
twenty (20%) percent of the Revolving Loan Limit, no more than two (2) such
physical counts in any twelve (12) month period, and at a time to coincide with
Borrowers’ and or Guarantors’ physical count of the Inventory, or (iii) if a
Default or an Event of Default exists or has occurred and is continuing, such
number of physical counts as Agent may request; provided, that, at any time or
times as Agent may request, at Agent’s expense,  Agent may arrange to have
written reports or appraisals conducted as to the Inventory.

 

(g)          Each Borrower and Guarantor shall produce, use, store and maintain
the Inventory, with all reasonable care and caution and in accordance with
applicable standards of any insurance and in conformity with applicable laws
(including the requirements of the Federal Fair Labor Standards Act of 1938, as
amended and all rules, regulations and orders related thereto).

 

(h)         None of the Inventory or other Collateral constitutes farm products
or the proceeds thereof.

 

(i)             Each Borrower and Guarantor assumes all responsibility and
liability arising from or relating to the production, use, sale or other
disposition of the Inventory.

 

(j)            No Borrower or Guarantor shall sell Inventory to any customer on
approval, or any other basis which entitles the customer to return or may
obligate such Borrower or Guarantor to repurchase such Inventory except for the
right of return given to retail customers of any Borrower or Guarantor in the
ordinary course of the business of such Borrower or Guarantor in accordance with
the then current return policy of such Borrower.

 

(k)         Each Borrower and Guarantor shall keep the Inventory in good and
marketable condition.

 

(l)             No Borrower or Guarantor shall, without prior written notice to
Agent or the specific identification of such Inventory in a report with respect
thereto provided by such Borrower or Guarantor to Agent pursuant to
Section 7.1(a) hereof, acquire or accept any Inventory on consignment or
approval.

 

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7.4       Equipment Covenants.  With respect to the Equipment:  (a) upon Agent’s
request, Borrowers and Guarantors shall, at their expense, at any time or times
as Agent may request after the occurrence and during the continuance of an Event
of Default, deliver or cause to be delivered to Agent written appraisals as to
the Equipment in form, scope and methodology acceptable to Agent and by an
appraiser acceptable to Agent, addressed to Agent and upon which Agent is
expressly permitted to rely; (b) Borrowers and Guarantors shall use commercially
reasonable efforts to keep the Equipment in good order, repair and running
(ordinary wear and tear excepted); (c) Borrowers and Guarantors shall use the
Equipment with all reasonable care and caution and in accordance with applicable
standards of any insurance and in conformity with all applicable laws; (d) the
Equipment is and shall be used in the business of Borrowers and Guarantors and
not for personal, family, household or farming use; (e) Borrowers and Guarantors
shall not remove any Equipment from the locations set forth or permitted herein,
except to the extent necessary to have any Equipment repaired or maintained in
the ordinary course of its business or to move Equipment directly from one
location set forth or permitted herein to another such location and except for
the movement of motor vehicles used by or for the benefit of Borrowers and
Guarantors in the ordinary course of business; (f) the Equipment is now and
shall remain personal property and Borrowers and Guarantors shall not permit any
of the Equipment to be or become a part of or affixed to real property; and
(g) Borrowers and Guarantors assume all responsibility and liability arising
from the use of the Equipment.

 

7.5       Bills of Lading and Other Documents of Title.

 

(a)                                 On and after the date hereof, with respect
to goods purchased by a Borrower in transit to the premises of such Borrower or
the premises of a Freight Forwarder in the United States of America (i) if
Borrowers have elected to comply with the eligibility criteria in clause
(c)(i)(A) of the definition of Eligible In-Transit Inventory and the eligibility
criteria of clause (f)(i) of the definition of Eligible In-Transit LC Inventory,
each Borrower shall cause all bills of lading or other documents of title
relating to such goods to be issued in a form so as to constitute negotiable
documents as such term is defined in the UCC, (ii) if Borrowers have elected to
comply with the eligibility criteria in clause (c)(i)(B) or (C) of the
definition of Eligible In-Transit Inventory and the eligibility criteria of
clause (f)(ii) or (iii) of the definition of Eligible In-Transit LC Inventory,
each Borrower shall cause all bills of lading or other documents of title
relating to such goods to be issued in a form so as to constitute non-negotiable
documents as such term is defined in the UCC and (iii) other than those relating
to goods being purchased pursuant to a Letter of Credit, to be issued either to
the order of Agent or such other person as Agent may from time to time designate
for such purpose as consignee or such Borrower as consignee.

 

(b)         There shall be no more than three (3) originals of any bills of
lading and other documents of title relating to goods being purchased by a
Borrower which are outside the United States of America and in transit to the
premises of such Borrower or the premises of a Freight Forwarder in the United
States of America.  As to any such bills of lading or other documents of title,
unless and until Agent shall direct otherwise, three (3) originals of each of
such bill of lading or other document of title shall be delivered to such
Freight Forwarder as such Borrower may specify and that is party to a Collateral
Access Agreement. Upon the request of Agent, one (1) original of each such bill
of lading or other document of title shall be delivered to Agent.  To the extent
that the terms of this Section 7.5 have not been satisfied as to any Inventory,
such Inventory shall not constitute Eligible Inventory, except as Agent may
otherwise agree.

 

7.6       [Reserved.]

 

7.7       Power of Attorney.

 

(a)         Each Borrower and Guarantor hereby irrevocably designates and
appoints Agent (and all

 

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persons designated by Agent) as such Borrower’s or Guarantor’s true and lawful
attorney-in-fact, and authorizes Agent, in such Borrower’s or Guarantor’s, or
Agent’s name, to, at any time an Event of Default exists or has occurred and is
continuing (i) demand payment on Receivables or other Collateral, (ii) enforce
payment of Receivables by legal proceedings or otherwise, (iii) exercise all of
such Borrower’s or Guarantor’s rights and remedies to collect any Receivable or
other Collateral, (iv) sell or assign any Receivable upon such terms, for such
amount and at such time or times as Agent deems advisable, (v) settle, adjust,
compromise, extend or renew an Account, (vi) discharge and release any
Receivable, (vii) prepare, file and sign such Borrower’s or Guarantor’s name on
any proof of claim in bankruptcy or other similar document against an account
debtor or other obligor in respect of any Receivables or other Collateral,
(viii) notify the post office authorities to change the address for delivery of
remittances from account debtors or other obligors in respect of Receivables or
other proceeds of Collateral to an address designated by Agent, and open and
dispose of all mail addressed to such Borrower or Guarantor and handle and store
all mail relating to the Collateral, (ix) do all acts and things which are
necessary, in Agent’s determination, to fulfill such Borrower’s or Guarantor’s
obligations under this Agreement and the other Financing Agreements, (x) take
control in any manner of any item of payment in respect of Receivables or
constituting Collateral or otherwise received in or for deposit in the Blocked
Accounts or otherwise received by Agent or any Lender, (xi) have access to any
lockbox or postal box into which remittances from account debtors or other
obligors in respect of Receivables or other proceeds of Collateral are sent or
received, (xii) endorse such Borrower’s or Guarantor’s name upon any items of
payment in respect of Receivables or constituting Collateral or otherwise
received by Agent and any Lender and deposit the same in Agent’s account for
application to the Obligations, (xiii) endorse such Borrower’s or Guarantor’s
name upon any chattel paper, document, instrument, invoice, or similar document
or agreement relating to any Receivable or any goods pertaining thereto or any
other Collateral, including any warehouse or other receipts, or bills of lading
and other negotiable or non-negotiable documents, (xiv) clear Inventory the
purchase of which was financed with Letters of Credit through U.S. Customs or
foreign export control authorities in such Borrower’s or Guarantor’s name,
Agent’s name or the name of Agent’s designee, and to sign and deliver to customs
officials powers of attorney in such Borrower’s or Guarantor’s own name for such
purpose, and to complete in such Borrower’s or Guarantor’s or Agent’s name, any
order, sale or transaction, obtain the necessary documents in connection
therewith and collect the proceeds thereof, and (xv) sign such Borrower’s or
Guarantor’s name on any verification of Receivables and notices thereof to
account debtors or any secondary obligors or other obligors in respect thereof.

 

(b)         Each Borrower and Guarantor hereby releases Agent and Lenders and
their respective officers, employees and designees from any liabilities arising
from any act or acts under this power of attorney and in furtherance thereof,
whether of omission or commission, except as a result of Agent’s or any Lender’s
own gross negligence or willful misconduct as determined pursuant to a final
non-appealable order of a court of competent jurisdiction.

 

7.8       Right to Cure.  Agent may, at its option, upon notice to Borrowers,
(a) cure any default by any Borrower or Obligor under any material agreement
with a third party that affects the Collateral, its value or the ability of
Agent to collect, sell or otherwise dispose of the Collateral or the rights and
remedies of Agent or any Lender therein or the ability of any Borrower or any
Obligor to perform its obligations hereunder or under any of the other Financing
Agreements, (b) pay or bond on appeal any judgment entered against any Borrower
or Obligor, (c) discharge taxes, liens, security interests or other encumbrances
at any time levied on or existing with respect to the Collateral and (d) pay any
amount, incur any expense or perform any act which, in Agent’s judgment, is
necessary or appropriate to preserve, protect, insure or maintain the Collateral
and the rights of Agent and Lenders with respect thereto.  Agent may add any
amounts so expended to the Obligations and charge any of the Loan Accounts
therefor, such amounts to be repayable by Borrowers on demand.  Agent and
Lenders shall be under no obligation to effect such cure, payment or bonding and
shall not, by doing so, be deemed to have assumed any

 

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obligation or liability of any Borrower or any Obligor.  Any payment made or
other action taken by Agent or any Lender under this Section shall be (a) made
by Agent or such Lender after Agent or such Lender makes reasonable efforts to
consult with Borrowers with respect thereto, and (b) without prejudice to any
right to assert an Event of Default hereunder and to proceed accordingly.

 

7.9       Access to Premises; Inspection Rights.

 

(a)         Each Loan Party will, and will cause each of its Subsidiaries to,
permit Agent, any Lender, and each of their respective duly authorized
representatives or agents to visit any of its properties and inspect any of its
assets or books and records, to examine and make copies of its books and
records, and to discuss its affairs, finances, and accounts with, and to be
advised as to the same by, its officers and employees (provided, that an
authorized representative of a Borrower shall be allowed to be present) at such
reasonable times and intervals as Agent or any Lender, as applicable, may
designate and, so long as no Default or Event of Default has occurred and is
continuing, with reasonable prior notice to Borrowers and during regular
business hours, at Borrowers’ expense in accordance with the provisions of
Section 9.20 hereof, subject to the limitations set forth below in Sections
7.3(d), (e) and (f), as applicable.

 

(b)                                 Each Loan Party will, and will cause each of
its Subsidiaries to, permit Agent and each of its duly authorized
representatives or agents to conduct field examinations, inventory counts,
appraisals or valuations at such reasonable times and intervals as Agent may
designate, at Borrowers’ expense in accordance with the provisions of
Section 9.20 hereof, , subject to the limitations set forth below in Sections
7.3(d), (e) and (f), as applicable.

 

SECTION 8. REPRESENTATIONS AND WARRANTIES

 

Each Borrower and Guarantor hereby represents and warrants to Agent and Lenders
the following (which shall survive the execution and delivery of this
Agreement), the truth and accuracy of which are a continuing condition of the
making of Loans and providing Letters of Credit to Borrowers:

 

8.1       Corporate Existence, Power and Authority.  Each Borrower and
Guarantor, and each of its Subsidiaries, is a corporation or limited liability
company duly organized and in good standing under the laws of its state of
incorporation or formation identified in its Information Certificate and is duly
qualified as a foreign corporation or limited liability company and in good
standing in all states or other jurisdictions where the nature and extent of the
business transacted by it or the ownership of assets makes such qualification
necessary, except for those jurisdictions in which the failure to so qualify
would not have a material adverse effect on such Borrower’s or Guarantor’s
financial condition, results of operation or business or the rights of Agent in
or to any of the Collateral.  The execution, delivery and performance of this
Agreement, the other Financing Agreements and the transactions contemplated
hereunder and thereunder by each Borrower and Guarantor (a) are all within such
Borrower’s or Guarantor’s corporate or limited liability company powers,
(b) have been duly authorized, (c) are not in contravention of law or the terms
of such Borrower’s or Guarantor’s certificate of incorporation, certificate of
formation, by-laws, operating agreement or other organizational documentation,
or any indenture, agreement or undertaking to which such Borrower or Guarantor
is a party or by which such Borrower or Guarantor or its property are bound,
except for those lease agreements of Lerner for which Lerner did not obtain
consents from the parties thereto with respect to this Agreement, and (d) will
not result in the creation or imposition of, or require or give rise to any
obligation to grant, any lien, security interest, charge or other encumbrance
upon any property of such Borrower or Guarantor other than liens in favor of
Agent or any Lender as contemplated hereby.  This Agreement and the other
Financing Agreements to which each Borrower and Guarantor is a party constitute
legal, valid and binding obligations of such Borrower or Guarantor enforceable
in accordance with their respective terms.

 

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8.2       Name; State of Organization; Chief Executive Office; Collateral
Locations.

 

(a)         The exact legal name of each Borrower and Guarantor is as set forth
on the signature pages of this Agreement and in each Borrower’s and Guarantor’s
Information Certificate, subject to the rights of Borrowers and Guarantors to
change names in accordance with Section 9.1(b) hereof.  No Borrower or Guarantor
has, during the five years immediately prior to the date hereof, been known by
or used any other corporate or fictitious name or been a party to any merger or
consolidation, or acquired all or substantially all of the assets of any Person,
or acquired any of its property or assets out of the ordinary course of
business, except as set forth in such Borrower’s or Guarantor’s Information
Certificate.

 

(b)         Each Borrower and Guarantor is an organization of the type and
organized in the jurisdiction set forth in such Borrower’s and Guarantor’s
Information Certificate.  Each Borrower’s and Guarantor’s Information
Certificate accurately sets forth the organizational identification number of
such Borrower or Guarantor or accurately states that such Borrower or Guarantor
has none and accurately sets forth the federal employer identification number of
such Borrower and Guarantor, subject to the right of each Guarantor or Borrower
to change names in accordance with Section 9.1(c) hereof.

 

(c)          The chief executive office and mailing address of each Borrower and
Guarantor and each Borrower’s and Guarantor’s Records concerning Accounts are
located only at the address(es) identified as such in such Borrower’s and
Guarantor’s Information Certificate, subject to the rights of each Borrower and
Guarantor to change its chief executive office or its mailing address in
accordance with Section 9.1(c) hereof, and its only other places of business and
the only other locations of Collateral, if any, are the addresses set forth in
such Borrower’s or Guarantor’s Information Certificate, subject to the rights of
Borrowers and Guarantors to establish new locations in accordance with
Section 9.2 hereof.  Each Borrower’s and Guarantor’s Information Certificate
correctly identifies any of such locations which are not owned by such Borrower
or Guarantor and sets forth the owners and/or operators thereof.

 

8.3       Financial Statements; No Material Adverse Change.  All financial
statements relating to Borrowers, Guarantors and their Subsidiaries (or any of
them) which have been or may hereafter be delivered by Borrowers and Guarantors
(or any of them) to Agent and Lenders have been prepared in accordance with GAAP
(except as to any interim financial statements, to the extent such statements
are subject to normal year-end adjustments and do not include any notes) and
fairly present in all material respects the financial condition and the results
of operation of Borrowers, Guarantors and their Subsidiaries as at the dates and
for the periods set forth therein.  Except as disclosed in any interim financial
statements furnished by Borrowers or Guarantors to Agent prior to the date of
this Agreement or otherwise fully and accurately disclosed to Agent in writing,
there has been no act, condition, circumstance or event which has had or is
reasonably likely to have a Material Adverse Effect since the date of the most
recent audited financial statements of Borrowers, Guarantors and their
Subsidiaries furnished by Borrowers and Guarantors to Agent prior to the date of
this Agreement.

 

8.4       Priority of Liens; Title to Properties.  The security interests and
liens granted to Agent under this Agreement and the other Financing Agreements
upon filing the appropriate documents (including UCC financing statements), but
only if and to the extent that a security interest may be so perfected under
applicable laws, constitute or deemed necessary by Agent to maintain valid and
perfected first priority liens and security interests in and upon the Collateral
subject only to the liens indicated on the Information Certificates and the
other liens permitted under Section 9.8 hereof.

 

8.5       Tax Returns.  Each Borrower and Guarantor and each of their
Subsidiaries has filed, or caused to be filed, in a timely manner (including any
extensions) all federal income tax returns and all other material tax returns,
reports and declarations that are required to be filed by it.  All information
in such tax returns, reports and declarations is complete and accurate in all
material respects.  Each

 

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Borrower and Guarantor and each of their Subsidiaries has paid or caused to be
paid all taxes due and payable or claimed due and payable in any assessment
received by it, except taxes (i) the validity of which are being contested in
good faith by appropriate proceedings diligently pursued and available to such
Borrower, Guarantor and such Subsidiary have and with respect to which adequate
reserves have been set aside on its books or (ii) the nonpayment of which could
not reasonably be expected to have a Material Adverse Effect.  Each Borrower and
Guarantor and each of their Subsidiaries have made adequate provision in
accordance with GAAP for all taxes not yet due and payable and whether or not
disputed.

 

8.6       Litigation.  There are no investigations by any Governmental Authority
pending, or to the best of each Borrower’s and Guarantor’s knowledge threatened,
against or affecting any Borrower, Guarantor or any of their Subsidiaries, its
assets or business and there is no action, suit, proceeding or claim by any
Person pending, or to the best of each Borrower’s and Guarantor’s knowledge
threatened, against any Borrower, Guarantor or any of their Subsidiaries or its
assets or goodwill, or against or affecting any transactions contemplated by
this Agreement, in each case, which if adversely determined against such
Borrower, Guarantor or such Subsidiaries has or could reasonably be expected to
have a Material Adverse Effect.

 

8.7       Compliance with Other Agreements and Applicable Laws.  Except for
those lease agreements of Lerner for which Lerner did not obtain consents from
the parties thereto with respect to this Agreement, no Borrower or Guarantor or
any of their Subsidiaries is in default in any respect under, or in violation in
any material respect of any of the terms of, any agreement, contract,
instrument, lease or other commitment to which it is a party or by which it or
any of its assets are bound which could reasonably be expected to have a
Material Adverse Effect.  Except as could not reasonably be expected to have a
Material Adverse Effect, each Borrower, Guarantor and each of their Subsidiaries
is in compliance in all respects with the requirements of all applicable laws,
rules, regulations and orders of any Governmental Authority relating to its
business, including, without limitation, those set forth in or promulgated
pursuant to the Occupational Safety and Health Act of 1970, as amended, the Fair
Labor Standards Act of 1938, as amended, ERISA, the Code, as amended, and the
rules and regulations thereunder, all Federal, State and local statutes,
regulations, rules and orders relating to consumer credit (including, without
limitation, as each has been amended, the Truth-in-Lending Act, the Fair Credit
Billing Act, the Equal Credit Opportunity Act and the Fair Credit Reporting Act,
and regulations, rules and orders promulgated thereunder), all Federal, State
and local states, regulations, rules and orders pertaining to sales of consumer
goods (including, without limitation, the Consumer Products Safety Act of 1972,
as amended, and the Federal Trade Commission Act of 1914, as amended, and all
regulations, rules and orders promulgated thereunder).

 

8.8       Environmental Compliance.

 

(a)         Except as set forth on Schedule 8.8 hereto or as would not
reasonably be expected to have a Material Adverse Effect, no Borrower, Guarantor
or any of their Subsidiaries has generated, used, stored, treated, transported,
manufactured, handled, produced or disposed of any Hazardous Materials, on or
off its premises (whether or not owned by it) in any manner which at any time
violates in any material respect any applicable Environmental Law or any permit
issued to any Borrower, Guarantor or any of their Subsidiaries under
Environmental Law, and the operations of Borrowers, Guarantors and their
respective Subsidiaries comply in all material respects with all Environmental
Laws and all permits issued to any Borrower, Guarantor and any of their
Subsidiaries under Environmental Law.

 

(b)         Except as set forth on Schedule 8.8 hereto or as would not
reasonably be expected to have a Material Adverse Effect, there has been no
investigation by any Governmental Authority or any proceeding, complaint, order,
directive, claim, citation or notice by any Governmental Authority or any

 

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other person nor is any pending or to the best of each Borrower’s and
Guarantor’s knowledge threatened, with respect to any non-compliance with or
violation of the requirements of any Environmental Law by such Borrower,
Guarantor or Subsidiary or the release, spill or discharge, threatened or
actual, of any Hazardous Material or the generation, use, storage, treatment,
transportation, manufacture, handling, production or disposal of any Hazardous
Materials by such Borrower, Guarantor or any of their Subsidiaries or any other
environmental, health or safety matter involving such Borrower, Guarantor or any
of their Subsidiaries, which adversely affects or would reasonably be expected
to adversely affect in any material respect such Borrower, Guarantor or any of
their Subsidiaries or their business, operations or assets or any properties at
which such Borrower, Guarantor or any of their Subsidiaries has transported,
stored or disposed of any Hazardous Materials.

 

(c)          Except as set forth on Schedule 8.8 hereto or as would not
reasonably be expected to have a Material Adverse Effect, no Borrower, Guarantor
or any of their Subsidiaries has any material liability (contingent or
otherwise) in connection with a release, spill or discharge, threatened or
actual, of any Hazardous Materials or the generation, use, storage, treatment,
transportation, manufacture, handling, production or disposal of any Hazardous
Materials.

 

(d)         Except as set forth on Schedule 8.8 hereto or as would not
reasonably be expected to have a Material Adverse Effect, each Borrower,
Guarantor and any of their Subsidiaries has all permits required to be obtained
or filed in connection with the operations of such Borrower, Guarantor or
Subsidiary under any Environmental Law and all of such licenses, certificates,
approvals or similar authorizations and other permits are valid and in full
force and effect.

 

8.9       Employee Benefits.

 

(a)         Except as could not reasonably be expected to have a Material
Adverse Effect, each Plan is in compliance in all material respects with the
applicable provisions of ERISA, the Code and other Federal or State law and each
Plan which is intended to qualify under Section 401(a) of the Code has received
a favorable determination letter from the Internal Revenue Service or is still
within the remedial amendment period (as defined in Section 401(b) of the Code)
to obtain a favorable determination letter.  Each Borrower and Guarantor and its
ERISA Affiliates have made all required contributions to any Pension Plan
subject to Section 412 of the Code, and no application for a funding waiver or
an extension of any amortization period pursuant to Section 412 of the Code has
been made with respect to any such Pension Plan.

 

(b)         Except as could not reasonably be expected to have a Material
Adverse Effect, there are no pending, or to the best of each Borrower’s and
Guarantor’s knowledge, threatened claims, actions or lawsuits, or action by any
Governmental Authority, with respect to any Plan, and there has been no
non-exempt prohibited transaction or violation of the fiduciary responsibility
rules with respect to any Plan.

 

(c)          (i)                                     Except as could not
reasonably be expected to have a Material Adverse Effect, no ERISA Event has
occurred or is reasonably expected to occur; (ii) the current value of the
assets of each Pension Plan (determined in accordance with the assumptions used
for funding such Pension Plan pursuant to Section 412 of the Code) are not
exceeded by such Pension Plan’s liabilities under Section 4001(a)(16) of ERISA
in an amount that could reasonably be expected to have a Material Adverse
Effect; (iii) no Borrower or Guarantor or any of its ERISA Affiliates have
incurred nor do any of them reasonably expect to incur any liability under Title
IV of ERISA with respect to any Pension Plan (other than premiums due and not
delinquent under Section 4007 of ERISA) in an amount which could reasonably be
expected to have a Material Adverse Effect; (iv) no Borrower or Guarantor or any
of its ERISA Affiliates have incurred nor do any of them reasonably expect to
incur any liability (and no event has occurred which, with the giving of notice
under Section 4219 of ERISA, would result in such

 

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liability) under Section 4201 or 4243 of ERISA with respect to a Multiemployer
Plan that could reasonably be expected to have a Material Adverse Effect; and
(v) no Borrower or Guarantor or any of its ERISA Affiliates has engaged in a
transaction that would be subject to Section 4069 or 4212(c) of ERISA.

 

8.10                        Bank Accounts, etc.  All of the deposit accounts,
investment accounts or other accounts in the name of or used by any Borrower or
Guarantor maintained at any bank or other financial institution are set forth on
such Borrower’s or Guarantor’s Information Certificate, subject to the right of
Borrowers and Guarantors to establish new accounts in accordance with
Section 5.2(d) hereof.

 

8.11                        Intellectual Property.

 

(a)         Each Borrower, Guarantor and each of their Subsidiaries owns or
licenses or otherwise has the right to use all Intellectual Property necessary
for the operation of its business as presently conducted or proposed to be
conducted.  As of the date hereof, no Borrower, Guarantor or any of their
Subsidiaries owns any Intellectual Property registered, or subject to pending
applications, in the United States Patent and Trademark Office or any similar
office or agency in the United States, any State thereof, any political
subdivision thereof or in any other country, other than those described in such
Borrower’s or Guarantor’s Information Certificate and has not granted any
licenses with respect thereto other than as set forth in such Borrower’s or
Guarantor’s Information Certificate.  To the best of each Borrower’s and
Guarantor’s knowledge, no event has occurred which permits or would permit after
notice or passage of time or both, the revocation, suspension or termination of
any Borrower’s, Guarantor’s or Subsidiary’s Intellectual Property rights the
loss of which could reasonably be expected to have a Material Adverse Effect. 
To the best of each Borrower’s and Guarantor’s knowledge, except as could not
reasonably be expected to have a Material Adverse Effect: (i) no slogan or other
advertising device, product, process, method, substance or other Intellectual
Property or goods bearing or using any Intellectual Property presently
contemplated to be sold by or employed by any Borrower, Guarantor or any of
their Subsidiaries infringes any patent, trademark, servicemark, tradename,
copyright, license or other Intellectual Property owned by any other Person
presently, and (ii) and no claim or litigation is pending or threatened against
or affecting any Borrower, Guarantor or any of their Subsidiaries contesting its
right to sell or use any such Intellectual Property.  Each Borrower’s and
Guarantor’s Information Certificate sets forth all of the agreements of such
Borrower, Guarantor and any of their Subsidiaries pursuant to which such
Borrower, Guarantor of Subsidiary has a license or other right to use any
material trademarks, logos, designs or other material Intellectual Property
owned by another person as in effect on the date hereof and the dates of the
expiration of such agreements (collectively, together with such agreements or
other arrangements as may be entered into by any Borrower or Guarantor or any of
their Subsidiaries after the date hereof, including any such license agreements
by any of the IP Holdcos to any Borrower or Guarantor, collectively, the “IP
License Agreements” and individually, an “IP License Agreement”).

 

(b)         No trademark, servicemark, copyright or other Intellectual Property
at any time used by any Borrower, Guarantor or any of their Subsidiaries which
is owned by another person, or owned by such Borrower, Guarantor or Subsidiary
subject to any security interest, lien, collateral assignment, pledge or other
encumbrance in favor of any person, except (i)  as set forth on such Borrower’s
or Guarantor’s Information Certificate, (ii) to the extent permitted under the
term of the IP License Agreements listed on such Borrower’s or Guarantor’s
Information Certificate, or (iii) to the extent the sale of Inventory to which
such Intellectual Property is affixed is permitted to be sold by such Borrower,
Guarantor or Subsidiary under applicable law (including the United States
Copyright Act of 1976).

 

8.12                        Subsidiaries; Affiliates; Capitalization; Solvency.

 

(a)         No Borrower or Guarantor has any direct or indirect Subsidiaries or
Affiliates and is not

 

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engaged in any joint venture or partnership except as set forth in such
Borrower’s or Guarantor’s Information Certificate.

 

(b)         Each Borrower and Guarantor is the record and beneficial owner of
all of the issued and outstanding Equity Interests of each of the Subsidiaries
listed on such Borrower’s or Guarantor’s Information Certificate as being owned
by such Borrower or Guarantor and there are no proxies, irrevocable or
otherwise, with respect to such Equity Interests of any of Subsidiary of a
Borrower or Guarantor are or may become required to be issued by reason of any
options, warrants, rights to subscribe to, calls or commitments of any kind or
nature and there are no contracts, commitments, understandings or arrangements
by which any Subsidiary of a Borrower or Guarantor is or may become bound to
issue additional Equity Interests or securities convertible into or exchangeable
for such interests.

 

(c)          The issued and outstanding shares of Equity Interests of each
Borrower and Guarantor and their Subsidiaries are directly and beneficially
owned and held by the persons indicated in such Borrower’s or Guarantor’s
Information Certificate, and in each case all of such shares have been duly
authorized and are fully paid and non-assessable, free and clear of all claims,
liens, pledges and encumbrances of any kind, except as may be permitted under
the terms of the Financing Agreements.

 

(d)         Each Borrower and Guarantor is Solvent and will continue to be
Solvent after the creation of the Obligations, the security interests of Agent
and the other transaction contemplated hereunder.

 

8.13                        Labor Disputes.

 

(a)         Set forth on Schedule 8.13 hereto is a list (including dates of
termination) of all collective bargaining or similar agreements between or
applicable to any Borrower, Guarantor or any of their Subsidiaries and any
union, labor organization or other bargaining agent in respect of the employees
of such Borrower, Guarantor or Subsidiary on the date hereof.

 

(b)         Except as could not reasonably be expected to have a Material
Adverse Effect, there is (i) no unfair labor practice complaint pending against
any Borrower, Guarantor or any of their Subsidiaries or, to the best of such
Borrower’s or Guarantor’s knowledge, threatened against it, before the National
Labor Relations Board, and no grievance or arbitration proceeding arising out of
or under any collective bargaining agreement is pending on the date hereof
against such Borrower, Guarantor or Subsidiary or, to best of such Borrower’s or
Guarantor’s knowledge, threatened against it, and (ii) no strike, labor dispute,
slowdown or stoppage is pending against any Borrower, Guarantor or any of their
Subsidiaries or, to the best of such Borrower’s or Guarantor’s knowledge,
threatened against such Borrower, Guarantor or Subsidiary.

 

8.14                        Restrictions on Subsidiaries.  Except for
restrictions contained in this Agreement, the Transition Services Agreement, or
any other agreement with respect to Indebtedness of any Borrower, Guarantor or
any of their Subsidiaries permitted hereunder as in effect on the date hereof
(or hereafter in effect pursuant to any refinancing thereof permitted under the
terms of this Agreement), there are no contractual or consensual restrictions on
any Borrower or Guarantor or any of its Subsidiaries which prohibit or otherwise
restrict (a) the transfer of cash or other assets (i) between Borrowers,
(ii) between any Borrower or Guarantor and any Subsidiary of a Borrower or
Guarantor, or (iii) between any Subsidiaries of any Borrower or Guarantor or
(b) the ability of any Borrower or Guarantor or any of its Subsidiaries to incur
Indebtedness or grant security interests to Agent or any Lender in the
Collateral.

 

8.15                        Material Contracts. Schedule 8.15 hereto sets forth
a list of all Material Contracts to which any Borrower, Guarantor or any of
their Subsidiaries is a party or is bound as of the date hereof.

 

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Each Borrower and Guarantor has delivered true, correct and complete copies of
such Material Contracts to Agent on or before the date hereof.  No Borrower,
Guarantor or any of their Subsidiaries is in breach or in default in any
material respect of or under any Material Contract and have not received any
notice of the intention of any other party thereto to terminate any Material
Contract.

