Exhibit 10.1
SECOND AMENDMENT
          SECOND AMENDMENT, dated as of August 12, 2008 (this “Second
Amendment”), to the Five-Year Credit Agreement, dated as of October 13, 2004, as
amended February 20, 2008 (as amended, supplemented or otherwise modified, the
“Credit Agreement”), among LIZ CLAIBORNE, INC., a Delaware corporation (the
“Borrower”), the lenders party thereto (the “Lenders”), BANK OF AMERICA, N.A.,
CITIBANK, N.A., SUNTRUST BANK and WACHOVIA BANK, NATIONAL ASSOCIATION, as
syndication agents (the “Syndication Agents”), and JPMORGAN CHASE BANK, N.A., as
administrative agent (the “Administrative Agent”).
W I T N E S S E T H:
          WHEREAS, the Borrower, the Lenders, the Syndication Agents and the
Administrative Agent are parties to the Credit Agreement;
          WHEREAS, the Borrower has requested certain amendments to the Credit
Agreement as set forth herein; and
          WHEREAS, the Required Lenders have consented to the requested
amendments as set forth herein;
          NOW THEREFORE, in consideration of the premises and the mutual
covenants hereinafter set forth, the parties hereto hereby agree as follows:
          1. Defined Terms. Unless otherwise defined herein, capitalized terms
used herein which are defined in the Credit Agreement are used herein as therein
defined.
          2. Amendments to Section 1.01. Section 1.01 of the Credit Agreement is
hereby amended as follows:
          (a) By inserting the following definitions in appropriate alphabetical
order:
          “Asset Coverage Ratio” means, as at the last day of any period, the
ratio of (a) the aggregate of the assets of the Borrower and its Subsidiaries at
such date set forth on the Borrower’s consolidated balance sheet opposite the
captions “Cash and cash equivalents,” “Marketable securities,” “Accounts
receivable — trade, net,” and “Inventories, net,” and 35% of the aggregate of
the assets of the Borrower and its Subsidiaries at such date set forth on the
Borrower’s consolidated balance sheet opposite the caption “Property and
Equipment, Net” to (b) Consolidated Total Debt as at such day.
          “Bilateral Agreements” means the agreements listed on
Schedule 1.01(a), as such Schedule may be modified from time to time by the
Borrower upon notice to the Administrative Agent; provided that the aggregate
credit lines under the Bilateral Agreements shall not be increased by more than
€40,000,000.

 

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          “Bilateral Counterparties” means any party to a Bilateral Agreement
that is not the Borrower or an Affiliate thereof.
          “Bilateral Indebtedness” means any Indebtedness of the Borrower under
or in respect of a Bilateral Agreement.
          “Borrower Obligations” means the unpaid principal of and interest on
the Loans, Reimbursement Obligations and Bilateral Indebtedness and all other
obligations and liabilities of the Borrower (including, without limitation,
interest thereon accruing at the then agreed rate after the maturity thereof and
interest accruing at the then agreed rate after the filing of any petition in
bankruptcy, or the commencement of any insolvency, reorganization or like
proceeding, relating to the Borrower, whether or not a claim for post-filing or
post-petition interest is allowed in such proceeding) to the Administrative
Agent, any Issuing Lender, any Bilateral Counterparty or any Lender (or, in the
case of any Hedging Agreement or Specified Cash Management Agreement, any
Affiliate of any Lender), whether direct or indirect, absolute or contingent,
due or to become due, or now existing or hereafter incurred, which may arise
under, out of, or in connection with, this Agreement, the other Loan Documents,
any Letter of Credit, any Hedging Agreement, any Specified Cash Management
Agreement or any Bilateral Agreement or any other document made, delivered or
given in connection with any of the foregoing, in each case whether on account
of principal, interest, reimbursement obligations, fees, indemnities, costs,
expenses or otherwise (including, without limitation, all fees and disbursements
of counsel to the Administrative Agent, to the Issuing Lenders, to the Lenders
(or, in the case of any Hedging Agreement or Specified Cash Management
Agreement, to any Affiliate of any Lender) or to the Bilateral Counterparties
that are required to be paid by the Borrower pursuant to the terms of any of the
foregoing agreements).
          “Collateral” means all property of the Loan Parties, now owned or
hereafter acquired, upon which a Lien is purported to be created by any Security
Document.
          “Commercial Letters of Credit” has the meaning set forth in
Section 3.01.
          “Commercial L/C Commitment” means $250,000,000.
          “Commercial L/C Obligations” means at any time, an amount equal to the
sum of (a) the aggregate then undrawn and unexpired amount of the then
outstanding Commercial Letters of Credit and (b) the aggregate amount of
drawings under Commercial Letters of Credit that have not then been reimbursed
pursuant to Section 3.05.
          “Guarantor Obligations” means, with respect to any Subsidiary
Guarantor, all obligations and liabilities of such Subsidiary Guarantor to the
Administrative Agent, any Issuing Lender, any Lender (or, in the case of any
Hedging Agreement or Specified Cash Management Agreement, any Affiliate of any
Lender) or any Bilateral Counterparty which may arise under or in connection
with any Loan Document, any Hedging Agreement, any Specified Cash Management
Agreement or any Bilateral Agreement to which such Subsidiary Guarantor is a
party, in each case whether on account of guarantee obligations, reimbursement
obligations, fees, indemnities, costs, expenses or otherwise (including, without
limitation, all fees and disbursements of counsel to the Administrative Agent,
to the Issuing Lenders, to the Lenders (or, in the case of any Hedging Agreement
or Specified Cash Management Agreement, to any Affiliate of any Lender) or to
the Bilateral Counterparties that are required to be paid by such

