EXHIBIT 10.1

 

 

AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT

 

 

 

 

Fleet Retail Group, Inc.

 

The Administrative and Collateral Agent

 

for the Lenders Referenced Herein

 

 

 

 

Mothers Work, Inc.

 

The Lead Borrower

 

For The Borrowers Referenced Herein

 

AND

 

The Guarantors Party Hereto

 

 

October 15, 2004

 

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

 

TABLE OF CONTENTS

 

ARTICLE I. - DEFINITIONS

2

 

 

 

ARTICLE II. - THE REVOLVING CREDIT
[a04-11788_1ex10d1.htm#ArticleIi_TheRevolvingCredit]

41 [a04-11788_1ex10d1.htm#ArticleIi_TheRevolvingCredit]

 

 

 

2.1 [a04-11788_1ex10d1.htm#EstablishmentOfRevolvingCredit_]

Establishment of Revolving Credit.
[a04-11788_1ex10d1.htm#EstablishmentOfRevolvingCredit_]

41 [a04-11788_1ex10d1.htm#EstablishmentOfRevolvingCredit_]

 

 

 

2.2 [a04-11788_1ex10d1.htm#AdvancesInExcessOfBorrowingBaseOv]

Advances in Excess of Borrowing Base (Overloans).
[a04-11788_1ex10d1.htm#AdvancesInExcessOfBorrowingBaseOv]

41 [a04-11788_1ex10d1.htm#AdvancesInExcessOfBorrowingBaseOv]

 

 

 

2.3 [a04-11788_1ex10d1.htm#RisksOfValueOfCollateral]

Risks of Value of Collateral. [a04-11788_1ex10d1.htm#RisksOfValueOfCollateral]

42 [a04-11788_1ex10d1.htm#RisksOfValueOfCollateral]

 

 

 

2.4 [a04-11788_1ex10d1.htm#CommitmentToMakeRevolvingCreditLoan]

Commitment to Make Revolving Credit Loans and Support Letters of Credit.
[a04-11788_1ex10d1.htm#CommitmentToMakeRevolvingCreditLoan]

42 [a04-11788_1ex10d1.htm#CommitmentToMakeRevolvingCreditLoan]

 

 

 

2.5 [a04-11788_1ex10d1.htm#RevolvingCreditLoanRequests_]

Revolving Credit Loan Requests.
[a04-11788_1ex10d1.htm#RevolvingCreditLoanRequests_]

42 [a04-11788_1ex10d1.htm#RevolvingCreditLoanRequests_]

 

 

 

2.6 [a04-11788_1ex10d1.htm#MakingOfRevolvingCreditLoans]

Making Of Revolving Credit Loans.
[a04-11788_1ex10d1.htm#MakingOfRevolvingCreditLoans]

45 [a04-11788_1ex10d1.htm#MakingOfRevolvingCreditLoans]

 

 

 

2.7 [a04-11788_1ex10d1.htm#SwinglineLoans]

SwingLine Loans. [a04-11788_1ex10d1.htm#SwinglineLoans]

45 [a04-11788_1ex10d1.htm#SwinglineLoans]

 

 

 

2.8 [a04-11788_1ex10d1.htm#TheLoanAccount]

The Loan Account. [a04-11788_1ex10d1.htm#TheLoanAccount]

46 [a04-11788_1ex10d1.htm#TheLoanAccount]

 

 

 

2.9 [a04-11788_1ex10d1.htm#TheRevolvingCreditNote_]

The Revolving Credit Note. [a04-11788_1ex10d1.htm#TheRevolvingCreditNote_]

47 [a04-11788_1ex10d1.htm#TheRevolvingCreditNote_]

 

 

 

2.10 [a04-11788_1ex10d1.htm#PaymentOfTheLoanAccount_]

Payment of the Loan Account. [a04-11788_1ex10d1.htm#PaymentOfTheLoanAccount_]

47 [a04-11788_1ex10d1.htm#PaymentOfTheLoanAccount_]

 

 

 

2.11 [a04-11788_1ex10d1.htm#InterestOnRevolvingCreditLoans]

Interest On Revolving Credit Loans.
[a04-11788_1ex10d1.htm#InterestOnRevolvingCreditLoans]

48 [a04-11788_1ex10d1.htm#InterestOnRevolvingCreditLoans]

 

 

 

2.12 [a04-11788_1ex10d1.htm#RevolvingCreditCommitmentFee]

Revolving Credit Commitment Fee.
[a04-11788_1ex10d1.htm#RevolvingCreditCommitmentFee]

49 [a04-11788_1ex10d1.htm#RevolvingCreditCommitmentFee]

 

 

 

2.13 [a04-11788_1ex10d1.htm#IntentionallyOmitted]

Intentionally Omitted. [a04-11788_1ex10d1.htm#IntentionallyOmitted]

50 [a04-11788_1ex10d1.htm#IntentionallyOmitted]

 

 

 

2.14 [a04-11788_1ex10d1.htm#UnusedLineFee]

Unused Line Fee. [a04-11788_1ex10d1.htm#UnusedLineFee]

50 [a04-11788_1ex10d1.htm#UnusedLineFee]

 

 

 

2.15 [a04-11788_1ex10d1.htm#EarlyTerminationFee]

Early Termination Fee. [a04-11788_1ex10d1.htm#EarlyTerminationFee]

50 [a04-11788_1ex10d1.htm#EarlyTerminationFee]

 

 

 

2.16 [a04-11788_1ex10d1.htm#ConcerningFees]

Concerning Fees. [a04-11788_1ex10d1.htm#ConcerningFees]

50 [a04-11788_1ex10d1.htm#ConcerningFees]

 

 

 

2.17 [a04-11788_1ex10d1.htm#Intentionallyomitted1]

Intentionally Omitted. [a04-11788_1ex10d1.htm#Intentionallyomitted1]

50 [a04-11788_1ex10d1.htm#Intentionallyomitted1]

 

 

 

2.18 [a04-11788_1ex10d1.htm#ProceduresForIssuanceOfLcs]

Procedures For Issuance Of L/C’s.
[a04-11788_1ex10d1.htm#ProceduresForIssuanceOfLcs]

51 [a04-11788_1ex10d1.htm#ProceduresForIssuanceOfLcs]

 

 

 

2.19 [a04-11788_1ex10d1.htm#FeesForLcs]

Fees For L/C’s. [a04-11788_1ex10d1.htm#FeesForLcs]

52 [a04-11788_1ex10d1.htm#FeesForLcs]

 

 

 

2.20 [a04-11788_1ex10d1.htm#ConcerningLcs]

Concerning L/C’s. [a04-11788_1ex10d1.htm#ConcerningLcs]

53 [a04-11788_1ex10d1.htm#ConcerningLcs]

 

 

 

2.21 [a04-11788_1ex10d1.htm#ChangedCircumstances]

Changed Circumstances. [a04-11788_1ex10d1.htm#ChangedCircumstances]

54 [a04-11788_1ex10d1.htm#ChangedCircumstances]

 

 

 

2.22 [a04-11788_1ex10d1.htm#LendersCommitments]

Lenders’ Commitments. [a04-11788_1ex10d1.htm#LendersCommitments]

56 [a04-11788_1ex10d1.htm#LendersCommitments]

 

 

 

2.23 [a04-11788_1ex10d1.htm#DesignationOfLeadBorrowerAsBorrower]

Designation of Lead Borrower as Borrowers’ Agent.
[a04-11788_1ex10d1.htm#DesignationOfLeadBorrowerAsBorrower]

58 [a04-11788_1ex10d1.htm#DesignationOfLeadBorrowerAsBorrower]

 

 

 

ARTICLE III. - CONDITIONS PRECEDENT
[a04-11788_1ex10d1.htm#ArticleIii_ConditionsPrecedent]

58 [a04-11788_1ex10d1.htm#ArticleIii_ConditionsPrecedent]

 

 

 

3.1 [a04-11788_1ex10d1.htm#CorporateDueDiligence]

Corporate Due Diligence. [a04-11788_1ex10d1.htm#CorporateDueDiligence]

58 [a04-11788_1ex10d1.htm#CorporateDueDiligence]

 

 

 

3.2 [a04-11788_1ex10d1.htm#Opinion]

Opinion. [a04-11788_1ex10d1.htm#Opinion]

59 [a04-11788_1ex10d1.htm#Opinion]

 

 

 

3.3 [a04-11788_1ex10d1.htm#OfficersCertificates]

Officers’ Certificates. [a04-11788_1ex10d1.htm#OfficersCertificates]

59 [a04-11788_1ex10d1.htm#OfficersCertificates]

 

 

 

3.4 [a04-11788_1ex10d1.htm#AdditionalDocuments]

Additional Documents. [a04-11788_1ex10d1.htm#AdditionalDocuments]

59 [a04-11788_1ex10d1.htm#AdditionalDocuments]

 

 

 

3.5 [a04-11788_1ex10d1.htm#RepresentationsAndWarranties]

Representations and Warranties.
[a04-11788_1ex10d1.htm#RepresentationsAndWarranties]

61 [a04-11788_1ex10d1.htm#RepresentationsAndWarranties]

 

 

 

3.6 [a04-11788_1ex10d1.htm#MinimumDayOneExcessAvailability]

Minimum Day One Excess Availability.
[a04-11788_1ex10d1.htm#MinimumDayOneExcessAvailability]

61 [a04-11788_1ex10d1.htm#MinimumDayOneExcessAvailability]

 

 

 

3.7 [a04-11788_1ex10d1.htm#AllFeesAndExpensesPaid]

All Fees and Expenses Paid. [a04-11788_1ex10d1.htm#AllFeesAndExpensesPaid]

62 [a04-11788_1ex10d1.htm#AllFeesAndExpensesPaid]

 

i

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

 

3.8 [a04-11788_1ex10d1.htm#NoBorrowerDefault]

No Borrower Default. [a04-11788_1ex10d1.htm#NoBorrowerDefault]