 

8.16                        Credit Card Agreements.  Set forth in Schedule 8.16
hereto is a correct and complete list of all of the Credit Card Agreements as of
the date hereof and all other agreements, documents and instruments existing as
of the date hereof between or among any Borrower or Guarantor, any of their
Affiliates, the Credit Card Issuers, the Credit Card Processors and any of their
Affiliates.  The Credit Card Agreements constitute all of such agreements
necessary for Borrowers and Guarantors to operate their business as presently
conducted with respect to credit cards and debit cards and no Receivables of any
Borrower or Guarantor arise from purchases by customers of Inventory with credit
cards or debit cards, other than those which are issued by Credit Card Issuers
with whom such Borrower or Guarantor has entered into one of the Credit Card
Agreements set forth on Schedule 8.16 hereto or with whom such Borrower or
Guarantor has entered into a Credit Card Agreement in accordance with
Section 9.21 hereof.  Each of the Credit Card Agreements constitutes the legal,
valid and binding obligations of the Borrower or Guarantor that is party thereto
and to the best of each Borrower and Guarantor’s knowledge, the other parties
thereto, enforceable in accordance with their respective terms and is in full
force and effect.  Except as could not reasonably (i) be expected to have a
Material Adverse Effect or (ii) result in the cessation of the transfer of
payments under any Credit Card Agreement to the Blocked Accounts as required
under this Agreement, no default or event of default, or act, condition or event
which after notice or passage of time or both, would constitute a default or an
event of default under any of the Credit Card Agreements exists or has
occurred.  The applicable Borrower and Guarantors and the other parties thereto
have complied with all of the terms and conditions of the Credit Card Agreements
to the extent necessary for such Borrower or Guarantor to be entitled to receive
all payments thereunder which constitute proceeds of Eligible Credit Card
Receivables.  Borrowers and Guarantors have delivered, or caused to be delivered
to Agent, true, correct and complete copies of all of the Credit Card
Agreements.

 

8.17                        Payable Practices.  Borrowers and Guarantors have
not made any material changes in their historical accounts payable practices
from those in effect immediately prior to the date hereof.

 

8.18                        Accuracy and Completeness of Information.  All
information furnished by or on behalf of any Borrower or Guarantor or any of
their Subsidiaries in writing to Agent or any Lender in connection with this
Agreement or any of the other Financing Agreements or any transaction
contemplated hereby or thereby, including all information on the Information
Certificates is true and correct in all material respects on the date as of
which such information is dated or certified and does not omit any material fact
necessary in order to make such information not misleading.  No event or
circumstance has occurred which has had or could reasonably be expected to have
a Material Adverse Effect, which has not been fully and accurately disclosed to
Agent in writing prior to the date hereof.  As of the Amendment No. 1 Effective
Date, the information included in the Beneficial Ownership Certification is true
and correct in all respects.

 

8.19                        No Defaults.  As of the date hereof, no event has
occurred and is continuing that constitutes (a) an Event of Default or Default
hereunder, or (b) except as could not reasonably be expected to have a Material
Adverse Effect, a default or event of default under the Transition Services
Agreement.

 

8.20                        Transition Services.  As of the date hereof, the
only material services being provided to Borrowers and Guarantors under the
Transition Services Agreement are logistics or other such Inventory processing
and handling services.

 

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8.21                        Patriot Act.  To the extent applicable, each Loan
Party is in compliance, in all material respects, with the (a) Trading with the
Enemy Act, as amended, and each of the foreign assets control regulations of the
United States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended)
and any other enabling legislation or executive order relating thereto, and
(b) Uniting and Strengthening America by Providing Appropriate Tools Required to
Intercept and Obstruct Terrorism (USA Patriot Act of 2001, as amended) (the
“Patriot Act”).

 

8.22                        OFAC; Sanctions; Anti-Corruption Laws; Anti-Money
Laundering Laws.  No Loan Party or any of its Subsidiaries is in violation of
any Sanctions.  No Loan Party nor any of its Subsidiaries nor, to the knowledge
of such Loan Party, any director, officer, employee, agent or Affiliate of such
Loan Party or such Subsidiary (a) is a Sanctioned Person or a Sanctioned Entity,
(b) has any assets located in Sanctioned Entities, or (c) derives revenues from
investments in, or transactions with Sanctioned Persons or Sanctioned Entities. 
Each of the Loan Parties and its Subsidiaries has implemented and maintains in
effect policies and procedures designed to ensure compliance with all Sanctions,
Anti-Corruption Laws and Anti-Money Laundering Laws.  Each of the Loan Parties
and its Subsidiaries, and to the knowledge of each such Loan Party, each
director, officer, employee, agent and Affiliate of each such Loan Party and
each such Subsidiary, is in compliance (i) with all Sanctions, and (ii) in all
material respects, with all Anti-Corruption Laws and Anti-Money Laundering
Laws.  No proceeds of any Loan made or Letter of Credit issued hereunder will be
used to fund any operations in, finance any investments or activities in, or
make any payments to, a Sanctioned Person or a Sanctioned Entity, or otherwise
used in any manner that would result in a violation of any Sanction,
Anti-Corruption Law or Anti-Money Laundering Law by any Person (including any
Lender, Bank Product Provider, or other individual or entity participating in
any transaction).

 

8.23                        Margin Stock.  Neither any Loan Party nor any of its
Subsidiaries owns any Margin Stock or is engaged principally, or as one of its
important activities, in the business of extending credit for the purpose of
purchasing or carrying any Margin Stock.  No part of the proceeds of the Loans
made to Borrowers will be used to purchase or carry any Margin Stock or to
extend credit to others for the purpose of purchasing or carrying any Margin
Stock or for any purpose that violates the provisions of Regulation T, U or X of
the Board of Governors.  Neither any Loan Party nor any of its Subsidiaries
expects to acquire any Margin Stock.

 

8.24                        IP Holdco Subsidiaries.  The IP Holdco Subsidiaries
(a) do not own or use assets, other than the Intellectual Property set forth on
Schedule 8.14 hereto as may be updated form time to time after the Amendment
No. 1 Effective Date in accordance with Section 9.28 hereof, (b) do not have any
liabilities (other than liabilities of a de minimis nature, except as permitted
by Section 9.9(d) hereof) or any encumbrances on their assets (other than
encumbrances permitted by Sections 9.7(b)(iii), (xi), (xii) and 9.8(m) hereof),
or (c) do not engage in any business activity, other than maintenance and
licensing of Intellectual Property to Borrowers and Guarantors or other Persons
in accordance with the terms hereof.

 

8.25                        Survival of Warranties; Cumulative.  All
representations and warranties contained in this Agreement or any of the other
Financing Agreements shall survive the execution and delivery of this Agreement
and shall be deemed to have been made again to Agent and Lenders on the date of
each additional borrowing or other credit accommodation hereunder and shall be
conclusively presumed to have been relied on by Agent and Lenders regardless of
any investigation made or information possessed by Agent or any Lender.  The
representations and warranties set forth herein shall be cumulative and in
addition to any other representations or warranties which any Borrower or
Guarantor shall now or hereafter give, or cause to be given, to Agent or any
Lender.

 

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SECTION 9. AFFIRMATIVE AND NEGATIVE COVENANTS

 

9.1       Maintenance of Existence.

 

(a)         Except as permitted under Section 9.7 hereof, each Borrower and
Guarantor shall, and shall cause each of their Subsidiaries, at all times
preserve, renew and keep in full force and effect its corporate existence and
material rights and franchises with respect thereto and maintain in full force
and effect all material licenses, trademarks, tradenames, approvals,
authorizations, leases, contracts and permits necessary to carry on the business
as presently or proposed to be conducted.

 

(b)         No Borrower or Guarantor shall change its name unless each of the
following conditions is satisfied: (i) Agent shall have received not less than
thirty (30) days’ prior written notice from such Borrower or Guarantor of such
proposed change in its corporate name, which notice shall accurately set forth
the new name (other than in the case of Lerner New York, Inc. in connection with
certain tax planning transaction of Borrowers and Guarantors, in which case
Agent shall have received not less than ten (10) days’ prior written notice of
such change); and (ii) Agent shall have received a copy of the amendment to the
Certificate of Incorporation of such Borrower or Guarantor providing for the
name change certified by the Secretary of State of the jurisdiction of
incorporation or organization of such Borrower or Guarantor as soon as it is
available.

 

(c)          No Borrower or Guarantor shall change its chief executive office or
its mailing address or organizational identification number (or if it does not
have one, shall not acquire one) unless Agent shall have received not less than
thirty (30) days’ prior written notice from such Borrower or Guarantor of such
proposed change, which notice shall set forth such information with respect
thereto as Agent may require and Agent shall have received such agreements as
Agent may reasonably require in connection therewith.  Without the prior written
consent of Agent, such consent not to be unreasonably withheld, no Borrower or
Guarantor shall change its type of organization, jurisdiction of organization or
other legal structure.

 

9.2       New Collateral Locations.  Any Borrower or Guarantor may open any new
location within the continental United States provided such Borrower or
Guarantor (a) gives Agent written notice of the opening of any such new location
on or before the date such Borrower or Guarantor decides to open such new
location and (b) executes and delivers, or causes to be executed and delivered,
to Agent such agreements, documents, and instruments as Agent may deem
reasonably necessary or desirable to protect its interests in the Collateral at
such location.

 

9.3       Compliance with Laws, Regulations, Etc.

 

(a)         Except as could not reasonably be expected to cause a Material
Adverse Effect, each Borrower and Guarantor shall, and shall cause its
respective Subsidiaries to, at all times, comply in all material respects with
all laws, rules, regulations, licenses, approvals, orders and other permits
applicable to it and duly observe all requirements of any foreign, Federal,
State or local Governmental Authority, the Code, the Occupational Safety and
Health Act of 1970, as amended, the Fair Labor Standards Act of 1938, as
amended, all Federal, State and local statutes, regulations, rules and orders
relating to consumer credit (including, without limitation, as each has been
amended, the Truth-in-Lending Act, the Fair Credit Billing Act, the Equal Credit
Opportunity Act and the Fair Credit Reporting Act, and regulations, rules and
orders promulgated thereunder), all Federal, State and local statutes,
regulations, rules and orders pertaining to sales of consumer goods (including,
without limitation, the Consumer Products Safety Act of 1972, as amended, and
the Federal Trade Commission Act of 1914, as amended, and all regulations,
rules and orders promulgated thereunder) and all statutes, rules, regulations,
orders, permits and stipulations relating to environmental pollution and
employee health and safety, including all of the Environmental Laws.

 

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(b)         Each Borrower and Guarantor shall give written notice to Agent
promptly upon such Borrower’s or Guarantor’s receipt of any notice of, or such
Borrower’s or Guarantor’s otherwise obtaining knowledge of any of the following,
except if it could not reasonably be expected to have a Material Adverse Effect,
(i) the occurrence of any event involving the unpermitted release, spill or
discharge, threatened or actual, of any Hazardous Material by any Borrower,
Guarantor or any of their Subsidiaries or (ii) any investigation, proceeding,
complaint, order, directive, claims, citation or notice with respect to: (A) any
non-compliance with or violation of any Environmental Law by any Borrower,
Guarantor or any of their Subsidiaries or (B) the release, spill or discharge,
threatened or actual, of any Hazardous Material by any Borrower, Guarantor or
any of their Subsidiaries, other than in the ordinary course of business and
other than as permitted under any applicable Environmental Law.  At the request
of Agent, Borrowers and Guarantors shall promptly furnish to Agent copies of all
environmental surveys, audits, assessments, feasibility studies and results of
remedial investigations with respect to the foregoing.  Borrowers and Guarantors
shall, and shall cause their Subsidiaries to, take prompt action to respond to
any material non-compliance with any of the Environmental Laws and, at the
request of Agent, shall regularly report to Agent on such response.

 

(c)          Without limiting the generality of the foregoing, whenever Agent
reasonably determines that there is non-compliance, or any condition which
requires any action by or on behalf of any Borrower, Guarantor or any of their
Subsidiaries in order to avoid any non-compliance, with any Environmental Law
except with respect to such non-compliance that could not reasonably be expected
to have a Material Adverse Effect, Borrowers and Guarantors shall, and shall
cause their Subsidiaries, at Agent’s request and Borrowers’ expense: (i) cause
an independent environmental consultant reasonably acceptable to Agent to assess
such non-compliance or alleged non-compliance with such Environmental Laws
(including sampling and analysis, if necessary) and prepare and deliver to Agent
a report as to such non-compliance setting forth the results of any sampling or
analysis, a proposed plan for responding to any environmental problems described
therein, and an estimate of the costs thereof and (ii) provide to Agent a
supplemental report of such consultant whenever the scope of such
non-compliance, or any Borrower’s, Guarantor’s or any of their Subsidiaries’
response thereto or the estimated costs thereof, shall change in any material
respect.

 

(d)         Each Borrower and Guarantor shall indemnify and hold harmless Agent
and Lenders and their respective directors, officers, employees, agents,
invitees, representatives, successors and assigns, from and against any and all
losses, claims, damages, liabilities, costs, and expenses (including reasonable
attorneys’ fees and expenses) directly or indirectly arising out of or
attributable to the use, generation, manufacture, reproduction, storage,
release, threatened release, spill, discharge, disposal or presence of a
Hazardous Material, including the costs of any required or necessary repair,
cleanup or other remedial work with respect to any property of any Borrower,
Guarantor or any of their Subsidiaries, and the preparation and implementation
of any closure, remedial or other required plans except to the extent such
losses, claims, damages, liabilities, costs, and expenses arise out of or are
attributable to the gross negligence or willful misconduct of Agent or any
Lender.  All indemnifications in this Section 9.3 shall survive the payment of
the Obligations and the termination of this Agreement.

 

9.4       Payment of Taxes and Claims.  Each Borrower and Guarantor shall, and
shall cause its Subsidiaries to, duly pay and discharge all Taxes, assessments,
contributions and governmental charges upon or against it or its properties or
assets, except for Taxes (i) the validity of which are being contested in good
faith by appropriate proceedings diligently pursued and available to such
Borrower or Guarantor or its Subsidiaries, as the case may be, and with respect
to which adequate reserves have been set aside on its books or (ii) the
non-payment of which could not reasonably be expected to have a Material Adverse
Effect.

 

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9.5       Insurance.

 

(a)         Each Borrower and Guarantor shall, and shall cause its Subsidiaries
to, at all times, maintain with financially sound and reputable insurers
insurance with respect to the Collateral against loss or damage, business
interruption and all other insurance of the kinds and in the amounts customarily
insured against or carried by corporations of established reputation engaged in
the same or similar businesses and similarly situated.  Said policies of
insurance shall be reasonably satisfactory to Agent as to form, amount and
insurer.  Each Borrower and Guarantor shall furnish certificates, policies or
endorsements to Agent as Agent shall reasonably require as proof of such
insurance, and, if such Borrower or Guarantor fails to do so, Agent is
authorized, but not required, to obtain such insurance at the expense of
Borrowers.  All policies with regard to such insurance shall provide for at
least thirty (30) days’ prior written notice to Agent of any cancellation or
reduction of coverage and that Agent may act as attorney for such Borrower or
Guarantor in obtaining, and at any time an Event of Default exists or has
occurred and is continuing, adjusting, settling, amending and canceling such
insurance.  Within ten (10) days after the date hereof, Borrowers and Guarantors
shall cause Agent to be named as a lender’s loss payee and an additional
insured, as its interests may appear (but without any liability for any
premiums), under such insurance policies and Borrowers and Guarantors shall
obtain non-contributory lender’s loss payable endorsements to all such insurance
policies in form and substance reasonably satisfactory to Agent.  Such lender’s
loss payable endorsements shall specify that the proceeds of such insurance
shall be payable to Agent, for itself and the ratable benefit of the Lenders and
the Bank Product Providers, as its interests may appear and further specify that
Agent and Lenders shall be paid regardless of any act or omission by any
Borrower or Guarantor or any of its Affiliates.  Without limiting any other
rights of Agent or Lenders, any insurance proceeds received by Agent at any time
may be applied to payment of the Obligations, whether or not then due, in
accordance with Section 6.4(a) hereof.  Upon application of such proceeds to the
Revolving Loans, Revolving Loans may be available subject and pursuant to the
terms hereof to be used for the costs of repair or replacement of the Collateral
lost or damages resulting in the payment of such insurance proceeds.

 

(b)         If at any time the area in which any real property that is subject
to a mortgage in favor of Lender is located is designated a “flood hazard area”
in any Flood Insurance Rate Map published by the Federal Emergency Management
Agency (or any successor agency), obtain flood insurance in such total amount
and on terms that are satisfactory to Agent and each Lender in their good faith
determination from time to time, and otherwise comply with the Flood Laws or as
is otherwise satisfactory to Agent and Lenders.

 

9.6       Financial Statements and Other Information.

 

(a)         Each Borrower and Guarantor shall, and shall cause its Subsidiaries
to, keep proper books and records in which true and complete entries shall be
made of all dealings or transactions of or in relation to the Collateral and the
business of such Borrower or Guarantor and its Subsidiaries in accordance with
GAAP.  Borrowers and Guarantors shall promptly furnish to Agent and Lenders all
such financial and other information as Agent shall reasonably request relating
to the Collateral and the assets, business and operations of Borrowers and
Guarantors, and Borrowers and Guarantors shall notify their auditors and
accountants that Agent is authorized to obtain such information directly from
them.  Without limiting the foregoing, Borrowers and Guarantors shall furnish or
cause to be furnished to Agent, the following:

 

(i)                       within thirty (30) days after the end of each month, a
Compliance Certificate, along with a schedule in a form reasonably satisfactory
to Agent of the calculations used in determining, as of the end of such month,
whether Borrowers and Guarantors are in compliance with the covenants set forth
in Section 9.17 hereof for such month;

 

(ii)                    within forty-five (45) days after the end of each fiscal
quarter, quarterly unaudited

 

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consolidated financial statements, and unaudited consolidating financial
statements (including in each case balance sheets, statements of income and
loss, statements of cash flow, and statements of shareholders’ equity), all in
reasonable detail, fairly presenting the financial position and the results of
the operations of RTW and its Subsidiaries as of the end of and through such
fiscal quarter, certified to be correct by either the “chief accounting officer”
or the “chief financial officer” of each Borrower, subject to normal year-end
adjustments;  provided, that, at any time an Increased Financial Reporting Event
exists or has occurred and is continuing, within thirty (30) days after the end
of each fiscal month, monthly unaudited consolidated financial statements, and
unaudited consolidating financial statements (including in each case balance
sheets, statements of income and loss, statements of cash flow, and statements
of shareholders’ equity), all in reasonable detail, fairly presenting the
financial position and the results of the operations of RTW and its Subsidiaries
as of the end of and through such fiscal month, certified to be correct by
either the “chief accounting officer” or the “chief financial officer” of each
Borrower, subject to normal year-end adjustments;

 

(iii)                 during any Cash Dominion Event or Increased Collateral
Reporting Event or on the last Business Day of any month therein, Borrowers will
deliver to Agent a compliance report, in form and substance reasonably
satisfactory to Agent, along with a schedule of the calculations used in
determining, as of the end of such month and such other date determined by
Borrowers in their sole discretion, whether either or both any Cash Dominion
Event or Increased Collateral Reporting Event has ceased to exist; and

 

(iv)                without duplication within ninety (90) days after each
Fiscal Year-End, audited consolidated financial statements and unaudited
consolidating financial statements of RTW and its Subsidiaries (including in
each case balance sheets, statements of income and loss, statements of cash
flow, and statements of shareholders’ equity), and the accompanying notes
thereto, all in reasonable detail, fairly presenting the financial position and
the results of the operations of RTW and its Subsidiaries as of the Fiscal
Year-End of and for such fiscal year, together with the unqualified opinion of
independent certified public accountants with respect to the audited
consolidated financial statements, which accountants shall be an independent
accounting firm selected by RTW and reasonably acceptable to Agent, that such
audited consolidated financial statements have been prepared in accordance with
GAAP, and present fairly the results of operations and financial condition of
RTW and its Subsidiaries as of the Fiscal Year-End then ended.

 

(b)         Borrowers and Guarantors shall promptly notify Agent in writing of
the details of (i) any loss, damage, investigation, action, suit, proceeding or
claim relating to Collateral having a value of more than $2,500,000 or which if
adversely determined would result in any material adverse change in any
Borrower’s or Guarantor’s business, properties, assets, goodwill or condition,
financial or otherwise, (ii) any Material Contract being terminated or amended
or any new Material Contract entered into (in which event the applicable
Borrower or Guarantor shall provide Agent with a copy of such Material
Contract), (iii) any order, judgment or decree in excess of $2,500,000 shall
have been entered against any Borrower or Guarantor or any of its properties or
assets, (iv) any notification of a material violation of laws or regulations
received by any Borrower or Guarantor, (v) any ERISA Event, and (vi) the
occurrence of any Event of Default.

 

(c)          Borrowers shall promptly after the sending or filing thereof
furnish or cause to be furnished to Agent copies of all reports and registration
statements which any Borrower or Guarantor files with the Securities and
Exchange Commission, any national securities exchange or the National
Association of Securities Dealers, Inc. Borrowers shall, in addition to the
foregoing, promptly after the sending of all material business reports which any
Borrower or Guarantor sends to its stockholders generally furnish or cause to be
furnished to Agent copies thereof.

 

(d)         As soon as available but in any event by no later than the thirtieth
(30th) day after each

 

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Fiscal Year-End, Borrowers and Guarantors shall furnish or cause to be furnished
to Agent such monthly budgets, forecasts, projections, borrowing availability
forecasts and other information respecting the Collateral and the business of
Borrowers and Guarantors, as Agent may reasonably request.  Agent is hereby
authorized to deliver a copy of any financial statement or any other information
relating to the business of Borrowers and Guarantors to any court or other
Governmental Authority, or to any Lender or Participant or prospective Lender or
Participant, or any financial institution engaged in the same business as
Agent.  Each Borrower and Guarantor hereby irrevocably authorizes and directs
all accountants or auditors to deliver to Agent, at Borrowers’ expense and
without duplication, copies of the financial statements of Borrowers and
Guarantors (or any of them) and any reports or management letters prepared by
such accountants or auditors on behalf of Borrowers and Guarantors (or any of
them) and to disclose to Agent and Lenders such information as they may have
regarding the business of any Borrower or Guarantor.  Any documents, schedules,
invoices or other papers delivered to Agent or any Lender may be destroyed or
otherwise disposed of by Agent or such Lender one (1) year after the same are
delivered to Agent or such Lender, except as otherwise designated by party to
Agent or such Lender in writing.

 

9.7       Sale of Assets, Consolidation, Merger, Dissolution, Etc..  No Borrower
or Guarantor shall, nor shall it permit any of its Subsidiaries to, directly or
indirectly:

 

(a)         merge into or with or consolidate with any other Person or permit
any other Person to merge into or with or consolidate with it; provided,
however, upon prior written notice to Agent:

 

(i)                       a Borrower may merge into or with or consolidate with
another Borrower so long as, other than with respect to a merger of Lerner New
York, Inc. with and into Lerner New York Outlet, LLC in connection with certain
tax planning transactions of Borrowers and Guarantors, both before and after
giving effect thereto no Default, Event of Default or Material Adverse Effect
exists or would occur; provided, that, in each of the foregoing cases, the
surviving Borrower entity of such merger or consolidation assumes and continues
to be responsible for all of the Obligations of the constituent corporations to
such merger or consolidation;

 

(ii)                    a Guarantor may merge into or with or consolidate with
another Guarantor; and

 

(iii)                 a Guarantor may merge into or with or consolidate with a
Borrower so long as (A) such Borrower is the surviving entity with respect
thereto and continues to be an organization of the type, domiciled in the state
and bearing the same corporate name as existed prior to such merger or
consolidation, (B) no Default or Event of Default then exists or would occur,
(C) no liens, other than those permitted under the terms of this Agreement with
regard to a Borrower, on the assets of such Guarantor then exist, and (D) such
Borrower would not, as a result of such transaction, be liable for any
Indebtedness or other obligations of such Guarantor, other than Indebtedness or
other obligations which are permitted under the terms of this Agreement with
regard to a Borrower;

 

(b)         sell, issue, assign, lease, license, transfer, abandon or otherwise
dispose of any Equity Interests to any other Person or any of its assets to any
other Person, except for

 

(i)                       sales of Inventory in the ordinary course of business;

 

(ii)                    subleases of real property in the ordinary course of
business, as disclosed to Agent pursuant to quarterly reports of such activity,

 

(iii)                 the abandonment or other disposition of Intellectual
Property so long as (A) such Intellectual Property (1) is not material and is no
longer used or useful in any material respect in the business of any Borrower,
Guarantor or any of their Subsidiaries, (2) does not appear on is or otherwise

 

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not affixed to or incorporated in any Inventory or necessary in connection with
the Records and (3) does not have any material value, (B) no Event of Default
shall exist or have occurred and be continuing, and (C) Borrowers furnish to
Agent a list of such Intellectual Property of Borrowers, Guarantors or any of
their Subsidiaries so abandoned at the end of each fiscal year of Borrowers with
the delivery of the Compliance Certificate required to be delivered immediately
following such Fiscal Year-End of Borrowers;

 

(iv)                exclusive of sales or dispositions contemplated by clause
(vii) hereof, the sale or other disposition of Equipment (including worn-out or
obsolete Equipment or Equipment no longer used or useful in the business of
Borrowers) in the ordinary course of business of Borrowers, Guarantors or any of
their Subsidiaries so long as the value of such Equipment sold in any fiscal
year is equal to or less than the value of all Equipment acquired in such year,
and

 

(v)                   the issuance and sale by any Borrower, Guarantor or any of
their Subsidiaries of Equity Interests of such Borrower, Guarantor of Subsidiary
after the date hereof; provided, that, (A) Agent shall have received not less
than ten (10) Business Days’ prior written notice of such issuance and sale by
such Borrower, Guarantor or Subsidiary, which notice shall specify the parties
to whom such shares are to be sold, the terms of such sale, the total amount
which it is anticipated will be realized from the issuance and sale of such
stock and the net cash proceeds which it is anticipated will be received by such
Borrower, Guarantor or Subsidiary from such sale, (B) such Borrower, Guarantor
or Subsidiary shall not be required to pay any cash dividends or repurchase or
redeem such Equity Interests or make any other payments in respect thereof,
except as otherwise permitted in Section 9.11 hereof, (C) the terms of such
Equity Interests, and the terms and conditions of the purchase and sale thereof,
shall not include any terms that include any limitation on the right of any
Borrower to request or receive Loans or Letters of Credit or the right of any
Borrower or Guarantor to amend or modify any of the terms and conditions of this
Agreement or any of the other Financing Agreements or otherwise in any way
relate to or affect the arrangements of Borrowers, Guarantors or any of their
Subsidiaries with Agent and Lenders or are more restrictive or burdensome to
Borrowers, Guarantors and their Subsidiaries than the terms of any Equity
Interests in effect on the date hereof and (D) if an Event of Default then
exists, all of the proceeds of the sale and issuance of such Equity Interests
shall be paid to Agent for application to the Obligations in accordance with
Section 6.4(a) hereof or at Agent’s option, to be held as cash collateral for
the Obligations,

 

(vi)                the issuance of Equity Interests of a Borrower, Guarantor or
any of their Subsidiaries consisting of common stock pursuant to an employee
stock option or grant or similar equity plan or 401(k) plans of such Borrower,
Guarantor or Subsidiary for the benefit of its employees, directors and
consultants, provided, that, in no event shall such Borrower, Guarantor or
Subsidiary be required to issue, or shall such Borrower, Guarantor or Subsidiary
issue, Equity Interests pursuant to such stock plans or 401(k) plans which would
result in a Change of Control or other Event of Default,

 

(vii)             sales or other dispositions by any Borrower of assets in
connection with the closing or sale of a retail store location of such Borrower
in the ordinary course of such Borrower’s business which consist of leasehold
interests in the premises of such store, the Equipment and fixtures located at
such premises and the books and records relating exclusively and directly to the
operations of such store; provided, that, as to each and all such sales and
closings, on the date of, and after giving effect to, any such closing or sale,
(A) the number of retail store locations closed or sold by such Borrower in any
fiscal year minus the number of retail stores opened by such Borrower in such
fiscal year, shall not exceed the amount equal to fifteen percent (15%) of the
number of retail store locations of such Borrower as of the end of the
immediately preceding fiscal year, (B) Agent shall have received not less than
ten (10) Business Days prior written notice of such sale or closing, which
notice shall set forth in reasonable detail satisfactory to Agent, the parties
to such sale or other disposition, the assets to be sold or otherwise

 

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disposed of, the purchase price and the manner of payment thereof and such other
information with respect thereto as Agent may request, (C) as of the date of
such sale or other disposition and after giving effect thereto, no Default or
Event of Default shall exist or have occurred and be continuing, (D) such sale
shall be on commercially reasonable prices and terms in a bona fide arm’s length
transaction, and (E) any and all proceeds payable or delivered to such Borrower
or any Guarantor in respect of such sale or other disposition shall be paid or
delivered, or caused to be paid or delivered, to Agent in accordance with the
terms of this Agreement (except to the extent such proceeds reflect payment in
respect of Indebtedness secured by a properly perfected first priority security
interest in the assets sold, in which case, such proceeds shall be applied to
such Indebtedness secured thereby),

 

(viii)          sales or transfers of assets between Borrowers,

 

(ix)                sales or transfers of assets from a Guarantor to a Borrower
so long as no Default or Event of Default would occur as a result thereof,

 

(x)                   sales or transfers of assets among Guarantors or sales or
transfers of a Subsidiary to a Borrower or Guarantor;

 

(xi)                the non-exclusive license of any material Intellectual
Property that is included in the Borrowing Base by a Borrower, Guarantor or a
Subsidiary to another Person in the ordinary course of business so long as
(A) Agent shall have received not less than five (5) Business Days’ prior
written notice of the intention of to license such Intellectual Property,
(B) such license is nonexclusive and on and pursuant to the reasonable
requirements of such Borrower’s or Guarantor’s business (as the case may be) and
upon fair market terms (as determined by the Borrower in good faith), (C) the
terms of such license shall not in any way interfere, detract from or impair the
IP Use Rights of Agent or otherwise affect the ability of Agent and Lenders to
exercise their rights and remedies with respect to the Collateral, and (D) as of
the date of and after giving effect to such license, no Default or Event of
Default shall exist or have occurred; and

 

(xii)             the non-exclusive license of any non-material Intellectual
Property by a Borrower, Guarantor or a Subsidiary to another Person in the
ordinary course of business so long as (A) the terms of such license shall not
in any way interfere, detract from or impair the IP Use Rights of Agent or
otherwise affect the ability of Agent and Lenders to exercise their rights and
remedies with respect to the Collateral, and (B) as of the date of and after
giving effect to such license, no Default or Event of Default shall exist or
have occurred;

 

(c)          except as permitted in clause (a) above, wind up, liquidate or
dissolve; or

 

(d)         agree to do any of the foregoing.