 

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Subsidiary Guarantor pursuant to the terms of any other Loan Document, any
Hedging Agreement, any Specified Cash Management Agreement or any Bilateral
Agreement).
          “Principal Offices” means the principal offices of the Borrower,
located at One Claiborne Avenue, North Bergen, NJ 07047.
          “Second Amendment” means the Second Amendment, dated as of August 12,
2008, to this Agreement.
          “Second Amendment Effective Date” has the meaning set forth in the
Second Amendment.
          “Security Documents” has the meaning set forth in Section 6.12(a).
          “Specified Cash Management Agreement” means any agreement providing
for treasury, depositary or cash management services, including in connection
with any automated clearing house transfers of funds or any similar transactions
between the Borrower or any Subsidiary Guarantor and any Lender or Affiliate
thereof, which has been designated by such Lender and the Borrower, by notice to
the Administrative Agent not later than 90 days after the execution and delivery
by the Borrower or such Subsidiary Guarantor, as a “Specified Cash Management
Agreement”.
          “Springing Lien” has the meaning set forth in Section 6.12(a).
          “Springing Lien Event” means the event that the Leverage Ratio as at
the last day of any fiscal quarter set forth below exceeds the ratio set forth
below opposite such fiscal quarter:

      Fiscal Quarter   Leverage Ratio
6/30/08
  3.00:1.00
9/30/08
  3.25:1.00
12/31/08
  2.50:1.00
3/31/09
  2.50:1.00
6/30/09
  2.25:1.00
9/30/09
  2.25:1.00

          “Standby L/C Commitment” means $40,000,000.
          “Standby L/C Obligations” means at any time, an amount equal to the
sum of (a) the aggregate then undrawn and unexpired amount of the then
outstanding Standby Letters of Credit and (b) the aggregate amount of drawings
under Standby Letters of Credit that have not then been reimbursed pursuant to
Section 3.05.
          “Standby Letters of Credit” has the meaning set forth in
Section 3.01(a).
          (b) By amending the definition of “Applicable Rate” by (i) deleting
the first paragraph of and table therein and inserting the following in lieu
thereof:
          “Applicable Rate” means, for any day, with respect to any Eurocurrency
Revolving Loan, Euro Reference Rate Revolving Loan, ABR Revolving Loan,
Commercial

 

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Letter of Credit or Standby Letter of Credit, as the case may be, or with
respect to the facility fees payable hereunder, the applicable rate per annum
set forth below under the caption “Eurocurrency Spread,” “ABR/Euro Reference
Rate Spread,” “Facility Fee Rate,” “Commercial Letter of Credit Fee,” or
“Standby Letter of Credit Fee,” based upon the ratings by Moody’s and S&P,
respectively, applicable on such date to the Index Debt:

                                                              Euro-   ABR/Euro  
Facility   Commercial   Standby             currency   Reference   Fee   Letter
of   Letter of Level   Rating   Spread   Spread   Rate   Credit Fee   Credit Fee
  I    
BBB+/Baa1
    1.500 %     0.750 %     0.250 %     0.875 %     1.750 % II  
BBB/Baa2
    1.700 %     1.000 %     0.300 %     1.000 %     2.000 % III  
BBB-/Baa3
    1.900 %     1.250 %     0.350 %     1.125 %     2.250 % IV  
BB+/Ba1
    2.100 %     1.500 %     0.400 %     1.250 %     2.500 %   V    
BB/Ba2
    2.300 %     1.750 %     0.450 %     1.375 %     2.750 % VI  
< BB/Ba2
    2.500 %     2.000 %     0.500 %     1.500 %     3.000 %

and (ii) by deleting the last sentence of the definition of “Applicable Rate.”
          (c) By deleting the definition of “Consolidated EBITDA” and inserting
in lieu thereof the following:
          “Consolidated EBITDA” means, for any period, Consolidated Net Income
for such period plus, without duplication and to the extent reflected as a
charge in the statement of Consolidated Net Income for such period, the sum of
(a) income or franchise tax expense, (b) interest expense, both expensed and
capitalized, amortization or writeoff of debt discount and debt issuance costs
and commissions, discounts and other fees and charges associated with
Indebtedness (including the Loans), (c) depreciation and amortization expense,
(d) amortization of intangibles (including, but not limited to, goodwill) and
organization costs, (e) any extraordinary, unusual or non-recurring non-cash
expenses or losses (including, whether or not otherwise includable as a separate
item in the statement of such Consolidated Net Income for such period, non-cash
losses on sales of assets outside of the ordinary course of business), (f) any
other non-cash charges, and (g) cash restructuring charges, store closures and
other non-recurring cash and non-cash charges, in each case, related to
streamlining and brand exiting related activities, provided that the amounts
referred to in this clause (g) shall not, in the aggregate, exceed (i) for
fiscal year 2008, $110,000,000 and (ii) for fiscal year 2009, $10,000,000 and
minus, to the extent included in the statement of Consolidated Net Income for
such period, the sum of (a) interest income, (b) any extraordinary, unusual or
non-recurring income or gains (including, whether or not otherwise includable as
a separate item in the statement of Consolidated Net Income for such period,
gains on the sales of assets outside of the ordinary course of business) and
(c) any other non-cash income, all as determined on a consolidated basis.
          (c) By deleting the definition of “L/C Obligations” and inserting in
lieu thereof:
          “L/C Obligations” means at any time, the sum of the Standby L/C
Obligations and the Commercial L/C Obligations.
          (d) By deleting the definitions of “Augmenting Lender”, “L/C
Commitment” and “Increasing Lender.”