62 [a04-11788_1ex10d1.htm#NoBorrowerDefault]

 

 

 

3.9 [a04-11788_1ex10d1.htm#NoAdverseChange]

No Adverse Change. [a04-11788_1ex10d1.htm#NoAdverseChange]

62 [a04-11788_1ex10d1.htm#NoAdverseChange]

 

 

 

3.10 [a04-11788_1ex10d1.htm#ValidityOfLiens_]

Validity of Liens. [a04-11788_1ex10d1.htm#ValidityOfLiens_]

62 [a04-11788_1ex10d1.htm#ValidityOfLiens_]

 

 

 

3.11 [a04-11788_1ex10d1.htm#Documents]

Documents. [a04-11788_1ex10d1.htm#Documents]

62 [a04-11788_1ex10d1.htm#Documents]

 

 

 

ARTICLE IV. - GENERAL REPRESENTATIONS, COVENANTS AND WARRANTIES
[a04-11788_1ex10d1.htm#ArticleIv]

62 [a04-11788_1ex10d1.htm#ArticleIv]

 

 

 

4.1 [a04-11788_1ex10d1.htm#PaymentAndPerformanceOfLiabilities]

Payment and Performance of Liabilities.
[a04-11788_1ex10d1.htm#PaymentAndPerformanceOfLiabilities]

62 [a04-11788_1ex10d1.htm#PaymentAndPerformanceOfLiabilities]

 

 

 

4.2 [a04-11788_1ex10d1.htm#DueOrganization_CorporateAuthorizatio]

Due Organization. Corporate Authorization. No Conflicts.
[a04-11788_1ex10d1.htm#DueOrganization_CorporateAuthorizatio]

63 [a04-11788_1ex10d1.htm#DueOrganization_CorporateAuthorizatio]

 

 

 

4.3 [a04-11788_1ex10d1.htm#TradeNames_]

Trade Names. [a04-11788_1ex10d1.htm#TradeNames_]

64 [a04-11788_1ex10d1.htm#TradeNames_]

 

 

 

4.4 [a04-11788_1ex10d1.htm#Infrastructure]

Infrastructure. [a04-11788_1ex10d1.htm#Infrastructure]

64 [a04-11788_1ex10d1.htm#Infrastructure]

 

 

 

4.5 [a04-11788_1ex10d1.htm#Guarantor]

GUARANTOR. [a04-11788_1ex10d1.htm#Guarantor]

65 [a04-11788_1ex10d1.htm#Guarantor]

 

 

 

4.6 [a04-11788_1ex10d1.htm#Locations]

Locations. [a04-11788_1ex10d1.htm#Locations]

65 [a04-11788_1ex10d1.htm#Locations]

 

 

 

4.7 [a04-11788_1ex10d1.htm#TitleToAssets]

Title To Assets. [a04-11788_1ex10d1.htm#TitleToAssets]

66 [a04-11788_1ex10d1.htm#TitleToAssets]

 

 

 

4.8 [a04-11788_1ex10d1.htm#Indebtedness]

Indebtedness. [a04-11788_1ex10d1.htm#Indebtedness]

67 [a04-11788_1ex10d1.htm#Indebtedness]

 

 

 

4.9 [a04-11788_1ex10d1.htm#Insurance]

Insurance. [a04-11788_1ex10d1.htm#Insurance]

68 [a04-11788_1ex10d1.htm#Insurance]

 

 

 

4.10 [a04-11788_1ex10d1.htm#MaterialContracts]

Licenses; Material Contracts. [a04-11788_1ex10d1.htm#MaterialContracts]

69 [a04-11788_1ex10d1.htm#MaterialContracts]

 

 

 

4.11 [a04-11788_1ex10d1.htm#Leases]

Leases. [a04-11788_1ex10d1.htm#Leases]

70 [a04-11788_1ex10d1.htm#Leases]

 

 

 

4.12 [a04-11788_1ex10d1.htm#RequirementsOfLaw]

Requirements of Law. [a04-11788_1ex10d1.htm#RequirementsOfLaw]

70 [a04-11788_1ex10d1.htm#RequirementsOfLaw]

 

 

 

4.13 [a04-11788_1ex10d1.htm#LaborRelations]

Labor Relations. [a04-11788_1ex10d1.htm#LaborRelations]

70 [a04-11788_1ex10d1.htm#LaborRelations]

 

 

 

4.14 [a04-11788_1ex10d1.htm#MaintainProperties]

Maintain Properties. [a04-11788_1ex10d1.htm#MaintainProperties]

71 [a04-11788_1ex10d1.htm#MaintainProperties]

 

 

 

4.15 [a04-11788_1ex10d1.htm#Taxes]

Taxes. [a04-11788_1ex10d1.htm#Taxes]

72 [a04-11788_1ex10d1.htm#Taxes]

 

 

 

4.16 [a04-11788_1ex10d1.htm#StockOrSecurities]

No Margin Stock or Securities. [a04-11788_1ex10d1.htm#StockOrSecurities]

73 [a04-11788_1ex10d1.htm#StockOrSecurities]

 

 

 

4.17 [a04-11788_1ex10d1.htm#Erisa]

ERISA. [a04-11788_1ex10d1.htm#Erisa]

73 [a04-11788_1ex10d1.htm#Erisa]

 

 

 

4.18 [a04-11788_1ex10d1.htm#MaterialsAndEnvironmental]

Hazardous Materials and Environmental Compliance.
[a04-11788_1ex10d1.htm#MaterialsAndEnvironmental]

74 [a04-11788_1ex10d1.htm#MaterialsAndEnvironmental]

 

 

 

4.19 [a04-11788_1ex10d1.htm#Litigation]

Litigation. [a04-11788_1ex10d1.htm#Litigation]

77 [a04-11788_1ex10d1.htm#Litigation]

 

 

 

4.20 [a04-11788_1ex10d1.htm#CorporateAction]

Dividends; Investments; Corporate Action [a04-11788_1ex10d1.htm#CorporateAction]

77 [a04-11788_1ex10d1.htm#CorporateAction]

 

 

 

4.21 [a04-11788_1ex10d1.htm#Loans]

Loans. [a04-11788_1ex10d1.htm#Loans]

79 [a04-11788_1ex10d1.htm#Loans]

 

 

 

4.22 [a04-11788_1ex10d1.htm#ProtectionOfAssets]

Protection of Assets. [a04-11788_1ex10d1.htm#ProtectionOfAssets]

79 [a04-11788_1ex10d1.htm#ProtectionOfAssets]

 

 

 

4.23 [a04-11788_1ex10d1.htm#LineOfBusiness]

Line of Business. [a04-11788_1ex10d1.htm#LineOfBusiness]

79 [a04-11788_1ex10d1.htm#LineOfBusiness]

 

 

 

4.24 [a04-11788_1ex10d1.htm#AffiliateTransactions]

Affiliate Transactions. [a04-11788_1ex10d1.htm#AffiliateTransactions]

79 [a04-11788_1ex10d1.htm#AffiliateTransactions]

 

 

 

4.25 [a04-11788_1ex10d1.htm#FurtherAssurances]

Further Assurances. [a04-11788_1ex10d1.htm#FurtherAssurances]

80 [a04-11788_1ex10d1.htm#FurtherAssurances]

 

 

 

4.26 [a04-11788_1ex10d1.htm#AdequacyOfDisclosure]

Adequacy OF Disclosure. [a04-11788_1ex10d1.htm#AdequacyOfDisclosure]

80 [a04-11788_1ex10d1.htm#AdequacyOfDisclosure]

 

 

 

4.27 [a04-11788_1ex10d1.htm#NoRestrictionsOnLiabilities]

No Restrictions on Liabilities.
[a04-11788_1ex10d1.htm#NoRestrictionsOnLiabilities]

81 [a04-11788_1ex10d1.htm#NoRestrictionsOnLiabilities]

 

 

 

4.28 [a04-11788_1ex10d1.htm#OtherCovenants]

Other Covenants. [a04-11788_1ex10d1.htm#OtherCovenants]

81 [a04-11788_1ex10d1.htm#OtherCovenants]

 

 

 

ARTICLE V. - FINANCIAL REPORTING AND PERFORMANCE COVENANTS
[a04-11788_1ex10d1.htm#ArticleV]

81 [a04-11788_1ex10d1.htm#ArticleV]

 

 

 

5.1 [a04-11788_1ex10d1.htm#MaintainRecords]

Maintain Records. [a04-11788_1ex10d1.htm#MaintainRecords]

81 [a04-11788_1ex10d1.htm#MaintainRecords]

 

ii

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

 

5.2 [a04-11788_1ex10d1.htm#AccessToRecords]

Access to Records. [a04-11788_1ex10d1.htm#AccessToRecords]

82 [a04-11788_1ex10d1.htm#AccessToRecords]

 

 

 

5.3 [a04-11788_1ex10d1.htm#ImmediateNoticeToAgent]

Immediate Notice to Agent. [a04-11788_1ex10d1.htm#ImmediateNoticeToAgent]

83 [a04-11788_1ex10d1.htm#ImmediateNoticeToAgent]

 

 

 

5.4 [a04-11788_1ex10d1.htm#BorrowingBaseCertificate]

Borrowing Base Certificate. [a04-11788_1ex10d1.htm#BorrowingBaseCertificate]

84 [a04-11788_1ex10d1.htm#BorrowingBaseCertificate]

 

 

 

5.5 [a04-11788_1ex10d1.htm#WeeklyReports]

Weekly Reports. [a04-11788_1ex10d1.htm#WeeklyReports]

84 [a04-11788_1ex10d1.htm#WeeklyReports]

 

 

 

5.6 [a04-11788_1ex10d1.htm#MonthlyReports]

Monthly Reports. [a04-11788_1ex10d1.htm#MonthlyReports]

84 [a04-11788_1ex10d1.htm#MonthlyReports]

 

 