 

9.8       Encumbrances.  No Borrower or Guarantor shall, nor shall it permit any
of its Subsidiaries to, create, incur, assume or suffer to exist any security
interest, mortgage, pledge, lien, charge or other encumbrance of any nature
whatsoever on any of its assets or properties, including the Collateral, or file
or permit the filing of, or permit to remain in effect, any financing statement
or other similar notice of any security interest or lien with respect to any
such assets or properties, except (a)             the security interests and
liens of Agent, for itself and the ratable benefit of the Lenders and the Bank
Product Providers;

 

(b)         liens securing the payment of taxes, assessments or other
governmental charges or levies either not yet overdue or the validity of which
are being contested in good faith by appropriate proceedings diligently pursued
and available to such Borrower or Guarantor or its Subsidiary, as the case may
be, and with respect to which adequate reserves have been set aside on its
books;

 

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(c)          non-consensual statutory liens (other than liens securing the
payment of taxes) arising in the ordinary course of such Borrower’s, such
Guarantor’s, or such Subsidiary’s, business to the extent: (i) such liens secure
Indebtedness which is not overdue or (ii) such liens secure Indebtedness
relating to claims or liabilities which are fully insured and being defended at
the sole cost and expense and at the sole risk of the insurer or being contested
in good faith by appropriate proceedings diligently pursued and available to
such Borrower, such Guarantor or such Subsidiary, in each case prior to the
commencement of foreclosure or other similar proceedings and with respect to
which adequate reserves have been set aside on its books;

 

(d)         zoning restrictions, easements, licenses, covenants and other
restrictions affecting the use of Real Property which do not interfere in any
material respect with the use of such Real Property or ordinary conduct of the
business of such Borrower, such Guarantor or such Subsidiary, as presently
conducted thereon or materially impair the value of the Real Property which may
be subject thereto;

 

(e)          purchase money security interests in Equipment (including Capital
Leases) to secure Indebtedness permitted under Section 9.9(b) hereof;

 

(f)           pledges and deposits of cash by such Borrower, Guarantor or
Subsidiary after the date hereof in the ordinary course of business in
connection with workers’ compensation, unemployment insurance and other types of
social security benefits consistent with the practices of such Borrower,
Guarantor or Subsidiary as of the date hereof;

 

(g)          pledges and deposits of cash by such Borrower, Guarantor or
Subsidiary after the date hereof to secure the performance of tenders, bids,
leases, trade contracts (other than for the repayment of Indebtedness),
statutory obligations and other similar obligations in each case in the ordinary
course of business consistent with the practices of such Borrower, Guarantor or
Subsidiary as of the date hereof; provided, that, in connection with any
performance bonds issued by a surety or other person, the issuer of such bond
shall have waived in writing any rights in or to, or other interest in, any of
the Collateral in an agreement, in form and substance reasonably satisfactory to
Agent;

 

(h)         liens arising from (i) operating leases and the precautionary UCC
financing statement filings in respect thereof and (ii) equipment or other
materials which are not owned by a Borrower, Guarantor or Subsidiary located on
the premises of such Borrower, Guarantor or Subsidiary (but not in connection
with, or as part of, the financing thereof) from time to time in the ordinary
course of business and consistent with current practices of such Borrower,
Guarantor or Subsidiary and the precautionary UCC financing statement filings in
respect thereof;

 

(i)             liens or rights of setoff or credit balances of such Borrower or
Guarantor with Credit Card Issuers, but not liens on or rights of setoff against
any other property or assets of such Borrower or Guarantor pursuant to the
Credit Card Agreements (as in effect on the date hereof) to secure the
obligations of such Borrower or Guarantor to the Credit Card Issuers as a result
of fees and chargebacks;

 

(j)            deposits of cash with the owner or lessor of premises leased and
operated by such Borrower, Guarantor or Subsidiary in the ordinary course of the
business of such Borrower or Guarantor to secure the performance by such
Borrower, Guarantor or Subsidiary of its obligations under the terms of the
lease for such premises;

 

(k)         judgments and other similar liens arising in connection with court
proceedings that do not constitute an Event of Default, provided, that, (i) such
liens are being contested in good faith and by appropriate proceedings
diligently pursued, (ii) adequate reserves or other appropriate provision, if
any, as are required by GAAP have been made therefor, (iii) a stay of
enforcement of any such liens is in effect

 

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and (iv) Agent may establish a Reserve with respect thereto; and

 

(l)             licenses of Intellectual Property to the extent permitted by
Sections 9.7(b)(xi) and (xii) hereof;

 

(m)     security interests in Intellectual Property to secure Indebtedness
permitted by Section 9.9(d) hereof in favor of a secured party so long as Agent
shall have been granted by such secured party an irrevocable, royalty free
license to use any such Intellectual Property to exercise Agent’s rights and
remedies with respect to the Collateral pursuant to the IP Use Rights; and

 

(n)         the security interests and liens set forth on the Information
Certificates.

 

9.9       Indebtedness.  No Borrower or Guarantor shall, nor shall any Borrower
or Guarantor permit any of its respective Subsidiaries to, incur, create,
assume, become or be liable in any manner with respect to, or permit to exist,
any Indebtedness, or guarantee, assume, endorse, or otherwise become responsible
for (directly or indirectly), the Indebtedness of any other Person, except:

 

(a)         the Obligations;

 

(b)         purchase money Indebtedness (including Capital Leases) arising after
the date hereof to the extent secured by purchase money security interests in
Equipment (including Capital Leases) so long as such security interests do not
apply to any property of any Borrower or Guarantor, or any Subsidiary of a
Borrower or Guarantor other than the Equipment so acquired, and the Indebtedness
secured thereby does not exceed the cost of the Equipment so acquired, as the
case may be;

 

(c)          unsecured Indebtedness of a Borrower or Guarantor or a Subsidiary
of a Borrower or Guarantor arising after the date hereof to any third person;
provided, that, on and after giving effect to the incurrence of such
Indebtedness, (i) no Default or Event of Default exists or has occurred and is
continuing, (ii) Borrowers have Excess Availability in an amount equal to not
less than twenty (20%) percent of the Revolving Loan Limit on and after giving
effect to such Indebtedness, and (iii) if such Indebtedness is incurred while an
Event of Default has occurred and is continuing, each of the following
additional conditions is satisfied as determined by Agent, (A) such Indebtedness
shall be on terms and conditions reasonably acceptable to Agent and (B) shall be
subject and subordinate in right of payment to the right of Agent and Lenders to
receive the prior indefeasible payment and satisfaction in full payment of all
of the Obligations pursuant to the terms of an intercreditor agreement between
Agent and such third party, in form and substance reasonably satisfactory to
Agent, (iv) Agent shall have received not less than ten (10) days’ prior written
notice of the intention of such Borrower, Guarantor or Subsidiary to incur such
Indebtedness, which notice shall set forth in reasonable detail reasonably
satisfactory to Agent the amount of such Indebtedness, the person or persons to
whom such Indebtedness will be owed, the interest rate, the schedule of
repayments and maturity date with respect thereto and such other information as
Agent may request with respect thereto, (v) Agent shall have received true,
correct and complete copies of all agreements, documents and instruments
evidencing or otherwise related to such Indebtedness, (vi) all of the proceeds
of the loans or other accommodations giving rise to such Indebtedness shall be
paid to Agent for application to the Obligations in such order and manner
consistent with Section 6.4(a) hereof, or at Agent’s option, to be held as cash
collateral for the Obligations, (vii) such Borrower or Guarantor shall not, and
shall cause each of their Subsidiaries not to, directly or indirectly,
(A) amend, modify, alter or change the terms of such Indebtedness or any
agreement, document or instrument related thereto, except, that, such Borrower,
Guarantor or Subsidiary may, after prior written notice to Agent, amend, modify,
alter or change the terms thereof so as to extend the maturity thereof, or defer
the timing of any payments in respect thereof, or to forgive or cancel any
portion of such Indebtedness (other than pursuant to payments thereof), or to
reduce the interest rate or any fees in connection therewith, or (B) redeem,

 

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retire, defease, purchase or otherwise acquire such Indebtedness (except
pursuant to regularly scheduled payments permitted herein), or set aside or
otherwise deposit or invest any sums for such purpose, and (viii) such Borrower
or Guarantor shall, and shall cause their subsidiaries to, furnish to Agent all
notices or demands in connection with such Indebtedness either received by such
Borrower, Guarantor or Subsidiary or on its behalf promptly after the receipt
thereof, or sent by such Borrower, Guarantor or Subsidiary or on its behalf
concurrently with the sending thereof, as the case may be;

 

(d)         secured Indebtedness of a Borrower or Guarantor or a Subsidiary of a
Borrower or Guarantor, arising after the Amendment No. 1 Effective Date to any
third person; provided, that, each of the following conditions shall have been
satisfied as determined by Agent in its good faith discretion: (i) on and after
giving effect to the incurrence of such Indebtedness, no Default or Event of
Default exists or has occurred and is continuing, (ii) the aggregate principal
amount of such Indebtedness shall not exceed $50,000,000 at any one time,
(iii) Agent shall have received not less than ten (10) days’ prior written
notice of the intention of such Borrower, Guarantor or Subsidiary to incur such
Indebtedness, which notice shall set forth in reasonable detail satisfactory to
Agent the terms of such Indebtedness, and Agent shall have received true,
correct and complete copies of all material agreements, documents and
instruments evidencing or otherwise related to such Indebtedness, (iv) such
Indebtedness shall be secured only by the Intellectual Property of such
Borrower, Guarantor or Subsidiary, and Agent shall have received an agreement by
such secured party in favor of Agent granting Agent the IP Use Rights, (v) if a
Cash Dominion Event shall exist or have occurred and be continuing, all of the
proceeds of the loans or other accommodations giving rise to such Indebtedness
shall be paid to Agent for application to the Obligations in such order and
manner consistent with Section 6.4(a) hereof, (vi) such Borrower or Guarantor
shall not, and shall cause each of their Subsidiaries not to, directly or
indirectly, (A) amend, modify, alter or change the terms of such Indebtedness or
any agreement, document or instrument related thereto in any way that would
materially affect the interest or rights of Agent and Lenders under the
Financing Agreements, and (vii) such Borrower or Guarantor shall, and shall
cause their Subsidiaries to, furnish to Agent all material notices or demands in
connection with such Indebtedness either received by such Borrower, Guarantor or
Subsidiary or on its behalf promptly after the receipt thereof, or sent by such
Borrower, Guarantor or Subsidiary or on its behalf concurrently with the sending
thereof, as the case may be;

 

(e)          refinancing of the Indebtedness referenced in the subsections (a),
(b), (c) or (d) hereof so long as such Indebtedness continues to comply with all
provisions of such subsections (a), (b), (c) or (d) hereof, as applicable, and
the incurrence of such Indebtedness would not otherwise cause a Default or Event
of Default to occur;

 

(f)           unsecured Indebtedness arising under or pursuant to any agreements
entered into by a Borrower or Guarantor or a Subsidiary of a Borrower or
Guarantor, for non-speculative purposes, that provides for an interest rate,
credit, commodity or equity swap, cap, floor, collar, forward foreign exchange
transaction, currency swap, cross currency rate swap, currency option, or any
combination of, or option with respect to, these or similar transactions, for
the purpose of hedging such Person’s exposure to fluctuations in interest or
exchange rates, loan, credit exchange, security or currency valuations or
commodity prices;

 

(g)          Indebtedness arising in connection with any reasonable deferred
compensation plan to officers, employees and directors for services rendered to
Borrowers, Guarantors and their Subsidiaries in the ordinary course of business;
and

 

(h)         the Indebtedness set forth on Schedule 9.9(h) hereto or other
Indebtedness of any Borrower to another Borrower or Guarantor or of any
Guarantor to a Borrower or another Guarantor, in each case, so long as (i) such
Guarantors are parties to the Intercompany Subordination Agreement, (ii)

 

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such Indebtedness is unsecured and (iii) payments made by a Borrower with
respect to such Indebtedness are made on a non-cash basis by way of a balance
sheet adjustment.

 

9.10                        Prepayments and Amendments; Loans, Investments, Etc.

 

(a)         No Borrower or Guarantor shall, nor shall any Borrower or Guarantor
permit any of its respective Subsidiaries to, directly or indirectly, prepay,
redeem, defease, purchase or otherwise acquire:  (i) the Obligations except in
accordance with this Agreement;  or (ii) any Indebtedness except in accordance
with the terms of such Indebtedness; provided, that, each of the following
conditions have been satisfied: (A) such Indebtedness is permitted to be
incurred to the extent provided by Section 9.9 hereof, (B) on the date of and
after giving effect to the payment of such payment, no Default or Event of
Default shall exist or have occurred and be continuing, (C) on the date of and
after giving effect to the such payment, Borrowers have Compliance Excess
Availability in an amount equal to not less than twenty (20%) percent of the
Revolving Loan Limit, (D) Agent shall have received, in form and substance
reasonably satisfactory to Agent, monthly projections showing that, for the
twelve (12) months immediately after such payment is made, Compliance Excess
Availability shall be greater than 20% of the Revolving Loan Limit, and
(E) Parent and its Subsidiaries shall have a Fixed Charge Coverage Ratio of
1.0:1.0 calculated based on the immediately preceding twelve (12) months for
which Agent has received financial statements delivered in accordance with
Section 9.6(a) hereof.

 

(b)         No Borrower or Guarantor shall, nor shall any Borrower or Guarantor
permit any of its respective Subsidiaries to, directly or indirectly, make any
loans or advance money or property to any person, or invest in (by capital
contribution, dividend or otherwise) or purchase or repurchase the Equity
Interests or Indebtedness or all or a substantial part of the assets or property
of any person, or form or acquire any Subsidiaries, or agree to do any of the
foregoing, except:

 

(i)                       the endorsement of instruments for collection or
deposit in the ordinary course of business;

 

(ii)                    investments in cash or Cash Equivalents, provided, that,
(i) no Revolving Loans are then outstanding and (ii) the terms and conditions of
Section 5.2 hereof shall have been satisfied with respect to the deposit
account, investment account or other account in which such cash or Cash
Equivalents are held;

 

(iii)                 the equity investments of such Borrower or Guarantor in
its Subsidiaries existing as of the date hereof or otherwise permitted to be
made hereunder; provided, that, such investments are made in cash and such
Borrower or Guarantor shall not have any further obligations or liabilities to
make any capital contributions or other additional investments in or for the
benefit of any of such Subsidiaries;

 

(iv)                loans and advances by such Borrower, Guarantor or Subsidiary
to employees of such Borrower, Guarantor or Subsidiary not to exceed the
principal amount of $2,000,000 in the aggregate for all Borrowers, Guarantors
and their Subsidiaries any time outstanding for:  (i) reasonably and necessary
work-related travel or other ordinary business expenses to be incurred by such
employee in connection with their work for such Borrower, Guarantor or
Subsidiary and (ii) reasonable and necessary relocation expenses of such
employees (including home mortgage financing for relocated employees);

 

(v)                   stock or obligations issued to such Borrower or Guarantor
by any Person (or the representative of such Person) in respect of Indebtedness
of such Person owing to such Borrower or Guarantor in connection with the
insolvency, bankruptcy, receivership or reorganization of such Person or a
composition or readjustment of the debts of such Person; provided, that, the
original of any such stock or instrument evidencing such obligations shall be
promptly delivered to Agent, upon Agent’s request,

 

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together with such stock power, assignment or endorsement by such Borrower or
Guarantor as Agent may request;

 

(vi)                obligations of account debtors to such Borrower or Guarantor
arising from Accounts which are past due evidenced by a promissory note made by
such account debtor payable to such Borrower or Guarantor; provided, that,
promptly upon the receipt of the original of any such promissory note by such
Borrower or Guarantor, such promissory note shall be endorsed to the order of
Agent by such Borrower or Guarantor and promptly delivered to Agent as so
endorsed;

 

(vii)             the loans and advances set forth on Schedule 9.10 hereto;
provided, that, as to such loans and advances, (i) such Borrower or Guarantor
shall not, directly or indirectly, amend, modify, alter or change the terms of
such loans and advances or any agreement, document or instrument related thereto
and (ii) such Borrower or Guarantor shall furnish to Agent all notices or
demands in connection with such loans and advances either received by such
Borrower or Guarantor or on its behalf, promptly after the receipt thereof, or
sent by such Borrower or Guarantor or on its behalf, concurrently with the
sending thereof, as the case may be;

 

(viii)          investments in the form of a joint venture made by such Borrower
or Guarantor in connection with the purchase of assets or Equity Interests of a
Person engaged in substantially the same or a related business as such Borrower
or Guarantor so long as (A) Agent shall have received not less than ten
(10) Business Days’ prior written notice of the intention of such Borrower or
Guarantor to enter into such investment, (B) on and after giving effect to such
investment, no Event of Default has occurred and is continuing, (C) on and after
giving effect to such investment, Borrowers shall have Excess Availability in an
amount equal to not less than twenty (20%) percent of the Revolving Loan Limit
after giving effect to such investment, (D) such Person shall have executed and
delivered a Guarantee to Agent, for itself and the ratable benefit of the
Lenders and the Bank Product Providers, (E) Agent shall have received a licensor
agreement by such Person providing for any IP Use Rights with respect to any
Collateral and (F) the assets of such Person shall not be included in the
calculation of the Borrowing Base, unless otherwise agreed to by Agent pursuant
to Section 9.22 hereof;

 

(ix)                loans or advances from (A) one Borrower to another Borrower,
from a Guarantor to a Borrower or another Guarantor so long as such Borrower or
Guarantor are parties to the Intercompany Subordination Agreement, or (B) from
any Borrower to any Guarantor so long as (A) such loans or advances are made on
a non-cash basis as balance sheet entries and (B) such Guarantor is a party to
the Intercompany Subordination Agreement;

 

(x)                   Permitted Acquisitions; and

 

(xi)                RTW may repurchase shares of Equity Interests from its
shareholders; provided, that (A) for each of the thirty (30) days immediately
prior to the date of such repurchase, Compliance Excess Availability in an
amount equal to not less than twenty (20%) percent of the Revolving Loan Limit,
and as of the date of any such repurchase and after giving effect thereto,
Compliance Excess Availability in an amount equal to not less than twenty (20%)
percent of the Revolving Loan Limit, (B) any such repurchase by RTW shall not
contravene its Certificate of Incorporation and By-Laws and shall comply with
all applicable provisions of State and Federal law and (C) as of the date of any
such repurchase and after giving effect thereto, no Event of Default shall exist
or shall have occurred and be continuing.

 

9.11                        Dividends and Redemptions.  No Borrower or Guarantor
shall, nor shall any Borrower or Guarantor permit any of its respective
Subsidiaries to, directly or indirectly, declare or pay any dividends on account
of any shares of class of any Equity Interests of such Borrower or Guarantor now
or hereafter

 

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outstanding, or set aside or otherwise deposit or invest any sums for such
purpose, or redeem, retire, defease, purchase or otherwise acquire any interest
of any Equity Interest (or set aside or otherwise deposit or invest any sums for
such purpose) for any consideration or apply or set apart any sum, or make any
other distribution (by reduction of capital or otherwise) in respect of any such
shares or agree to do any of the foregoing, except that:

 

(a)         any Borrower or Guarantor (or any Subsidiary of any Borrower or
Guarantor) may declare and pay such dividends or redeem, retire, defease,
purchase or otherwise acquire any Equity Interests for consideration in the form
of shares of common stock (so long as after giving effect thereto no Change of
Control or other Default or Event of Default shall exist or occur);

 

(b)         any Borrower (or any Subsidiary of any Borrower or Guarantor) may
pay dividends to any other Borrower and any Guarantor or may pay dividends to
any Borrower;

 

(c)          Borrowers and Guarantors (or any Subsidiaries of Borrowers and
Guarantors) may pay (directly or indirectly) dividends in cash to RTW to the
extent required to permit RTW to repurchase Equity Interests consisting of
common or preferred stock held by employees pursuant to any employee stock
ownership plan thereof upon the termination, retirement or death of any such
employee in accordance with the provisions of such plan; provided, that, as to
any such repurchase, each of the following conditions is satisfied: (A) as of
the date of the payment for such repurchase and after giving effect thereto, no
Default or Event of Default shall exist or have occurred and be continuing,
(B) such repurchase shall be paid with funds legally available therefor, and
(C) such repurchase shall not violate any law or regulation or the terms of any
indenture, agreement or undertaking to which Lerner is a party or by which
Lerner or its properties are bound, and (D) Borrowers have Compliance Excess
Availability in an amount equal to not less than twenty (20%) percent of the
Revolving Loan Limit after giving effect to such payments;

 

(d)         Borrowers and Guarantors (or any Subsidiaries of Borrowers and
Guarantors) may pay dividends in cash (directly or indirectly) to RTW, or any
other corporation that is the direct or indirect parent of any affiliated,
consolidated, combined or unitary group of corporations of which Borrowers and
Guarantors are members, in an amount equal to the sum of (i) the federal, state
and local income tax liability of such group that is attributable to Borrowers
and Guarantors and their respective Subsidiaries and (ii) amounts owed by RTW to
the independent trade creditors, service providers, employees and independent
directors of RTW for the services or goods (of the types set forth on Schedule
9.11(d)) hereto supplied by such independent trade creditors, service providers,
employees and independent directors which have conferred a direct benefit to
Borrowers, Guarantors and/or their respective Subsidiaries, plus an arms-length
cost plus fees (not to exceed one and three-quarters of one percent (1.75%) of
the amounts payable thereof) to RTW for its services rendered in arranging and
processing payments for those goods and services; and

 

(e)          Borrowers and Guarantors (or any Subsidiaries of Borrowers and
Guarantors) may pay dividends in cash to RTW so that RTW may pay dividends in
cash to its equity holders so long as each of the following conditions have been
satisfied (i) on and after giving effect to the payment of such dividend, no
Default or Event of Default shall exist or have occurred and be continuing,
(ii) such dividend shall be paid with funds legally available therefor,
(iii) the declaration or payment of such dividend shall not violate any law or
regulation or the terms of any indenture, agreement or undertaking to which such
Borrower or Guarantor is a party or by which such Borrower or Guarantor or its
properties are bound, (iv) on and after giving effect to the payment of such
dividend, Borrowers have Compliance Excess Availability in an amount equal to
not less than twenty (20%) percent of the Revolving Loan Limit, (v) Agent shall
have received, in form and substance reasonably satisfactory to Agent, monthly
projections showing that, for the twelve (12) months immediately after such
payment is made, Compliance Excess

 

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Availability shall be greater than 20% of the Revolving Loan Limit, and
(vi) Parent and its Subsidiaries shall have a Fixed Charge Coverage Ratio of
1.0:1.0 calculated based on the immediately preceding twelve (12) months for
which Agent has received financial statements delivered in accordance with
Section 9.6(a) hereof.

 

9.12                        Transactions with Affiliates.  No Borrower or
Guarantor shall, nor shall any Borrower or Guarantor permit any of its
respective Subsidiaries to, directly or indirectly:

 

(a)         except as provided in subsection (b) below, purchase, acquire or
lease any property from, or sell, transfer or lease any property to, any
officer, director or other Affiliate of a Borrower or Guarantor (other than
another Borrower or Guarantor), except in the ordinary course of and pursuant to
the reasonable requirements of such Borrower’s or Guarantor’s business (as the
case may be) and upon fair and reasonable terms no less favorable to such
Borrower or Guarantor than such Borrower or Guarantor would obtain in a
comparable arm’s length transaction with an unaffiliated person; or

 

(b)         make any payments (whether by dividend, loan or otherwise) of
management, consulting or other fees for management or similar services, or of
any Indebtedness owing to any officer, employee, shareholder, director or any
other Affiliate of any Borrower or Guarantor, except

 

(i)                       reasonable current or deferred compensation in the
form of cash or Equity Interests to officers, employees and directors for
services rendered to Borrowers and Guarantors in the ordinary course of
business, and

 

(ii)                    as permitted under Section 9.11 hereof.

 

9.13                        Compliance with ERISA.  Except as could not
reasonably be expected to have a Material Adverse Effect, each Borrower and
Guarantor shall, and shall with respect to any Pension Plan cause each of its
ERISA Affiliates, to:  (a) maintain each Plan in compliance in all material
respects with the applicable provisions of ERISA, the Code and other Federal and
State law; (b) cause each Plan which is qualified under Section 401(a) of the
Code to maintain such qualification; (c) not terminate any Pension Plan so as to
incur any material liability to the Pension Benefit Guaranty Corporation;
(d) not allow or suffer to exist any non-exempt prohibited transaction which
would be reasonably likely to subject any Borrower or Guarantor or any ERISA
Affiliate to a material tax or penalty or other liability on prohibited
transactions imposed under Section 4975 of the Code or ERISA; (e) make all
required contributions to any Pension Plan under Section 302 of ERISA,
Section 412 of the Code or the terms of such Pension Plan and all required
contributions to any Multiemployer Plan; (f) not allow or suffer to exist any
accumulated funding deficiency, whether or not waived, with respect to any
Pension Plan or any material liability to any Multiemployer Plan; or (g) allow
or suffer to exist any occurrence of a reportable event or any other event or
condition which presents a material risk of termination by the Pension Benefit
Guaranty Corporation of any Pension Plan that is a single employer plan, which
termination could result in any material liability to any Borrower or Guarantor.

 

9.14                        End of Fiscal Years; Fiscal Quarters.  RTW shall,
for financial reporting purposes, cause its and its Subsidiaries’ (a) fiscal
years to end on the Fiscal Year-End of each year set forth on Exhibit F hereto,
(b) fiscal quarters to end on the Fiscal Quarter -End of each fiscal year set
forth on Exhibit F hereto and (c) fiscal months to end on the Fiscal Month-End
of each fiscal year set forth on Exhibit F hereto.

 

9.15                        Change in Business.  No Borrower or Guarantor shall,
nor shall it permit its Subsidiaries to, engage in any business other than the
business of Borrowers and Guarantors on the date hereof and any business
reasonably related, ancillary or complimentary to the business in which Lerner
was engaged

 

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as of the date hereof.

 

9.16                        Limitation of Restrictions Affecting Subsidiaries. 
No Borrower or Guarantor shall, nor shall any Borrower or Guarantor permit any
of its respective Subsidiaries to, directly or indirectly, create or otherwise
cause or suffer to exist any encumbrance or restriction which prohibits or
limits the ability of any Subsidiary of any Borrower or Guarantor to (a) pay
dividends or make other distributions or pay any Indebtedness owed to such
Borrower or Guarantor or any of its Subsidiaries; (b) make loans or advances to
such Borrower or Guarantor or any of its Subsidiaries, (c) transfer any of its
properties or assets to such Borrower or Guarantor or any of its Subsidiaries;
or (d) create, incur, assume or suffer to exist any lien upon any of its
property, assets or revenues, whether now owned or hereafter acquired, other
than encumbrances and restrictions arising under (i) applicable law, (ii) this
Agreement, (iii) customary provisions restricting subletting or assignment of
any lease governing a leasehold interest of such Borrower or Guarantor or any of
its Subsidiaries, (iv) customary restrictions on dispositions of real property
interests found in reciprocal easement agreements of such Borrower or Guarantor
or any of its Subsidiaries, (v) any agreement relating to Indebtedness incurred
by a Subsidiary of such Borrower or Guarantor prior to the date on which such
Subsidiary was acquired by such Borrower or Guarantor and outstanding on such
acquisition date that is permitted under the terms of this Agreement, (vi) the
extension or continuation of contractual obligations in existence on the date
hereof, or (vii) any agreement relating to a refinancing of Indebtedness
permitted under the terms of this Agreement; provided, that, any such
encumbrances or restrictions contained in such extension or continuation are no
less favorable to Agent and Lenders than those encumbrances and restrictions
under or pursuant to the contractual obligations so extended or continued.

 

9.17                        Minimum Excess Availability.  Borrowers shall at all
times maintain Excess Availability equal to the greater of (a) ten percent (10%)
of the Revolving Loan Limit and (b) $7,500,000.

 

9.18                        IP License Agreements.

 

(a)         Each Borrower and Guarantor shall, and shall cause each of its
Subsidiaries to, (i) promptly and faithfully observe and perform all of the
material terms, covenants, conditions and provisions of the material IP License
Agreements to which it is a party to be observed and performed by it, at the
times set forth therein, if any, (ii) not do, permit, suffer or refrain from
doing anything that could reasonably be expected to result in a default under or
breach of any of the terms of any material IP License Agreement, (iii) not
cancel, surrender, modify, amend, waive or release any material IP License
Agreement in any material respect or any term, provision or right of the
licensee thereunder in any material respect, or consent to any of the foregoing;
except, subject to Section 9.18(b) hereof, a Borrower, Guarantor or Subsidiary
may cancel, surrender or release any material IP License Agreement in the
ordinary course of the business of such Borrower or Guarantor; provided, that,
such Borrower or Guarantor shall, and shall cause any such Subsidiary to, give
Agent not less than thirty (30) days prior written notice of its intention to so
cancel, surrender and release any such material IP License Agreement, (iv) give
Agent prompt written notice of any material IP License Agreement entered into by
such Borrower or Guarantor or Subsidiary after the date hereof, together with a
true, correct and complete copy thereof and such other information with respect
thereto as Agent may request (subject to any obligation of confidentiality
contained therein), (v) give Agent prompt written notice of any notice of
default sent to another party to a material IP License Agreement by such
Borrower, Guarantor or Subsidiary of any material breach of any obligation, or
any default, by such party under any material IP License Agreement, and deliver
to Agent (promptly upon the receipt thereof by such Borrower, Guarantor or
Subsidiary in the case of a notice to such Borrower, Guarantor or Subsidiary and
concurrently with the sending thereof in the case of a notice from such
Borrower, Guarantor or Subsidiary) a copy of each notice of default and every
other notice and other communication received or delivered by such Borrower,
Guarantor or Subsidiary in connection with any material IP License Agreement
which relates to the right of such

 

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Borrower, Guarantor or Subsidiary to continue to use the property subject to
such material IP License Agreement, and (vi) furnish to Agent, promptly upon the
request of Agent, such information and evidence as Agent may reasonably require
from time to time concerning the observance, performance and compliance by such
Borrower or Guarantor or the other party or parties thereto with the material
terms, covenants or provisions of any material IP License Agreement.  For the
avoidance of doubt, a material IP License Agreement shall mean any IP License
Agreement pursuant to which a licensor licenses Intellectual Property to a
Borrower or Guarantor that is used by such Borrower or Guarantor in connection
with the Collateral or a material portion of the business of such Borrower or
Guarantor.

 

(b)         Each Borrower or Guarantor shall, and shall cause each of its
Subsidiaries to, either exercise any option to renew or extend the term of each
material IP License Agreement to which it is a party in such manner as will
cause the term of such material IP License Agreement to be effectively renewed
or extended for the period provided by such option and give prompt written
notice thereof to Agent or give Agent prior written notice that such Borrower,
Guarantor or Subsidiary does not intend to renew or extend the term of any such
material IP License Agreement, not less than sixty (60) days prior to the date
of any such non-renewal or expiration.  In the event of the failure of any
Borrower, Guarantor or Subsidiary to extend or renew any material IP License
Agreement to which it is a party for reasons which are commercially
unreasonable, Agent shall have, and is hereby granted, the irrevocable right and
authority, at its option upon notice to such Borrower, Guarantor or Subsidiary,
as applicable to renew or extend the term of such material IP License Agreement,
whether in its own name and behalf, or in the name and behalf of a designee or
nominee of Agent or in the name and behalf of such Borrower, Guarantor or
Subsidiary, as Agent shall determine at any time that an Event of Default shall
exist or have occurred and be continuing.  Agent may, but shall not be required
to, perform any or all of such obligations of such Borrower, Guarantor or
Subsidiary under any of the IP License Agreements, including, but not limited
to, the payment of any or all sums due from such Borrower or Guarantor
thereunder, except for amount due to another Borrower, Guarantor or Subsidiary. 
Any sums so paid by Agent shall constitute part of the Obligations.