 

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          3. Amendment to Section 2.02. Section 2.02 of the Credit Agreement is
hereby amended by deleting clause (e) thereof.
          4. Amendment to Section 3.01. Section 3.01 of the Credit Agreement is
hereby amended by deleting clause (a) thereof and inserting in lieu thereof the
following:
          (a) Subject to the terms and conditions hereof, each Issuing Lender,
in reliance on the agreements of the other Lenders set forth in Section 3.04(a),
agrees to issue letters of credit for the account of the Borrower on any
Business Day during the Availability Period as follows:
A. standby letters of credit (collectively, the “Standby Letters of Credit”) in
a form reasonably satisfactory to the Issuing Lender and in favor of such
beneficiaries as the Borrower shall specify from time to time (which shall be
reasonably satisfactory to the Issuing Lender); and
B. commercial letters of credit in the form of the Issuing Lender’s standard
commercial letters of credit (“Commercial Letters of Credit”) in favor of
sellers of goods or services to the Borrower or its Subsidiaries (the Standby
Letters of Credit and Commercial Letters of Credit being referred to
collectively as the “Letters of Credit”);
provided that no Issuing Lender shall have an obligation to issue any Letter of
Credit if, after giving effect to such issuance, (i) (A) the Standby L/C
Obligations would exceed the Standby L/C Commitment or (B) the Commercial L/C
Obligations would exceed the Commercial L/C Commitment or (ii) the sum of the
Revolving Credit Exposures would exceed the total Commitments. Each Letter of
Credit shall be issued under the Dollar Tranche Commitments or the
Multi-Currency Commitments or a combination thereof, as determined by the
Borrower in its request for the issuance of such Letter of Credit pursuant to
Section 3.02; provided no Issuing Lender shall have an obligation to issue any
Letter of Credit if, after giving effect to such issuance, (i) the sum of the
Dollar Tranche Revolving Credit Exposures would exceed the total Dollar Tranche
Commitments or (ii) the sum of the Multi-Currency Tranche Revolving Credit
Exposures would exceed the total Multi-Currency Tranche Commitments. Each Letter
of Credit shall (i) be denominated in dollars and (ii) expire no later than the
earlier of (x) (A) in the case of Standby Letters of Credit 365 days after the
date of issuance and (B) in the case of Commercial Letters of Credit 180 days
after the date of issuance and (y) the date that is five Business Days prior to
the Maturity Date; provided that any Letter of Credit with a one-year tenor may
provide for the renewal thereof for additional one-year periods (which shall in
no event extend beyond the date referenced in clause (y) above).
          5. Amendment to Article VI. Article VI of the Credit Agreement is
hereby amended by inserting the following as Section 6.12:
          SECTION 6.12. Grant of Security Interest.
          (a) The Borrower will, and will cause each of the Subsidiary
Guarantors to, no later than 15 Business Days after the occurrence of a
Springing Lien Event, grant to the Administrative Agent, for the benefit of the
Lenders, Affiliates of Lenders (in the case of Borrower Obligations and/or
Guarantor Obligations under or in respect of Hedging Agreements and/or Specified
Cash Management Agreements) and the Bilateral Counterparties, and take all

 

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actions necessary or advisable to perfect, a first priority (subject to
customary exceptions) security interest securing the Borrower Obligations or
Guarantor Obligations, as applicable (the “Springing Lien”), in all of the
Borrower’s and the Subsidiary Guarantors’ tangible and intangible assets
(including, without limitation, intellectual property, real property and all of
the capital stock of each of its material direct and indirect subsidiaries
(limited, in the case of foreign subsidiaries, to 65% of the capital stock of
first tier foreign subsidiaries to the extent a pledge of a greater percentage
could reasonably be expected to result in adverse tax consequences)), except for
those assets as to which the Administrative Agent shall determine in its sole
reasonable discretion that the costs of obtaining such a security interest are
excessive in relation to the value of the security to be afforded thereby;
provided that (A) the Springing Lien shall be granted and perfected pursuant to
documentation (including legal opinions of counsel to the Borrower)
substantially in the form that shall be approved by the Administrative Agent
(the “Security Documents”) in its sole discretion, (B) with respect to real
property, the Borrower will, and will cause each of the Subsidiary Guarantors
to, grant and perfect the Springing Lien in accordance with this Section 6.12(a)
no later than 30 Business Days after the occurrence of a Springing Lien Event,
(C) to the extent that other existing Indebtedness of the Borrower is required
to be equally and ratably secured with the Indebtedness incurred under this
Agreement, such Indebtedness shall be so secured and (C) the Administrative
Agent, on behalf of the Lenders and the Bilateral Counterparties, shall have the
authority to release the Springing Lien on any assets sold, transferred, leased
or otherwise disposed of in a transaction permitted under this Agreement
(including inventory sold in the ordinary course of business). Notwithstanding
Section 10.02, the Administrative Agent shall be permitted to make technical
changes to the affected provisions of this Agreement to the extent necessary to
implement the provisions of this Section, without the consent of any other
Person.
          (b) With respect to any tangible or intangible assets (including,
without limitation, intellectual property, real property and all of the capital
stock of each of its material direct and indirect subsidiaries (limited, in the
case of foreign subsidiaries, to 65% of the capital stock of first tier foreign
subsidiaries to the extent a pledge of a greater percentage could reasonably be
expected to result in adverse tax consequences)) acquired after the Springing
Lien Event by the Borrower or any Subsidiary Guarantor or owned by a Subsidiary
that becomes a Subsidiary Guarantor after the Springing Lien Event, in either
case as to which the Administrative Agent, for the benefit of the Lenders,
Affiliates of Lenders (in the case of Borrower Obligations and/or Guarantor
Obligations under or in respect of Hedging Agreements and/or Specified Cash
Management Agreements) and the Bilateral Counterparties, does not have a
perfected Lien, the Borrower will, and will cause each of the Subsidiary
Guarantors, to promptly (i) execute and deliver to the Administrative Agent such
amendments to the Security Documents as the Administrative Agent deems necessary
or advisable to grant to the Administrative Agent, for the benefit of the
Lenders, Affiliates of Lenders (in the case of Borrower Obligations and/or
Guarantor Obligations under or in respect of Hedging Agreements and/or Specified
Cash Management Agreements) and the Bilateral Counterparties, a security
interest in such property, except for those assets as to which the
Administrative Agent shall determine in its sole reasonable discretion that the
costs of obtaining such a security interest are excessive in relation to the
value of the security to be afforded thereby, and (ii) take all actions
necessary or advisable to grant to the Administrative Agent, for the benefit of
the Lenders, Affiliates of Lenders (in the case of Borrower Obligations and/or
Guarantor Obligations under or in respect of Hedging Agreements and/or Specified
Cash Management Agreements) and the Bilateral Counterparties, a perfected first
priority security interest in such property.