 

5.7 [a04-11788_1ex10d1.htm#QuarterlyReports]

Quarterly Reports. [a04-11788_1ex10d1.htm#QuarterlyReports]

86 [a04-11788_1ex10d1.htm#QuarterlyReports]

 

 

 

5.8 [a04-11788_1ex10d1.htm#AnnualReports]

Annual Reports. [a04-11788_1ex10d1.htm#AnnualReports]

86 [a04-11788_1ex10d1.htm#AnnualReports]

 

 

 

5.9 [a04-11788_1ex10d1.htm#Certificates]

Officers’ Certificates. [a04-11788_1ex10d1.htm#Certificates]

87 [a04-11788_1ex10d1.htm#Certificates]

 

 

 

5.10 [a04-11788_1ex10d1.htm#Appraisals]

Inventories, Appraisals, and Audits. [a04-11788_1ex10d1.htm#Appraisals]

87 [a04-11788_1ex10d1.htm#Appraisals]

 

 

 

5.11 [a04-11788_1ex10d1.htm#FinancialInformation]

Additional Financial Information. [a04-11788_1ex10d1.htm#FinancialInformation]

88 [a04-11788_1ex10d1.htm#FinancialInformation]

 

 

 

5.12 [a04-11788_1ex10d1.htm#FinancialPerformanceCovenants]

Financial Performance Covenants.
[a04-11788_1ex10d1.htm#FinancialPerformanceCovenants]

89 [a04-11788_1ex10d1.htm#FinancialPerformanceCovenants]

 

 

 

ARTICLE VI. - USE AND COLLECTION OF COLLATERAL [a04-11788_1ex10d1.htm#ArticleVi]

90 [a04-11788_1ex10d1.htm#ArticleVi]

 

 

 

6.1 [a04-11788_1ex10d1.htm#UseOfInventoryCollateral]

Use of Inventory Collateral. [a04-11788_1ex10d1.htm#UseOfInventoryCollateral]

90 [a04-11788_1ex10d1.htm#UseOfInventoryCollateral]

 

 

 

6.2 [a04-11788_1ex10d1.htm#InventoryQuality]

Inventory Quality. [a04-11788_1ex10d1.htm#InventoryQuality]

90 [a04-11788_1ex10d1.htm#InventoryQuality]

 

 

 

6.3 [a04-11788_1ex10d1.htm#AdjustmentsAndAllowances]

Adjustments and Allowances. [a04-11788_1ex10d1.htm#AdjustmentsAndAllowances]

90 [a04-11788_1ex10d1.htm#AdjustmentsAndAllowances]

 

 

 

6.4 [a04-11788_1ex10d1.htm#ValidityOfAccounts]

Validity of Accounts. [a04-11788_1ex10d1.htm#ValidityOfAccounts]

90 [a04-11788_1ex10d1.htm#ValidityOfAccounts]

 

 

 

6.5 [a04-11788_1ex10d1.htm#NotificationToAccountDebtors]

Notification to Account Debtors.
[a04-11788_1ex10d1.htm#NotificationToAccountDebtors]

91 [a04-11788_1ex10d1.htm#NotificationToAccountDebtors]

 

 

 

ARTICLE VII. - CASH MANAGEMENT; PAYMENT OF LIABILITIES
[a04-11788_1ex10d1.htm#ArticleVii]

91 [a04-11788_1ex10d1.htm#ArticleVii]

 

 

 

7.1 [a04-11788_1ex10d1.htm#DepositoryAccounts]

Depository Accounts. [a04-11788_1ex10d1.htm#DepositoryAccounts]

91 [a04-11788_1ex10d1.htm#DepositoryAccounts]

 

 

 

7.2 [a04-11788_1ex10d1.htm#CreditCardReceipts]

Credit Card Receipts. [a04-11788_1ex10d1.htm#CreditCardReceipts]

92 [a04-11788_1ex10d1.htm#CreditCardReceipts]

 

 

 

7.3 [a04-11788_1ex10d1.htm#TheConcentration]

The Concentration, Blocked, and Operating Accounts.
[a04-11788_1ex10d1.htm#TheConcentration]

92 [a04-11788_1ex10d1.htm#TheConcentration]

 

 

 

7.4 [a04-11788_1ex10d1.htm#ProceedsAndCollectionOfAccounts]

Proceeds and Collection of Accounts.
[a04-11788_1ex10d1.htm#ProceedsAndCollectionOfAccounts]

94 [a04-11788_1ex10d1.htm#ProceedsAndCollectionOfAccounts]

 

 

 

7.5 [a04-11788_1ex10d1.htm#PaymentOfLiabilities]

Payment of Liabilities. [a04-11788_1ex10d1.htm#PaymentOfLiabilities]

95 [a04-11788_1ex10d1.htm#PaymentOfLiabilities]

 

 

 

7.6 [a04-11788_1ex10d1.htm#TheOperatingAccountAndDisbursement]

The Operating Account and Disbursement Account.
[a04-11788_1ex10d1.htm#TheOperatingAccountAndDisbursement]

96 [a04-11788_1ex10d1.htm#TheOperatingAccountAndDisbursement]

 

 

 

ARTICLE VIII. - GRANT OF SECURITY INTEREST [a04-11788_1ex10d1.htm#ArticleViii]

96 [a04-11788_1ex10d1.htm#ArticleViii]

 

 

 

8.1 [a04-11788_1ex10d1.htm#GrantOfSecurityInterest]

Grant of Security Interest. [a04-11788_1ex10d1.htm#GrantOfSecurityInterest]

96 [a04-11788_1ex10d1.htm#GrantOfSecurityInterest]

 

 

 

8.2 [a04-11788_1ex10d1.htm#ExtentAndDurationOfSecurityInterest]

Extent and Duration of Security Interest.
[a04-11788_1ex10d1.htm#ExtentAndDurationOfSecurityInterest]

98 [a04-11788_1ex10d1.htm#ExtentAndDurationOfSecurityInterest]

 

 

 

8.3 [a04-11788_1ex10d1.htm#PerfectionOfSecurityInterests]

Perfection of Security Interests.
[a04-11788_1ex10d1.htm#PerfectionOfSecurityInterests]

98 [a04-11788_1ex10d1.htm#PerfectionOfSecurityInterests]

 

 

 

ARTICLE IX. - COLLATERAL AGENT AS BORROWERS’ ATTORNEY-IN-FACT
[a04-11788_1ex10d1.htm#ArticleIx_]

101 [a04-11788_1ex10d1.htm#ArticleIx_]

 

 

 

9.1 [a04-11788_1ex10d1.htm#Appointment]

Appointment as Attorney-In-Fact. [a04-11788_1ex10d1.htm#Appointment]

101 [a04-11788_1ex10d1.htm#Appointment]

 

 

 

9.2 [a04-11788_1ex10d1.htm#NoObligation]

No Obligation to Act. [a04-11788_1ex10d1.htm#NoObligation]

102 [a04-11788_1ex10d1.htm#NoObligation]

 

 

 

ARTICLE X. - EVENTS OF DEFAULT [a04-11788_1ex10d1.htm#ArticleX]

102 [a04-11788_1ex10d1.htm#ArticleX]

 

 

 

10.1 [a04-11788_1ex10d1.htm#Failure]

Failure to Pay Revolving Credit. [a04-11788_1ex10d1.htm#Failure]

103 [a04-11788_1ex10d1.htm#Failure]

 

 

 

10.2 [a04-11788_1ex10d1.htm#FailureToMake]

Failure To Make Other Payments. [a04-11788_1ex10d1.htm#FailureToMake]

103 [a04-11788_1ex10d1.htm#FailureToMake]

 

 

 

10.3 [a04-11788_1ex10d1.htm#FailureToPerform]

Failure to Perform Covenant or Liability (No Grace Period).
[a04-11788_1ex10d1.htm#FailureToPerform]

103 [a04-11788_1ex10d1.htm#FailureToPerform]

 

iii

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

 

10.4 [a04-11788_1ex10d1.htm#FailureToPerformCovenant]

Failure to Perform Covenant or Liability (Grace Period).
[a04-11788_1ex10d1.htm#FailureToPerformCovenant]

104 [a04-11788_1ex10d1.htm#FailureToPerformCovenant]

 

 

 

10.5 [a04-11788_1ex10d1.htm#Misrepresentation]

Misrepresentation. [a04-11788_1ex10d1.htm#Misrepresentation]

104 [a04-11788_1ex10d1.htm#Misrepresentation]

 

 

 

10.6 [a04-11788_1ex10d1.htm#Acceleration]

Acceleration of Other Debt. Breach of Lease.
[a04-11788_1ex10d1.htm#Acceleration]

104 [a04-11788_1ex10d1.htm#Acceleration]

 

 

 

10.7 [a04-11788_1ex10d1.htm#DefaultUnder]

Default Under Other Agreements. [a04-11788_1ex10d1.htm#DefaultUnder]

105 [a04-11788_1ex10d1.htm#DefaultUnder]

 

 

 

10.8 [a04-11788_1ex10d1.htm#IntentionallyOmitted_]

Intentionally Omitted. [a04-11788_1ex10d1.htm#IntentionallyOmitted_]

105 [a04-11788_1ex10d1.htm#IntentionallyOmitted_]

 

 

 

10.9 [a04-11788_1ex10d1.htm#Attachment]

Attachment; Judgment; Restraint of Business. [a04-11788_1ex10d1.htm#Attachment]

105 [a04-11788_1ex10d1.htm#Attachment]

 

 

 

10.10 [a04-11788_1ex10d1.htm#BusinessFailure_]

Business Failure. [a04-11788_1ex10d1.htm#BusinessFailure_]

105 [a04-11788_1ex10d1.htm#BusinessFailure_]

 

 

 

10.11 [a04-11788_1ex10d1.htm#Bankruptcy_]

Bankruptcy. [a04-11788_1ex10d1.htm#Bankruptcy_]