 

9.19                        After Acquired Real Property.  If any Borrower or
Guarantor hereafter acquires any Real Property, fixtures or any other property
related thereto, then if such Real Property, fixtures or other property at any
location (or series of adjacent, contiguous or related locations, and regardless
of the number of parcels) has a fair market value in an amount equal to or
greater than $3,000,000 (or if a Default or Event of Default exists, then
regardless of the fair market value of such assets), without limiting any other
rights of Agent or any Lender, or duties or obligations of any Borrower or
Guarantor, promptly upon Agent’s request, such Borrower or Guarantor shall
execute and deliver to Agent a mortgage, deed of trust or deed to secure debt,
as Agent may determine, in form and substance reasonably satisfactory to Agent
and as to any provisions relating to specific state laws reasonably satisfactory
to Agent and in form appropriate for recording in the real estate records of the
jurisdiction in which such Real Property or other property is located granting
to Agent a first and only lien and mortgage on and security interest in such
Real Property, fixtures or other property (except as such Borrower or Guarantor
would otherwise be permitted to incur hereunder or under its Guarantee, as
applicable, or as otherwise consented to in writing by Agent ) and such other
agreements, documents and instruments as Agent may reasonable require in
connection therewith.  Notwithstanding any provisions to the contrary herein, no
Borrower or Guarantor shall be required to deliver to Agent a mortgage, deed of
trust or deed to secure debt if the Real Property to be secured thereby is a
leasehold interest, and the granting of such security interest is prohibited
under the lease and the landlord has withheld its consent to such security
interest.  Except as provided in Section 9.8 hereof or if Agent’s prior written
consent shall have been obtained, no Borrower shall grant to any Person other
than Agent a lien on or security interest in the Real Property located on
466-472 53rd Street, Brooklyn, New York.

 

9.20                        Costs and Expenses.  Borrowers shall pay to Agent on
demand all costs, expenses, filing

 

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fees and taxes paid or payable in connection with the preparation, negotiation,
execution, delivery, recording, administration, collection, liquidation,
enforcement and defense of the Obligations, Agent’s rights in the Collateral,
this Agreement, the other Financing Agreements and all other documents related
hereto or thereto, including any amendments, supplements or consents which may
hereafter be contemplated (whether or not executed) or entered into in respect
hereof and thereof, including:  (a) all costs and expenses of filing or
recording (including UCC financing statement filing taxes and fees, documentary
taxes, intangibles taxes and mortgage recording taxes and fees, if applicable);
(b) costs and expenses and fees for insurance premiums, appraisal fees and
search fees, costs and expenses of remitting Loan proceeds, collecting checks
and other items of payment, and establishing and maintaining the Blocked
Accounts, together with Agent’s customary charges and fees with respect thereto;
(c) charges, fees or expenses charged by Issuing Bank in connection with the
Letters of Credit; (d) costs and expenses of preserving and protecting the
Collateral; (e) costs and expenses paid or incurred in connection with obtaining
payment of the Obligations, enforcing the security interests and liens of Agent,
selling or otherwise realizing upon the Collateral, and otherwise enforcing the
provisions of this Agreement and the other Financing Agreements or defending any
claims made or threatened against Agent or any Lender arising out of the
transactions contemplated hereby and thereby (including preparations for and
consultations concerning any such matters); (f) subject to Sections 7.3(d),
7.3(e) and 7.3(f) hereof, all reasonable out-of-pocket expenses and costs
incurred by Agent during the course of periodic field examinations of the
Collateral and Borrowers’ operations or for conducting any appraisals of the
Collateral; (g) the fees and disbursements of expenses of one external counsel
(including legal assistants) to Agent (and, in the case of an actual or
perceived conflict of interest where a Lender affected by such conflict has
informed Agent of such conflict, of another firm of counsel for such affected
Lender) and, to the extent required, one firm of special counsel (including
legal assistants) to Agent and one firm of local counsel (including legal
assistants) to Agent in any relevant jurisdiction in connection with any of the
foregoing; (h) Agent’s customary fees and charges imposed or incurred in
connection with any background checks or OFAC/PEP searches related to any Loan
Party or its Subsidiaries; (i) Agent’s customary fees and charges (as adjusted
from time to time) with respect to the disbursement of funds (or the receipt of
funds) to or for the account of any Borrower (whether by wire transfer or
otherwise), together with any out-of-pocket costs and expenses incurred in
connection therewith; and (j) customary charges imposed or incurred by Agent
resulting from the dishonor of checks payable by or to any Loan Party,.

 

9.21                        Credit Card Agreements.  Each Borrower and Guarantor
shall (a) observe and perform all material terms, covenants, conditions and
provisions of the Credit Card Agreements to be observed and performed by it at
the times set forth therein; (b) not do, permit, suffer or refrain from doing
anything, as a result of which there could be a default under or breach of any
of the terms of any of the Credit Card Agreements and at all times maintain in
full force and effect the Credit Card Agreements and not terminate, cancel,
surrender, modify, amend, waive or release any of the Credit Card Agreements, or
consent to or permit to occur any of the foregoing; except, that, any Borrower
or Guarantor may terminate or cancel any of the Credit Card Agreements in the
ordinary course of the business of such Borrower or Guarantor; provided, that,
such Borrower or Guarantor shall give Agent not less than ten (10) Business Days
prior written notice of its intention to so terminate or cancel any of the
Credit Card Agreements; (c) not enter into any new Credit Card Agreements with
any new Credit Card Issuer unless Agent shall have received not less than ten
(10) Business Days prior written notice of the intention of such Borrower or
Guarantor to enter into such agreement (together with such other information
with respect thereto as Agent may request) and such Borrower or Guarantor
delivers, or causes to be delivered to Agent, a Credit Card Acknowledgment in
favor of Agent; (d) give Agent immediate written notice of any Credit Card
Agreement entered into by such Borrower or Guarantor after the date hereof,
together with a true, correct and complete copy thereof and such other
information with respect thereto as Agent may reasonably request; (e) furnish to
Agent, promptly upon the request of Agent, such information and evidence as
Agent may require from time to time concerning the observance, performance and
compliance by such

 

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Borrower or Guarantor or the other party or parties thereto with the terms,
covenants or provisions of the Credit Card Agreements; and (f) not modify any
instructions given by Agent to any Credit Card Issuer or Credit Card Processor
provided for in any Credit Card Acknowledgement or otherwise direct the
remittance of payments under any Credit Card Agreement to any account other than
the Blocked Account.

 

9.22                        Additional Guaranties and Collateral Security;
Further Assurances.

 

(a)         In the event that a Subsidiary is acquired pursuant to a Permitted
Acquisition, the Borrower or Guarantor acquiring such Subsidiary shall cause
such Subsidiary to execute and deliver to Agent, in form and substance
reasonably satisfactory to Agent, (i) a joinder agreement to the Financing
Agreements in order to make such Subsidiary a party to this Agreement as a
“Borrower” if it owns accounts or inventory that would constitute Eligible
Accounts and Eligible Inventory to the extent provided by the definition of
Permitted Acquisitions or otherwise as a “Guarantor”, and (ii) a guarantee as a
“Guarantor” or pledge agreement as a “Pledgor”, and including, but not limited
to, supplements and amendments hereto and to any of the other Financing
Agreements, authorization to file UCC financing statements, Collateral Access
Agreements, other agreements, documents or instruments contemplated hereunder
and other consents, waivers, acknowledgments and other agreements from third
persons which Agent may deem reasonably necessary or desirable in order to
permit, protect and perfect its security interests in and liens upon the assets
of such Subsidiary and the Equity Interests of any Borrower or Guarantor in such
Subsidiary, corporate resolutions and other organization and authorizing
documents of such Person, and favorable opinions of counsel to such person;
provided, that, if such Subsidiary is a Foreign Subsidiary that is acquired
pursuant to a Permitted Acquisition, then such Borrower or Guarantor shall not
be required to cause such Foreign Subsidiary to grant a security interest in its
assets located outside the United States or execute and deliver a Guarantee and
become a Loan Party to the extent that granting a security interest in any such
assets by such Foreign Subsidiary or the execution and delivery of a Guarantee
by such Foreign Subsidiary would have an adverse tax impact on such Borrower or
Guarantor for purposes of Section 956 of the Code as determined by Agent in its
good faith discretion in consultation with such Borrower or Guarantor.

 

(b)         In the case of an acquisition of assets whether pursuant to a
Permitted Acquisition or otherwise in accordance with the terms and conditions
hereof by a Borrower or Guarantor after the date hereof, Agent shall have
received, in form and substance reasonably satisfactory to Agent, (i) evidence
that Agent has valid and perfected security interests in and liens upon all
purchased assets to the extent such assets constitute Collateral hereunder
(except in the case of deposit accounts, within thirty (30) days after the
acquisition thereof); provided, that, in no event shall any such assets
consisting of Accounts or Inventory so purchased be deemed to be Eligible
Accounts or Eligible Inventory until Agent is perfected in such deposit accounts
and Agent has agreed to include such Accounts or Inventory in the Borrowing Base
in the case of a Permitted Acquisition, pursuant to the requirements of the
definition of Permitted Acquisition, and in all other cases in the discretion of
Agent), (ii) all Collateral Access Agreements and other consents, waivers,
acknowledgments and other agreements from third persons which Agent may deem
necessary or desirable in order to permit, protect and perfect its security
interests in and liens upon the assets purchased, and (iii) such other
agreements, documents and instruments as Agent may require in connection with
the documents referred to above, including, but not limited to, supplements and
amendments hereto, corporate resolutions and other organization and authorizing
documents and favorable opinions of counsel to such person.

 

(c)          [Reserved];

 

(d)         At the request of Agent at any time and from time to time, Borrowers
and Guarantors shall, at their expense, duly execute and deliver, or cause to be
duly executed and delivered, such further agreements, documents and instruments,
and do or cause to be done such further acts as may be necessary

 

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or proper to evidence, perfect, maintain and enforce the security interests and
the priority thereof in the Collateral and to otherwise effectuate the
provisions or purposes of this Agreement or any of the other Financing
Agreements.  Upon any Borrower’s request for a Loan or a Letter of Credit in
accordance with the provisions of Section 6.6 hereof, Agent may request a
certificate from an officer of each Borrower representing that all conditions
precedent to the making of Loans and providing Letters of Credit contained
herein are satisfied.  In the event of such request by Agent, Agent and Lenders
may, at Agent’s option, cease to make any further Loans or provide any further
Letters of Credit until Agent has received such certificate and, in addition,
Agent has determined that such conditions are satisfied.

 

(e)          Notwithstanding anything to the contrary contained herein
(including Section 9.19 and this Section 9.22) or in any other Financing
Agreement, (i) Agent shall not accept delivery of any mortgage, deed of trust or
deed to secured debt with respect to any Real Property from any Loan Party
unless each of the Lenders has received forty-five (45) days’ prior written
notice thereof and Agent has received confirmation from each Lender that such
Lender has completed its flood insurance diligence, has received copies of all
flood insurance documentation and has confirmed that flood insurance compliance
has been completed as required by the Flood Laws or as otherwise satisfactory to
such Lender and (ii) Agent shall not accept delivery of any joinder to any
Financing Agreement with respect to any Subsidiary of any Loan Party that is not
a Loan Party, if such Subsidiary that qualifies as a “legal entity customer”
under the Beneficial Ownership Regulation unless such Subsidiary has delivered a
Beneficial Ownership Certification in relation to such Subsidiary and Agent has
completed its Patriot Act searches, OFAC/PEP searches and customary individual
background checks for such Subsidiary, the results of which shall be
satisfactory to Agent.

 

9.23                        Private Label Credit Cards.  In the event an Event
of Default has occurred and is continuing and upon Agent’s written notice to
Borrowers, Borrowers and Guarantors will cease to receive any In-Store
Payments.  Upon an acceleration of the Obligations following an Event of
Default, Borrowers and Guarantors will cease to accept any customer payments
made through any Borrower’s or Guarantor’s private label credit cards.

 

9.24                        Termination of Transition Services Agreement. 
Borrowers shall give Agent written notice of the termination of the Transition
Services Agreement thirty (30) days prior to the date of such termination.

 

9.25                        Cash Collateral Account.  Borrowers shall:

 

(a)         continue to maintain the Cash Collateral Account at their sole
expense;

 

(b)         ensure that at all times the Cash Collateral Account Control
Agreement is in effect with respect to the Cash Collateral Account;

 

(c)          not, without the prior written consent of Agent, close or transfer
the Cash Collateral Account or take any other action with respect to the Cash
Collateral Account that is not expressly authorized by this Agreement;

 

(d)         provide to Agent, as and when received by Borrowers, copies of all
statements received by Borrowers with respect to the Cash Collateral Account to
the extent that the financial institution or other person with whom such account
is maintained has not provided such statements directly to Agent;

 

(e)          in the event the available balance of the Cash Collateral Account
is at any time less than an amount sufficient to support the advances then
outstanding pursuant to clause (a)(v) of the definition of Borrowing Base,
immediately report such event to Agent and immediately, but in any event within
two

 

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(2) Business Days after receipt of written notice from Agent of such event,
deposit readily available funds into the Cash Collateral Account sufficient to
cause such balance to support the full amount of all advances then outstanding
pursuant to clause (a)(v) of the definition of Borrowing Base; and

 

(f)           not make any withdrawals or transfers from the Cash Collateral
Account without the prior written consent of Agent, which consent shall not be
unreasonably withheld to the extent that both before and after giving effect to
such withdrawal or transfer, (i) no Default or Event of Default then exists and
(ii) the then outstanding balance of the Revolving Loans made against the
available balance of the Cash Collateral Account is greater than or equal to one
hundred percent (100%) of the available balance of the Cash Collateral Account.

 

9.26                        OFAC; Sanctions; Anti-Corruption Laws; Anti-Money
Laundering Laws.  Each Loan Party will, and will cause each of its Subsidiaries
to comply with all applicable Sanctions, Anti-Corruption Laws and Anti-Money
Laundering Laws.  Each of the Loan Parties and its Subsidiaries shall implement
and maintain in effect policies and procedures designed to ensure compliance by
the Loan Parties and their Subsidiaries and their respective directors,
officers, employees, agents and Affiliates with all Sanctions, Anti-Corruption
Laws and Anti-Money Laundering Laws.  Each of the Loan Parties shall and shall
cause their respective Subsidiaries to comply with all Sanctions,
Anti-Corruption Laws and Anti-Money Laundering Laws.

 

9.27                        ECP Guarantor Keepwell.  Each Qualified ECP
Guarantor hereby jointly and severally absolutely, unconditionally and
irrevocably undertakes to provide such funds or other support as may be needed
from time to time by each Borrower and Guarantor to guarantee and otherwise
honor all Obligations in respect of Swap Obligations; provided, that, each
Qualified ECP Guarantor shall only be liable under this Section 9.27 for the
maximum amount of such liability that can be hereby incurred without rendering
its obligations under this Section 9.27, or otherwise under this Agreement,
voidable under applicable law relating to fraudulent conveyance or fraudulent
transfer, and not for any greater amount). The obligations of each Qualified ECP
Guarantor under this Section 9.27 shall remain in full force and effect until
payment in full of the Obligations. Each Qualified ECP Guarantor intends that
this Section 9.27 constitute, and this Section 9.27 shall be deemed to
constitute, a “keepwell, support, or other agreement” for the benefit of each
Borrower and Guarantor for all purposes of Section 1a(18)(A)(v)(II) of the
Commodity Exchange Act.

 

9.28                        IP Holdco Subsidiaries.  Each Borrower and Guarantor
shall not permit the IP Holdco Subsidiaries (a) to own or use assets, other than
the Intellectual Property set forth on Schedule 8.14 hereto as may be updated
from time to time pursuant to written notice to Agent within five (5) Business
Days after the acquisition by any IP Holdco after the Amendment No. 1 Effective
Date of any Intellectual Property, (b) to incur any liabilities (other than
liabilities of a de minimis nature, except as permitted by
Section 9.9(d) hereof) or any encumbrances on their assets (other than
encumbrances permitted by Sections 9.7(b)(iii), (xi), (xii) and 9.8(m) hereof),
or (c) to engage in any business activity, other than maintenance and licensing
of Intellectual Property to Borrowers and Guarantors or other Persons in
accordance with the terms hereof.

 

SECTION 10.                  EVENTS OF DEFAULT AND REMEDIES

 

10.1                        Events of Default.  The occurrence or existence of
any one or more of the following events are referred to herein individually as
an “Event of Default”, and collectively as “Events of Default”:

 

(a)         (i) any Borrower fails to make any principal payment after the same
becomes due and payable, or any Borrower fails to pay any of the other
Obligations (other than with respect to principal

 

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payments) within two (2) Business Days after the same becomes due and payable or
(ii) any Borrower or Guarantor fails to perform any of the covenants contained
in Sections 9.1(a), 9.2, 9.3, 9.4, 9.5, 9.7, 9.11, 9.13, 9.15, 9.16, 9.17, 9.20,
9.24, 9.25 and 9.26 of this Agreement and such failure shall continue for
fifteen (15) Business Days; provided, that, such fifteen (15) Business Day
period shall not apply in the case of: (i) any failure to observe any such
covenant which is not capable of being cured at all or within such fifteen (15)
Business Day period or which has been the subject of a prior failure within a
six (6) month period or (ii) an intentional breach by Borrower or any Guarantor
of any such covenant or (iii) any Borrower or Guarantor fails to perform any of
the terms, covenants, conditions or provisions contained in this Agreement or
any of the other Financing Agreements other than those described in Sections
10.1(a)(i) and 10.1(a)(ii) above and such failure shall continue for thirty (30)
Business Days; provided, that, such thirty (30) Business Day period shall not
apply in the case of: (A) any failure to observe any such covenant which is not
capable of being cured at all or within such thirty (30) Business Day period or
which has been the subject of a prior failure within a six (6) month period or
(B) an intentional breach by any Borrower or such Guarantor of any such
covenant;

 

(b)         any representation, warranty or statement of fact made by any
Borrower or Guarantor in this Agreement, the other Financing Agreements or any
other written agreement, schedule, confirmatory assignment or otherwise shall
when made or deemed made be false or misleading in any material respect;

 

(c)          any Guarantor revokes or terminates, or fails to perform any of the
terms, covenants, conditions or provisions of any Guarantee in favor of Agent or
any Lender;

 

(d)         if one or more judgments, orders, or awards for the payment of money
involving an amount in excess of  $6,000,000 individually or in excess of
$10,000,000 in the aggregate (except to the extent fully covered (other than to
the extent of customary deductibles) by insurance pursuant to which the insurer
has not denied coverage) is entered or filed against a Loan Party or any of its
Subsidiaries, or with respect to any of their respective assets, and either
(a) there is a period of 30 consecutive days at any time after the entry of any
such judgment, order, or award during which (i) the same is not discharged,
satisfied, vacated, or bonded pending appeal, or (ii) a stay of enforcement
thereof is not in effect, or (b) enforcement proceedings are commenced upon such
judgment, order, or award;

 

(e)          except as permitted by Section 9.7 hereof, any Borrower or
Guarantor dissolves or any Borrower suspends or discontinues doing business;

 

(f)           any Borrower or any Obligor makes an assignment for the benefit of
creditors or a general assignment for the benefit of creditors, makes or sends
notice of a bulk transfer or calls a meeting of its creditors or principal
creditors in connection with a moratorium or adjustment of the Indebtedness due
to them;

 

(g)          a case or proceeding under the bankruptcy laws of the United States
of America now or hereafter in effect or under any insolvency, reorganization,
receivership, readjustment of debt, dissolution or liquidation law or statute of
any jurisdiction now or hereafter in effect (whether at law or in equity) is
filed against any Borrower, any Obligor or all or any part of any such Person’s
properties and such petition or application is not dismissed within thirty (30)
days after the date of its filing or any Borrower or any Obligor shall file any
answer admitting or not contesting such petition or application or indicates its
consent to, acquiescence in or approval of, any such action or proceeding or the
relief requested is granted sooner;

 

(h)         a case or proceeding under the bankruptcy laws of the United States
of America now or hereafter in effect or under any insolvency, reorganization,
receivership, readjustment of debt, dissolution or liquidation law or statute of
any jurisdiction now or hereafter in effect (whether at a law or equity) is

 

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filed by any Borrower or any Obligor or for all or any part of its property;

 

(i)             any default in respect of any Indebtedness of any Borrower or
Obligor (other than Indebtedness owing to Agent and Lenders hereunder), in any
case in an amount in excess of $25,000,000, which default continues beyond any
cure period applicable thereto, if any, with respect to such Indebtedness, or
any default by any Borrower or Obligor under any Material Contract (other than a
Credit Card Agreement), which default continues beyond any cure period
applicable thereto, if any, and/or is not waived in writing by the other parties
thereto;

 

(j)            any Credit Card Issuer or Credit Card Processor: (i) shall send
notice to any Borrower or Guarantor that it is ceasing to make or suspending
payments to such Borrower or Guarantor of amounts due or to become due to such
Borrower or Guarantor or shall cease or suspend such payments, (ii) shall send
notice to any Borrower or Guarantor that it is terminating its arrangements with
such Borrower or Guarantor or such arrangements shall terminate as a result of
any event of default under such arrangements, except where (A) the loss of
services by a Credit Card Issuer or Credit Card Processor would not result in
non-payment of amounts due to any Borrower or Guarantor or could not reasonably
be expected to cause a Material Adverse Effect or (B) such Borrower or Guarantor
shall have entered into arrangements with another Credit Card Issuer or Credit
Card Processor, as the case may be, within forty-five (45) days after the date
of any such notice, (iii) withholds payment of amounts otherwise payable to any
Borrower or Guarantor to fund a reserve account or otherwise hold as collateral,
or shall require any Borrower or Guarantor to pay funds into a reserve account
or for such Credit Card Issuer or Credit Card Processor to otherwise hold as
collateral, or any Borrower or Guarantor shall provide a letter of credit,
guarantee, indemnity or similar instrument to or in favor of such Credit Card
Issuer or Credit Card Processor such that in the aggregate all of such funds in
the reserve account, other amounts held as collateral and the amount of such
letters of credit, guarantees, indemnities or similar instruments shall exceed
an aggregate for Borrowers and Guarantors of $5,000,000 at any one time or
(iv) debits or deducts any amounts from any deposit account of any Borrower or
Guarantor;

 

(k)         any material provision hereof or of any of the other Financing
Agreements shall for any reason cease to be valid, binding and enforceable with
respect to any party hereto or thereto (other than Agent) in accordance with its
terms, or any such party shall challenge the enforceability hereof or thereof,
or shall assert in writing, or take any action or fail to take any action based
on the assertion that any provision hereof or of any of the other Financing
Agreements has ceased to be or is otherwise not valid, binding or enforceable in
accordance with its terms, or any security interest provided for herein or in
any of the other Financing Agreements shall cease to be a valid and perfected
first priority security interest in any of the Collateral purported to be
subject thereto (except as otherwise permitted herein or therein);

 

(l)             an ERISA Event or other event, circumstance or breach by a
Borrower or Guarantor or an ERISA Affiliate of ERISA or the Code applicable to
any Pension Plan or Multiemployer Plan, shall occur which results in or could
reasonably be expected to result in liability of any Borrower or Guarantor in an
amount which could reasonably be expected to have a Material Adverse Effect;

 

(m)     any Change of Control;

 

(n)         the indictment by any Governmental Authority, or as Agent may
reasonably and in good faith determine, the threatened indictment by any
Governmental Authority of any Borrower or any Obligor of which such Borrower,
such Obligor or Agent receives notice, in either case, as to which there is a
reasonable possibility of an adverse determination, in the good faith
determination of Agent, under any criminal statute, or commencement or
threatened commencement of criminal or civil proceedings against any Borrower or
any Obligor, pursuant to which statute or proceedings the penalties or remedies
sought or available include forfeiture of (i) any of the Collateral having a
value in excess of $2,500,000 or

 

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(ii) any other property of any Borrower or Guarantor which is necessary or
material to the conduct of its business, and which indictment or proceeding, in
Agent’s reasonable judgment, has had, or could reasonably be expected to have, a
Material Adverse Effect; or

 

(o)         any event occurs that gives rise to an actual termination of the
logistics and other Inventory handling services being provided pursuant to the
Transition Services Agreement as of the date hereof and such services have not
been adequately replaced by another service provider or assumed by a Borrower or
an Obligor.

 

10.2                        Remedies.

 

(a)         At any time an Event of Default exists or has occurred and is
continuing, Agent and Lenders shall have all rights and remedies provided in
this Agreement, the other Financing Agreements, the UCC and other applicable
law, all of which rights and remedies may be exercised without notice to or
consent by any Borrower or any Obligor, except as such notice or consent is
expressly provided for hereunder or required by applicable law.  All rights,
remedies and powers granted to Agent and Lenders hereunder, under any of the
other Financing Agreements, the UCC or other applicable law, are cumulative, not
exclusive and enforceable, in Agent’s discretion, alternatively, successively,
or concurrently on any one or more occasions, and shall include, without
limitation, the right to apply to a court of equity for an injunction to
restrain a breach or threatened breach by any Borrower or any Obligor of this
Agreement or any of the other Financing Agreements.  Subject to Section 12
hereof, Agent may, and at the direction of the Required Lenders shall, at any
time or times, proceed directly against any Borrower or any Obligor to collect
the Obligations without prior recourse to the Collateral.

 

(b)         Without limiting the foregoing, at any time an Event of Default
exists or has occurred and is continuing, Agent may, in its discretion, and upon
the direction of the Required Lenders, shall (i) accelerate the payment of all
Obligations and demand immediate payment thereof to Agent, for itself and the
ratable benefit of the Lenders and the Bank Product Providers (provided, that,
upon the occurrence of any Event of Default described in Sections 10.1(g) and
10.1(h), all Obligations shall automatically become immediately due and
payable), (ii) make Reserves for all sales, excise or similar taxes that are
past due, (iii) with or without judicial process or the aid or assistance of
others, enter upon any premises on or in which any of the Collateral may be
located and take possession of the Collateral or complete processing,
manufacturing and repair of all or any portion of the Collateral, (iv) require
Borrowers or any Obligor, at Borrowers’ expense, to assemble and make available
to Agent any part or all of the Collateral at any place and time designated by
Agent, (v) collect, foreclose, receive, appropriate, setoff and realize upon any
and all Collateral, (vi) remove any or all of the Collateral from any premises
on or in which the same may be located for the purpose of effecting the sale,
foreclosure or other disposition thereof or for any other purpose, (vii) sell,
lease, transfer, assign, deliver or otherwise dispose of any and all Collateral
(including entering into contracts with respect thereto, public or private sales
at any exchange, broker’s board, at any office of Agent or elsewhere) at such
prices or terms as Agent may deem reasonable, for cash, upon credit or for
future delivery, with Agent having the right to purchase the whole or any part
of the Collateral at any such public sale, all of the foregoing being free from
any right or equity of redemption of any Borrower or any Obligor, which right or
equity of redemption is hereby expressly waived and released by each Borrower
and Obligors and/or (viii) terminate this Agreement.  If any of the Collateral
is sold or leased by Agent upon credit terms or for future delivery, the
Obligations shall not be reduced as a result thereof until payment therefor is
finally collected by Agent.  If notice of disposition of Collateral is required
by law, ten (10) days prior notice by Agent to Borrowers designating the time
and place of any public sale or the time after which any private sale or other
intended disposition of Collateral is to be made, shall be deemed to be
reasonable notice thereof and Borrowers waive any other notice.  In the event
Agent institutes an action to recover any Collateral or seeks recovery of any
Collateral by way of prejudgment remedy, Borrowers waive the posting of any bond
which would otherwise be required.  At

 

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any time an Event of Default exists or has occurred and is continuing, upon
Agent’s request, Borrowers will either, as Agent shall specify, furnish cash
collateral to Issuing Bank to be used to secure and fund Agent’s reimbursement
obligations to Issuing Bank in connection with any Letters of Credit or furnish
cash collateral to Agent for the Letters of Credit.  Such cash collateral shall
be in the amount equal to one hundred five percent (105%) of the amount of the
Letters of Credit plus the amount of any fees and expenses payable in connection
therewith through the end of the latest expiration date of such Letters of
Credit.

 

(c)          At any time or times that an Event of Default exists or has
occurred and is continuing, Agent may, in its discretion, and upon the direction
of the Required Lenders, Agent shall, enforce the rights of any Borrower or any
Obligor against any account debtor, secondary obligor or other obligor in
respect of any of the Accounts or other Receivables.  Without limiting the
generality of the foregoing, Agent may, in its discretion, and upon the
direction of the Required Lenders, Agent shall, at such time or times (i) notify
any or all account debtors (including Credit Card Issuers and Credit Card
Processors), secondary obligors or other obligors in respect thereof that the
Receivables have been assigned to Agent and that Agent has a security interest
therein and Agent may direct any or all accounts debtors (including Credit Card
Issuers and Credit Card Processors), secondary obligors and other obligors to
make payment of Receivables directly to Agent, (ii) extend the time of payment
of, compromise, settle or adjust for cash, credit, return of merchandise or
otherwise, and upon any terms or conditions, any and all Receivables or other
obligations included in the Collateral and thereby discharge or release the
account debtor or any secondary obligors or other obligors in respect thereof
without affecting any of the Obligations, (iii) demand, collect or enforce
payment of any Receivables or such other obligations, but without any duty to do
so, and Agent and Lenders shall not be liable for any failure to collect or
enforce the payment thereof nor for the negligence of its agents or attorneys
with respect thereto, and (iv) take whatever other action Agent may deem
necessary or desirable for the protection of its interests and the interests of
Lenders.  At any time that an Event of Default exists or has occurred and is
continuing, at Agent’s request, all invoices and statements sent to any account
debtor shall state that the Accounts and such other obligations have been
assigned to Agent and are payable directly and only to Agent and Borrowers and
Obligors shall deliver to Agent such originals of documents evidencing the sale
and delivery of goods or the performance of services giving rise to any Accounts
as Agent may require.  In the event any account debtor returns Inventory when an
Event of Default exists or has occurred and is continuing, Borrowers shall, upon
Agent’s request, hold the returned Inventory in trust for Agent, segregate all
returned Inventory from all of its other property, dispose of the returned
Inventory solely according to Agent’s instructions, and not issue any credits,
discounts or allowances with respect thereto without Agent’s prior written
consent.

 

(d)         If Agent determines at any time that any amount received by Agent
must be returned to any Borrower or any Obligor or paid to any other person
pursuant to any insolvency law or otherwise, then, notwithstanding any other
term or condition of this Agreement or any other Financing Agreement, Agent will
not be required to distribute any portion thereof to any Lender.  In addition,
each Lender will repay to Agent on demand any portion of such amount that Agent
has distributed to such Lender, together with interest at such rate, if any,
that Agent is required to pay to any Borrower or any Obligor or such other
person (without setoff, counterclaim or deduction of any kind).

 

(e)          Anything in this Agreement, any Financing Agreement or any other
agreements or document related hereto to the contrary notwithstanding, each
Lender hereby agrees with each other Lender that no Lender shall take any action
(other than actions against Agent for violating its obligations under this
Agreement) to protect or enforce its rights arising out of this Agreement or one
or more Financing Agreements without first obtaining the prior written consent
of Agent, it being the intent of Lenders that any such action to protect or
enforce rights under this Agreement or one or more Financing Agreements shall be
taken in concert and at the direction or with the consent of Agent.  Each Lender

 

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agrees and acknowledges that Agent may exercise all rights and remedies provided
to Agent under, and in accordance with, the terms of the Financing Agreements
and applicable law (including, without limitation, with respect to the liens
granted to Agent).