 

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          (c) For the avoidance of doubt, in the event that, subsequent to the
occurrence of a Springing Lien Event, the Leverage Ratio as at the last day of
any fiscal quarter does not exceed the applicable Leverage Ratio for such fiscal
quarter in the definition of “Springing Lien Event”, the obligations of the
Borrower and the Subsidiary Guarantors pursuant to this Section 6.12 will
continue in effect, and the Administrative Agent will not be under any
obligation to release the Collateral from the Liens created pursuant to this
Section 6.12.
          6. Amendment to Article VII. Article VII of the Credit Agreement is
hereby amended by deleting it in its entirety and inserting in lieu thereof the
provisions in Annex I hereto.
          7. Additional Schedules. The Credit Agreement is hereby amended by
adding thereto Schedule 1.01(a) and Schedule 7.05(iii) in the form,
respectively, of Schedule 1.01(a) and Schedule 7.05(iii) hereto.
          8. Conditions to Effectiveness of this Amendment. This Second
Amendment shall become effective on and as of the date (such date the “Second
Amendment Effective Date”) on which each of the following conditions are met:
          (a) this Second Amendment shall have been executed and delivered by
the Borrower, the Administrative Agent and the Required Lenders; and
          (b) The Administrative Agent shall have received favorable written
opinions (addressed to the Administrative Agent and the Lenders and dated the
Second Amendment Effective Date) of (i) Kramer Levin Naftalis & Frankel LLP,
counsel for the Borrower, and (ii) Nicholas J. Rubino, General Counsel of the
Borrower, in each case in form and substance reasonably satisfactory to the
Administrative Agent. The Borrower hereby requests such counsel to deliver such
opinion.
          9. Miscellaneous.
          (a) Representation and Warranties. The Borrower hereby represents that
as of the Second Amendment Effective Date each of the representations and
warranties made by any Loan Party in or pursuant to the Loan Documents is true
and correct in all material respects as if made on and as of such date (it being
understood and agreed that any representation or warranty that by its terms is
made as of a specific date shall be required to be true and correct in all
material respects only as of such specified date), and no Default or Event of
Default has occurred and is continuing after giving effect to the amendments
contemplated herein.
          (b) Effect. Except as expressly amended hereby, all of the
representations, warranties, terms, covenants and conditions of the Loan
Documents shall remain unamended and not waived and shall continue to be in full
force and effect.
          (c) Counterparts. This Second Amendment may be executed by one or more
of the parties to this Second Amendment on any number of separate counterparts,
and all of said counterparts taken together shall be deemed to constitute one
and the same instrument. A set of the copies of this Second Amendment signed by
all the parties shall be lodged with the Borrower and the Administrative Agent.

 

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          (d) Severability. Any provision of this Second Amendment which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
          (e) Integration. This Second Amendment and the other Loan Documents
represent the agreement of the Loan Parties, the Administrative Agent and the
Lenders with respect to the subject matter hereof and thereof, and there are no
promises, undertakings, representations or warranties by the Administrative
Agent or any Lender relative to the subject matter hereof or thereof not
expressly set forth or referred to herein or in the other Loan Documents.
          (f) GOVERNING LAW. THIS SECOND AMENDMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES UNDER THIS SECOND AMENDMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.

 

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          IN WITNESS WHEREOF, the parties hereto have caused this Second
Amendment to be duly executed and delivered by their proper and duly authorized
officers as of the day and year first above written.