105 [a04-11788_1ex10d1.htm#Bankruptcy_]

 

 

 

10.12 [a04-11788_1ex10d1.htm#DefaultBy]

Default by Guarantor or Affiliate. [a04-11788_1ex10d1.htm#DefaultBy]

106 [a04-11788_1ex10d1.htm#DefaultBy]

 

 

 

10.13 [a04-11788_1ex10d1.htm#Indictment]

Indictment - Forfeiture. [a04-11788_1ex10d1.htm#Indictment]

106 [a04-11788_1ex10d1.htm#Indictment]

 

 

 

10.14 [a04-11788_1ex10d1.htm#Termination]

Termination of Guaranty. [a04-11788_1ex10d1.htm#Termination]

106 [a04-11788_1ex10d1.htm#Termination]

 

 

 

10.15 [a04-11788_1ex10d1.htm#ChallengeToLoanDo]

Challenge to Loan Documents. [a04-11788_1ex10d1.htm#ChallengeToLoanDo]

106 [a04-11788_1ex10d1.htm#ChallengeToLoanDo]

 

 

 

10.16 [a04-11788_1ex10d1.htm#Intentionally]

Intentionally Omitted. [a04-11788_1ex10d1.htm#Intentionally]

106 [a04-11788_1ex10d1.htm#Intentionally]

 

 

 

10.17 [a04-11788_1ex10d1.htm#ChangeIn]

Change in Control. [a04-11788_1ex10d1.htm#ChangeIn]

106 [a04-11788_1ex10d1.htm#ChangeIn]

 

 

 

10.18 [a04-11788_1ex10d1.htm#Uninsured]

Uninsured Losses. [a04-11788_1ex10d1.htm#Uninsured]

106 [a04-11788_1ex10d1.htm#Uninsured]

 

 

 

10.19 [a04-11788_1ex10d1.htm#Erisa_]

ERISA. [a04-11788_1ex10d1.htm#Erisa_]

107 [a04-11788_1ex10d1.htm#Erisa_]

 

 

 

ARTICLE XI. - RIGHTS AND REMEDIES UPON DEFAULT
[a04-11788_1ex10d1.htm#ArticleXi_]

107 [a04-11788_1ex10d1.htm#ArticleXi_]

 

 

 

11.1 [a04-11788_1ex10d1.htm#RightsOfEnf]

Rights of Enforcement. [a04-11788_1ex10d1.htm#RightsOfEnf]

107 [a04-11788_1ex10d1.htm#RightsOfEnf]

 

 

 

11.2 [a04-11788_1ex10d1.htm#SaleOf]

Sale of Collateral. [a04-11788_1ex10d1.htm#SaleOf]

108 [a04-11788_1ex10d1.htm#SaleOf]

 

 

 

11.3 [a04-11788_1ex10d1.htm#Occupation]

Occupation of Business Location. [a04-11788_1ex10d1.htm#Occupation]

108 [a04-11788_1ex10d1.htm#Occupation]

 

 

 

11.4 [a04-11788_1ex10d1.htm#GrantOf]

Grant of Nonexclusive License. [a04-11788_1ex10d1.htm#GrantOf]

109 [a04-11788_1ex10d1.htm#GrantOf]

 

 

 

11.5 [a04-11788_1ex10d1.htm#AssemblyOf]

Assembly of Collateral. [a04-11788_1ex10d1.htm#AssemblyOf]

109 [a04-11788_1ex10d1.htm#AssemblyOf]

 

 

 

11.6 [a04-11788_1ex10d1.htm#RightsAndRemedies_]

Rights and Remedies. [a04-11788_1ex10d1.htm#RightsAndRemedies_]

109 [a04-11788_1ex10d1.htm#RightsAndRemedies_]

 

 

 

ARTICLE XII. - NOTICES [a04-11788_1ex10d1.htm#ArticleXii_Notices]

110 [a04-11788_1ex10d1.htm#ArticleXii_Notices]

 

 

 

12.1 [a04-11788_1ex10d1.htm#NoticeAddresses_]

Notice Addresses. [a04-11788_1ex10d1.htm#NoticeAddresses_]

110 [a04-11788_1ex10d1.htm#NoticeAddresses_]

 

 

 

12.2 [a04-11788_1ex10d1.htm#NoticeGiven_]

Notice Given. [a04-11788_1ex10d1.htm#NoticeGiven_]

111 [a04-11788_1ex10d1.htm#NoticeGiven_]

 

 

 

ARTICLE XIII. - TERM [a04-11788_1ex10d1.htm#ArticleXiii_Term]

111 [a04-11788_1ex10d1.htm#ArticleXiii_Term]

 

 

 

13.1 [a04-11788_1ex10d1.htm#TerminationOfRevol]

Termination of Revolving Credit. [a04-11788_1ex10d1.htm#TerminationOfRevol]

111 [a04-11788_1ex10d1.htm#TerminationOfRevol]

 

 

 

13.2 [a04-11788_1ex10d1.htm#ActionsOnTermination_]

Actions On Termination. [a04-11788_1ex10d1.htm#ActionsOnTermination_]

111 [a04-11788_1ex10d1.htm#ActionsOnTermination_]

 

 

 

ARTICLE XIV. - GENERAL [a04-11788_1ex10d1.htm#ArticleXiv_General]

112 [a04-11788_1ex10d1.htm#ArticleXiv_General]

 

 

 

14.1 [a04-11788_1ex10d1.htm#ProtectionOfCollateral_]

Protection of Collateral. [a04-11788_1ex10d1.htm#ProtectionOfCollateral_]

112 [a04-11788_1ex10d1.htm#ProtectionOfCollateral_]

 

 

 

14.2 [a04-11788_1ex10d1.htm#Publicity_]

Publicity. [a04-11788_1ex10d1.htm#Publicity_]

112 [a04-11788_1ex10d1.htm#Publicity_]

 

 

 

14.3 [a04-11788_1ex10d1.htm#SuccessorsAndAssigns_]

Successors and Assigns. [a04-11788_1ex10d1.htm#SuccessorsAndAssigns_]

112 [a04-11788_1ex10d1.htm#SuccessorsAndAssigns_]

 

 

 

14.4 [a04-11788_1ex10d1.htm#Severability_]

Severability. [a04-11788_1ex10d1.htm#Severability_]

112 [a04-11788_1ex10d1.htm#Severability_]

 

 

 

14.5 [a04-11788_1ex10d1.htm#AmendmentsCourseOfDealing_]

Amendments; Course of Dealing.
[a04-11788_1ex10d1.htm#AmendmentsCourseOfDealing_]

112 [a04-11788_1ex10d1.htm#AmendmentsCourseOfDealing_]

 

iv

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

 

14.6 [a04-11788_1ex10d1.htm#PowerOfAttorney_]

Power of Attorney. [a04-11788_1ex10d1.htm#PowerOfAttorney_]

113 [a04-11788_1ex10d1.htm#PowerOfAttorney_]

 

 

 

14.7 [a04-11788_1ex10d1.htm#ApplicationOfProceeds_]

Application of Proceeds. [a04-11788_1ex10d1.htm#ApplicationOfProceeds_]

113 [a04-11788_1ex10d1.htm#ApplicationOfProceeds_]

 

 

 

14.8 [a04-11788_1ex10d1.htm#IncreasedCosts_]

Increased Costs. [a04-11788_1ex10d1.htm#IncreasedCosts_]

113 [a04-11788_1ex10d1.htm#IncreasedCosts_]

 

 

 

14.9 [a04-11788_1ex10d1.htm#CostsAndExpenses]

Costs and Expenses of the Agent and Lenders.
[a04-11788_1ex10d1.htm#CostsAndExpenses]

114 [a04-11788_1ex10d1.htm#CostsAndExpenses]

 

 

 

14.10 [a04-11788_1ex10d1.htm#CopiesAndFacsimiles_]

Copies and Facsimiles. [a04-11788_1ex10d1.htm#CopiesAndFacsimiles_]

115 [a04-11788_1ex10d1.htm#CopiesAndFacsimiles_]

 

 

 

14.11 [a04-11788_1ex10d1.htm#NewYorkLaw_]

New York Law. [a04-11788_1ex10d1.htm#NewYorkLaw_]

115 [a04-11788_1ex10d1.htm#NewYorkLaw_]

 

 

 

14.12 [a04-11788_1ex10d1.htm#ConsentToJurisdiction_]

Consent to Jurisdiction. [a04-11788_1ex10d1.htm#ConsentToJurisdiction_]

115 [a04-11788_1ex10d1.htm#ConsentToJurisdiction_]

 

 

 

14.13 [a04-11788_1ex10d1.htm#Indemnification_]

Indemnification. [a04-11788_1ex10d1.htm#Indemnification_]

116 [a04-11788_1ex10d1.htm#Indemnification_]

 

 

 

14.14 [a04-11788_1ex10d1.htm#RulesOfConstruction_]

Rules of Construction. [a04-11788_1ex10d1.htm#RulesOfConstruction_]

116 [a04-11788_1ex10d1.htm#RulesOfConstruction_]

 

 

 

14.15 [a04-11788_1ex10d1.htm#Intent_]

Intent. [a04-11788_1ex10d1.htm#Intent_]

118 [a04-11788_1ex10d1.htm#Intent_]

 

 

 

14.16 [a04-11788_1ex10d1.htm#Participations_]

Participations. [a04-11788_1ex10d1.htm#Participations_]

118 [a04-11788_1ex10d1.htm#Participations_]

 

 

 

14.17 [a04-11788_1ex10d1.htm#RightOf]

Right of Set-Off. [a04-11788_1ex10d1.htm#RightOf]

119 [a04-11788_1ex10d1.htm#RightOf]

 

 

 

14.18 [a04-11788_1ex10d1.htm#PledgesToFederal]

Pledges To Federal Reserve Banks. [a04-11788_1ex10d1.htm#PledgesToFederal]