 

(f)           To the extent that applicable law imposes duties on Agent or any
Lender to exercise remedies in a commercially reasonable manner (which duties
cannot be waived under such law), each Borrower and Guarantor acknowledges and
agrees that it is not commercially unreasonable for Agent or any Lender (i) to
fail to incur expenses reasonably deemed significant by Agent or any Lender to
prepare Collateral for disposition or otherwise to complete raw material or work
in process into finished goods or other finished products for disposition,
(ii) to fail to obtain third party consents for access to Collateral to be
disposed of, or to obtain or, if not required by other law, to fail to obtain
consents of any Governmental Authority or other third party for the collection
or disposition of Collateral to be collected or disposed of, (iii) to fail to
exercise collection remedies against account debtors, secondary obligors or
other persons obligated on Collateral or to remove liens or encumbrances on or
any adverse claims against Collateral, (iv) to exercise collection remedies
against account debtors and other persons obligated on Collateral directly or
through the use of collection agencies and other collection specialists, (v) to
advertise dispositions of Collateral through publications or media of general
circulation, whether or not the Collateral is of a specialized nature, (vi) to
contact other persons, whether or not in the same business as Borrowers and
Guarantors, for expressions of interest in acquiring all or any portion of the
Collateral, (vii) to hire one or more professional auctioneers to assist in the
disposition of Collateral, whether or not the collateral is of a specialized
nature, (viii) to dispose of Collateral by utilizing Internet sites that provide
for the auction of assets of the types included in the Collateral or that have
the reasonable capability of doing so, or that match buyers and sellers of
assets, (ix) to dispose of assets in wholesale rather than retail markets,
(x) to disclaim disposition warranties, (xi) to purchase insurance or credit
enhancements to insure Agent or Lenders against risks of loss, collection or
disposition of Collateral or to provide to Agent or Lenders a guaranteed return
from the collection or disposition of Collateral, or (xii) to the extent deemed
appropriate by Agent, to obtain the services of other brokers, investment
bankers, consultants and other professionals to assist Agent in the collection
or disposition of any of the Collateral.  Each Borrower and Guarantor
acknowledges that the purpose of this Section is to provide non-exhaustive
indications of what actions or omissions by Agent or any Lender would not be
commercially unreasonable in the exercise by Agent or any Lender of remedies
against the Collateral and that other actions or omissions by Agent or any
Lender shall not be deemed commercially unreasonable solely on account of not
being indicated in this Section.  Without limitation of the foregoing, nothing
contained in this Section shall be construed to grant any rights to any Borrower
or Guarantor or to impose any duties on Agent or Lenders that would not have
been granted or imposed by this Agreement or by applicable law in the absence of
this Section.

 

(g)          For the purpose of enabling Agent to exercise the rights and
remedies hereunder, each Borrower and Guarantor hereby grants to Agent, to the
extent assignable and to the extent that the same would not conflict with or,
under applicable law and the terms of such agreement, result in the invalidity
or breach of any agreements (other than any agreement between any Borrower or
Guarantor and any other Borrower or Guarantor) or otherwise result in the
revocation, infringement, unenforceability, misappropriation or dilution of any
rights in any Intellectual Property forming the subject thereof, an irrevocable,
non-exclusive license (exercisable upon the occurrence of and during the
continuation of an Event of Default) without payment of royalty or other
compensation to any Borrower or Guarantor, to use, assign, license or sublicense
any of the trademarks, service-marks, trade names, business names, trade styles,
designs, logos and other source of business identifiers and other Intellectual
Property and general intangibles now owned or hereafter acquired by such
Borrower, wherever the same maybe located, including in such license reasonable
access to all media in which any of the licensed items may be recorded or stored
and to all computer programs used for the compilation or printout thereof.

 

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(h)         Agent may apply the cash proceeds of Collateral actually received by
Agent from any sale, lease, foreclosure or other disposition of the Collateral
to payment of the Obligations, in whole or in part and in such order as Agent
may elect, whether or not then due.  Borrowers and Guarantors shall remain
liable to Agent and Lenders for the payment of any deficiency with interest at
the highest rate provided for herein and all costs and expenses of collection or
enforcement, including attorneys’ fees and expenses.

 

(i)             Without limiting the foregoing, upon the occurrence of a Default
or an Event of Default, (i) Agent and Lenders may, at Agent’s option, and upon
the occurrence of an Event of Default, at the direction of the Required Lenders,
Agent and Lenders shall, without notice, (A) cease making Loans or arranging for
Letters of Credit or reduce the lending formulas or amounts of Loans and Letters
of Credit available to Borrowers and/or (B) terminate any provision of this
Agreement providing for any future Loans or Letters of Credit to be made by
Agent and Lenders to Borrowers, and (ii) Agent may, at its option, establish
such Reserves as Agent determines without limitation or restriction,
notwithstanding anything to the contrary provided herein.

 

SECTION 11.                  JURY TRIAL WAIVER; OTHER WAIVERS AND CONSENTS;
GOVERNING LAW.

 

11.1                        Governing Law; Choice of Forum; Service of Process;
Jury Trial Waiver.

 

(a)         The validity, interpretation and enforcement of this Agreement and
the other Financing Agreements and any dispute arising out of the relationship
between the parties hereto, whether in contract, tort, equity or otherwise,
shall be governed by the internal laws of the State of New York but excluding
any principles of conflicts of law or other rule of law that would cause the
application of the law of any jurisdiction other than the laws of the State of
New York.

 

(b)         Borrowers, Guarantors, Agent and Lenders irrevocably consent and
submit to the non-exclusive jurisdiction of the Supreme Court of the State of
New York for New York County and the United States District Court for the
Southern District of New York, whichever Agent may elect, and waive any
objection based on venue or forum non conveniens with respect to any action
instituted therein arising under this Agreement or any of the other Financing
Agreements or in any way connected with or related or incidental to the dealings
of the parties hereto in respect of this Agreement or any of the other Financing
Agreements or the transactions related hereto or thereto, in each case whether
now existing or hereafter arising, and whether in contract, tort, equity or
otherwise, and agree that any dispute with respect to any such matters shall be
heard only in the courts described above (except that Agent and Lenders shall
have the right to bring any action or proceeding against any Borrower or
Guarantor or its or their property in the courts of any other jurisdiction which
Agent deems necessary or appropriate in order to realize on the Collateral or to
otherwise enforce its rights against any Borrower or Guarantor or its or their
property).

 

(c)          Each Borrower and Guarantor hereby waives personal service of any
and all process upon it and consents that all such service of process may be
made by certified mail (return receipt requested) directed to its address set
forth herein and service so made shall be deemed to be completed five (5) days
after the same shall have been so deposited in the U.S. mails, or, at Agent’s
option, by service upon such Borrower or Guarantor in any other manner provided
under the rules of any such courts.  Within thirty (30) days after such service,
such Borrower or Guarantor shall appear in answer to such process, failing which
such Borrower or Guarantor shall be deemed in default and judgment may be
entered by Agent against such Borrower or Guarantor for the amount of the claim
and other relief requested.

 

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(d)         BORROWERS, GUARANTORS, AGENT AND LENDERS EACH HEREBY WAIVE ANY RIGHT
TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (i) ARISING
UNDER THIS AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR (ii) IN ANY WAY
CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO IN
RESPECT OF THIS AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR THE
TRANSACTIONS RELATED HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING OR
HEREAFTER ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE. 
BORROWERS, GUARANTORS, AGENT AND LENDERS EACH HEREBY AGREE AND CONSENT THAT ANY
SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL
WITHOUT A JURY AND THAT ANY BORROWER, ANY GUARANTOR, AGENT OR ANY LENDER
MAY FILE AN ORIGINAL COUNTERPART OF A COPY OF THIS AGREEMENT WITH ANY COURT AS
WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR
RIGHT TO TRIAL BY JURY.

 

(e)          Agent and Lenders shall not have any liability to any Borrower or
any Guarantor (whether in tort, contract, equity or otherwise) for losses
suffered by such Borrower or Guarantor in connection with, arising out of, or in
any way related to the transactions or relationships contemplated by this
Agreement, or any act, omission or event occurring in connection herewith,
unless it is determined by a final and non-appealable judgment or court order
binding on Agent and such Lender, that the losses were the result of acts or
omissions constituting gross negligence or willful misconduct of Agent and/or
such Lenders.  In any such litigation, Agent and Lenders shall be entitled to
the benefit of the rebuttable presumption that it acted in good faith and with
the exercise of ordinary care in the performance by it of the terms of this
Agreement.  Each Borrower and Guarantor: (i) certifies that neither Agent, any
Lender nor any representative, agent or attorney acting for or on behalf of
Agent or any Lender has represented, expressly or otherwise, that Agent and
Lenders would not, in the event of litigation, seek to enforce any of the
waivers provided for in this Agreement or any of the other Financing Agreements
and (ii) acknowledges that in entering into this Agreement and the other
Financing Agreements, Agent and Lenders are relying upon, among other things,
the waivers and certifications set forth in this Section 11.1 and elsewhere
herein and therein.

 

11.2                        Waiver of Notices.  Each Borrower and Guarantor
hereby expressly waives demand, presentment, protest and notice of protest and
notice of dishonor with respect to any and all instruments and chattel paper,
included in or evidencing any of the Obligations or the Collateral, and any and
all other demands and notices of any kind or nature whatsoever with respect to
the Obligations, the Collateral and this Agreement, except such as are expressly
provided for herein.  No notice to or demand on any Borrower or Guarantor which
Agent or any Lender may elect to give shall entitle any Borrower or Guarantor to
any other or further notice or demand in the same, similar or other
circumstances.

 

11.3                        Amendments and Waivers.

 

(a)         Neither this Agreement nor any other Financing Agreement nor any
terms hereof or thereof may be amended, waived, discharged or terminated unless
such amendment, waiver, discharge or termination is in writing signed by Agent
and the Required Lenders or at Agent’s option, by Agent with the authorization
of the Required Lenders, and as to amendments to any of the Financing Agreements
(other than with respect to any provision of Section 12 hereof), by Borrowers;
except, that:

 

(i)                       without the prior written consent of Agent and each
Lender affected thereby, no such amendment, waiver, discharge or termination
shall:

 

(A)       amend, modify or waive any of the provisions of the introductory
paragraph of

 

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this Section 11.3(a) or any of the provisions of this Section 11.3(a)(i);

 

(B)       reduce any percentage specified in the definition of Required Lenders
or amend, modify or waive any provision of the definition of Pro Rata Share;

 

(C)       release any Collateral (except as expressly required hereunder or
under any of the other Financing Agreements or applicable law and except as
permitted under Section 12.11(b) hereof);

 

(D)       consent to the assignment or transfer by any Borrower or any Guarantor
of any of their rights and obligations under this Agreement;

 

(E)        increase (1) the advance rates set forth in the definition of
Borrowing Base, (2) the Maximum Credit or (3) the amount of Revolving Loans or
Letters of Credit available to Borrowers at any time;

 

(F)         amend, modify or waive any of the provisions of the definition of
Borrowing Base or of any of the defined terms referred to in the definition of
Borrowing Base if the effect thereof increases the amount of the Borrowing Base;

 

(G)       reduce the amount of Compliance Excess Availability required in
Section 4.1(d) or the amount of Excess Availability in Section 9.17 hereof;

 

(H)      amend, modify, or waive the provisions of Section 9.17 hereof, or any
definition of any term relating to the financial terms used in such Section, if
such amendment, modification or waiver makes the covenants contained therein
less restrictive; or

 

(I)           amend, modify or waive any provision of the definitions of Cash
Dominion Event, Increased Collateral Reporting Event, Compliance Excess
Availability, Excess Availability, or of Section 7.3(d) or (e) hereof;

 

(ii)                    without the prior written consent of Agent and each
Lender directly affected thereby, no such amendment, waiver, discharge or
termination shall:

 

(A)       amend, modify or waive any of the provisions of this
Section 11.3(a)(ii);

 

(B)       reduce any percentage specified in the definition of Required Lenders;

 

(C)       reduce the Interest Rate or any fees or indemnities related to the
Revolving Loans or Letters of Credit, or otherwise extend the time of payment of
principal of the Revolving Loans, extend the time of payment of interest or any
fees related to the Revolving Loans or reduce the principal amount of any
Revolving Loans or Letters of Credit;

 

(D)       increase the total amount of Commitments or the Commitment of any
Lender over the amount thereof then in effect or provided hereunder; or

 

(E)        amend, modify or waive the provisions of Section 14.1(b) hereof.

 

(b)         Notwithstanding anything to the contrary contained in
Section 11.3(a) hereof, Agent may, in its discretion and without the consent of
the Lenders, amend or otherwise modify the Borrowing Base, the Reserves or any
of their respective components which amendments or modifications have the effect
of increasing the Borrowing Base, decreasing the Reserves or otherwise
increasing the amounts available for

 

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borrowing hereunder to the extent that such amendment or modification is made to
restore the Borrowing Base, Reserves or other components thereof if the reason
for such reduction or increase no longer exists, as determined by Agent.

 

(c)          Agent and Lenders shall not, by any act, delay, omission or
otherwise be deemed to have expressly or impliedly waived any of its or their
rights, powers and/or remedies unless such waiver shall be in writing and signed
as provided herein.  Any such waiver shall be enforceable only to the extent
specifically set forth therein.  A waiver by Agent or any Lender of any right,
power and/or remedy on any one occasion shall not be construed as a bar to or
waiver of any such right, power and/or remedy which Agent or any Lender would
otherwise have on any future occasion, whether similar in kind or otherwise.

 

(d)         The consent of Agent shall be required for any amendment, waiver or
consent affecting the rights or duties of Agent hereunder or under any of the
other Financing Agreements, in addition to the consent of the Lenders otherwise
required by this Section and the exercise by Agent of any of its rights
hereunder with respect to Reserves, Eligible Credit Card Receivables, Eligible
Damaged Goods Vendors Receivables, Eligible Sell-Off Vendors Receivables or
Eligible Inventory shall not be deemed an amendment to the advance rates
provided for in this Section 11.3.

 

(e)          Replacement of Certain Lenders.

 

(i)                       If (A) any action to be taken by the Lender Group or
Agent hereunder requires the consent, authorization, or agreement of all Lenders
or all Lenders affected thereby and if such action has received the consent,
authorization, or agreement of the Required Lenders but not of all Lenders or
all Lenders affected thereby, or (B) any Lender makes a claim for compensation
under Section 15, then Borrowers or Agent, upon at least five Business Days
prior irrevocable notice, may permanently replace any Lender that failed to give
its consent, authorization, or agreement (a “Non-Consenting Lender”) or any
Lender that made a claim for compensation (a “Tax Lender”) with one or more
Replacement Lenders, and the Non-Consenting Lender or Tax Lender, as applicable,
shall have no right to refuse to be replaced hereunder.  Such notice to replace
the Non-Consenting Lender or Tax Lender, as applicable, shall specify an
effective date for such replacement, which date shall not be later than 15
Business Days after the date such notice is given.

 

(ii)                    Prior to the effective date of such replacement, the
Non-Consenting Lender or Tax Lender, as applicable, and each Replacement Lender
shall execute and deliver an Assignment and Acceptance, subject only to the
Non-Consenting Lender or Tax Lender, as applicable, being repaid in full its
share of the outstanding Obligations (without any premium or penalty of any kind
whatsoever, but including (A) all interest, fees and other amounts that may be
due in payable in respect thereof, (B) an assumption of its Pro Rata Share of
participations in the Letters of Credit, and (C) Funding Losses).  If the
Non-Consenting Lender or Tax Lender, as applicable, shall refuse or fail to
execute and deliver any such Assignment and Acceptance prior to the effective
date of such replacement, Agent may, but shall not be required to, execute and
deliver such Assignment and Acceptance in the name or and on behalf of the
Non-Consenting Lender or Tax Lender, as applicable, and irrespective of whether
Agent executes and delivers such Assignment and Acceptance, the Non-Consenting
Lender or Tax Lender, as applicable, shall be deemed to have executed and
delivered such Assignment and Acceptance.  The replacement of any Non-Consenting
Lender or Tax Lender, as applicable, shall be made in accordance with the terms
of Section 14.7.  Until such time as one or more Replacement Lenders shall have
acquired all of the Obligations, the Commitments, and the other rights and
obligations of the Non-Consenting Lender or Tax Lender, as applicable, hereunder
and under the other Financing Agreements, the Non-Consenting Lender or Tax
Lender, as applicable, shall remain obligated to make the Non-Consenting
Lender’s or Tax Lender’s, as applicable, Pro Rata Share of Revolving Loans and
to purchase a participation in each Letter of Credit, in an amount equal to its
Pro Rata Share of participations in such Letters of Credit.

 

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11.4                        Waiver of Counterclaims.  Each Borrower and
Guarantor waives all rights to interpose any claims, deductions, setoffs or
counterclaims of any nature (other than compulsory counterclaims) in any action
or proceeding with respect to this Agreement, the Obligations, the Collateral or
any matter arising therefrom or relating hereto or thereto.

 

11.5                        Indemnification.  Each Borrower and Guarantor shall
indemnify and hold Agent and each Lender, and its respective officers,
directors, agents, employees, advisors and counsel and their respective
Affiliates (each such person being an “Indemnitee”), harmless from and against
any and all losses, claims, damages, liabilities, costs or expenses (including
attorneys’ fees and expenses) imposed on, incurred by or asserted against any of
them in connection with any litigation, investigation, claim or proceeding
commenced or threatened related to the negotiation, preparation, execution,
delivery, enforcement, performance or administration of this Agreement, any
other Financing Agreements, or any undertaking or proceeding related to any of
the transactions contemplated hereby or any act, omission, event or transaction
related or attendant thereto, including amounts paid in settlement, court costs,
and the fees and expenses of counsel, except that (a) no Borrower or Guarantor
shall not have any obligation under this Section 11.5 to indemnify an Indemnitee
with respect to a matter covered hereby resulting from the gross negligence or
willful misconduct of such Indemnitee as determined pursuant to a final,
non-appealable order of a court of competent jurisdiction (but without limiting
the obligations of any Borrower or Guarantor as to any other Indemnitee) and
(b) this indemnification shall not apply to any claims for Taxes, which shall be
governed by Section 15, other than taxes that related primarily to non-Tax
claims. To the extent that the undertaking to indemnify, pay and hold harmless
set forth in this Section may be unenforceable because it violates any law or
public policy, Borrowers and Guarantors shall pay the maximum portion which they
are permitted to pay under applicable law to Agent and Lenders in satisfaction
of indemnified matters under this Section.  To the extent permitted by
applicable law, no Borrower or Guarantor shall assert, and each Borrower and
Guarantor hereby waives, any claim against any Indemnitee, on any theory of
liability, for special, indirect, consequential or punitive damages (as opposed
to direct or actual damages) arising out of, in connection with, or as a result
of, this Agreement, any of the other Financing Agreements or any undertaking or
transaction contemplated hereby.  All amounts due under this Section shall be
payable upon demand. The foregoing indemnity shall survive the payment of the
Obligations and the termination or non-renewal of this Agreement.

 

SECTION 12.                  THE AGENT

 

12.1                        Appointment, Powers and Immunities.  Each Lender and
Issuing Bank irrevocably designates, appoints and authorizes Wells Fargo to act
as Agent hereunder and under the other Financing Agreements with such powers as
are specifically delegated to Agent by the terms of this Agreement and of the
other Financing Agreements, together with such other powers as are reasonably
incidental thereto.  Agent (a) shall have no duties or responsibilities except
those expressly set forth in this Agreement and in the other Financing
Agreements, and shall not by reason of this Agreement or any other Financing
Agreement be a trustee or fiduciary for any Lender; (b) shall not be responsible
to Lenders for any recitals, statements, representations or warranties contained
in this Agreement or in any of the other Financing Agreements, or in any
certificate or other document referred to or provided for in, or received by any
of them under, this Agreement or any other Financing Agreement, or for the
value, validity, effectiveness, genuineness, enforceability or sufficiency of
this Agreement or any other Financing Agreement or any other document referred
to or provided for herein or therein or for any failure by any Borrower or any
Guarantor or any other Person to perform any of its obligations hereunder or
thereunder; and (c) shall not be responsible to Lenders for any action taken or
omitted to be taken by it hereunder or under any other Financing Agreement or
under any other document or instrument referred to or provided for herein or
therein or in connection herewith or therewith, except for its own gross
negligence or willful misconduct as determined by a final non-appealable
judgment of a court of competent jurisdiction.  Agent may employ agents and
attorneys in fact and shall not be responsible for the negligence or misconduct
of

 

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any such agents or attorneys in fact selected by it in good faith.  Agent may
deem and treat the payee of any note as the holder thereof for all purposes
hereof unless and until the assignment thereof pursuant to an agreement (if and
to the extent permitted herein) in form and substance reasonably satisfactory to
Agent shall have been delivered to and acknowledged by Agent.

 

12.2                        Reliance by Agent.  Agent shall be entitled to rely
upon any certification, notice or other communication (including any thereof by
telephone, telecopy, telex, telegram or cable) believed by it to be genuine and
correct and to have been signed or sent by or on behalf of the proper Person or
Persons, and upon advice and statements of legal counsel, independent
accountants and other experts selected by Agent.  As to any matters not
expressly provided for by this Agreement or any other Financing Agreement, Agent
shall in all cases be fully protected in acting, or in refraining from acting,
hereunder or thereunder in accordance with instructions given by the Required
Lenders or all of Lenders as is required in such circumstance, and such
instructions of such Agents and any action taken or failure to act pursuant
thereto shall be binding on all Lenders.

 

12.3                        Events of Default.

 

(a)         Agent shall not be deemed to have knowledge or notice of the
occurrence of a Default or an Event of Default or other failure of a condition
precedent to the Loans and Letters of Credit hereunder, unless and until Agent
has received written notice from a Lender, or a Borrower specifying such Event
of Default or any unfulfilled condition precedent, and stating that such notice
is a “Notice of Default or Failure of Condition” (each a “Notice of Default or
Failure of Condition”).  In the event that Agent receives such a Notice of
Default or Failure of Condition, Agent shall give prompt notice thereof to the
Lenders.  Agent shall (subject to Section 12.7 hereof) take such action with
respect to any such Event of Default or failure of condition precedent as shall
be directed by the Required Lenders; provided, that, unless and until Agent
shall have received such directions, Agent may (but shall not be obligated to)
take such action, or refrain from taking such action, with respect to or by
reason of such Event of Default or failure of condition precedent, as it shall
deem advisable in the best interest of Lenders.  Without limiting the foregoing,
and notwithstanding the existence or occurrence and continuance of an Event of
Default or any other failure to satisfy any of the conditions precedent set
forth in Section 4 of this Agreement to the contrary, subject to the limitations
set forth in Section 12.8 hereof, Agent may, but shall have no obligation to,
make Loans and issue or cause to be issued Letters of Credit for the ratable
account and risk of Lenders from time to time if Agent reasonably and in good
faith believes making such Loans or issuing or causing to be issued such Letter
of Credit is in the best interest of Lenders.

 

(b)         Except with the prior written consent of Agent, no Lender may assert
or exercise any enforcement right or remedy in respect of the Loans, Letters of
Credit or other Obligations, as against any Borrower or any Guarantor or any of
the Collateral or other property of any Borrower or Guarantor.

 

12.4                        Wells Fargo in its Individual Capacity.

 

(a)         With respect to its Commitment and the Loans made and Letters of
Credit issued or caused to be issued by it (and any successor acting as Agent),
so long as Wells Fargo shall be a Lender hereunder, it shall have the same
rights and powers hereunder as any other Lender and may exercise the same as
though it were not acting as Agent, and the term “Lender” or “Lenders” shall,
unless the context otherwise indicates, include Wells Fargo in its individual
capacity as Lender hereunder.

 

(b)         Wells Fargo (and any successor acting as Agent) and its Affiliates
may (without having to account therefor to any Lender) lend money to, make
investments in and generally engage in any kind of business with any Borrower or
Guarantor (and any of its Subsidiaries or Affiliates) as if it were not acting
as Agent, and Wells Fargo and its Affiliates may accept fees and other
consideration from any

 

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Borrower or any Guarantor and any of its Subsidiaries and Affiliates for
services in connection with this Agreement or otherwise without having to
account for the same to Lenders.

 

12.5                        Indemnification.  Lenders agree to indemnify Agent
(to the extent not reimbursed by Borrowers or Guarantors hereunder and without
limiting any obligations of Borrowers or Guarantors hereunder) ratably, in
accordance with their Pro Rata Shares, for any and all claims of any kind and
nature whatsoever that may be imposed on, incurred by or asserted against Agent
arising out of or by reason of any investigation in or in any way relating to or
arising out of this Agreement or any other Financing Agreement or any other
documents contemplated by or referred to herein or therein or the transactions
contemplated hereby or thereby (including the costs and expenses that Agent is
obligated to pay hereunder) or the enforcement of any of the terms hereof or
thereof or of any such other documents, provided, that, no Lender shall be
liable for any of the foregoing to the extent it arises from the gross
negligence or willful misconduct of the party to be indemnified as determined by
a final non-appealable judgment of a court of competent jurisdiction.  The
foregoing indemnity shall survive the payment of the Obligations and the
termination or non-renewal of this Agreement.

 

12.6                        Non Reliance on Agent and Other Lenders.  Each
Lender agrees that it has, independently and without reliance on Agent or other
Lender, and based on such documents and information as it has deemed
appropriate, made its own credit analysis of Borrowers and Guarantors and has
made its own decision to enter into this Agreement and that it will,
independently and without reliance upon Agent or any other Lender, and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own analysis and decisions in taking or not taking action
under this Agreement or any of the other Financing Agreements.  Agent shall not
be required to keep itself informed as to the performance or observance by
Borrowers or Guarantors of any term or provision of this Agreement or any of the
other Financing Agreements or any other document referred to or provided for
herein or therein or to inspect the properties or books of any Borrower or
Guarantor.  Agent will use reasonable efforts to provide Lenders with any
information received by Agent from any Borrower or Guarantor which is required
to be provided to Lenders or which is deemed to be requested by Lenders
hereunder and with a copy of any Notice of Default or Failure of Condition
received by Agent from any Borrower or Guarantor; provided, that, Agent shall
not be liable to any Lender for any failure to do so, except to the extent that
such failure is attributable to Agent’s own gross negligence or willful
misconduct as determined by a final non-appealable judgment of a court of
competent jurisdiction.  Except for notices, reports and other documents
expressly required to be furnished to Lenders by Agent hereunder, Agent shall
not have any duty or responsibility to provide any Lender with any other credit
or other information concerning the affairs, financial condition or business of
any Borrower or Guarantor that may come into the possession of Agent.

 

12.7                        Failure to Act.  Except for action expressly
required of Agent hereunder and under the other Financing Agreements, Agent
shall in all cases be fully justified in failing or refusing to act hereunder
and thereunder unless it shall receive further assurances to its satisfaction
from Lenders of their indemnification obligations under Section 12.5 hereof
against any and all liability and expense that may be incurred by it by reason
of taking or continuing to take any such action.

 

12.8                        Additional Revolving Loans.  Agent shall not make
any Revolving Loans or provide any Letters of Credit to Borrowers on behalf of
Lenders intentionally and with actual knowledge that such Revolving Loans or
Letters of Credit would cause the aggregate amount of the total outstanding
Revolving Loans and Letters of Credit to Borrowers to exceed the Borrowing Base
(each individually an “Additional Revolving Loan”, and collectively, “Additional
Revolving Loans”), without the prior consent of all Lenders, provided, that
notwithstanding any provision to the contrary, Agent may make any such
Additional Revolving Loan or Letter of Credit so long as:  (a) the total
principal amount of such Additional Revolving Loans or such additional Letters
of Credit together with the principal amount of

 

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Special Agent Advances made pursuant to Section 12.11 hereof, shall not exceed
the least of (i) $7,500,000, (ii) the sum of (x) the amount which, when added to
all other Revolving Loans, Letters of Credit and Special Agent Advances, would
not cause the principal amount of all outstanding Revolving Loans, Letters of
Credit and Special Agent Advances to exceed the Borrowing Base and (y) if
applicable, an amount equal to any reduction, made with the consent of all
Lenders, of the Excess Availability required by Section 9.17 hereof, and
(iii) the amount which would not cause the total principal amount of all
Revolving Loans, Letters of Credit and Special Agent Advances to exceed the
Maximum Credit, and (b) no such Additional Revolving Loans or Letters of Credit
shall be outstanding more than ninety (90) days after the date such Additional
Revolving Loan or Letter of Credit is made or issued (as the case may be),
except as the Required Lenders may otherwise agree.  Each Lender shall be
obligated to pay Agent the amount of its Pro Rata Share of any such Additional
Revolving Loans or Letters of Credit.

 

12.9                        Concerning the Collateral and the Related Financing
Agreements.  Each Lender authorizes and directs Agent to enter into this
Agreement and the other Financing Agreements.  Each Lender agrees that any
action taken by Agent or Required Lenders in accordance with the terms of this
Agreement or the other Financing Agreements and the exercise by Agent or
Required Lenders of their respective powers set forth therein or herein,
together with such other powers that are reasonably incidental thereto, shall be
binding upon all of the Lenders.

 

12.10                 Field Audit, Examination Reports and other Information;
Disclaimer by Lenders.  By signing this Agreement, each Lender:

 

(a)         is deemed to have requested that Agent furnish such Lender, promptly
after it becomes available, a copy of each field audit or examination report and
a monthly or weekly Borrowing Base Certificate, as the case may be, pursuant to
Section 7.1(a)(ii) hereof, prepared by Agent (each field audit or examination
report and monthly or weekly report with respect to the Borrowing Base being
referred to herein as a “Report” and collectively, “Reports”);

 

(b)         expressly agrees and acknowledges that Agent (A) does not make any
representation or warranty as to the accuracy of any Report, or (B) shall not be
liable for any information contained in any Report;

 

(c)          expressly agrees and acknowledges that the Reports are not
comprehensive audits or examinations, that Agent or any other party performing
any audit or examination will inspect only specific information regarding any
Borrower and any Guarantor and will rely significantly upon such Borrower’s and
Guarantor’s books and records, as well as on representations of such Borrower’s
and Guarantor’s personnel; and

 

(d)         agrees to keep all Reports confidential and strictly for its
internal use in accordance with the terms of Section 14.5 hereof, and not to
distribute or use any Report in any other manner.

 

12.11                 Collateral Matters.

 

(a)         Subject to the limitations in Section 12.8 hereof, Agent may, at its
option, from time to time, at any time on or after an Event of Default and for
so long as the same is continuing or upon any other failure of a condition
precedent to the Revolving Loans and Letters of Credit hereunder, make such
disbursements and advances (“Special Agent Advances”) which Agent, in its sole
discretion, deems necessary or desirable either (i) to preserve or protect the
Collateral or any portion thereof or (ii) to enhance the likelihood or maximize
the amount of repayment by Borrowers of the Loans and other Obligations, or
(iii) to pay any other amount chargeable to Borrowers or Obligors pursuant to
the terms of this Agreement or any of the other Financing Agreements consisting
of (A) costs, fees and expenses and

 

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(B) payments to Issuing Bank of Letters of Credit; provided, that
notwithstanding any provision to the contrary, Agent may make any such Special
Agent Advances so long as:  (a) the total principal amount of such Special Agent
Advances together with the principal amount of the Additional Revolving Loans
and additional Letters of Credit made pursuant to Section 12.11 hereof, shall
not exceed the least of (i) $7,500,000, (ii) the sum of (x) the amount which,
when added to all other Special Agent Advances, Revolving Loans and Letters of
Credit, would not cause the principal amount of all outstanding Special Agent
Advances, Revolving Loans and Letters of Credit to exceed the Borrowing Base and
(y) if applicable, an amount equal to any reduction, made with the consent of
all Lenders, of the Excess Availability required by Section 9.17 hereof, and
(iii) the amount which would not cause the total principal amount of all
Revolving Loans, Letters of Credit and Special Agent Advances to exceed the
Maximum Credit.  Special Agent Advances shall be repayable on demand and be
secured by the Collateral.  Special Agent Advances shall not constitute
Revolving Loans but shall otherwise constitute Obligations hereunder.  Agent
shall notify Lenders and Borrowers in writing of each such Special Agent
Advance, which notice shall include a description of the purpose of such Special
Agent Advance.  Without limitation of its obligations pursuant to the settlement
procedures set forth herein, each Lender agrees that it shall make available to
Agent, upon Agent’s demand, in immediately available funds, the amount equal to
such Lender’s Pro Rata Share of each such Special Agent Advance.  If such funds
are not made available to Agent by such Lender, then such Lender shall be deemed
a Defaulting Lender and Agent shall be entitled to recover such funds, on demand
from such Lender together with interest thereon for each day from the date such
payment was due until the date such amount is paid to Agent at the Federal Funds
Rate for each day during such period (as published by the Federal Reserve Bank
of New York or at Agent’s option based on the arithmetic mean determined by
Agent of the rates for the last transaction in overnight Federal funds arranged
prior to 9:00 a.m. on that day by each of the three leading brokers of Federal
funds transactions in New York City selected by Agent) and if such amounts are
not paid within three (3) days of Agent’s demand, at the highest Interest Rate
provided for in Section 3.1 hereof applicable to Base Rate Loans.