            LIZ CLAIBORNE, INC.
      By:   /s/ Andrew Warren         Name:   Andrew Warren        Title:  
Chief Financial Officer     

 

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            JPMORGAN CHASE BANK, as Administrative Agent and a Lender
      By:   /s/ Jules Panno       Name:   Jules Panno       Title:   Vice
President        BANK OF AMERICA, N.A., as Syndication Agent and a
Lender
      By:   /s/ Thomas Kainamura        Name:   Thomas Kainamura       Title:  
Vice President       CITIBANK, N.A., as Syndication Agent and a Lender
      By:   /s/ John McQuiston       Name:   John McQuiston       Title:   Vice
President and Director  

 

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            The Bank of Tokyo — Mitsubishi UFJ, Ltd., as a Lender
      By:   /s/ Lillian Kim         Name:   Lillian Kim        Title:  
Authorized Signatory     

            WACHOVIA BANK, NATIONAL ASSOCIATION, as Syndication Agent and a
Lender
      By:   /s/ Susan T. Gallagher         Name:   Susan T. Gallagher       
Title:   Director     

            COMMERZBANK AG
NEW YORK AND GRAND CAYMAN BRANCHES
      By:   /s/ Christopher Winthrop         Name:   Christopher Winthrop       
Title:   Vice President     

                  By:   /s/ Jennifer O'Neill         Name:   Jennifer O'Neill   
    Title:   Assistant Cashier     

            FORTIS CAPITAL CORP., as a Lender
      By:   /s/ Elaine Kan         Name:   Elaine Kan        Title:   Assistant
Vice President     

                  By:   /s/ Gill Dickson         Name:   Gill Dickson       
Title:   Director     

            THE HUNTINGTON NATIONAL BANK, as a Lender
      By:   /s/ Steven P. Clemens         Name:   Steven P. Clemens       
Title:   Senior Vice President     

            Israel Discount Bank of New York, as a Lender
      By:   /s/ James M. Morton         Name:   James M. Morton        Title:  
First Vice President     

                  By:   /s/ David Herzog         Name:   David Herzog       
Title:   First Vice President     

            COMERICA BANK, as a Lender
      By:   /s/ Sarah R. West         Name:   Sarah R. West        Title:   Vice
President     

            Union Bank of California, N.A., as a Lender
      By:   /s/ Ching Lim         Name:   Ching Lim        Title:   Vice
President     

            HSBC Bank USA N.A., as a Lender
      By:   /s/ Kyu Hwang         Name:   Kyu Hwang        Title:   Senior Vice
President     

            US Bank, N.A., as a Lender
      By:   /s/ Frances W. Josephic         Name:   Frances W. Josephic       
Title:   Vice President     

            ING BANK N.V., Amsterdam, as a Lender

On the condition that the 2nd quarter results of 2008 will not deviate
materially from what has been communicated to the Lender via the Agent in the
Liz Leverage Cushion Calculations — Quarterly (projections as of July 16, 2008).
 

                  By:   /s/ Marianne Elfrink-Rijntjes         Name:   Marianne
Elfrink-Rijntjes        Title:   Vice President     

                  By:   /s/ Arnold Esser         Name:   Arnold Esser       
Title:   Managing Director     

            The Bank of New York Mellon, as a Lender
      By:   /s/ David B. Wirl         Name:   David B. Wirl        Title:   Vice
President     

 

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ANNEX I
ARTICLE VII
Negative Covenants
          Until the Commitments have expired or terminated and the principal of
and interest on each Loan and all fees payable hereunder have been paid in full
and all Letters of Credit have expired or terminated or been cancelled, the
Borrower covenants and agrees with the Lenders that:
          SECTION 7.01. Financial Covenants.
          (a) Leverage Ratio. The Borrower will not permit the Leverage Ratio as
at the last day of any fiscal quarter set forth below to exceed the ratio set
forth below opposite such fiscal quarter.

      Fiscal Quarter   Leverage Ratio
6/30/08
  3.25:1.00
9/30/08
  3.50:1.00
12/31/08
  2.75:1.00
3/31/09
  2.75:1.00
6/30/09
  2.75:1.00
9/30/09
  2.75:1.00

          (b) Fixed Charge Coverage Ratio. The Borrower will not permit the
Fixed Charge Coverage Ratio for any period of four consecutive fiscal quarters
of the Borrower to be less than 1.75 to 1.00.
          (c) Asset Coverage Ratio. The Borrower will not permit the Asset
Coverage Ratio as at the last day of any fiscal quarter set forth below to be
less than the ratio set forth below opposite such fiscal quarter:

      Fiscal Quarter   Asset Coverage Ratio
6/30/08
  1.00:1.00
9/30/08
  1.10:1.00
12/31/08
  1.10:1.00
3/31/09
  1.10:1.00
6/30/09
  1.10:1.00
9/30/09
  1.10:1.00

          SECTION 7.02. Indebtedness. The Borrower will not, and will not permit
any Subsidiary to, create, incur, assume or permit to exist any Indebtedness,
except:
          (a) Indebtedness created hereunder or under the Subsidiary Guarantees;
          (b) Indebtedness existing on the date hereof and set forth in
Schedule 7.02;
          (c) Indebtedness of the Borrower to any Subsidiary and of any
Subsidiary to the Borrower or any other Subsidiary;

 