119 [a04-11788_1ex10d1.htm#PledgesToFederal]

 

 

 

14.19 [a04-11788_1ex10d1.htm#MaximumInterestRate_]

Maximum Interest Rate. [a04-11788_1ex10d1.htm#MaximumInterestRate_]

119 [a04-11788_1ex10d1.htm#MaximumInterestRate_]

 

 

 

14.20 [a04-11788_1ex10d1.htm#Waivers_]

Waivers. [a04-11788_1ex10d1.htm#Waivers_]

119 [a04-11788_1ex10d1.htm#Waivers_]

 

 

 

14.21 [a04-11788_1ex10d1.htm#Counterparts_]

Counterparts. [a04-11788_1ex10d1.htm#Counterparts_]

120 [a04-11788_1ex10d1.htm#Counterparts_]

 

 

 

14.22 [a04-11788_1ex10d1.htm#ElectronicSubmissions_]

Electronic Submissions. [a04-11788_1ex10d1.htm#ElectronicSubmissions_]

120 [a04-11788_1ex10d1.htm#ElectronicSubmissions_]

 

 

 

14.23 [a04-11788_1ex10d1.htm#FleetRetail]

Fleet Retail Group, Inc. as Agent. [a04-11788_1ex10d1.htm#FleetRetail]

121 [a04-11788_1ex10d1.htm#FleetRetail]

 

 

 

14.24 [a04-11788_1ex10d1.htm#JointBorrower]

Joint Borrower Provisions. [a04-11788_1ex10d1.htm#JointBorrower]

121 [a04-11788_1ex10d1.htm#JointBorrower]

 

 

 

14.25 [a04-11788_1ex10d1.htm#Transitional]

Transitional Arrangements. [a04-11788_1ex10d1.htm#Transitional]

125 [a04-11788_1ex10d1.htm#Transitional]

 

 

 

14.26 [a04-11788_1ex10d1.htm#Confidentiality_]

Confidentiality. [a04-11788_1ex10d1.htm#Confidentiality_]

125 [a04-11788_1ex10d1.htm#Confidentiality_]

 

v

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

 

EXHIBITS

 

2.7

:

SwingLine Note

 

 

 

2.9

:

Revolving Credit Note

 

 

 

2.22

:

Revolving Credit Lenders’ Commitments

 

 

 

4.2

:

Affiliates

 

 

 

4.3

:

Trade Names

 

 

 

4.6(a)

:

Locations, Leases, and Landlords

 

 

 

4.6(c)

 

Form of Landlord Waiver

 

 

 

4.7(a)

:

Encumbrances

 

 

 

4.7(d)

:

Third Party Bailees

 

 

 

4.8

:

Indebtedness

 

 

 

4.9

:

Insurance Policies

 

 

 

4.10

:

Licenses; Material Contracts

 

 

 

4.11

:

Capital Leases

 

 

 

4.15

:

Taxes

 

 

 

4.17

:

ERISA

 

 

 

4.18

:

Environmental Compliance

 

 

 

4.19

:

Litigation

 

 

 

4.20

:

Investments

 

 

 

5.4

:

Form of Borrowing Base Certificate

 

 

 

5.9

:

Officer’s Compliance Certificate

 

 

 

5.12(a)

:

Financial Performance Covenants

 

 

 

5.12(b)

:

Business Plan

 

 

 

7.1

:

DDA’s

 

 

 

7.2

:

Credit Card Arrangements

 

 

 

8.3(d)

:

Investment Property

 

vi

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

 

AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT

 

October 15, 2004

 

THIS AGREEMENT is made between

 

 

Fleet Retail Group, Inc., a Delaware corporation, with offices at 40 Broad
Street, Boston, Massachusetts  02109, as agent (in such capacity, herein the
“Administrative Agent”) for the benefit of the Lenders, on a Pro Rata basis,
based upon each Lender’s Percentage Commitment, who are, at present, those
financial institutions identified on the signature pages of this Agreement and
who in the future are those Persons (if any) who become a “Lender” in accordance
with the provisions of Article VII of the Agency Agreement;

 

and

 

Fleet Retail Group, Inc., a Delaware corporation, with offices at 40 Broad
Street, Boston, Massachusetts  02109, as agent (in such capacity, herein the
“Collateral Agent”) for the benefit of the Lenders and the Administrative Agent,

 

and

 

Cave Springs, Inc., a Delaware corporation (collectively, with the Lead
Borrower, the “Borrowers” and each individually, a “Borrower”), which has its
principal executive offices at 456 North Fifth Street, Philadelphia,
Pennsylvania  19123,

 

Mothers Work, Inc., a Delaware corporation with its principal executive offices
at 456 North Fifth Street, Philadelphia, Pennsylvania  19123 (the “Lead
Borrower” and a “Borrower”),

 

and

 

Mothers Work Canada, Inc., a Delaware corporation (“Guarantor”), which has its
principal executive offices at 456 North Fifth Street, Philadelphia,
Pennsylvania 19123,

 

in consideration of the mutual covenants contained herein and benefits to be
derived herefrom,

 

WITNESSETH:

 

1

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

 

ARTICLE I. - DEFINITIONS:

 

As herein used, the following terms have the following meanings or are defined
in the section of this Agreement so indicated:

 

“Acceleration”:  With respect to any Indebtedness, its becoming due and payable
prior to its stated maturity.  Derivations of the word “Acceleration” (such as
“Accelerate”) are used with like meaning in this Agreement.

 

“Accounts” and “Accounts Receivable”   “Accounts” as defined in the UCC, and
also all:  accounts, accounts receivable, receivables, and rights to payment
(whether or not earned by performance) for: property that has been or is to be
sold, leased, licensed, assigned, or otherwise disposed of; services rendered or
to be rendered; a policy of insurance issued or to be issued; a secondary
obligation incurred or to be incurred; energy provided or to be provided; for
the use or hire of a vessel; arising out of the use of a credit or charge card
or information contained on or used with that card; winnings in a lottery or
other game of chance; and also all Inventory which gave rise thereto, and all
rights associated with such Inventory, including the right of stoppage in
transit; all reclaimed, returned, rejected or repossessed Inventory (if any) the
sale of which gave rise to any Account.

 

“ACH”:  Automated clearing house.

 

“Account Debtor”:  Has the meaning given that term in the UCC.

 

“Administrative Agent”:  Defined in the Preamble.

 

“Affiliate”:

 

(a)           With respect to any two Persons, a relationship in which (i) one
holds, directly or indirectly, not less than Twenty-Five Percent (25%) of the
capital stock, beneficial interests, partnership interests, or other equity
interests of the other; or (ii) one has, directly or indirectly, the right,
under ordinary circumstances, to elect a majority of the directors (or other
body or Person who has those powers customarily vested in a board of directors
of a corporation); or (iii) the same third Person holds, directly or indirectly,
not less than Twenty-Five Percent (25%) of their respective capital stock,
beneficial interests, partnership interests or other equity interests; or has
directly or indirectly the right to elect the majority of directors of both such
parties; or

 

(b)           Any corporation, limited liability company, trust, partnership,
joint venture, or other enterprise which: is a parent, brother-sister,
subsidiary, or affiliate, of any Obligor; has such enterprise’s tax returns or
financial statements consolidated with the Lead Borrower’s; is a member of the

 

2

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

 

same controlled group of corporations (within the meaning of Section 1563(a)(1),
(2) and (3) of the Internal Revenue Code of 1986, as amended from time to time)
of which the Lead Borrower is a member; controls or is controlled by the Lead
Borrower.

 

“Agreement”:  This Loan and Security Agreement, as it may be modified, amended,
supplemented or restated from time to time.

 

“Agency Agreement”:  That certain Agency Agreement dated October 15, 2004, by
and among the Administrative Agent, the Collateral Agent, and the Lenders.

 

“Agent”:  When not preceded by “Administrative” or “Collateral”, the terms
“Agent” or “Agents” refer collectively and individually to the Administrative
Agent and the Collateral Agent.

 

 “Agent Fee Letter”:  That certain letter of even date by and between the
Administrative Agent and the Borrowers concerning Administrative Agent’s and
Collateral Agent’s fees.

 

“Agent’s Rights and Remedies”:  Defined in Section 11.6.

 

“Appraised Inventory Liquidation Percentage”: That percentage, obtained by the
Collateral Agent from the then most recent appraisal of the Borrowers’ Inventory
obtained by the Collateral Agent, to reflect the appraiser’s estimate of the
consolidated net recovery (liquidation value) as a percentage of cost including
raw materials.

 

“Approved Electronic Form Notice”:  Defined in Section 14.22.

 

“Approved Electronic Form”:  Defined in Section 14.22.

 

“Acquired Real Property”: Any real property acquired by the Borrowers after the
date hereof, other than the Headquarters Facility.

 

“Authorized Officer”:  The Lead Borrower’s President, Treasurer or Chief
Financial Officer duly authorized by the Lead Borrower’s Board of Directors, or,
in the case of Borrowing Base Certificates, such person as is authorized by the
Board of Directors of the Borrower.

 

“Availability”:      The sum of:

 

(a)           The Borrowing Base

 

Minus

 

(b)           The aggregate unpaid balance of the Loan Account

 

3

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

 

Minus

 

(c)           The aggregate undrawn Stated Amount of all then outstanding L/C’s.

 

“Availability Reserves”:  Such reserves as the Collateral Agent from time to
time determines in the Collateral Agent’s reasonable discretion as being
appropriate (determined in accordance with customary credit considerations) to
reflect the impediments to the Collateral Agent’s ability to realize upon the
Collateral.  Without limiting the generality of the foregoing, Availability
Reserves may include (but are not limited to) reserves based on the following:

 

(I)            RENT FOR ANY LOCATION IN A LANDLORD STATE WITH RESPECT TO WHICH A
LANDLORD WAIVER HAS NOT BEEN RECEIVED BY THE COLLATERAL AGENT (WHICH INITIALLY
SHALL BE ONE (1) MONTH RENT FOR ANY SUCH LOCATION).