 

(b)         Lenders hereby irrevocably authorize Agent, at its option and in its
discretion to release any security interest in, mortgage or lien upon, any of
the Collateral (i) upon termination of all of the Commitments of all Lenders and
payment and satisfaction of all of the Obligations and delivery of cash
collateral to the extent required under Section 14.1 hereof, or
(ii) constituting property being sold or disposed of if the applicable Borrower
or Guarantor certifies to Agent that the sale or disposition is made in
compliance with Section 9.7 hereof (and Agent may rely conclusively on any such
certificate, without further inquiry), or (iii) constituting property in which
no Borrower or Guarantor owned an interest at the time the security interest,
mortgage or lien was granted or at any time thereafter, or (iv) having a value
in the aggregate in any twelve (12) month period of less than $1,000,000 or
(v) if required or permitted under the terms of any of the other Financing
Agreements, including any intercreditor agreement, or (vi) if approved,
authorized or ratified in writing by all of Lenders.  Except as provided above,
Agent will not release any security interest in, mortgage or lien upon, any of
the Collateral without the prior written authorization of all of Lenders.  Upon
request by Agent at any time, Lenders will promptly confirm in writing Agent’s
authority to release particular types or items of Collateral pursuant to this
Section.

 

(c)          Without any manner limiting Agent’s authority to act without any
specific or further authorization or consent by the Required Lenders, each
Lender agrees to confirm in writing, upon request by Agent, the authority to
release Collateral conferred upon Agent under this Section.  Agent shall (and is
hereby irrevocably authorized by Lenders to) execute such documents as may be
necessary to evidence the release of the security interest, mortgage or liens
granted to Agent upon any Collateral to the extent set forth above; provided,
that, (i) Agent shall not be required to execute any such document on terms
which, in Agent’s opinion, would expose Agent to liability or create any
obligations or entail any consequence other than the release of such security
interest, mortgage or liens without recourse or warranty and (ii) such release
shall not in any manner discharge, affect or impair the Obligations or any

 

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security interest, mortgage or lien upon (or obligations of any Borrower or any
Guarantor in respect of) the Collateral retained by such Borrower or such
Guarantor.

 

(d)         Agent shall have no obligation whatsoever to any Lender or any other
Person to investigate, confirm or assure that the Collateral exists or is owned
by any Borrower or Guarantor or is cared for, protected or insured or has been
encumbered, or that any particular items of Collateral meet the eligibility
criteria applicable in respect of the Loans or Letters of Credit hereunder, or
whether any particular reserves are appropriate, or that the liens and security
interests granted to Agent pursuant hereto or any of the Financing Agreements or
otherwise have been properly or sufficiently or lawfully created, perfected,
protected or enforced or are entitled to any particular priority, or to exercise
at all or in any particular manner or under any duty of care, disclosure or
fidelity, or to continue exercising, any of the rights, authorities and powers
granted or available to Agent in this Agreement or in any of the other Financing
Agreements, it being understood and agreed that in respect of the Collateral, or
any act, omission or event related thereto, Agent may act in any manner it may
deem appropriate, in its discretion, given Agent’s own interest in the
Collateral as a Lender and that Agent shall have no duty or liability whatsoever
to any other Lender.

 

12.12                 Agency for Perfection.  Each Lender hereby appoints Agent
and each other Lender as agent and bailee for the purpose of perfecting the
security interests in and liens upon the Collateral of Agent in assets which, in
accordance with Article 9 of the UCC can be perfected only by possession (or
where the security interest of a secured party with possession has priority over
the security interest of another secured party) and Agent and each Lender hereby
acknowledges that it holds possession of any such Collateral for the benefit of
Agent, the other Lenders and the Bank Product Providers as secured party. 
Should any Lender obtain possession of any such Collateral, such Lender shall
notify Agent thereof, and, promptly upon Agent’s request therefor shall deliver
such Collateral to Agent or in accordance with Agent’s instructions.

 

12.13                 Successor Agent.  Agent may resign as Agent upon thirty
(30) days’ notice to Lenders and Borrowers.  If Agent resigns under this
Agreement, the Required Lenders shall appoint from among the Lenders a successor
agent for Lenders.  If no successor agent is appointed prior to the effective
date of the resignation of Agent, Agent may appoint, after consulting with
Lenders and Borrowers, a successor agent from among Lenders.  Upon the
acceptance by the Lender so selected of its appointment as successor agent
hereunder, such successor agent shall succeed to all of the rights, powers and
duties of the retiring Agent and the term “Agent” as used herein and in the
other Financing Agreements shall mean such successor agent and the retiring
Agent’s appointment, powers and duties as Agent shall be terminated.  After any
retiring Agent’s resignation hereunder as Agent, the provisions of this
Section 12 shall inure to its benefit as to any actions taken or omitted by it
while it was Agent under this Agreement.  If no successor agent has accepted
appointment as Agent by the date which is thirty (30) days after the date of a
retiring Agent’s notice of resignation, the retiring Agent’s resignation shall
nonetheless thereupon become effective and Lenders shall perform all of the
duties of Agent hereunder until such time, if any, as the Required Lenders
appoint a successor agent as provided for above.

 

SECTION 13.                  JOINT AND SEVERAL LIABILITY; SURETYSHIP WAIVERS.

 

13.1                        Independent Obligations; Subrogation.  Without
limiting the provisions of Section 2.9 hereof or in the Guarantee, the
Obligations of each Borrower and of each Guarantor hereunder are joint and
several.  To the maximum extent permitted by law, each Borrower and Guarantor
hereby waives any claim, right or remedy which such Borrower or Guarantor now
has or hereafter acquires against any other Borrower or Guarantor that arises
hereunder including, without limitation, any claim, remedy or right of
subrogation, reimbursement, exoneration, contribution, indemnification, or
participation in any claim, right or remedy of Agent or any Lender against any
Borrower or Guarantor or any Collateral which Agent

 

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or any Lender now has or hereafter acquires, whether or not such claim, right or
remedy arises in equity, under contract, by statute, under common law or
otherwise until the Obligations are fully paid and finally discharged.  In
addition, each Borrower and Guarantor hereby waives any right to proceed against
the other Borrowers and Guarantors, now or hereafter, for contribution,
indemnity, reimbursement, and any other suretyship rights and claims, whether
direct or indirect, liquidated or contingent, whether arising under express or
implied contract or by operation of law, which any Borrower or Guarantor may now
have or hereafter have as against the other Borrowers and Guarantors with
respect to the Obligations until the Obligations are fully paid and finally
discharged.  Each Borrower and Guarantor also hereby waives any rights of
recourse to or with respect to any asset of the other Borrowers and Guarantors
until the Obligations are fully paid and finally discharged.

 

13.2                        Authority to Modify Obligations and Security.  Each
Borrower and Guarantor acknowledges that any action taken by Agent and/or
Lenders in accordance with the terms of this Agreement and applicable law to:
(a) renew, extend, accelerate, or otherwise change the time for payment of, or
otherwise change any other term or condition of, any document or agreement
evidencing or relating to any Obligations as such Obligations relate to the
other Borrowers and Guarantors, including, without limitation, to increase or
decrease the rate of interest thereon; (b) accept, substitute, waive, defease,
increase, release, exchange or otherwise alter any Collateral, in whole or in
part, securing the Obligations of each other Borrower or Guarantor; (c) apply
any and all such Collateral and direct the order or manner of sale thereof as
Agent and Lenders, in their sole discretion, may determine; (d) deal with the
other Borrowers and Guarantors as Agent or any Lender may elect; (e) in Agent’s
and Lenders’ sole discretion, settle, release on terms satisfactory to them, or
by operation of law or otherwise, compound, compromise, collect or otherwise
liquidate any Obligations of any other Borrower or Guarantor and/or any of the
Collateral in any manner, and bid and purchase any of the collateral at any sale
thereof; (f) apply any and all payments or recoveries from the other Borrowers
and Guarantors as Agent or Lenders, in their sole discretion, may determine,
whether or not such indebtedness relates to the Obligations; all whether such
Obligations are secured or unsecured or guaranteed or not guaranteed by others;
and (g) apply any sums realized from Collateral furnished by the other Borrowers
and Guarantors upon any of its indebtedness or obligations to Agent or Lenders
as they in their sole discretion, may determine, whether or not such
indebtedness relates to the Obligations; shall not in any way diminish, release
or discharge the liability of any Borrower or Guarantor hereunder (except to the
extent that the Obligations are in fact repaid as a result of such action).

 

13.3                        Waiver of Defenses.  Upon an Event of Default by any
Borrower or Guarantor in respect of any Obligations, Agent and Lenders may, at
their option and without notice to any Borrower or Guarantor, proceed directly
against any Borrower or Guarantor to collect and recover the full amount of the
liability hereunder, or any portion thereof, and each Borrower and Guarantor
waives any right to require Agent or any Lender to: (a) proceed against the
other Borrowers and Guarantors or any other person whomsoever; (b) proceed
against or exhaust any Collateral given to or held by Agent or any Lender in
connection with the Obligations; (c) give notice of the terms, time and place of
any public or private sale of any of the Collateral except as otherwise provided
herein; or (d) pursue any other remedy in Agent’s or any Lender’s power
whatsoever.  A separate action or actions may be brought and prosecuted against
any Borrower or Guarantor whether or not action is brought against the other
Borrowers and Guarantors and whether the other Borrowers and Guarantors be
joined in any such action or actions; and each Borrower and Guarantor waives the
benefit of any statute of limitations affecting the liability hereunder or the
enforcement hereof, and agrees that any payment of any Obligations or other act
which shall toll any statute of limitations applicable thereto shall similarly
operate to toll such statute of limitations applicable to the liability
hereunder.

 

13.4                        Exercise of Agent’s and Lenders’ Rights.  Each
Borrower and Guarantor hereby authorizes and empowers Agent and Lenders in their
sole discretion, without any notice or demand to

 

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such Borrower or Guarantor whatsoever and without affecting the liability of
such Borrower or Guarantor hereunder, to exercise any right or remedy which
Agent or any Lender may have available to them against the other Borrowers and
Guarantors.

 

13.5                        Additional Waivers.  Each Borrower and Guarantor
waives any defense arising by reason of any disability or other defense of the
other Borrowers and Guarantors or by reason of the cessation from any cause
whatsoever of the liability of any other Borrowers or Guarantors or by reason of
any act or omission of Agent or any Lender or others which directly or
indirectly results in or aids the discharge or release of any other Borrowers or
Guarantors or any Obligations or any Collateral by operation of law or
otherwise.  The Obligations shall be enforceable against each Borrower and
Guarantor without regard to the validity, regularity or enforceability of any of
the Obligations with respect to any other Borrowers or Guarantors or any of the
documents related thereto or any collateral security documents securing any of
the Obligations.  No exercise by Agent or any Lender of, and no omission of
Agent or any Lender to exercise, any power or authority recognized herein and no
impairment or suspension of any right or remedy of Agent or any Lender against
any Borrower or Guarantor or any Collateral shall in any way suspend, discharge,
release, exonerate or otherwise affect any of the Obligations or any Collateral
furnished by Borrowers or Guarantors or give to Borrowers or Guarantors any
right of recourse against Agent or any Lender.  Each Borrower and Guarantor
specifically agrees that the failure of Agent or any Lender: (a) to perfect any
lien on or security interest in any property heretofore or hereafter given any
Borrower or Guarantor to secure payment of the Obligations, or to record or file
any document relating thereto or (b) to file or enforce a claim against the
estate (either in administration, bankruptcy or other proceeding) of any
Borrower or Guarantor shall not in any manner whatsoever terminate, diminish,
exonerate or otherwise affect the liability of any Borrower or Guarantor
hereunder.

 

13.6                        Additional Indebtedness.  Additional Obligations may
be created from time to time at the request of any Borrower or Guarantor and
without further authorization from or notice to any other Borrower or Guarantor
even though the borrowing Borrower’s or Guarantor’s financial condition may
deteriorate since the date hereof.  Each Borrower and Guarantor waives the
right, if any, to require Agent or any Lender to disclose to such Borrower or
Guarantor any information it may now have or hereafter acquire concerning any
other Borrower’s or Guarantor’s character, credit, Collateral, financial
condition or other matters.  Each Borrower and Guarantor has established
adequate means to obtain from each other Borrower and Guarantor, on a continuing
basis, financial and other information pertaining to such Borrower’s or
Guarantor’s business and affairs, and assumes the responsibility for being and
keeping informed of the financial and other conditions of the other Borrowers
and Guarantors and of all circumstances bearing upon the risk of nonpayment of
the Obligations which diligent inquiry would reveal.  Neither Agent nor any
Lender need inquire into the powers of any Borrower or Guarantor or the
authority of any of their respective officers, directors, partners or agents
acting or purporting to act in their behalf, and any Obligations created in
reliance upon the purported exercise of such power or authority is hereby
guaranteed.  All Obligations of each Borrower and Guarantor to Agent and Lenders
heretofore, now or hereafter created shall be deemed to have been granted at
each Borrower’s and Guarantor’s special insistence and request and in
consideration of and in reliance upon this Agreement.

 

13.7                        Notices, Demands, Etc.  Except as expressly provided
by this Agreement, neither Agent nor any Lender shall be under any obligation
whatsoever to make or give to any Borrower or Guarantor, and each Borrower and
Guarantor hereby waives diligence, all rights of setoff and counterclaim against
Agent or any Lender, all demands, presentments, protests, notices of protests,
notices of protests, notices of nonperformance, notices of dishonor, and all
other notices of every kind or nature, including notice of the existence,
creation or incurring of any new or additional Obligations.

 

13.8                        Revival and Reinstatement.  If any member of the
Lender Group or any Bank Product Provider repays, refunds, restores, or returns
in whole or in part, any payment or property (including any

 

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proceeds of Collateral) previously paid or transferred to such member of the
Lender Group or such Bank Product Provider in full or partial satisfaction of
any Obligation or on account of any other obligation of any Loan Party under any
Financing Agreement or any Bank Product Agreement, because the payment,
transfer, or the incurrence of the obligation so satisfied is asserted or
declared to be void, voidable, or otherwise recoverable under any law relating
to creditors’ rights, including provisions of the Bankruptcy Code relating to
fraudulent transfers, preferences, or other voidable or recoverable obligations
or transfers (each, a “Voidable Transfer”), or because such member of the Lender
Group or Bank Product Provider elects to do so on the reasonable advice of its
counsel in connection with a claim that the payment, transfer, or incurrence is
or may be a Voidable Transfer, then, as to any such Voidable Transfer, or the
amount thereof that such member of the Lender Group or Bank Product Provider
elects to repay, restore, or return (including pursuant to a settlement of any
claim in respect thereof), and as to all reasonable costs, expenses, and
attorneys’ fees of such member of the Lender Group or Bank Product Provider
related thereto, (i) the liability of the Loan Parties with respect to the
amount or property paid, refunded, restored, or returned will automatically and
immediately be revived, reinstated, and restored and will exist, and
(ii) Agent’s security interests or liens securing such liability shall be
effective, revived, and remain in full force and effect, in each case, as fully
as if such Voidable Transfer had never been made.  If, prior to any of the
foregoing, (A) Agent’s security interests or liens shall have been released or
terminated, or (B) any provision of this Agreement shall have been terminated or
cancelled, Agent’s security interests or liens, or such provision of this
Agreement, shall be reinstated in full force and effect and such prior release,
termination, cancellation or surrender shall not diminish, release, discharge,
impair or otherwise affect the obligation of any Loan Party in respect of such
liability or any Collateral securing such liability. This provision shall
survive the termination of this Agreement and the repayment in full of the
Obligations.

 

13.9                        Understanding of Waivers.  Each Borrower and
Guarantor warrants and agrees that the waivers set forth in this Section 13 are
made with full knowledge of their significance and consequences.  If any of such
waivers are determined to be contrary to any applicable law or public policy,
such waivers shall be effective only to the maximum extent permitted by law.

 

SECTION 14.                  TERM; MISCELLANEOUS.

 

14.1                        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 the Maturity Date.  Agent may, at
its option (or shall at the direction of any Lender in writing received by Agent
at least sixty (60) days prior to the Maturity Date or the anniversary of any
Maturity Date, as the case may be), terminate this Agreement and the other
Financing Agreements, or Borrowers may terminate this Agreement and the other
Financing Agreements, in each case, effective on the Maturity Date or on the
anniversary of the Maturity Date in any year by giving to the other party at
least sixty (60) days prior written notice; provided, that, this Agreement and
all other Financing Agreements still in effect on such date, if any, must be
terminated simultaneously.  In addition, Borrowers may terminate this Agreement
at any time upon three (3) Business Days (or such shorter period acceptable to
Agent) prior written notice to Agent (which notice shall be irrevocable) and
Agent may, at its option, and shall at the direction of Required Lenders,
terminate this Agreement at any time on or after the occurrence and during the
continuance of an Event of Default, subject to any cure periods specified in
Section 10.1 hereof.  Upon the Maturity Date or any other effective date of
termination of the Financing Agreements, Borrowers shall pay to Agent all
outstanding and unpaid Obligations (other than contingent indemnification
obligations and other contingent Obligations which expressly survive the
termination of this Agreement and the other Financing Agreements) and shall
furnish (i) Letter of Credit Collateralization to Agent to be held as security
for Borrowers’ reimbursement obligations in respect of drawings that may
subsequently occur

 

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under issued and outstanding Letters of Credit (or at Agent’s option, a letter
of credit issued for the account of Borrowers and at Borrowers’ expense, in form
and substance satisfactory to Agent, by an issuer acceptable to Agent and
payable to Agent as beneficiary), (ii) Bank Product Collateralization to be held
as security for any Loan Parities’ or their Subsidiaries’ obligations in respect
of outstanding Bank Products (unless such Bank Product Obligations are paid in
full in cash and terminated in a manner satisfactory to such Bank Product
Provider), and (iii) cash collateral in such amounts as Agent determines are
reasonably necessary to secure Agent, Lenders and Issuing Bank from loss, cost,
damage or expense, including attorneys’ fees and expenses, in connection with
any other contingent Obligations, including checks or other payments
provisionally credited to the Obligations and/or as to which Agent or any Lender
has not yet received final payment and any continuing obligations of Agent or
any Lender. The amount of such Letter of Credit Collateralization (or letter of
credit, as Agent may determine) as to any Letters of Credit shall be in the
amount equal to one hundred five (105%) percent of the amount of the Letters of
Credit plus the amount of any fees and expenses payable in connection therewith
through the end of the latest expiration date of the letters of credit giving
rise to such Letters of Credit.  Such payments in respect of the Obligations and
cash collateral shall be remitted by wire transfer in Federal funds to the Agent
Payment Account or such other bank account of Agent, as Agent may, in its
discretion, designate in writing to Borrowers for such purpose.  Interest shall
be due until and including the next Business Day, if the amounts so paid by
Borrowers to the Agent Payment Account or other bank account designated by Agent
are received in such bank account later than 12:00 p.m.

 

(b)         No termination of the Credit Facility, this Agreement or the other
Financing Agreements shall relieve or discharge any Borrower or any 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 Agent’s continuing security interest in the Collateral
and the rights and remedies of Agent and Lenders 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 and Lenders have no
further obligations hereunder (following which all securing interests, liens and
the like shall be released).  Accordingly, each Borrower and Guarantor waives
any rights it may have under the UCC to demand the filing of termination
statements with respect to the Collateral and Agent shall not be required to
send such termination statements to any Borrower or Guarantor, or to file them
with any filing office, unless and until this Agreement and all Commitments of
all Lenders shall have been terminated in accordance with its terms and all
Obligations paid and satisfied in full in immediately available funds.

 

14.2                        Additional Interpretative Provisions. Without
limiting Section 1.3 hereof,

 

(a)         All references to the plural herein shall also mean the singular and
to the singular shall also mean the plural unless the context otherwise
requires.

 

(b)         An Event of Default shall exist or continue or be continuing until
such Event of Default is waived in accordance with Section 11.3 hereof or is
cured in a manner satisfactory to Agent, if such Event of Default is capable of
being cured as determined by Agent.

 

(c)          All references to the term “good faith” used herein when applicable
to Agent or any Lender shall mean, notwithstanding anything to the contrary
contained herein or in the UCC, honesty in fact in the conduct or transaction
concerned.  Borrowers shall have the burden of proving any lack of good faith on
the part of Agent or any Lender alleged by Borrowers at any time.

 

(d)         In the computation of periods of time from a specified date to a
later specified date, the word “from” means “from and including”, the words “to”
and “until” each mean “to but excluding” and the word “through” means “to and
including”.

 

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(e)          The captions and headings of this Agreement are for convenience of
reference only and shall not affect the interpretation of this Agreement.

 

(f)           This Agreement and other Financing Agreements may use several
different limitations, tests or measurements to regulate the same or similar
matters.  All such limitations, tests and measurements are cumulative and shall
each be performed in accordance with their terms.

 

(g)          All references to the gross negligence or willful misconduct of
Agent, members of the Lender Group, Bank Product Providers or their related
persons in this Agreement or the other Financing Agreements shall mean gross
negligence or willful misconduct as determined by a final and non-appealable
order of a court of competent jurisdiction.

 

(h)         This Agreement and the other Financing Agreements are the result of
negotiations among and have been reviewed by counsel to Agent and the other
parties, and are the products of all parties.  Accordingly, this Agreement and
the other Financing Agreements shall not be construed against Agent or Lenders
merely because of Agent’s or any Lender’s involvement in their preparation.

 

14.3                        Notices.  Except as otherwise provided herein, all
notices, requests and demands hereunder shall be in writing and deemed to have
been given or made:  if delivered in person, immediately upon delivery; if by
telex, telegram or facsimile transmission, immediately upon sending and upon
confirmation of receipt; if by nationally recognized overnight courier service
with instructions to deliver the next Business Day, one (1) Business Day after
sending; and if by certified mail, return receipt requested, five (5) days after
mailing.  All notices, requests and demands upon the parties are to be given to
the following addresses (or to such other address as any party may designate by
notice in accordance with this Section):

 

If to any Borrower or Guarantor:

 

Lerner New York, Inc.
330 West 34th Street
New York, New York 10001
Attention: Marc Schuback, General Counsel
Telephone No.:
E-mail: MSchuback@retailwinds.com

 

 

 

With a copy to:

 

Kirkland & Ellis LLP
601 Lexington Avenue
New York, NY 10022
Attention: Judson Oswald
Telephone No.: (212) 446-4812
E-mail: judson.oswald@kirkland.com

 

 

 

If to Agent:

 

Wells Fargo Bank, National Association, as Agent
One Boston Place, 19th Floor
Boston, Massachusetts 02108
Attention: Michele Riccobono
Telephone No.: (617) 854-7246
Telecopy No.: (866) 303-3930

 

14.4                        Partial Invalidity.  If any provision of this
Agreement is held to be invalid or unenforceable, such invalidity or
unenforceability shall not invalidate this Agreement as a whole, but this

 

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Agreement shall be construed as though it did not contain the particular
provision held to be invalid or unenforceable and the rights and obligations of
the parties shall be construed and enforced only to such extent as shall be
permitted by applicable law.

 

14.5                        Confidentiality.

 

(a)         Agent and Lenders each individually (and not jointly or jointly and
severally) agree that material, non-public information regarding the Loan
Parties and their Subsidiaries, their operations, assets, and existing and
contemplated business plans (“Confidential Information”) shall be treated by
Agent and the Lenders in a confidential manner, and shall not be disclosed by
Agent and the Lenders to Persons who are not parties to this Agreement, except: 
(i) to attorneys for and other advisors, accountants, auditors, and consultants
to any member of the Lender Group and to employees, directors and officers of
any member of the Lender Group (the Persons in this clause (i), “Lender Group
Representatives”) on a “need to know” basis in connection with this Agreement
and the transactions contemplated hereby and on a confidential basis, (ii) to
Subsidiaries and Affiliates of any member of the Lender Group (including the
Bank Product Providers); provided, that any such Subsidiary or Affiliate shall
have agreed to receive such information hereunder subject to the terms of this
Section 14.5, (iii) as may be required by regulatory authorities so long as such
authorities are informed of the confidential nature of such information, (iv) as
may be required by statute, decision, or judicial or administrative order, rule,
or regulation; provided, that (A) prior to any disclosure under this clause
(iv), the disclosing party agrees to provide Borrowers with prior notice
thereof, to the extent that it is practicable to do so and to the extent that
the disclosing party is permitted to provide such prior notice to Borrowers
pursuant to the terms of the applicable statute, decision, or judicial or
administrative order, rule, or regulation and (B) any disclosure under this
clause (iv) shall be limited to the portion of the Confidential Information as
may be required by such statute, decision, or judicial or administrative order,
rule, or regulation, (v) as may be agreed to in advance in writing by Borrowers,
(vi) as requested or required by any Governmental Authority pursuant to any
subpoena or other legal process; provided, that (A) prior to any disclosure
under this clause (vi) the disclosing party agrees to provide Borrowers with
prior written notice thereof, to the extent that it is practicable to do so and
to the extent that the disclosing party is permitted to provide such prior
written notice to Borrowers pursuant to the terms of the subpoena or other legal
process and (B) any disclosure under this clause (vi) shall be limited to the
portion of the Confidential Information as may be required by such Governmental
Authority pursuant to such subpoena or other legal process, (vii) as to any such
information that is or becomes generally available to the public (other than as
a result of prohibited disclosure by Agent or the Lenders or the Lender Group
Representatives), (viii) in connection with any assignment, participation or
pledge of any Lender’s interest under this Agreement; provided, that prior to
receipt of Confidential Information any such assignee, participant, or pledgee
shall have agreed in writing to receive such Confidential Information either
subject to the terms of this Section 14.5 or pursuant to confidentiality
requirements substantially similar to those contained in this Section 14.5 (and
such Person may disclose such Confidential Information to Persons employed or
engaged by them as described in clause (i) above), (ix) in connection with any
litigation or other adversary proceeding involving parties hereto which such
litigation or adversary proceeding involves claims related to the rights or
duties of such parties under this Agreement or the other Financing Agreements;
provided, that, prior to any disclosure to any Person (other than any Loan
Party, Agent, any Lender, any of their respective Affiliates, or their
respective counsel) under this clause (ix) with respect to litigation involving
any Person (other than any Borrower, Agent, any Lender, any of their respective
Affiliates, or their respective counsel), the disclosing party agrees to provide
Borrowers with prior written notice thereof, and (x) in connection with, and to
the extent reasonably necessary for, the exercise of any secured creditor remedy
under this Agreement or under any other Financing Agreement.

 

(b)         Anything in this Agreement to the contrary notwithstanding, Agent
may disclose information concerning the terms and conditions of this Agreement
and the other Financing Agreements

 

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to loan syndication and pricing reporting services or in its marketing or
promotional materials, with such information to consist of deal terms and other
information customarily found in such publications or marketing or promotional
materials and may otherwise use the name, logos, and other insignia of any
Borrower or the other Loan Parties and the Commitments provided hereunder in any
“tombstone” or other advertisements, on its website or in other marketing
materials of the Agent.

 

(c)          Each Loan Party agrees that Agent may make materials or information
provided by or on behalf of Borrowers hereunder (collectively, “Borrower
Materials”) available to the Lenders by posting the Communications on
IntraLinks, SyndTrak or a substantially similar secure electronic transmission
system (the “Platform”).  The Platform is provided “as is” and “as available.” 
Agent does not warrant the accuracy or completeness of the Borrower Materials,
or the adequacy of the Platform and expressly disclaim liability for errors or
omissions in the communications.  No warranty of any kind, express, implied or
statutory, including any warranty of merchantability, fitness for a particular
purpose, non-infringement of third party rights or freedom from viruses or other
code defects, is made by Agent in connection with the Borrower Materials or the
Platform.  In no event shall Agent or any of the Agent-Related Persons have any
liability to the Loan Parties, any Lender or any other person for damages of any
kind, including direct or indirect, special, incidental or consequential
damages, losses or expenses (whether in tort, contract or otherwise) arising out
of any Loan Party’s or Agent’s transmission of communications through the
Internet, except to the extent the liability of such person is found in a final
non-appealable judgment by a court of competent jurisdiction to have resulted
from such person’s gross negligence or willful misconduct.  Each Loan Party
further agrees that certain of the Lenders may be “public-side” Lenders (i.e.,
Lenders that do not wish to receive material non-public information with respect
to the Loan Parties or their securities) (each, a “Public Lender”).  The Loan
Parties shall be deemed to have authorized Agent and its Affiliates and the
Lenders to treat Borrower Materials marked “PUBLIC” or otherwise at any time
filed with the SEC as not containing any material non-public information with
respect to the Loan Parties or their securities for purposes of United States
federal and state securities laws.  All Borrower Materials marked “PUBLIC” are
permitted to be made available through a portion of the Platform designated as
“Public Investor” (or another similar term).  Agent and its Affiliates and the
Lenders shall be entitled to treat any Borrower Materials that are not marked
“PUBLIC” or that are not at any time filed with the SEC as being suitable only
for posting on a portion of the Platform not marked as “Public Investor” (or
such other similar term).

 

14.6                        Successors.  This Agreement, the other Financing
Agreements and any other document referred to herein or therein shall be binding
upon and inure to the benefit of and be enforceable by Agent, Lenders, Bank
Product Providers, Borrowers, Guarantors and their respective successors and
assigns, except that no Borrower or Guarantor may assign its rights under this
Agreement, the other Financing Agreements and any other document referred to
herein or therein without the prior written consent of Agent and Lenders.  Any
such purported assignment without such express prior written consent shall be
void.  No Lender may assign its rights and obligations under this Agreement
without the prior written consent of Agent, except as provided in Section 14.7
below.  The terms and provisions of this Agreement and the other Financing
Agreements are for the purpose of defining the relative rights and obligations
of Borrowers, Guarantors, Agent and Lenders with respect to the transactions
contemplated hereby and there shall be no third party beneficiaries of any of
the terms and provisions of this Agreement or any of the other Financing
Agreements.

 

14.7                        Assignments; Participations.

 

(a)         Each Lender may assign all or, if less than all, a portion equal to
at least $10,000,000 in the aggregate for the assigning Lender, of such rights
and obligations under this Agreement to one or more Eligible Transferees or
Approved Funds (but not including for this purpose any assignments in the form
of a participation), each of which assignees shall become a party to this
Agreement as a Lender by

 

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execution of an Assignment and Acceptance; provided, that, such transfer or
assignment will not be effective until:  (i) it is recorded by the applicable
Agent on the applicable Register; (ii) Agent shall have received for its sole
account payment of a processing fee from the assigning Lender or the assignee in
the amount of $5,000; (iii) Agent shall have provided its prior written consent
to such assignment, and (iv) Borrowers shall have provided their prior written
consent, which consent shall not be unreasonably withheld, conditioned or
delayed; provided, that, (A) Borrowers shall be deemed to have consented to a
proposed assignment unless they object to such assignment by written notice to
Agent within five (5) Business Days after having received notice thereof and
(B) no consent of Borrowers shall be required if a Default or an Event of
Default exists or has occurred and is continuing.  Anything contained in this
Section 14.7 hereof to the contrary notwithstanding, the consent of Borrowers or
Agent shall not be required, the minimum assignment amount shall not be
applicable, an Assignment and Acceptance shall not be required to be delivered
to, accepted by or recorded by Agent on the Register in order to be effective,
valid, binding and enforceable and payments of the processing fee shall not be
required if such assignment is in connection with any merger, consolidation,
sale, transfer, or other disposition of all or any substantial portion of the
business or loan portfolio of a Lender; provided, that Borrowers and Agent may
continue to deal solely and directly with the assigning Lender in connection
with the interest so assigned until such time as written notice of such
assignment shall have been delivered by the assigning Lender or the assignee to
Agent.