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          (d) Guarantees by the Borrower of Indebtedness of any Subsidiary and
by any Subsidiary of Indebtedness of the Borrower or any other Subsidiary;
          (e) Indebtedness of the Borrower or any Subsidiary incurred to finance
the acquisition, construction or improvement of any fixed or capital assets,
including Capital Lease Obligations and any Indebtedness assumed in connection
with the acquisition of any such assets or secured by a Lien on any such assets
prior to the acquisition thereof, provided that (i) such Indebtedness is
incurred prior to or within 90 days after such acquisition or the completion of
such construction or improvement and (ii) the aggregate principal amount of
Indebtedness permitted by this clause (e) shall not exceed $150,000,000 at any
time outstanding;
          (f) Indebtedness of any Person that becomes a Subsidiary after the
date hereof; provided that (i) such Indebtedness exists or is committed at the
time such Person becomes a Subsidiary and is not created in contemplation of or
in connection with such Person becoming a Subsidiary and (ii) the Borrower and
its Subsidiaries are in compliance, on a pro forma basis after giving effect to
such acquisition, with the covenants contained in Section 7.01 recomputed as at
the last day of the most recently ended fiscal quarter of the Borrower for which
financial statements are available, as if such acquisition had occurred on the
first day of each relevant period for testing such compliance;
          (g) Indebtedness of the Borrower or any Subsidiary incurred (a) as an
account party in respect of trade letters of credit issued in the ordinary
course of business and (b) in connection with standby letters of credit in an
aggregate principal amount not exceeding $40,000,000 at any time outstanding;
          (h) Indebtedness of the Borrower or any Subsidiary in respect of
commercial paper; provided that the aggregate amount of such Indebtedness, when
added to the aggregate amount of outstanding Loans and L/C Obligations, shall
not exceed the aggregate amount of the Commitments;
          (i) Subordinated Indebtedness;
          (j) any refinancings, refundings, renewals or extensions of
Indebtedness permitted hereunder that do not increase the outstanding principal
amount of such Indebtedness;
          (k) additional Indebtedness not otherwise permitted hereunder secured
by Liens and not exceeding $25,000,000 in aggregate principal amount at any time
outstanding;
          (l) Indebtedness not otherwise permitted hereunder, not secured by any
Lien and incurred after the date hereof and not exceeding $50,000,000 in
aggregate principal amount at any time outstanding; provided that the Borrower
and its Subsidiaries are in compliance, on a pro forma basis after giving effect
to such Indebtedness, with the covenants contained in Section 7.01 recomputed as
at the last day of the most recently ended fiscal quarter of the Borrower for
which financial statements are available, as if such Indebtedness had been
incurred on the first day of each relevant period for testing such compliance;
          (m) Indebtedness under or in respect of Bilateral Agreements; and
          (n) Indebtedness of the Borrower incurred as a result of a mortgage,
sale and leaseback or similar transaction with respect to the Principal Offices.

 

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          SECTION 7.03. Liens. The Borrower will not, and will not permit any
Subsidiary to, create, incur, assume or permit to exist any Lien on any property
or asset now owned or hereafter acquired by it, or assign or sell any income or
revenues (including accounts receivable) or rights in respect of any thereof,
except:
          (a) Permitted Encumbrances;
          (b) any Lien on any property or asset of the Borrower or any
Subsidiary existing on the date hereof and set forth in Schedule 7.03; provided
that (i) such Lien shall not apply to any other property or asset of the
Borrower or any Subsidiary and (ii) such Lien shall secure only those
obligations which it secures on the date hereof and extensions, renewals and
replacements thereof that do not increase the outstanding principal amount
thereof;
          (c) Liens arising by the terms of letters of credit entered into in
the ordinary course of business to secure reimbursement obligations and other
obligations in connection therewith;
          (d) Liens solely constituting the right of any other Person to a share
of any licensing royalties (pursuant to a licensing agreement or other related
agreement entered into by the Borrower or any of its Subsidiaries with such
Person in the ordinary course of the Borrower’s or such Subsidiary’s business)
otherwise payable to the Borrower or any of its Subsidiaries; provided that such
right shall have been conveyed to such Person for consideration received by the
Borrower or such Subsidiary on an arm’s-length basis;
          (e) Liens arising by reason of any judgment, decree or order of any
court or other Governmental Authority for the payment of money in aggregate
amount not to exceed $35,000,000 in any fiscal year at any time outstanding;
          (f) Liens arising in connection with factoring accounts receivable
related to any acquired Subsidiary; provided that such factoring shall not
continue for a period longer than one year from the date such Subsidiary is
acquired;
          (g) any Lien existing on any property or asset prior to the
acquisition thereof by the Borrower or any Subsidiary or existing on any
property or asset of any Person that becomes a Subsidiary after the date hereof
prior to the time such Person becomes a Subsidiary; provided that (i) such Lien
is not created in contemplation of or in connection with such acquisition or
such Person becoming a Subsidiary, as the case may be, (ii) such Lien shall not
apply to any other property or assets of the Borrower or any Subsidiary and
(iii) such Lien shall secure only those obligations which it secures on the date
of such acquisition or the date such Person becomes a Subsidiary, as the case
may be and extensions, renewals and replacements thereof that do not increase
the outstanding principal amount thereof;
          (h) Liens on fixed or capital assets acquired, constructed or improved
by the Borrower or any Subsidiary; provided that (i) such security interests
secure Indebtedness permitted by clause (e) of Section 7.02, (ii) such security
interests and the Indebtedness secured thereby are incurred prior to or within
90 days after such acquisition or the completion of such construction or
improvement, (iii) the Indebtedness secured thereby does not exceed 100% of the
cost of acquiring, constructing or improving such fixed or capital assets and
(iv) such security interests shall not apply to any other property or assets of
the Borrower or any Subsidiary;

 