 

(II)           CUSTOMER CREDIT LIABILITIES (THE AVAILABILITY RESERVE FOR WHICH
INITIALLY SHALL BE UP TO THIRTY-THREE PERCENT (33%) OF CUSTOMER CREDIT
LIABILITIES AND WHICH MAY BE ADJUSTED BASED ON CHANGES IN THE OPERATION OF THE
BORROWER’S BUSINESS).

 

(III)          TAXES AND OTHER GOVERNMENTAL CHARGES, INCLUDING, AD VALOREM,
PERSONAL PROPERTY, AND OTHER TAXES WHICH MIGHT HAVE PRIORITY OVER THE COLLATERAL
INTERESTS OF THE COLLATERAL AGENT IN THE COLLATERAL.

 

(IV)          PAYABLES (BASED UPON PAYABLES WHICH ARE PAST THE BORROWER’S NORMAL
TRADE TERMS).

 

“Bankruptcy Code”:  Title 11, U.S.C., as amended from time to time.

 

“Base”:    The Base is the publicly announced prime rate from time to time by
FNB (or any successor in interest to FNB)(which is not intended to be FNB’s
lowest or most favorable rate in effect at any time).  In the event that said
bank (or any such successor) ceases to announce such a rate, “Base” shall refer
to that rate or index announced or published from time to time as the
Administrative Agent, in good faith, designates as the functional equivalent to
said rate.  Any change in “Base” shall be effective, for purposes of the
calculation of interest due hereunder, when such change is made effective
generally by the bank on whose rate or index “Base” is being set.  In all
events, interest that is determined by reference to Base (or any successor to
Base) shall be calculated on a 365/366-day year and actual days elapsed.

 

“Base Margin”:  Zero Percent (0.00 %).

 

“Base Margin Loan”:  Each Revolving Credit Loan while bearing interest at the
Base Margin Rate.

 

“Base Margin Rate”:  The aggregate of Base plus the applicable Base Margin.

 

4

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

 

“Blocked Account”:  Defined in Section 7.3(a)(ii).

 

“Blocked Account Agreement”:  An agreement, in form satisfactory to the
Collateral Agent, which agreement recognizes the Collateral Agent’s Collateral
Interest in the contents of the DDA which is the subject of such agreement and
agrees that such contents shall be transferred only to the Concentration Account
or as otherwise instructed by the Collateral Agent.

 

“Borrowers”:  Defined in the Preamble.

 

“Borrowing Base”:             The lesser of:

 

(a)           the lesser of the Revolving Credit Loan Ceiling or Borrowing Base
A;

 

or

 

(b)           the Borrowing Base B.

 

“Borrowing Base A”:  The sum of:

 

(a)           The lesser of (1) 50% of the sum of clauses (b), (c), (d), and (e)
below or (2) the sum of:

 

(i)      the face amount of Eligible Accounts arising from the sale of goods in
wholesale arrangements multiplied by Eighty-Five Percent (85%), plus

 

(ii)     the face amount of Eligible Accounts arising from the leasing of a
customer list, marketing services, or an Account owing to a Borrower from an
account debtor operating a department or specialty store or other location in
which a Borrower leases or licenses a portion of the space in such store 
(provided, however, that customer list or marketing services Accounts shall be
included only to the extent that they do not exceed $5,000,000 in the aggregate)
multiplied by Eighty Percent (80%),

 

Plus

 

(b)           the face amount of Eligible Credit Card Receivables multiplied by
the Credit Card Advance Rate;

 

Plus

 

(c)           the sum of:

 

5

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(i) the Cost of Eligible Raw Materials Inventory (net of Inventory Reserves)
multiplied by the applicable Inventory Advance Rate,

 

(ii) (A) the sum of (I) the Cost of Eligible Finished Goods Inventory (net of
Inventory Reserves) not located in department or specialty stores or other
locations in which a Borrower leases or licenses a portion of the space in such
store; plus (II) the lesser of (a) 18% of the sum of the Cost of Eligible
Finished Goods Inventory, Eligible L/C Inventory, and Eligible In-Transit
Inventory (in each case, net of Inventory Reserves) or (b) the Cost of Eligible
Finished Goods Inventory (net of Inventory Reserves) located in department or
specialty stores or other locations in which a Borrower leases or licenses a
portion of the space in such store multiplied by (B) the applicable Inventory
Advance Rate, and

 

(iii) the lesser of $20,000,000 or the sum of (A) Cost of Eligible L/C Inventory
(net of Inventory Reserves) multiplied by the applicable Inventory Advance Rate;
plus (B) the Cost of Eligible In-Transit Inventory (net of Inventory Reserves)
multiplied by the applicable Inventory Advance Rate;

 

Plus

 

(d)           (i) prior to the date that the Third Mortgage Conditions have been
satisfied, the lesser of (i) the Determined Value of the Eligible Fixed Assets
multiplied by the Real Estate Advance Rate; or (ii) the Stated Amount of the
Special Purpose Credit; or

 

(ii) thereafter, the amount equal to (A) the Determined Value of the Eligible
Fixed Assets multiplied by the Real Estate Advance Rate; less (B) the Second
Mortgage Cap;

 

Plus

 

(e)           the sum of:

 

(i) 100% of Eligible Liquid Collateral consisting of a money market fund held by
FNB whose assets entirely consist of cash;

 

PLUS

 

(ii) 90% of Eligible Liquid Collateral consisting of a money market fund whose
assets entirely consist of cash (other than a fund held by FNB);

 

6

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PLUS

 

(iii) 100% of Eligible Liquid Collateral consisting of certificates of deposit
with maturities of 365 days or less from the date of acquisition issued by FNB
(or a money market fund held by FNB whose assets consist entirely of cash and
certificates of deposit with maturities of 365 days or less from the date of
acquisition issued by a FDIC-insured financial institution);

 

PLUS

 

(iv) 90% of Eligible Liquid Collateral consisting of certificates of deposit
with maturities of 365 days or less from the date of acquisition issued by a
FDIC-insured financial institution other than FNB (or a money market fund (other
than a fund held by FNB) whose assets consist entirely of cash and certificates
of deposit with maturities of 365 days or less from the date of acquisition
issued by FDIC-insured financial institutions);

 

PLUS

 

(v) 90% of Eligible Liquid Collateral consisting of securities with maturities
of 180 days or less from the date of acquisition issued or fully guaranteed or
insured as to payment of principal and interest by the United States Treasury
held by FNB (or a money market fund held by FNB whose assets consist entirely of
cash, securities with maturities of 180 days or less from the date of
acquisition issued or fully guaranteed or insured as to payment of principal and
interest by the United States Treasury, and certificates of deposit with
maturities of 365 days or less from the date of acquisition issued by a
FDIC-insured financial institution);

 

PLUS

 

(vi) 85% of Eligible Liquid Collateral consisting of securities (not held by
FNB) with maturities of 180 days or less from the date of acquisition issued or
fully guaranteed or insured as to payment of principal and interest by the
United States Treasury (or a money market fund (other than a fund held by FNB)
whose assets consist entirely of cash, securities with maturities of 180 days or
less from the date of acquisition issued or fully guaranteed or insured as to

 

7

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payment of principal and interest by the United States Treasury, and
certificates of deposit with maturities of 365 days or less from the date of
acquisition issued by a FDIC-insured financial institution);

 

PLUS

 

(vii) 80% of Eligible Liquid Collateral consisting of senior unsecured bonds of
a domestic corporate issuer rated at least A- by a rating agency acceptable to
the Collateral Agent with maturities of 2 years or less from the date of
acquisition held by FNB (or a money market fund held by FNB whose assets consist
entirely of cash, senior unsecured bonds of a domestic corporate issuer rated at
least A- by a rating agency acceptable to the Collateral Agent with maturities
of 2 years or less from the date of acquisition, securities with maturities of
180 days or less from the date of acquisition issued or fully guaranteed or
insured as to payment of principal and interest by the United States Treasury,
and certificates of deposit with maturities of 365 days or less from the date of
acquisition issued by a FDIC-insured financial institution);

 

PLUS

 

(viii) 75% of Eligible Liquid Collateral consisting of senior unsecured bonds
(not held by FNB) of a domestic corporate issuer rated at least A- by a rating
agency acceptable to the Collateral Agent with maturities of 2 years or less
from the date of acquisition (or a money market fund (other than a fund held by
FNB) whose assets consist entirely of cash, senior unsecured bonds of a domestic
corporate issuer rated at least A- by a rating agency acceptable to the
Collateral Agent with maturities of 2 years or less from the date of
acquisition, securities with maturities of 180 days or less from the date of
acquisition issued or fully guaranteed or insured as to payment of principal and
interest by the United States Treasury, and certificates of deposit with
maturities of 365 days or less from the date of acquisition issued by a
FDIC-insured financial institution);

 

Minus

 

(f)            Availability Reserves.

 

8

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“Borrowing Base B”:  At any time that the Indenture restricts Indebtedness, the
sum that the Lead Borrower and those Obligors that are Restricted Subsidiaries
(as defined in the Indenture Agreement) are permitted to incur as Indebtedness
(as defined in the Indenture Agreement) hereunder on a consolidated basis
without violating the Indenture Agreement.

 

“Borrowing Base Certificate”:  Defined in Section 5.4.

 

“Business Day”:  Any day (with any references herein to time of day requirements
meaning such times based on Eastern time) other than (a) Saturday or Sunday; (b)
any day on which banks in Boston, Massachusetts or New York City, New York,
generally are not open to the general public for the purpose of conducting
commercial banking business; or (c) a day on which the principal office of the
Administrative Agents or any Lender is not open to the general public to conduct
business.

 

“Business Plan”:  The Borrowers’ business plan annexed hereto as EXHIBIT 5.12(b)
and any revision, amendment, or update of such business plan, provided such
revision, amendment, or update has been accepted in writing by the
Administrative Agent.