 

(b)         Agent, acting for this purpose only as a non-fiduciary agent of
behalf of Borrowers, shall maintain a register of the names and addresses of
Lenders, their Commitments and the principal amount of their Loans (the
“Register”); provided, that, in the case of an assignment or delegation covered
by Section 14.7(a) hereof, which is not reflected in the Register, the assigning
Lender shall maintain a comparable register (the “Lender Register”) on behalf of
Borrowers.  Agent shall also maintain a copy of each Assignment and Acceptance
delivered to and accepted by it and shall modify the Register to give effect to
each Assignment and Acceptance.  The entries in the Register and Lender Register
shall be conclusive and binding for all purposes, absent manifest error, and
Borrowers, Guarantors, Agent and Lenders may treat each Person whose name is
recorded in the Register or Lender Register as a Lender hereunder for all
purposes of this Agreement.  The Register and Lender Register shall be available
for inspection by Borrowers and any Lender at any reasonable time and from time
to time upon reasonable prior notice.  This Section 14.7(b) shall be construed
so that the Loans and Commitments are at all times maintained in “registered
form” within the meaning of Sections 163(f), 871(h)(2) and 881(c)(2) of the
Code.

 

(c)          If required under Section 14.7 hereof, upon such execution,
delivery, acceptance and recording, and otherwise from and after the effective
date specified in each Assignment and Acceptance, (i) the assignee thereunder
shall be a party hereto and to the other Financing Agreements and, to the extent
that rights and obligations hereunder have been assigned to it pursuant to such
Assignment and Acceptance, have the rights and obligations (including, without
limitation, the obligation to participate in Letters of Credit) of a Lender
hereunder and thereunder and (ii) the assigning Lender shall, to the extent that
rights and obligations hereunder have been assigned by it pursuant to such
Assignment and Acceptance, relinquish its rights and be released from its
obligations under this Agreement.

 

(d)         By execution and delivery to each other of an Assignment and
Acceptance, the assignor and assignee thereunder confirm to and agree with each
other and the other parties hereto as follows:  (i) other than as provided in
such Assignment and Acceptance, the assigning Lender makes no representation or
warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with this Agreement or
any of the other Financing Agreements or the execution, legality,
enforceability, genuineness, sufficiency or value of this Agreement or any of
the other Financing Agreements furnished pursuant hereto, (ii) the assigning
Lender makes no representation or warranty and assumes no responsibility with
respect to the financial condition of any Borrower, any Guarantor or any

 

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of their respective Subsidiaries or the performance or observance by any
Borrower or any Guarantor of any of the Obligations; (iii) such assignee
confirms that it has received a copy of this Agreement and the other Financing
Agreements, together with such other documents and information it has deemed
appropriate to make its own credit analysis and decision to enter into such
Assignment and Acceptance, (iv) such assignee will, independently and without
reliance upon the assigning Lender, Agent and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under this Agreement and the
other Financing Agreements, (v) such assignee appoints and authorizes Agent to
take such action as agent on its behalf and to exercise such powers under this
Agreement and the other Financing Agreements as are delegated to Agent by the
terms hereof and thereof, together with such powers as are reasonably incidental
thereto, and (vi) such assignee agrees that it will perform in accordance with
their terms all of the obligations which by the terms of this Agreement and the
other Financing Agreements are required to be performed by it as a Lender. 
Agent and Lenders may furnish any information concerning any Borrower or any
Guarantor in the possession of Agent or any Lender from time to time to
assignees and Participants.

 

(e)          Each Lender may sell participations to one or more banks or other
entities in or to all or a portion of its rights and obligations under this
Agreement and the other Financing Agreements (including, without limitation, all
or a portion of its Commitment and the Loans owing to it and its participation
in the Letters of Credit, without the consent of Agent or the other Lenders);
provided, that, (i) such Lender’s obligations under this Agreement (including,
without limitation, its Commitment hereunder) and the other Financing Agreements
shall remain unchanged, (ii) such Lender shall remain solely responsible to the
other parties hereto for the performance of such obligations, and Borrowers, the
other Lenders and Agent shall continue to deal solely and directly with such
Lender in connection with such Lender’s rights and obligations under this
Agreement and the other Financing Agreements, (iii) the Participant shall not
have any rights under this Agreement or any of the other Financing Agreements
(the Participant’s rights against such Lender in respect of such participation
to be those set forth in the agreement executed by such Lender in favor of the
Participant relating thereto) and all amounts payable by Borrowers or any
Guarantor hereunder (including any amounts payable under Sections 3.3, 3.4 and
3.5 hereof) shall be determined as if such Lender had not sold such
participation.

 

(f)           Nothing in this Agreement shall prevent or prohibit any Lender
from pledging its Loans hereunder to a Federal Reserve Bank in support of
borrowings made by such Lenders from such Federal Reserve Bank.  Borrowers
hereby acknowledge that the Lenders and their Affiliates may sell or securitize
the Loans (a “Securitization”) through the pledge of the Loans as collateral
security for loans to the Lenders or their Affiliates or through the sale of the
Loans or the issuance of direct or indirect interests in the Loans, which loans
to the Lenders or their Affiliates or direct or indirect interests will be rated
by Moody’s, Standard & Poor’s or one or more other rating agencies (the “Rating
Agencies”).  Borrowers shall cooperate with the Lenders and their Affiliates to
effect the Securitization including, without limitation, by (a) amending this
Agreement and the other Financing Agreements, and executing such additional
documents, as reasonably requested by the Lenders in connection with the
Securitization, provided that (i) any such amendment or additional documentation
does not impose material additional costs on the Borrowers and (ii) any such
amendment or additional documentation does not materially adversely affect the
rights, or materially increase the obligations, of the Borrowers under the
Financing Agreements or change or affect in a manner adverse to the Borrowers
the financial terms of the Loans, (b) providing such information as may be
reasonably requested by the Lenders in connection with the rating of the Loans
or the Securitization, and (c) providing in connection with any rating of the
Loans a certificate (i) agreeing to indemnify the Lenders and their Affiliates,
any of the Rating Agencies, or any party providing credit support or otherwise
participating in the Securitization (collectively, the “Securitization Parties”)
for any losses, claims, damages or liabilities (the “Liabilities”) to which the
Lenders, their Affiliates or such Securitization Parties may become subject
insofar as the Liabilities arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact contained

 

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in any Financing Agreement or in any writing delivered by or on behalf of any
Borrower or Guarantor to the Lenders in connection with any Financing Agreement
or arise out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein, or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading, and such indemnity shall survive any transfer by the
Lenders or their successors or assigns of the Loans and (ii) agreeing to
reimburse the Lenders and their Affiliates for any legal or other expenses
reasonably incurred by such Persons in connection with defending the
Liabilities.

 

(g)          Borrowers shall assist Agent or any Lender permitted to sell
assignments or participations under this Section 14.7 in whatever manner
reasonably necessary in order to enable or effect any such assignment or
participation, including (but not limited to) the execution and delivery of any
and all agreements, notes and other documents and instruments as shall be
requested and the delivery of informational materials, appraisals or other
documents for, and the participation of relevant management in meetings and
conference calls with, potential Lenders or Participants.  Borrowers shall
certify the correctness, completeness and accuracy, in all material respects, of
all descriptions of Borrowers and their affairs provided, prepared or reviewed
by Borrowers that are contained in any selling materials and all other
information provided by it and included in such materials.

 

14.8                        Entire Agreement.  This Agreement, the other
Financing Agreements, any supplements hereto or thereto, and any instruments or
documents delivered or to be delivered in connection herewith or therewith
represents the entire agreement and understanding concerning the subject matter
hereof and thereof between the parties hereto, and supersede all other prior
agreements, understandings, negotiations and discussions, representations,
warranties, commitments, proposals, offers and contracts concerning the subject
matter hereof, whether oral or written.  In the event of any inconsistency
between the terms of this Agreement and any schedule or exhibit hereto, the
terms of this Agreement shall govern.

 

14.9                        Bank Product Providers.  Each Bank Product Provider
in its capacity as such shall be deemed a third party beneficiary hereof and of
the provisions of the other Financing Agreements for purposes of any reference
in a Financing Agreement to the parties for whom Agent is acting.  Agent hereby
agrees to act as agent for such Bank Product Providers and, by virtue of
entering into a Bank Product Agreement, the applicable Bank Product Provider
shall be automatically deemed to have appointed Agent as its agent and to have
accepted the benefits of the Financing Agreements.  It is understood and agreed
that the rights and benefits of each Bank Product Provider under the Financing
Agreements consist exclusively of such Bank Product Provider’s being a
beneficiary of the liens and security interests (and, if applicable, guarantees)
granted to Agent and the right to share in payments and collections out of the
Collateral as more fully set forth herein. In addition, each Bank Product
Provider, by virtue of entering into a Bank Product Agreement, shall be
automatically deemed to have agreed that Agent shall have the right, but shall
have no obligation, to establish, maintain, relax, or release reserves in
respect of the Bank Product Obligations and that if reserves are established
there is no obligation on the part of Agent to determine or insure whether the
amount of any such reserve is appropriate or not.  In connection with any such
distribution of payments or proceeds of Collateral, Agent shall be entitled to
assume no amounts are due or owing to any Bank Product Provider unless such Bank
Product Provider has provided a written certification (setting forth a
reasonably detailed calculation) to Agent as to the amounts that are due and
owing to it and such written certification is received by Agent a reasonable
period of time prior to the making of such distribution.  Agent shall have no
obligation to calculate the amount due and payable with respect to any Bank
Products, but may rely upon the written certification of the amount due and
payable from the applicable Bank Product Provider.  In the absence of an updated
certification, Agent shall be entitled to assume that the amount due and payable
to the applicable Bank Product Provider is the amount last certified to Agent by
such Bank Product Provider as being due and payable (less any distributions made
to such Bank Product Provider on account thereof).  Borrowers may obtain Bank
Products from any Bank Product Provider, although Borrowers are not required to
do so.

 

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Each Borrower acknowledges and agrees that no Bank Product Provider has
committed to provide any Bank Products and that the providing of Bank Products
by any Bank Product Provider is in the sole and absolute discretion of such Bank
Product Provider.  Notwithstanding anything to the contrary in this Agreement or
any other Financing Agreement, no provider or holder of any Bank Product shall
have any voting or approval rights hereunder (or be deemed a Lender) solely by
virtue of its status as the provider or holder of such agreements or products or
the Obligations owing thereunder, nor shall the consent of any such provider or
holder be required (other than in their capacities as Lenders, to the extent
applicable) for any matter hereunder or under any of the other Financing
Agreements, including as to any matter relating to the Collateral or the release
of Collateral or Guarantors.

 

14.10                 Debtor-Creditor Relationship.  The relationship between
the Lenders and Agent, on the one hand, and the Loan Parties, on the other hand,
is solely that of creditor and debtor.  No member of the Lender Group has (or
shall be deemed to have) any fiduciary relationship or duty to any Loan Party
arising out of or in connection with the Financing Agreements or the
transactions contemplated thereby, and there is no agency or joint venture
relationship between the members of the Lender Group, on the one hand, and the
Loan Parties, on the other hand, by virtue of any Financing Agreement or any
transaction contemplated therein.

 

14.11                 Patriot Act.  Each Lender that is subject to the
requirements of the Patriot Act hereby notifies the Loan Parties that pursuant
to the requirements of the Patriot Act, it is required to obtain, verify and
record information that identifies each Loan Party, which information includes
the name and address of each Loan Party and other information that will allow
such Lender to identify each Loan Party in accordance with the Patriot Act.  In
addition, Agent and each Lender shall have the right to periodically conduct due
diligence on all Loan Parties, their senior management and key principals and
legal and beneficial owners.  Each Loan Party agrees to cooperate in respect of
the conduct of such due diligence and further agrees that the reasonable costs
and charges for any such due diligence by Agent shall be payable to Agent
hereunder and be for the account of Borrowers.

 

14.12                 Counterparts, Etc.  This Agreement or any of the other
Financing Agreements may be executed in any number of counterparts, each of
which shall be an original, but all of which taken together shall constitute one
and the same agreement. Delivery of an executed counterpart of this Agreement or
any of the other Financing Agreements by telefacsimile shall have the same force
and effect as the delivery of an original executed counterpart of this Agreement
or any of such other Financing Agreements.  Any party delivering an executed
counterpart of any such agreement by telefacsimile shall also deliver an
original executed counterpart, but the failure to do so shall not affect the
validity, enforceability or binding effect of such agreement.

 

14.13                 Acknowledgement and Consent to Bail-In of EEA Financial
Institutions.  Notwithstanding anything to the contrary in any Financing
Agreement or in any other agreement, arrangement or understanding among any such
parties, each party hereto acknowledges that any liability of any EEA Financial
Institution arising under any Financing Agreement, to the extent such liability
is unsecured, may be subject to the write-down and conversion powers of an EEA
Resolution Authority and agrees and consents to, and acknowledges and agrees to
be bound by:

 

(a)                                 the application of any Write-Down and
Conversion Powers by an EEA Resolution Authority to any such liabilities arising
hereunder which may be payable to it by any party hereto that is an EEA
Financial Institution; and

 

(b)                                 the effects of any Bail-In Action on any
such liability, including, if applicable:

 

(i)                                     a reduction in full or in part or
cancellation of any such liability;

 

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(ii)                                  a conversion of all, or a portion of, such
liability into shares or other instruments of ownership in such EEA Financial
Institution, its parent undertaking, or a bridge institution that may be issued
to it or otherwise conferred on it, and that such shares or other instruments of
ownership will be accepted by it in lieu of any rights with respect to any such
liability under this Agreement or any other Financing Agreement; or

 

(iii)                               the variation of the terms of such liability
in connection with the exercise of the write-down and conversion powers of any
EEA Resolution Authority.

 

14.14                 Acknowledgement Regarding Any Supported QFCs.  To the
extent, that the Financing Agreements provide support, through a guarantee or
otherwise for Hedge Agreements or any other agreement or instrument that is a
QFC (such support “QFC Credit Support” and each such QFC a “Supported QFC”), the
parties acknowledge and agree as follows with respect to the resolution power of
the Federal Deposit Insurance Corporation under the Federal Deposit Insurance
Act and Title II of the Dodd-Frank Wall Street Reform and Consumer Protection
Act (together with the regulations promulgated thereunder, the “U.S. Special
Resolution Regimes”) in respect of such Supported QFC and QFC Credit Support,
(with the provisions below applicable notwithstanding that the Financing
Agreements and, any Supported QFC may in fact be stated, to be governed by the
laws of the State of New York and/or of the United States or any other state of
the United States): In the event a Covered Entity that is party to a Supported
QFC (each a “Covered Party”) becomes subject to a proceeding under a U.S.
Special Resolution Regime, the transfer of such Supported QFC and the benefit of
such QFC Credit Support (and any interest and obligation in or under such
Supported QFC and such QFC Credit Support and any rights in property securing
such Supported QFC or such QFC Credit Support) from such Covered Party will be
effective to the same extent as the transfer would be effective under the U.S.
Special Resolution Regime if the Supported QFC and such QFC Credit Support (and
any such interest, obligation and rights in property) were governed by the laws
of the United States or a state of the United States. In the event a Covered
Party or a BHC Act Affiliate of a Covered Party becomes subject to a proceeding
under a U.S. Special Resolution Regime Default Rights under the Financing
Agreements that might otherwise apply to such Supported QFC or any QFC Credit
Support that may be exercised against such Covered Party are permitted to be
exercised to no greater extent than such Default Rights could be exercised under
the U.S. Special Resolution Regime if the Supported QFC and the Financing
Agreements were governed by the laws of the United States or a state of the
United States. Without limitation of the foregoing, it is understood and agreed
that rights and remedies of the parties with respect to a Defaulting Lender
shall in no event affect the rights of any Covered Party with respect to a
Supported QFC or any QFC Credit Support.

 

SECTION 15.                  WITHHOLDING TAXES.

 

15.1                        Payments.  All payments made by any Loan Party under
any Financing Agreement will be made free and clear of, and without deduction or
withholding for, any Taxes, except as otherwise required by applicable law. In
the event any deduction or withholding of Indemnified Taxes is required,
Borrowers shall comply with the next sentence of this Section 15.1.  If any
Indemnified Taxes are so levied or imposed, Borrowers agree to pay the full
amount of such Indemnified Taxes and such additional amounts as may be necessary
so that every payment of all amounts due under this Agreement, any note, or
Financing Agreement, including any amount paid pursuant to this Section 15.1
after withholding or deduction for or on account of any Indemnified Taxes, will
not be less than the amount provided for herein.  Borrowers will furnish to
Agent as promptly as possible after the date the payment of any Indemnified Tax
is due pursuant to applicable law, originals or certified copies of a receipt
evidencing such payment by the Loan Parties or other evidence of such payment
reasonably satisfactory to Agent.  In addition, without duplication of the
foregoing, Loan Parties will promptly pay any Other Taxes or reimburse Agent for
such Other Taxes upon Agent’s demand.  The Loan Parties shall jointly and

 

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severally indemnify each Indemnitee (as defined in Section 11.5) (collectively a
“Tax Indemnitee”) for the full amount of Indemnified Taxes arising in connection
with this Agreement or any other Financing Agreement or breach thereof by any
Loan Party (including any Indemnified Taxes imposed or asserted on, or
attributable to, amounts payable under this Section 15) imposed on, or paid by,
such Tax Indemnitee and all reasonable costs and expenses related thereto
(including fees and disbursements of attorneys and other tax professionals),
whether or not such Indemnified Taxes were correctly or legally imposed or
asserted by the relevant Governmental Authority (other than Indemnified Taxes
and additional amounts that a court of competent jurisdiction finally determines
to have resulted from the gross negligence or willful misconduct of such Tax
Indemnitee).  The obligations of the Loan Parties under this Section 15 shall
survive the termination of this Agreement, the resignation and replacement of
the Agent, and the repayment of the Obligations.

 

15.2                        Exemptions.

 

(a)         If a Lender or Participant is entitled to claim an exemption or
reduction from withholding tax, such Lender or Participant agrees to deliver to
Borrowers and Agent, at the times reasonably requested by Borrowers or the
Agent, such properly completed and executed documentation reasonably requested
by Borrowers or the Agent as will permit such payments to be made without
withholding or at a reduced rate of withholding.  In addition, any Lender, if
reasonably requested by Borrowers or Agent, shall deliver such other
documentation prescribed by applicable law or reasonably requested by Borrowers
or Agent as will enable Borrowers or Agent to determine whether or not such
Lender is subject to backup withholding or information reporting requirements. 
Without limiting the generality of the foregoing, any Lender or Participant that
is a “United States person” (as defined in Section 7701(a)(30) of the Code)
shall deliver to Borrowers and Agent on or prior to the date on which such
Lender or Participant becomes a Lender or Participant under this Agreement (and
from time to time thereafter upon the reasonable request of Borrowers or Agent),
executed originals of IRS Form W-9 certifying that such Lender or Participant is
exempt from U.S. federal backup withholding tax and any Foreign Lender shall, to
the extent it is legally entitled to do so, deliver to Borrowers and Agent (in
such number of copies as shall reasonably be requested by the recipient) on or
prior to the date on which such Foreign Lender becomes a Lender or Participant
under this Agreement (and from time to time thereafter upon the reasonable
request of a Borrower or the Agent), whichever of the following is applicable:

 

(i)                       if such Lender or Participant is entitled to claim an
exemption from United States withholding tax pursuant to the portfolio interest
exception, (A) a statement of the Lender or Participant, signed under penalty of
perjury, that it is not a (I) a “bank” as described in Section 881(c)(3)(A) of
the Code, (II) a 10% shareholder of any Borrower (within the meaning of
Section 871(h)(3)(B) of the Code), or (III) a controlled foreign corporation
related to Borrowers within the meaning of Section 864(d)(4) of the Code, and
(B) a properly completed and executed IRS Form W-8BEN, Form W-8BEN-E or
Form W-8IMY (with proper attachments as applicable);

 

(ii)                    if such Lender or Participant is entitled to claim an
exemption from, or a reduction of, withholding tax under a United States tax
treaty, a properly completed and executed copy of IRS Form W-8BEN or
Form W-8BEN-E, as applicable;

 

(iii)                 if such Lender or Participant is entitled to claim that
interest paid under this Agreement is exempt from United States withholding tax
because it is effectively connected with a United States trade or business of
such Lender, a properly completed and executed copy of IRS Form W-8ECI;

 

(iv)                if such Lender or Participant is entitled to claim that
interest paid under this Agreement is exempt from United States withholding tax
because such Lender or Participant serves as an

 

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intermediary, a properly completed and executed copy of IRS Form W-8IMY
(including a withholding statement and copies of the tax certification
documentation for its beneficial owner(s) of the income paid to the
intermediary, if required based on its status provided on the Form W-8IMY); or

 

(v)                   a properly completed and executed copy of any other form
or forms, including IRS Form W-9, as may be required under the Code or other
laws of the United States as a condition to exemption from, or reduction of,
United States withholding or backup withholding tax.

 

(b)         Each Lender or Participant shall provide new forms (or successor
forms) upon the expiration or obsolescence of any previously delivered forms and
promptly notify Agent and Borrowers (or, in the case of a Participant, to the
Lender granting the participation) of any change in circumstances which would
modify or render invalid any claimed exemption or reduction.

 

(c)          If a Lender or Participant claims an exemption from withholding tax
in a jurisdiction other than the United States, such Lender or such Participant
agrees with and in favor of Agent and Borrowers, to deliver to Agent and
Borrowers (or, in the case of a Participant, to the Lender granting the
participation) any such form or forms, as may be required under the laws of such
jurisdiction as a condition to exemption from, or reduction of, foreign
withholding or backup withholding tax before receiving its first payment under
this Agreement, but only if such Lender or such Participant is legally able to
deliver such forms, or the providing of or delivery of such forms in the
Lender’s reasonable judgment would not subject such Lender to any material
unreimbursed cost or expense or materially prejudice the legal or commercial
position of such Lender (or its Affiliates); provided, further, that nothing in
this Section 15.2(c) shall require a Lender or Participant to disclose any
information that it deems to be confidential (including its tax returns).  Each
Lender and each Participant shall provide new forms (or successor forms) upon
the expiration or obsolescence of any previously delivered forms and promptly
notify Agent and Borrowers (or, in the case of a Participant, to the Lender
granting the participation) of any change in circumstances which would modify or
render invalid any claimed exemption or reduction.

 

(d)         If a Lender or Participant claims exemption from, or reduction of,
withholding tax and such Lender or Participant sells, assigns, grants a
participation in, or otherwise transfers all or part of the Obligations of
Borrowers to such Lender or Participant, such Lender or Participant agrees to
notify Agent and Borrowers (or, in the case of a sale of a participation
interest, to the Lender granting the participation) of the percentage amount in
which it is no longer the beneficial owner of Obligations of Borrowers to such
Lender or Participant.  To the extent of such percentage amount, Agent and
Borrowers will treat such Lender’s or such Participant’s documentation provided
pursuant to Section 15.2(a) or 15.2(c) as no longer valid.  With respect to such
percentage amount, such Participant or Assignee may provide new documentation,
pursuant to Section 15.2(a) or 15.2(c), if applicable.  Borrowers agree that
each Participant shall be entitled to the benefits of this Section 15 with
respect to its participation in any portion of the Commitments and the
Obligations so long as such Participant complies with the obligations set forth
in this Section 15 with respect thereto.

 

(e)          If a payment made to a Lender under any Financing Agreement would
be subject to U.S. federal withholding tax imposed by FATCA if such Lender were
to fail to comply with the applicable due diligence and reporting requirements
of FATCA (including those contained in Section 1471(b) or 1472(b) of the Code,
as applicable), such Lender shall deliver to Agent (or, in the case of a
Participant, to the Lender granting the participation) at the time or times
prescribed by law and at such time or times reasonably requested by Agent (or,
in the case of a Participant, the Lender granting the participation) such
documentation prescribed by applicable law (including as prescribed by
Section 1471(b)(3)(C)(i) of the Code) and such additional documentation
reasonably requested by Agent (or, in the case of a Participant, the Lender
granting the participation) as may be necessary for Agent or Borrowers to comply
with their

 

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obligations under FATCA and to determine that such Lender has complied with such
Lender’s obligations under FATCA or to determine the amount to deduct and
withhold from such payment.  Solely for purposes of this clause (e), “FATCA”
shall include any amendments made to FATCA after the date of this Agreement.

 

15.3                        Reductions.

 

(a)         If a Lender or a Participant is subject to an applicable withholding
tax, Agent (or, in the case of a Participant, the Lender granting the
participation) may withhold from any payment to such Lender or such Participant
an amount equivalent to the applicable withholding tax.  If the forms or other
documentation required by Section 15.2(a), 15.2(c) or 15.2(e) are not delivered
to Agent (or, in the case of a Participant, to the Lender granting the
participation), then Agent (or, in the case of a Participant, to the Lender
granting the participation) may withhold from any payment to such Lender or such
Participant not providing such forms or other documentation an amount equivalent
to the applicable withholding tax.

 

(b)         If the IRS or any other Governmental Authority of the United States
or other jurisdiction asserts a claim that Agent (or, in the case of a
Participant, to the Lender granting the participation) did not properly withhold
tax from amounts paid to or for the account of any Lender or any Participant due
to a failure on the part of the Lender or any Participant (because the
appropriate form was not delivered, was not properly executed, or because such
Lender failed to notify Agent (or such Participant failed to notify the Lender
granting the participation) of a change in circumstances which rendered the
exemption from, or reduction of, withholding tax ineffective, or for any other
reason) such Lender shall indemnify and hold Agent harmless (or, in the case of
a Participant, such Participant shall indemnify and hold the Lender granting the
participation harmless) for all amounts paid, directly or indirectly, by Agent
(or, in the case of a Participant, to the Lender granting the participation), as
tax or otherwise, including penalties and interest, and including any taxes
imposed by any jurisdiction on the amounts payable to Agent (or, in the case of
a Participant, to the Lender granting the participation) under this Section 15,
together with all costs and expenses (including attorneys’ fees and expenses).
 The obligation of the Lenders and the Participants under this subsection shall
survive the payment of all Obligations and the resignation or replacement of
Agent.

 

15.4                        Refunds.  If Agent or a Lender determines, in its
sole discretion exercised in good faith, that it has received a refund of any
Indemnified Taxes to which the Loan Parties have paid additional amounts
pursuant to this Section 15, so long as no Default or Event of Default has
occurred and is continuing, it shall pay over such refund to the Borrowers on
behalf of the Loan Parties (but only to the extent of payments made, or
additional amounts paid, by the Loan Parties under this Section 15 with respect
to Indemnified Taxes giving rise to such a refund), net of all out-of-pocket
expenses of Agent or such Lender and without interest (other than any interest
paid by the applicable Governmental Authority with respect to such a refund);
provided, that the Loan Parties, upon the request of Agent or such Lender,
agrees to repay the amount paid over to the Loan Parties (plus any penalties,
interest or other charges, imposed by the applicable Governmental Authority,
other than such penalties, interest or other charges imposed as a result of the
willful misconduct or gross negligence of Agent or Lender hereunder as finally
determined by a court of competent jurisdiction) to Agent or such Lender in the
event Agent or such Lender is required to repay such refund to such Governmental
Authority.  Notwithstanding anything in this Agreement to the contrary, this
Section 15 shall not be construed to require Agent or any Lender to make
available its tax returns (or any other information which it deems confidential)
to Loan Parties or any other Person or require Agent or any Lender to pay any
amount to an indemnifying party pursuant to Section 15.4, the payment of which
would place Agent or such Lender (or their Affiliates) in a less favorable net
after-Tax position than such Person would have been in if the Tax subject to
indemnification and giving rise to such refund had not been deducted, withheld
or otherwise imposed and the indemnification payments or additional amounts with
respect to such Tax had never been paid.

 

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SECTION 16.                  ACKNOWLEDGMENT AND RESTATEMENT

 

16.1                        Existing Obligations.  Each Borrower and Guarantor
hereby acknowledges, confirms and agrees that, as of the close of business on
October 23, 2014, Borrowers are indebted to Agent and Lenders in respect of
Loans under the Existing Loan Agreement in the aggregate principal amount of
$4,356,358.09 and Existing Letters of Credit under the Existing Loan Agreement
in the aggregate principal amount of $20,929,194.10, in each case together with
all interest accrued and accruing thereon (to the extent applicable), and all
fees, costs, expenses and other charges relating thereto, all of which are
unconditionally owing by Borrowers and Guarantors to Agent and Lenders, without
offset, defense or counterclaim of any kind, nature or description whatsoever.

 

16.2                        Acknowledgment of Security Interests.  Each Borrower
and Guarantor hereby acknowledges, confirms and agrees that Agent, for itself
and the ratable benefit of the Lenders and the Bank Product Providers, shall
continue to have a security interest in and lien upon the Collateral heretofore
granted to Agent pursuant to the Existing Financing Agreements to secure the
Obligations, as well as any Collateral granted to Agent under this Agreement or
under any of the other Financing Agreements or otherwise granted to or held by
Agent or any Lender.  The liens and security interests of Agent in the
Collateral shall be deemed to be continuously granted and perfected from the
earliest date of the granting and perfection of such liens and security
interests to Agent, whether under the Existing Financing Agreements, this
Agreement or any of the other Financing Agreements.

 

16.3                        Existing Financing Agreements.  Each Borrower and
Guarantor hereby acknowledges, confirms and agrees that: (a) the Existing
Financing Agreements have been duly executed and delivered by such Borrower and
Guarantor and are in full force and effect as of the date hereof and (b) the
agreements and obligations of such Borrower and Guarantor contained in the
Existing Financing Agreements constitute the legal, valid and binding
obligations of such Borrower and Guarantor enforceable against each of them in
accordance with their respective terms and such Borrower and Guarantor has no
valid defense to the enforcement of such obligations and (c) Agent, on behalf of
Lenders and Bank Product Providers, is entitled to all of the rights and
remedies provided for in favor of Agent, Lenders and Bank Product Providers in
the Existing Financing Agreements, as amended and restated by this Agreement.

 

16.4                        Restatement.  Except as otherwise stated in
Section 16.2 hereof and this Section 16.4, as of the date hereof, the terms,
conditions, agreements, covenants, representations and warranties set forth in
the Existing Financing Agreements are hereby amended and restated in their
entirety, and as so amended and restated, replaced and superseded, by the terms,
conditions, agreements, covenants, representations and warranties set forth in
this Agreement and the other Financing Agreements.  The amendment and
restatement contained herein shall not, in any manner, be construed to
constitute payment of, or impair, limit, cancel or extinguish, or constitute a
novation in respect of, the Indebtedness and any other obligations and
liabilities of Borrowers or Guarantors evidenced by or arising under the
Existing Financing Agreements, and the liens and security interests of Agent,
for itself and the ratable benefit of the Lenders and the Bank Product
Providers, in the Collateral (as such term is defined herein) securing such
Indebtedness and other obligations and liabilities, which shall not in any
manner be impaired, limited, terminated, waived or released, but shall continue
in full force and effect in favor of Agent, for itself and the ratable benefit
of the Lenders and the Bank Product Providers.  The principal amount of the
Loans and the amount of the Existing Letters of Credit outstanding as of the
date hereof under the Existing Financing Agreements shall be allocated to the
Loans and Letters of Credit hereunder in such manner and in such amounts as
Agent shall determine.