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          (i) Liens securing Indebtedness permitted under Sections 7.02(j),
7.02(k) and 7.02(n); provided that with respect to Indebtedness incurred
pursuant to Section 7.02(j) no such Lien is spread to cover additional property;
          (j) any Springing Liens; and
          (k) Liens granted to secure other existing Indebtedness of the
Borrower if required to be granted due to the grant of a Springing Lien.
          SECTION 7.04. Fundamental Changes. Except in connection with
transactions otherwise permitted pursuant to Section 7.05 or 7.06, the Borrower
will not, and will not permit any Subsidiary to, merge into or consolidate with
any other Person, or permit any other Person to merge into or consolidate with
it, or sell, transfer, lease or otherwise dispose of (in one transaction or in a
series of transactions) all or substantially all of its assets, or all or
substantially all of the stock of any of its Subsidiaries (in each case, whether
now owned or hereafter acquired), or liquidate or dissolve, except that, if at
the time thereof and immediately after giving effect thereto, no Default shall
have occurred and be continuing (i) any Person may merge into the Borrower in a
transaction in which the Borrower is the surviving corporation, (ii) any Person
may merge into any Subsidiary in a transaction in which the surviving entity is
a Subsidiary and, if required to be so under Section 6.10, a Subsidiary
Guarantor, (iii) any Subsidiary may sell, transfer, lease or otherwise dispose
of its assets to the Borrower or to another Subsidiary which is a Subsidiary
Guarantor and (iv) any Subsidiary may liquidate or dissolve if the Borrower
determines in good faith that such liquidation or dissolution is in the best
interests of the Borrower and is not materially disadvantageous to the Lenders;
provided that any such merger involving a Person that is not a wholly owned
Subsidiary immediately prior to such merger shall not be permitted unless also
permitted by Section 7.05.
          SECTION 7.05. Investments, Loans, Advances, Guarantees and
Acquisitions; Hedging Agreements. (a) The Borrower will not, and will not permit
any of its Subsidiaries to, purchase, hold or acquire (including pursuant to any
merger with any Person that was not a wholly owned Subsidiary prior to such
merger) any capital stock, evidences of indebtedness or other securities
(including any option, warrant or other right to acquire any of the foregoing)
of, make or permit to exist any loans or advances to, guarantee any obligations
of, or make or permit to exist any investment or any other interest in, any
other Person, or purchase or otherwise acquire (in one transaction or a series
of transactions) any assets of any other Person constituting a business unit,
except:
     (i) existing investments not otherwise permitted under this Agreement and
described in Schedule 7.05(i) hereto;
     (ii) investments made in accordance with the investment policy of the
Borrower as set forth on Schedule 7.05(ii) hereto; as provided that any material
amendment or other material modification to such policy is subject to the
approval of the Administrative Agent in its reasonable discretion;
     (iii) investments by the Borrower in the capital stock of its Subsidiaries;
     (iv) Permitted Acquisitions not to exceed in any period of four consecutive
fiscal quarters (A) $100,000,000, or (B) if the Leverage Ratio as at the last
day of any two consecutive fiscal quarters is less than 1.50:1.00, $200,000,000.

 

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     (v) investments received in connection with the bona fide settlement of any
defaulted Indebtedness or other liability owed to the Borrower or any
Subsidiary;
     (vi) advances or loans made in the ordinary course of business to employees
of the Borrower or any of its Subsidiaries in an aggregate amount not to exceed
$10,000,000 at any time outstanding;
     (vii) loans or advances to third party contractors, suppliers or customers
in the ordinary course of business and consistent with past practice;
     (viii) loans or advances made by the Borrower to any Subsidiary and made by
any Subsidiary to the Borrower or any other Subsidiary;
     (ix) guarantees by the Borrower or any Subsidiary of obligations of the
Borrower or any other Subsidiary which do not constitute Indebtedness;
     (x) Guarantees constituting Indebtedness permitted by Section 7.02; and
     (xi) any other investments in, advances or loans to or Guarantees of, any
Person in an aggregate amount not to exceed $75,000,000 at any time outstanding;
provided that such amount may be increased by $20,000,000 in connection with the
joint venture described in Schedule 7.05(iii).
          (b) The Borrower will not, and will not permit any of its Subsidiaries
to, enter into any Hedging Agreement, other than Hedging Agreements entered into
in the ordinary course of business (including, without limitation, Hedging
Agreements in connection with the Borrower’s stock repurchase program) to hedge
or mitigate risks to which the Borrower or any Subsidiary is exposed in the
conduct of its business or the management of its liabilities.
          SECTION 7.06. Limitation on Sale of Assets. Except in the ordinary
course of business, the Borrower will not, and will not permit any of its
Subsidiaries to, sell, convey, lease, transfer or otherwise dispose of (other
than as otherwise permitted by Section 7.04 or 7.05) all or any substantial part
of its assets; provided that the foregoing shall not prohibit any such sale,
conveyance, lease, transfer or disposition (i) which (x) is for a price not
materially less than the fair market value of such assets of the Borrower or
such Subsidiary, (y) would not materially impair the ability of the Borrower to
perform its obligations under this Agreement and (z) together with all other
such sales, conveyances, leases, transfers and dispositions, would have no
Material Adverse Effect, (ii) of assets that individually or in the aggregate
constitute less than 10% of the total assets of the Borrower and its
Subsidiaries taken as a whole or (iii) of assets in connection with factoring
arrangements with respect to any acquired Subsidiary, provided that such
factoring arrangements do not continue longer than a year after such Subsidiary
is acquired by the Borrower.
          SECTION 7.07. Restricted Payments. The Borrower will not, and will not
permit any of its Subsidiaries to, declare or make, or agree to pay or make,
directly or indirectly, any Restricted Payment, except (a) the Borrower may
declare and pay dividends with respect to its capital stock payable solely in
additional shares of its common stock, (b) so long as no Default or Event of
Default has occurred and is continuing, the Borrower may declare and pay
quarterly cash dividends with respect to its capital stock not in excess of
$0.06 per share, (c) any Subsidiary may declare and pay dividends to the
Borrower or, in the case of any Subsidiary that