 

“Capital Adequacy Demand”:  Defined in Section 14.8.

 

“Capital Adequacy Charge”:  Defined in Section 14.8.

 

“Capital Expenditures”:  The expenditure of funds or the incurrence of
liabilities which are capitalized in accordance with GAAP.

 

“Capital Lease”:  Any lease which is capitalized in accordance with GAAP.

 

“Certificate”:  Any certificate in form and substance acceptable to the Agents. 
Each Certificate shall be deemed to be given under oath by the signatory to such
Certificate.

 

“Change in Control”:  The occurrence of any of the following:

 

(a)           The failure of the Lead Borrower to directly or indirectly own,
beneficially and of record, 100% of the capital stock of all of the other
Obligors; provided, however, it shall not constitute a “Change in Control” under
this Agreement if the Lead Borrower no longer owns 100% of the capital stock of
any other Obligor as a result of a merger or consolidation of such other Obligor
with and into Lead Borrower, with Lead Borrower being the survivor thereof.

 

(b)           The acquisition after the date hereof, by any group of persons
(within the meaning of the Securities Exchange Act of 1934, as amended) or by
any Person, of beneficial ownership (within the meaning of Rule

 

9

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13d-3 of the Securities Exchange Act of 1934, as amended), directly or
indirectly, of 50% or more of the issued and outstanding capital stock of any
Obligor having the right to vote for the election of directors of such Obligor.

 

(c)           More than half of the persons who were directors of the Lead
Borrower on the first day of any period consisting of Twelve (12) consecutive
calendar months (the first of which Twelve (12) month periods commencing with
the first day of the month during which this Agreement was executed), cease, for
any reason other than death or disability, to be directors of the Lead Borrower,
and the board of directors as thereafter constituted is not acceptable to the
Administrative Agent.

 

“Chattel Paper”:  Has the meaning given that term in the UCC.

 

“Closing Date”:  The date on which all conditions precedent in Article III of
this Agreement are satisfied and the initial Revolving Credit Loans are made
under this Agreement.

 

“Collateral”:  Defined in Section 8.1.

 

“Collateral Agent”:  Defined in the Preamble.

 

“Collateral Interest”:  Any interest in property to secure an obligation,
including, without limitation, a security interest, mortgage, and deed of trust.

 

“Commitment”:  With respect to each Lender, that respective Lender’s Dollar
Commitment.

 

“Concentration Account”:  Defined in Section 7.3(a)(i).

 

“Consolidated”:  When used to modify a financial term, test, statement, or
report, refers to the application or preparation of such term, test, statement,
or report (as applicable) based upon the consolidation, in accordance with GAAP,
with any adjustments or modifications acceptable to the Administrative Agent, of
the financial condition or operating results of the Borrowers.

 

“Cost”:

 

The calculated cost of purchases, based upon the Borrowers’ accounting
practices, on a first-in, first-out (FIFO) basis, known to the Collateral Agent,
which practices are in effect on the date on which this Agreement was executed
as such calculated cost is determined from invoices received by the Borrowers;
such Borrower’s purchase journal; or such Borrower’s stock ledger

 

10

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provided that “Cost” does not include Inventory capitalization costs or other
non-purchase price charges (such as freight and UNICAP) used in the Borrowers’
calculation of cost of goods sold.

 

“Costa Rican Facilities”:  Includes (i) Property # A F 007368-000; Industrial
Unit A2, Alajuela, District 09 Rio Segundo, County 01, (ii) Property # A
182290-00, Alajuela, District 02 San Jose, County 01, (iii) Property # A
205774-000, Alajuela, District 02 San Jose, County 01, (iv) Property # A
213743-000, Alajuela, District 01 Palmares, County 07, (v) Property # A
159001-00, Alajuela, District 01 Palmares, County 07, (vi) Property # A
219383-000, Alajuela, District 01 Palmares, County 07, (vii) Property # A
215113-000, Alajuela, District 01 Palmares, County 07, and (viii) Property # P
084214-000, lot for construction, Puntarenas, District 01 Quepos, County 06.

 

“Costa Rican Transaction”:  The sale or lease of the Costa Rican Facilities
individually or as a whole.

 

“Costs of Collection”:  Includes, without limitation, all attorneys’ reasonable
fees and reasonable out-of-pocket expenses incurred by the Agents’ attorneys,
and all reasonable costs incurred by any Agent including, without limitation,
reasonable costs and expenses associated with any bankruptcy or insolvency
proceeding or travel on behalf of any Agent, where such costs and expenses are
directly or indirectly related to or in respect of such Agent’s:  administration
and management of the Liabilities; negotiation, documentation, and amendment of
any Loan Document; or efforts to preserve, protect, collect, or enforce the
Collateral, the Liabilities, and/or the Agent’s Rights and Remedies and/or any
of the rights and remedies of any such Agent against or in respect of any
guarantor or other person liable in respect of the Liabilities (whether or not
suit is instituted in connection with such efforts).  “Costs of Collection”
shall also include the reasonable costs and expenses similar to the foregoing of
Lender’s Special Counsel.  The Costs of Collection are Liabilities, and at the
Administrative Agent’s option may bear interest at the then effective Base
Margin Rate.

 

 “Credit Card Advance Rate”:  Ninety Percent (90%).

 

“Customer Credit Liability”:  Gift certificates, customer deposits, merchandise
credits, layaway obligations, frequent shopping programs, and similar
liabilities of any Borrower to its retail customers and prospective customers.

 

“Customs Broker Agreement”:   A tri-party agreement in form satisfactory to the
Collateral Agent, among the Lead Borrower or any Obligor, and a customs broker
or other carrier, in which the customs broker or other carrier acknowledges that
it has control over and holds the documents evidencing ownership of the subject
Inventory for the benefit of the Collateral Agent and agrees, upon notice from
the

 

11

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Collateral Agent, to hold and dispose of the subject Inventory solely as
directed by the Collateral Agent.

 

“DDA”:  Any checking or other demand depository account maintained by any of the
Borrowers other than an Exempt DDA.

 

“Deposit Account”:  Has the meaning given that term in the UCC.

 

“Determined Value”:  At the relevant time of reference thereto, the appraised
value of such assets on fair market value basis determined by the most recent
appraisal thereof acceptable to the Collateral Agent in its discretion.

 

 “Distributions”:  Includes (i) the payment of any dividends or other
distributions on capital stock of the Lead Borrower (except distributions in
such stock), and (ii) the redemption or acquisition of Securities.

 

“Documents”:  Has the meaning given that term in the UCC.

 

“Documents of Title”:  Has the meaning given that term in the UCC.

 

“Dollar Commitment”:  As set forth on EXHIBIT 2.22, annexed hereto (as such
amounts may change in accordance with the provisions of this Agreement).  The
aggregate of the Dollar Commitments shall not exceed the Revolving Credit Loan
Ceiling.

 

“Domestic Distribution Centers:” The Borrowers’ distribution centers located at
the Headquarters Facility and Naval Yard, Philadelphia, or elsewhere upon prior
written notice to the Collateral Agent.

 

“EBITDA”:  The Borrowers’ Consolidated earnings (excluding extraordinary gains
and gains from the sale of assets other than in the ordinary course of business)
before interest, taxes, depreciation, amortization and other non-cash charges
properly deducted in determining earnings in accordance with GAAP, each as
determined in accordance with GAAP.

 

“Eligible Accounts”:  Includes an Account owing to a Borrower with respect to
(A) the leasing of a customer list or marketing services, (B) an Account owing
to a Borrower arising from a department or specialty store or other location in
which a Borrower leases or licenses a portion of the space in such store, or (C)
a wholesale Account, each of which arose in the ordinary course of a Borrower’s
business from the lease of customer lists, sale of goods or rendition of
services.  Eligible Accounts shall be determined without duplication of Eligible
Credit Card Receivables.  In no event shall Accounts purchased by a Borrower or
held by a Borrower whose stock has been purchased by a Borrower constitute
Eligible Accounts until after a determination thereof has been made by the
Collateral Agent in its reasonable discretion (determined in accordance with
customary

 

12

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credit considerations).  Without limiting the generality of the foregoing, no
Account shall be an Eligible Account if:

 

(i)            it arises out of a sale made by a Borrower to a Subsidiary or an
Affiliate of a Borrower or to a Person controlled by an Affiliate of a Borrower;
or

 

(ii)           (a) if arising under clause (A) above, it is due or unpaid more
than 60 days after the original due date shown on the invoice or more than 90
days after the date of such invoice;

 

(b) if arising under clause (B) above, it is due or unpaid more than 30 days
from the date such account is owing under the applicable agreement; or

 

(c) if arising under clause (C) above, it is due or unpaid more than 60 days
after the original due date shown on the invoice or more than 120 days after the
date of such invoice;

 

(iii)          50% or more of the Accounts from the Account Debtor are not
deemed Eligible Accounts hereunder; or

 

(iv)          the total unpaid Accounts of the Account Debtor exceed 20% of the
net amount of all Eligible Accounts, to the extent of such excess (other than
those Account Debtors as to which the Collateral Agent has agreed in writing
that this clause (iv) does not apply); or

 

(v)           any covenant, representation or warranty contained in the
Agreement with respect to such Account has been breached; or

 

(vi)          the Account Debtor is also a Borrower’s creditor or supplier, or
the Account Debtor has disputed liability with respect to such Account, or the
Account Debtor has made any claim with respect to any other Account due from
such Account Debtor to any Borrower or the Account otherwise is or may become
subject to any right of setoff by the Account Debtor (but in the case of such
claims or setoff, 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 owed by such Account Debtor may be an Eligible
Account); or

 