 

16.5                        Release.  Each Borrower and Guarantor, for itself
and its successors and assigns, does hereby remise, release, discharge and hold
Agent, Lenders, Bank Product Providers, and their respective

 

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officers, directors, agents and employees and their respective predecessors,
successors and assigns harmless from all claims, demands, debts, sums of money,
accounts, damages, judgments, financial obligations, actions, causes of action,
suits at law or in equity, of any kind or nature whatsoever, whether or not now
existing or known, which any Borrower, any Guarantor or their respective
successors or assigns has had or may now or hereafter claim to have against
Agent, any Lender, any Bank Product Provider or their respective officers,
directors, agents and employees and their respective predecessors, successors
and assigns in any way arising from or connected with the Existing Financing
Agreements or the arrangements set forth therein or transactions thereunder up
to and including the date hereof, except to the extent Borrowers shall notify
Agent in writing of any specific exceptions to charges for interest, fees, costs
and expenses set forth in the most recent monthly statement of  the Loan
Accounts sent by Agent to Borrowers prior to the date hereof pursuant to the
Existing Financing Agreements within thirty (30) days after the date hereof.

 

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the day and year first above written.

 

 

BORROWERS

 

 

 

LERNER NEW YORK, INC.

 

 

 

 

By:

 

 

Name:

 

 

Title:

 

 

 

 

 

LERNCO, INC.

 

 

 

 

By:

 

 

Name:

 

 

Title:

 

 

 

 

 

LERNER NEW YORK OUTLET, LLC

 

 

 

 

By:

 

 

Name:

 

 

Title:

 

 

 

 

 

LERNER NEW YORK FTF, LLC

 

 

 

 

By:

 

 

Name:

 

 

Title:

 

 

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GUARANTORS

 

 

 

RTW RETAIL WINDS, INC.

 

 

 

 

By:

 

 

Name:

 

 

Title:

 

 

 

 

 

LERNER NEW YORK HOLDING, INC.

 

 

 

 

By:

 

 

Name:

 

 

Title:

 

 

 

 

 

LERNER NEW YORK GC, LLC

 

 

 

 

By:

 

 

Name:

 

 

Title:

 

 

 

 

 

NEW YORK & COMPANY STORES, INC.

 

 

 

By:

 

 

Name:

 

 

Title:

 

 

 

 

 

FTF GC, LLC

 

 

 

By:

 

 

Name:

 

 

Title:

 

 

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AGENT

 

 

 

WELLS FARGO BANK, NATIONAL ASSOCIATION, as Agent

 

 

 

 

By:

 

 

Name:

 

 

Title:

 

 

 

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REVOLVING LOAN LENDERS

 

 

 

WELLS FARGO BANK, NATIONAL ASSOCIATION, as Revolving Loan Lender

 

 

 

 

By:

 

 

Name:

 

 

Title:

 

 

 

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EXHIBIT A
TO
FOURTH AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT

 

FORM OF

ASSIGNMENT AND ACCEPTANCE AGREEMENT

 

This ASSIGNMENT AND ACCEPTANCE AGREEMENT (this “Assignment and Acceptance”)
dated as of              , 20   is made between                          (the
“Assignor”) and                      (the “Assignee”).  Initially capitalized
terms used herein without definitions shall have the meanings given in the Loan
Agreement (as defined below).

 

W I T N E S S E T H:

 

WHEREAS, Wells Fargo Capital Finance, LLC, as arranger, Wells Fargo, National
Association, in its capacity as agent pursuant to the Loan Agreement (as
hereinafter defined) acting for and on behalf of the Persons which are parties
thereto as lenders (in such capacity, “Agent”), and the Persons which are
parties to the Loan Agreement as lenders (individually, each a “Lender” and
collectively, “Lenders”) have entered or are about to enter into financing
arrangements pursuant to which Agent and Lenders may make loans and, with regard
to Lenders only, provide other financial accommodations to Lerner New
York, Inc., a Delaware corporation (“Lerner”), Lernco, Inc., a Delaware
corporation (“Lernco”), Lerner New York Outlet, LLC, a Massachusetts limited
liability company (“Lerner Outlet”) and Lerner New York FTF, LLC, a Delaware
limited liability company (“Lerner FTF”, and together with Lerner, Lernco and
Lerner Outlet, collectively, “Borrowers”) as set forth in the Fourth Amended and
Restated Loan and Security Agreement, dated October 24, 2014, by and among
Borrowers, certain of their affiliates, Agent, and Lenders (as the same now
exists or may hereafter be amended, modified, supplemented, extended, renewed,
restated or replaced, the “Loan Agreement”), and the other agreements, documents
and instruments referred to therein or at any time executed and/or delivered in
connection therewith or related thereto (all of the foregoing, together with the
Loan Agreement, as the same now exist or may hereafter be amended, modified,
supplemented, extended, renewed, restated or replaced, being collectively
referred to herein as the “Financing Agreements”);

 

WHEREAS, as provided under the Loan Agreement, Assignor committed to making
Revolving Loans (the “Committed Revolving Loans”) to Borrowers in an aggregate
amount not to exceed                Dollars ($         ) (the “Commitment”);

 

WHEREAS, Assignor wishes to assign to Assignee [part of the] [all] rights and
obligations of Assignor under the Loan Agreement in respect of its Commitment in
an amount equal to $               (the “Assigned Commitment Amount”) on the
terms and subject to the conditions set forth herein and Assignee wishes to
accept assignment of such rights and to assume such obligations from Assignor on
such terms and subject to such conditions;

 

NOW, THEREFORE, in consideration of the foregoing and the mutual agreements
contained herein, the parties hereto agree as follows:

 

1.     Assignment and Acceptance.

 

(a)   Subject to the terms and conditions of this Assignment and Acceptance,
Assignor hereby sells, transfers and assigns to Assignee, and Assignee hereby
purchases, assumes and undertakes from

 

A-1

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Assignor, without recourse and without representation or warranty (except as
provided in this Assignment and Acceptance) an interest in (i) the Commitment
and each of the Committed Revolving Loans of Assignor and (ii) all related
rights, benefits, obligations, liabilities and indemnities of the Assignor under
and in connection with the Loan Agreement and the other Financing Agreements, so
that after giving effect thereto, the Commitment of Assignee shall be as set
forth below and the Pro Rata Share of Assignee shall be         (  %).

 

(b)   With effect on and after the Effective Date (as defined in Section 5
hereof), Assignee shall be a party to the Loan Agreement and succeed to all of
the rights and be obligated to perform all of the obligations of a Lender under
the Loan Agreement, including the requirements concerning confidentiality and
the payment of indemnification, with a Commitment in an amount equal to the
Assigned Commitment Amount.  Assignee agrees that it will perform in accordance
with their terms all of the obligations which by the terms of the Loan Agreement
are required to be performed by it as a Lender.  It is the intent of the parties
hereto that the Commitment of Assignor shall, as of the Effective Date, be
reduced by an amount equal to the Assigned Commitment Amount and Assignor shall
relinquish its rights and be released from its obligations under the Loan
Agreement to the extent such obligations have been assumed by Assignee;
provided, that, Assignor shall not relinquish its rights under Sections 2.1,
6.4, 6.9 and 6.10 of the Loan Agreement to the extent such rights relate to the
time prior to the Effective Date.

 

(c)   After giving effect to the assignment and assumption set forth herein, on
the Effective Date Assignee’s Commitment will be              Dollars
($       ).

 

(d)   After giving effect to the assignment and assumption set forth herein, on
the Effective Date Assignor’s Commitment will be              Dollars ($       )
(as such amount may be further reduced by any other assignment by Assignor on or
after the date hereof).

 

2.     Payments.

 

(a)   As consideration for the sale, assignment and transfer contemplated in
Section 1 hereof, Assignee shall pay to Assignor on the Effective Date in
immediately available funds an amount equal to              Dollars ($       ),
representing Assignee’s Pro Rata Share of the amount owed by Borrowers with
respect to the Committed Revolving Loans assigned hereunder.

 

(b)   Assignee shall pay to Agent the processing fee in the amount specified in
Section 14.7(a) of the Loan Agreement.

 

3.     Reallocation of Payments.  Any interest, fees and other payments accrued
to the Effective Date with respect to the Commitment, Committed Revolving Loans
and outstanding Letters of Credit shall be for the account of Assignor.  Any
interest, fees and other payments accrued on and after the Effective Date with
respect to the Assigned Commitment Amount shall be for the account of Assignee. 
Each of Assignor and Assignee agrees that it will hold in trust for the other
party any interest, fees and other amounts which it may receive to which the
other party is entitled pursuant to the preceding sentence and pay to the other
party any such amounts which it may receive promptly upon receipt.

 

4.     Independent Credit Decision.  Assignee acknowledges that it has received
a copy of the Loan Agreement and the Schedules and Exhibits thereto, together
with copies of the most recent financial statements of the Borrowers and their
Subsidiaries, and such other documents and information as it has deemed
appropriate to make its own credit and legal analysis and decision to enter into
this Assignment and Acceptance and agrees that it will, independently and
without reliance upon Assignor, Agent or any Lender and based on such documents
and information as it shall deem appropriate at the time, continue to make its
own credit and legal decisions in taking or not taking action under the Loan
Agreement.

 

A-2

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5.     Effective Date; Notices.

 

(a)   As between Assignor and Assignee, the effective date for this Assignment
and Acceptance shall be                , 20   (the “Effective Date”); provided,
that, the following conditions precedent have been satisfied on or before the
Effective Date:

 

(i)   this Assignment and Acceptance shall be executed and delivered by Assignor
and Assignee;

 

(ii)   the consent of Agent as required for an effective assignment of the
Assigned Commitment Amount by Assignor to Assignee shall have been duly obtained
and shall be in full force and effect as of the Effective Date;

 

(iii)   written notice of such assignment, together with payment instructions,
addresses and related information with respect to Assignee, shall have been
given to Borrowers and Agent;

 

(iv)   Assignee shall pay to Assignor all amounts due to Assignor under this
Assignment and Acceptance; and

 

(v)   the processing fee referred to in Section 2(b) hereof shall have been paid
to Agent.

 

(b)   Promptly following the execution of this Assignment and Acceptance,
Assignor shall deliver to Borrowers and Agent for acknowledgment by Agent, a
Notice of Assignment in the form attached hereto as Schedule 1.

 

6.     Agent.[INCLUDE ONLY IF ASSIGNOR IS AN AGENT]

 

(a)   Assignee hereby appoints and authorizes Wells Fargo Bank, National
Association in its capacity as Agent to take such action as agent on its behalf
to exercise such powers under the Loan Agreement as are delegated to Agent by
Lenders pursuant to the terms of the Loan Agreement.

 

(b)   Assignee shall assume no duties or obligations held by Assignor in its
capacity as [Agent under the Loan Agreement.]

 

7.     Withholding Tax.  Assignee (a) represents and warrants to Assignor, Agent
and Borrowers that under applicable law and treaties no tax will be required to
be withheld by Assignee, Agent or Borrowers with respect to any payments to be
made to Assignee hereunder or under any of the Financing Agreements, (b) agrees
to furnish (if it is organized under the laws of any jurisdiction other than the
United States or any State thereof) to Agent and Borrowers prior to the time
that Agent or Borrowers are required to make any payment of principal, interest
or fees hereunder, duplicate executed originals of either U.S. Internal Revenue
Service Form W-8ECI or U.S. Internal Revenue Service Form W-8BEN (wherein
Assignee claims entitlement to the benefits of a tax treaty that provides for a
complete exemption from U.S. federal income withholding tax on all payments
hereunder) and agrees to provide new Forms W-8ECI or W-8BEN upon the expiration
of any previously delivered form or comparable statements in accordance with
applicable U.S. law and regulations and amendments thereto, duly executed and
completed by Assignee, and (c) agrees to comply with all applicable U.S. laws
and regulations with regard to such withholding tax exemption.

 

A-3

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8.     Representations and Warranties.

 

(a)   Assignor represents and warrants that (i) it is the legal and beneficial
owner of the interest being assigned by it hereunder and that such interest is
free and clear of any security interest, lien, encumbrance or other adverse
claim, (ii) it is duly organized and existing and it has the full power and
authority to take, and has taken, all action necessary to execute and deliver
this Assignment and Acceptance and any other documents required or permitted to
be executed or delivered by it in connection with this Assignment and Acceptance
and to fulfill its obligations hereunder, (iii) no notices to, or consents,
authorizations or approvals of, any Person are required (other than any already
given or obtained) for its due execution, delivery and performance of this
Assignment and Acceptance, and apart from any agreements or undertakings or
filings required by the Loan Agreement, no further action by, or notice to, or
filing with, any Person is required of it for such execution, delivery or
performance, and (iv) this Assignment and Acceptance has been duly executed and
delivered by it and constitutes the legal, valid and binding obligation of
Assignor, enforceable against Assignor in accordance with the terms hereof,
subject, as to enforcement, to bankruptcy, insolvency, moratorium,
reorganization and other laws of general application relating to or affecting
creditors’ rights and to general equitable principles.

 

(b)   Assignor makes no representation or warranty and assumes no responsibility
with respect to any statements, warranties or representations made in or in
connection with the Loan Agreement or any of the other Financing Agreements or
the execution, legality, validity, enforceability, genuineness, sufficiency or
value of the Loan Agreement or any other instrument or document furnished
pursuant thereto.  Assignor makes no representation or warranty in connection
with, and assumes no responsibility with respect to, the solvency, financial
condition or statements of Borrowers, or the performance or observance by
Borrowers or any other Person, of any of its respective obligations under the
Loan Agreement or any other instrument or document furnished in connection
therewith.

 

(c)   Assignee represents and warrants that (i) it is duly organized and
existing and it has full power and authority to take, and has taken, all action
necessary to execute and deliver this Assignment and Acceptance and any other
documents required or permitted to be executed or delivered by it in connection
with this Assignment and Acceptance, and to fulfill its obligations hereunder,
(ii) no notices to, or consents, authorizations or approvals of, any Person are
required (other than any already given or obtained) for its due execution,
delivery and performance of this Assignment and Acceptance, and apart from any
agreements or undertakings or filings required by the Loan Agreement, no further
action by, or notice to, or filing with, any Person is required of it for such
execution, delivery or performance; and (iii) this Assignment and Acceptance has
been duly executed and delivered by it and constitutes the legal, valid and
binding obligation of Assignee, enforceable against Assignee in accordance with
the terms hereof, subject, as to enforcement, to bankruptcy, insolvency,
moratorium, reorganization and other laws of general application relating to or
affecting creditors’ rights to general equitable principles.

 

9.     Further Assurances.  Assignor and Assignee each hereby agree to execute
and deliver such other instruments, and take such other action, as either party
may reasonably request in connection with the transactions contemplated by this
Assignment and Acceptance, including the delivery of any notices or other
documents or instruments to Borrowers or Agent, which may be required in
connection with the assignment and assumption contemplated hereby.

 

10.  Miscellaneous.

 

(a)   Any amendment or waiver of any provision of this Assignment and Acceptance
shall be in writing and signed by the parties hereto.  No failure or delay by
either party hereto in exercising any right, power or privilege hereunder shall
operate as a waiver thereof and any waiver of any breach of the provisions of
this Assignment and Acceptance shall be without prejudice to any rights with
respect to any other for further breach thereof.

 

A-4

--------------------------------------------------------------------------------

 

(b)   All payments made hereunder shall be made without any set-off or
counterclaim.

 

(c)   Assignor and Assignee shall each pay its own costs and expenses incurred
in connection with the negotiation, preparation, execution and performance of
this Assignment and Acceptance.

 

(d)   This Assignment and Acceptance may be executed in any number of
counterparts and all of such counterparts taken together shall be deemed to
constitute one and the same instrument.

 

(e)   THIS ASSIGNMENT AND ACCEPTANCE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK.  Assignor and Assignee each
irrevocably submits to the non-exclusive jurisdiction of any State or Federal
court sitting in New York County, New York over any suit, action or proceeding
arising out of or relating to this Assignment and Acceptance and irrevocably
agrees that all claims in respect of such action or proceeding may be heard and
determined in such New York State or Federal court.  Each party to this
Assignment and Acceptance hereby irrevocably waives, to the fullest extent it
may effectively do so, the defense of an inconvenient forum to the maintenance
of such action or proceeding.

 

(f)    ASSIGNOR AND ASSIGNEE EACH HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF
ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH
THIS ASSIGNMENT AND ACCEPTANCE, THE LOAN AGREEMENT, ANY OF THE OTHER FINANCING
AGREEMENTS OR ANY RELATED DOCUMENTS AND AGREEMENTS OR ANY COURSE OF CONDUCT,
COURSE OF DEALING, OR STATEMENTS (WHETHER ORAL OR WRITTEN).

 

A-5

--------------------------------------------------------------------------------

 

IN WITNESS WHEREOF, Assignor and Assignee have caused this Assignment and
Acceptance to be executed and delivered by their duly authorized officers as of
the date first above written.

 

 

[ASSIGNOR]

 

 

 

 

By:

 

 

Title:

 

 

 

 

 

[ASSIGNEE]

 

 

 

 

By:

 

 

Title:

 

 

A-6

--------------------------------------------------------------------------------

 

SCHEDULE 1

 

NOTICE OF ASSIGNMENT AND ACCEPTANCE

 

, 20   

 

Wells Fargo Bank, National Association
One Boston Place, 19th Floor

Boston, Massachusetts 02108

Attn.: Portfolio Manager-Lerner New York, Inc.

 

Ladies and Gentlemen:

 

Wells Fargo Capital Finance, LLC, as arranger, Wells Fargo Bank, National
Association, in its capacity as agent pursuant to the Loan Agreement (as
hereinafter defined) acting for and on behalf of the Persons which are parties
thereto as lenders (in such capacity, “Agent”), and the Persons which are
parties to the Loan Agreement as lenders (individually, each a “Lender” and
collectively, “Lenders”) have entered or are about to enter into financing
arrangements pursuant to which Agent and Lenders may make loans and, with regard
to Lenders only, provide other financial accommodations, to Lerner New
York, Inc., a Delaware corporation (“Lerner”), Lernco, Inc., a Delaware
corporation (“Lernco”), Lerner New York Outlet, LLC, a Massachusetts limited
liability company (“Lerner Outlet”) and Lerner New York FTF, LLC, a Delaware
limited liability company (“Lerner FTF”, and together with Lerner, Lernco and
Lerner Outlet, collectively, “Borrowers”) as set forth in the Fourth Amended and
Restated Loan and Security Agreement, dated October 24, 2014, by and among
Borrowers, certain of their affiliates, Agent and Lenders (as the same now
exists or may hereafter be amended, modified, supplemented, extended, renewed,
restated or replaced, the “Loan Agreement”), and the other agreements, documents
and instruments referred to therein or at any time executed and/or delivered in
connection therewith or related thereto (all of the foregoing, together with the
Loan Agreement, as the same now exist or may hereafter be amended, modified,
supplemented, extended, renewed, restated or replaced, being collectively
referred to herein as the “Financing Agreements”).  Capitalized terms not
otherwise defined herein shall have the respective meanings ascribed thereto in
the Loan Agreement.

 

We hereby give you notice of, and request your consent to, the assignment by
                           (the “Assignor”) to                             (the
“Assignee”) such that after giving effect to the assignment Assignee shall have
an interest equal to          (  %) of the Commitments pursuant to the
Assignment and Acceptance Agreement attached hereto (the “Assignment and
Acceptance”).  We understand that the Assignor’s Commitment shall be reduced by
           Dollars ($         ), as the same may be further reduced by other
assignments on or after the date hereof.

 

Assignee agrees that, upon receiving the consent of Agent to such assignment,
Assignee will be bound by the terms of the Loan Agreement as fully and to the
same extent as if the Assignee were the Lender originally holding such interest
under the Loan Agreement.

 

The following administrative details apply to Assignee:

 

(A)      

Notice address:

 

 

 

 

 

 

 

Assignee name:

 

 

 

A-7

--------------------------------------------------------------------------------

 

 

Address:

 

 

 

Attention:

 

 

 

Telephone:

 

 

 

Telecopier:

 

 

 

 

 

 

(B)      

Payment instructions:

 

 

 

 

 

 

 

Account No.:

 

 

 

At:

 

 

 

Reference:

 

 

 

Attention:

 

 

 

You are entitled to rely upon the representations, warranties and covenants of
each of Assignor and Assignee contained in the Assignment and Acceptance.

 

A-8

--------------------------------------------------------------------------------

 

IN WITNESS WHEREOF, Assignor and Assignee have caused this Notice of Assignment
and Acceptance to be executed by their respective duly authorized officials,
officers or agents as of the date first above mentioned.

 

 

Very truly yours,

 

 

 

[NAME OF ASSIGNOR]

 

 

 

 

By:

 

 

Title:

 

 

 

 

[NAME OF ASSIGNEE]

 

 

 

 

By:

 

 

Title:

 

 

ACKNOWLEDGED AND ASSIGNMENT

 

CONSENTED TO:

 

 

 

WELLS FARGO BANK, NATIONAL ASSOCIATION

 

as Agent

 

 

 

 

By:

 

 

Title:

 

 

 

A-9

--------------------------------------------------------------------------------

 

EXHIBIT B

TO

FOURTH AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT

 

Form of Borrowing Base Certificate

 

(See attached)

 

B-1

--------------------------------------------------------------------------------

 

EXHIBIT C
TO

FOURTH AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT

 

Form of Compliance Certificate

 

COMPLIANCE CERTIFICATE

 

Wells Fargo Bank, National Association
One Boston Place, 19th Floor

Boston, Massachusetts 02108

 

Ladies and Gentlemen:

 

Each of the undersigned hereby certifies to you pursuant to Section 9.6(a) of
the Loan Agreement (as defined below) as follows:

 

1.              HE/SHE IS THE DULY ELECTED CHIEF FINANCIAL OFFICER OR OTHER
ELECTED OFFICER ACCEPTABLE TO AGENT (AS DEFINED BELOW) OF EACH BORROWER (AS
DEFINED BELOW) WITH RESPECT TO WHICH SUCH PERSON HAS EXECUTED THIS DOCUMENT. 
CAPITALIZED TERMS USED HEREIN WITHOUT DEFINITION SHALL HAVE THE MEANINGS GIVEN
TO SUCH TERMS IN THE FOURTH AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT,
DATED OCTOBER 24, 2014 (AS THE NOW EXISTS OR MAY HEREAFTER BE AMENDED, MODIFIED,
SUPPLEMENTED, EXTENDED, RENEWED, RESTATED OR REPLACED, THE “LOAN AGREEMENT”), BY
AND AMONG WELLS FARGO CAPITAL FINANCE, LLC, AS ARRANGER, WELLS FARGO BANK,
NATIONAL ASSOCIATION, AS AGENT FOR THE PERSONS PARTY THERETO AS LENDERS (IN SUCH
CAPACITY, “AGENT”), THE PERSONS PARTY THERETO AS LENDERS (COLLECTIVELY,
“LENDERS”), LERNER NEW YORK, INC. (“LERNER”), LERNCO, INC. (“LERNCO”), LERNER
NEW YORK OUTLET, LLC (“LERNER OUTLET”) AND LERNER NEW YORK FTF, LLC (“LERNER
FTF”, AND TOGETHER WITH LERNER, LERNCO AND LERNER OUTLET, COLLECTIVELY,
“BORROWERS”) AND THE OTHER PARTIES THERETO.

 

2.              He/She has reviewed the terms of the Loan Agreement, and has
made, or has caused to be made under his/her supervision, a review in reasonable
detail of the transactions and the financial condition of Borrowers and their
Subsidiaries, during the immediately preceding fiscal month.

 

3.              The review described in Section 2 above did not disclose the
existence during or at the end of such fiscal month, and he/she has no knowledge
of the existence and continuance on the date hereof, of any condition or event
which constitutes a Default or an Event of Default, except as set forth on
Schedule I attached hereto.  Described on Schedule I attached hereto are the
exceptions, if any, to this Section 3 listing, in detail, the nature of the
condition or event, the period during which it has existed and the action which
Borrowers or any Obligor has taken, is taking, or proposes to take with respect
to such condition or event.

 

4.              He/She further certifies that, based on the review described in
Section 2 above, no Borrower or Guarantor has at any time during or at the end
of such fiscal month, except as specifically described on

 

C-1

--------------------------------------------------------------------------------

 

Schedule II attached hereto or as permitted by the Loan Agreement, done any of
the following:

 

(a)         Changed its corporate name, or transacted business under any trade
name, style, or fictitious name, other than those previously described to you
and set forth in the Financing Agreements.

 

(b)         Changed the location of its chief executive office, changed its
jurisdiction of incorporation, changed its type of organization or changed the
location of or disposed of any of its properties or assets (other than pursuant
to the sale of Inventory in the ordinary course of its business or as otherwise
permitted by Section 9.7 of the Loan Agreement), or established any new asset
locations.

 

(c)          Materially changed the terms upon which it sells goods (including
sales on consignment) or provides services, nor has any vendor or trade supplier
to any Borrower or any Guarantor during or at the end of such period materially
adversely changed the terms upon which it supplies goods to such Borrower or
such Guarantor.

 

(d)         Permitted or suffered to exist any security interest in or liens on
any of its properties, whether real or personal, other than as specifically
permitted in the Financing Agreements.

 

(e)          Received any notice of, or obtained knowledge of any of the
following not previously disclosed to Agent:  (i) the occurrence of any event
involving the release, spill or discharge of any Hazardous Material in violation
of applicable Environmental Law in a material respect or (ii) any investigation,
proceeding, complaint, order, directive, claims, citation or notice with respect
to: (A) any non-compliance with or violation of any applicable Environmental Law
by any Borrower or any Guarantor in any material respect or (B) the release,
spill or discharge of any Hazardous Material in violation of applicable
Environmental Law in a material respect or (C) the generation, use, storage,
treatment, transportation, manufacture, handling, production or disposal of any
Hazardous Materials in violation of applicable Environmental Laws in a material
respect or (D) any other environmental, health or safety matter, which has a
material adverse effect on any Borrower or any Guarantor or its business,
operations or assets or any properties at which such Borrower or such Guarantor
transported, stored or disposed of any Hazardous Materials.

 

(f)           Become aware of, obtained knowledge of, or received notification
of, any breach or violation of any material covenant contained in any instrument
or agreement in respect of Indebtedness for money borrowed by any Borrower or
any Guarantor.

 

5.              Attached hereto as Schedule III are the calculations used in
determining, as of the end of such fiscal month whether Borrowers are in
compliance with the covenants set forth in Section 9.17 of the Loan Agreement
for such fiscal month.

 

C-2

--------------------------------------------------------------------------------

 

The foregoing certifications are made and delivered this day of            ,
20  .

 

 

LERNER NEW YORK, INC.

 

 

 

 

By:

 

 

Name:

 

 

Title:

 

 

 

 

 

LERNCO, INC.

 

 

 

 

By:

 

 

Name:

 

 

Title:

 

 

 

 

 

LERNER NEW YORK OUTLET, INC.

 

 

 

 

By:

 

 

Name:

 

 

Title:

 

 

C-3

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EXHIBIT D

TO

FOURTH AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT

 

Information Certificates

 

See Attached.

 

D-1

--------------------------------------------------------------------------------

 

EXHIBIT E
TO
FOURTH AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT

 

Location of Inventory

 

1.              330 West 34th Street

New York, NY 10001

 

2.              Three Limited Parkway

Columbus, OH 43230

 

3.              466-472 53rd Street

Brooklyn, NY

 

4.              See attached lease summaries for store listings (Schedule 1.64)

 

5.              Radial

307 Hollie Drive

Martinsville, VA 24112

 

E-1

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EXHIBIT F
TO
FOURTH AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT

 

Fiscal Year-End; Fiscal Quarter-End; and Fiscal Month-End

 

 

 

2018

 

2019

 

2020

 

2021

 

2022

 

2023

 

2024

 

Fiscal Month-End Closing Dates:

February

 

March 3, 2018

 

March 2, 2019

 

February 29, 2020

 

February 27, 2021

 

February 26, 2022

 

February 25, 2023

 

March 2, 2024

March

 

April 7, 2018

 

April 6, 2019

 

April 4, 2020

 

April 3, 2021

 

April 2, 2022

 

April 1, 2023

 

April 6, 2024

April

 

May 5, 2018

 

May 4, 2019

 

May 2, 2020

 

May 1, 2021

 

April 30, 2022

 

April 29, 2023

 

May 4, 2024

May

 

June 2, 2018

 

June 1, 2019

 

May 30, 2020

 

May 29, 2021

 

May 28, 2022

 

May 27, 2023

 

June 1, 2024

June

 

July 7, 2018

 

July 6, 2019

 

July 4, 2020

 

July 3, 2021

 

July 2, 2022

 

July 1, 2023

 

July 6, 2024

July

 

August 4, 2018

 

August 3, 2019

 

August 1, 2020

 

July 31, 2021

 

July 30, 2022

 

July 29, 2023

 

August 3, 2024

August

 

September 1, 2018

 

August 31, 2019

 

August 29, 2020

 

August 28, 2021

 

August 27, 2022

 

August 26, 2023

 

August 31, 2024

September

 

October 6, 2018

 

October 5, 2019

 

October 3, 2020

 

October 2, 2021

 

October 1, 2022

 

September 30, 2023

 

October 5, 2024

October

 

November 3, 2018

 

November 2, 2019

 

October 31, 2020

 

October 30, 2021

 

October 29, 2022

 

October 28, 2023

 

November 2, 2024

November

 

December 1, 2018

 

November 30, 2019

 

November 28, 2020

 

November 27, 2021

 

November 26, 2022

 

November 25, 2023

 

November 30, 2024

December

 

January 5, 2019

 

January 4, 2020

 

January 2, 2021

 

January 1, 2022

 

December 31, 2022

 

December 30, 2023

 

January 4, 2025

January

 

February 2, 2019

 

February 1, 2020

 

January 30, 2021

 

January 29, 2022

 

January 28, 2023

 

February 3, 2024

 

February 1, 2025

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fiscal Quarter-End Closing Dates:

Q1

 

April 28, 2018

 

May 4, 2019

 

May 2, 2020

 

May 1, 2021

 

April 30, 2022

 

April 29, 2023

 

May 4, 2024

Q2

 

July 28, 2018

 

August 3, 2019

 

August 1, 2020

 

July 31, 2021

 

July 30, 2022

 

July 29, 2023

 

August 3, 2035

Q3

 

October 27, 2018

 

November 2, 2019

 

October 31, 2020

 

October 30, 2021

 

October 29, 2022

 

October 28, 2023

 

November 2, 2024

Q4

 

February 2, 2019

 

February 1, 2020

 

January 30, 2021

 

January 29, 2022

 

January 28, 2023

 

February 3, 2024

 

February 1, 2025

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fiscal Year-End Closing Dates:

Fiscal 2018

 

February 2, 2019

 

 

 

 

 

 

 

 

 

 

 

 

Fiscal 2019

 

 

 

February 1, 2020

 

 

 

 

 

 

 

 

 

 

Fiscal 2020

 

 

 

 

 

January 30, 2021

 

 

 

 

 

 

 

 

Fiscal 2021

 

 

 

 

 

 

 

January 29, 2022

 

 

 

 

 

 

Fiscal 2022

 

 

 

 

 

 

 

 

 

January 28, 2023

 

 

 

 

Fiscal 2023

 

 

 

 

 

 

 

 

 

 

 

February 3, 2024

 

 

Fiscal 2024

 

 

 

 

 

 

 

 

 

 

 

 

 

February 1, 2025

 

--------------------------------------------------------------------------------

 

SCHEDULE 1
TO
FOURTH AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT

 

Revolving Loan Lender

 

Lender’s Commitment

 

Wells Fargo Bank, National Association

 

$

75,000,000

 

 

 

 

 

Total Revolver Commitments:

 

$

75,000,000

 

 

--------------------------------------------------------------------------------