 

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is wholly owned by another Subsidiary, to such other Subsidiary, (d) the
Borrower may make Restricted Payments pursuant to and in accordance with stock
option plans or other benefit plans for management or employees of the Borrower
and its Subsidiaries, (e) so long as no Default or Event of Default has occurred
and is continuing, the Borrower may repurchase its capital stock pursuant to its
stock repurchase program; provided that such repurchases shall not exceed
$25,000,000 in any fiscal year, and (f) so long as no Default or Event of
Default has occurred and is continuing, the Borrower may repurchase its capital
stock and declare and pay dividends with respect to its capital stock; provided
that, for any period of four consecutive fiscal quarters, such capital stock
repurchases and dividends shall not in the aggregate exceed 50% of Consolidated
Net Income for such period of four consecutive fiscal quarters.
          SECTION 7.08. Transactions with Affiliates. The Borrower will not, and
will not permit any of its Subsidiaries to, sell, lease or otherwise transfer
any property or assets to, or purchase, lease or otherwise acquire any property
or assets from, or otherwise engage in any other transactions with, any of its
Affiliates, except (a) in the ordinary course of business at prices and on terms
and conditions not less favorable to the Borrower or such Subsidiary than could
be obtained on an arm’s-length basis from unrelated third parties,
(b) transactions between or among the Borrower and its Subsidiaries not
involving any other Affiliate and (c) any Restricted Payment permitted by
Section 7.07.
          SECTION 7.09. Changes in Fiscal Periods. The Borrower will not, and
will not permit any of its Subsidiaries to, permit the fiscal year of such
Borrower to end on a day other than the last Saturday closest to December 31 or
change such Borrower’s method of determining fiscal quarters.
          SECTION 7.10. Lines of Business. The Borrower will not, and will not
permit any of its Subsidiaries to, enter into any business, either directly or
through any Subsidiary, except for Permitted Lines of Business.
          SECTION 7.11. Negative Pledge Clauses. Enter into or suffer to exist
or become effective any agreement that prohibits or limits the ability of the
Borrower or any of its Subsidiaries to create, incur, assume or suffer to exist
any Lien upon any of its property or revenues, whether now owned or hereafter
acquired, to secure its obligations under the Loan Documents to which it is a
party other than (a) this Agreement and the other Loan Documents and (b) any
agreements governing any purchase money Liens or Capital Lease Obligations
otherwise permitted hereby (in which case, any prohibition or limitation shall
only be effective against the assets financed thereby).

 

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Schedule 1.01(a)

                                                                               
      Outstanding           Mexx Credit Lines           Credit Lines            
U.S.$ Credit Lines     as of 8/2/08          
Ing Bank
  euro     21,000,000                       16,390,000          
HSBC
  euro     15,000,000                       14,080,000          
HSBC — UK LCE
  euro     2,410,000                       0          
Fortis Bank
  euro     26,000,000                       16,000,000          
Citibank
  euro     20,000,000                       16,930,000          
Citibank
  euro     9,500,000                       100,000          
Artesia Bank
  euro     0                       0          
Commerzbank
  euro     2,000,000                       0          
HSBC HK
  euro     6,320,000                       0          
Bank Austria
  euro     20,000                       0          
Other
            0                       0          
 
                                           
1.5553
          € 102,250,000             $ 159,029,425     € 63,500,000     $
98,761,550  
 
                                               
Liz Claiborne Canada
                                               
 
                                               
HSBC — Canada
                                               
@
    1.0273       5,000,000     CAD   $ 4,867,127     CAD 0   $ 0  
 
                                       
 
                      Lines $ 163,896,552     Total Debt     $ 98,761,550  
 
                                           
L/C Standby Credit Lines
                                               
 
                                               
 
                          Lines           outstanding
 
                                           
HSBC
                          $ 15,250,000             $ 14,364,758  
 
                                               
 
                                          Outstanding
L/C Credit Lines
                          $ Credit Lines           as of 8/2/08
 
                                           
Wachovia Bank
                          $ 75,000,000             $ 52,369,691  
Bank of America
                          $ 75,000,000             $ 47,913,699  
Huntington National Bank
                          $ 50,000,000             $ 33,635,158  
JP Morgan Chase
                          $ 85,000,000             $ 33,191,311  
 
                                           
 
                          $ 285,000,000             $ 167,109,860  
 
                                                Note: Mexx has o/s LCs = $13.4mm
and o/s Standby LCs = $11.1mm.
The credit lines for these facilities are part of the Euro 102.25mm above.

Synthetic Lease — Ohio & RI Distribution Centers                        
 
                                               
SunTrust Bank
                                          $ 19,000,000  
US Bank
                                          $ 13,806,207  
 
                                             
 
                                          $ 32,806,207  

 

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Schedule 7.05(iii)
Kate Spade Joint Venture — The Borrower is planning to enter into a joint
venture with a Japanese partner to pursue business opportunities for the Kate
Spade brand in Japan. It is expected to be set up as an independent legal entity
owned by Kate Spade and the Japanese partner.