(vii)         the Account Debtor has commenced a voluntary case under the
federal bankruptcy laws, as now constituted or hereafter amended, or made an
assignment for the benefit of creditors, or a decree or order for relief has
been entered by a court having jurisdiction in the premises in respect of the
Account Debtor in an involuntary case under the federal bankruptcy laws, as now
constituted or hereafter amended, or any other petition or other application for
relief under the federal bankruptcy laws has been filed against the Account
Debtor, or if the Account Debtor has failed, suspended business, ceased to be
solvent, or consented to or suffered a

 

13

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receiver, trustee, liquidator or custodian to be appointed for it or for all or
a significant portion of its assets or affairs; or

 

(viii)        it arises from a sale to an Account Debtor outside the United
States, unless the sale is on letter of credit, guaranty or acceptance terms, in
each case acceptable to Collateral Agent in its sole discretion; or

 

(ix)           it arises from a sale to the Account Debtor on a bill-and-hold,
guaranteed sale, sale-or-return, sale-on-approval, consignment or any other
repurchase or return basis; or

 

(x)            the Account Debtor is the United States of America or any
department, agency or instrumentality thereof, unless such Borrower assigns its
right to payment of such Account to Collateral Agent for the benefit of the
Lenders, in a manner satisfactory to Collateral Agent, so as to comply with the
Assignment of Claims Act of 1940 (31 U.S.C. §§ 203 et seq., as amended); or

 

(xi)           the Account is not at all times subject to Lender’s duly
perfected, first priority security interest and no other Encumbrance other than
a Permitted Encumbrance; or

 

(xii)          the goods giving rise to such Account have not been delivered to
and accepted by the Account Debtor or the services giving rise to such Account
have not been performed by a Borrower and accepted by the Account Debtor or the
Account otherwise does not represent a final sale; or

 

(xiii)         the Account is evidenced by chattel paper or an Instrument of any
kind, or has been reduced to judgment; or

 

(xiv)        such Borrower has made any agreement with the Account Debtor for
any deduction therefrom, except for discounts or allowances which are made in
the ordinary course of business for prompt payment and which discounts or
allowances are reflected in the calculation of the face value of each invoice
related to such Account; or

 

(xv)         such Borrower has made an agreement with the Account Debtor to
extend the time of payment thereof in the ordinary course of business (provided,
however that such Account shall cease to be an Eligible Account if it is due or
unpaid beyond the applicable limited period of days after the original invoice
date or original due date set forth in clause (ii) above); or

 

(xvi)        the Account is otherwise deemed unacceptable by the Collateral
Agent in its reasonable discretion (determined in accordance with customary
credit considerations).

 

14

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The criteria for Eligible Accounts set forth above may only be changed and any
new criteria for Eligible Accounts may only be established by Collateral Agent
in its reasonable credit judgment (determined in accordance with customary
credit considerations) 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 Collateral Agent has no
written notice thereof from Borrower 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 Collateral
Agent.  Any Accounts which are not Eligible Accounts shall nevertheless be part
of the Collateral.

 

“Eligible Credit Card Receivables”:  Accounts due on a non-recourse basis from
major credit card processors (which, if due on account of a private label credit
card program, are deemed in the reasonable discretion of the Collateral Agent to
be eligible (determined in accordance with customary credit considerations)),
which accounts have been outstanding for no more than Five (5) Business Days.

 

 “Eligible Finished Goods Inventory”: Eligible Inventory consisting of finished
goods.

 

“Eligible Fixed Assets”:  The Headquarters Facility to the extent that it is (a)
owned by the Borrowers, (b) subject to a Mortgage, (c) properly insured in
accordance with the provisions of Section 4.9, and (d) not encumbered by an
Encumbrance other than Permitted Encumbrances.

 

“Eligible Inventory”:  Borrowers’ Inventory in the United States, at such
locations, and of such types, character, quality and quantities, as the
Collateral Agent in its reasonable discretion from time to time determines to be
acceptable for inclusion in the calculation of the Borrowing Base purposes
(determined in accordance with customary credit considerations), as to which the
Collateral Agent has a perfected security interest that is prior and superior to
all claims and all Encumbrances (other than Permitted Encumbrances, subject to
the Collateral Agent’s rights to establish Reserves therefore).  In no event
shall Inventory purchased by a Borrower out of the ordinary course or held by a
Borrower whose common stock has been purchased by a Borrower constitute Eligible
Inventory until after the results of an appraisal thereof satisfactory to
Collateral Agent in its discretion has been performed by an appraiser
satisfactory to Collateral Agent in its reasonable discretion and the
determination thereof has been made by the Collateral Agent in its reasonable
discretion (determined in accordance with customary credit considerations).

 

In no event, shall  “Eligible Inventory” include: (i) any non-merchandise
inventory (such as labels, bags, and packaging materials); (ii) damaged goods,
return to vendor merchandise, packaways, consigned inventory, and other similar
categories of Goods; (iii) any Inventory located in any store of the Borrowers
which has been closed for business for more than 20 days in any fiscal quarter;
and (iv) work in process.

 

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“Eligible In-Transit Inventory”: That portion of the Borrowers’ Inventory
(without duplication of other Eligible Inventory and Eligible L/C Inventory) 
that meets the following criteria, which criteria may be revised by the
Collateral Agent in its reasonable discretion (determined in accordance with
customary credit considerations) from time to time after the Closing Date:

 

(a)           such Inventory currently is in transit (whether by vessel, air, or
land) from a location outside of the continental United States to one of the
Borrower’s Domestic Distribution Centers, which is expected to be delivered to
such Domestic Distribution Center and received by such Borrower within 30 days,

 

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

 

(c)           such Inventory is insured against types of loss, damage, hazards,
and risks, and in amounts, satisfactory to the Collateral Agent in its
reasonable discretion,

 

(e)           such Inventory either

 

(1)   is the subject of a negotiable bill of lading that (x) is consigned to
Lender (either directly or by means of endorsements), (y) was issued by the
carrier respecting the subject Inventory, and (z) either is (I) in the
possession of Collateral Agent or a customs broker or (II) if such Inventory was
the subject of a documentary L/C, the subject of a telefacsimile copy that
Collateral Agent has received from the Issuer which issued the LC and as to
which Collateral Agent also has received a confirmation from such Issuer that
such document is in-transit by air-courier to Collateral Agent or a customs
broker, or

 

(2)   is the subject of a negotiable cargo receipt and is not the subject of a
bill of lading (other than a negotiable bill of lading consigned to, and in the
possession of, a consolidator or Collateral Agent, or their respective agents)
and such negotiable cargo receipt is (x) consigned to Collateral Agent (either
directly or by means of endorsements), (y) that was issued by a consolidator
respecting the subject Inventory, (z) that either is (I) in the possession of
Collateral Agent or a customs broker, or (II) if such Inventory was the subject
of a documentary L/C, the subject of a telefacsimile copy that Collateral Agent
has received from the Issuer which issued the LC and as to which Collateral
Agent also has received a confirmation from such Issuer that such document is
in-transit by air-courier to Collateral Agent or a customs broker, and

 

(f)            Borrower has provided a Borrowing Base Certificate to Collateral
Agent that certifies that, to the best knowledge of Borrower, such Inventory
meets all of Borrower’s representations and warranties contained in the

 

16

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Loan Documents concerning Eligible Inventory, that Borrower knows of no reason
why such Inventory would not be accepted by the Borrower when it is delivered to
Borrower, and that the shipment as evidenced by the documents conforms to the
related order documents.

 

“Eligible L/C Inventory”:  That portion of the Borrowers’ Inventory (without
duplication of other Eligible Inventory and Eligible In-Transit Inventory) the
purchase of which is supported by a documentary L/C and which is expected to be
delivered to such Domestic Distribution Center and received by such Borrower
within 30 days, provided that

 

(a)           Such Inventory is of such types, character, quality and quantities
as the Collateral Agent in its reasonable discretion (determined in accordance
with customary credit considerations) from time to time determines to be
Eligible Inventory; and

 

(b)           The documentary L/C which relate to such shipment names the
Collateral Agent as consignee of the subject Inventory and the Collateral Agent
has control over the documents which evidence ownership of the subject Inventory
(such as by the providing to the Collateral Agent of a Customs Brokers Agreement
to the Collateral Agent).

 

“Eligible Liquid Collateral”:  Each of the following:

 

(i)  a money market fund whose assets consist entirely of cash, securities with
maturities of 180 days or less from the date of acquisition issued or fully
guaranteed or insured as to payment of principal and interest by the United
States Treasury, and certificates of deposit with maturities of 365 days or less
from the date of acquisition issued by a FDIC-insured financial institution;

 

(ii)  certificates of deposit with maturities of 365 days or less from the date
of acquisition issued by a FDIC-insured financial institution;

 

(iii)  securities with maturities of 180 days or less from the date of
acquisition issued or fully guaranteed or insured as to payment of principal and
interest by the United States Treasury; and

 

(iv)  senior unsecured bonds of a domestic corporate issuer rated at least A- by
a rating agency acceptable to the Collateral Agent with maturities of 2 years or
less from the date of acquisition;

 

in each case only to the extent (i) subject to the Collateral Agent’s first
priority, perfected, valid, and enforceable security interest to secure the
Liabilities; (ii) immediately available to the Collateral Agent; (iii) not
subject to any restriction on their use (other than in favor of Collateral

 

17

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Agent; and (iv) either held by FNB or by another financial institution
acceptable to the Collateral Agent with whom the Collateral Agent and the
applicable Borrower have agreed to a written control agreement in form and
substance satisfactory to Collateral Agent.

 

“Eligible Raw Materials Inventory”: Eligible Inventory consisting of raw
materials .

 

“Employee Benefit Plan”:  As defined in ERISA.

 

“Encumbrance”:  Each of the following:

 

(a)           Any security interest, mortgage, pledge, hypothecation, lien,
attachment, or charge of any kind (including any agreement to give any of the
foregoing); the interest of a lessor under a Capital Lease; conditional sale or
other title retention agreement; sale of Accounts or Chattel Paper; or other
arrangement pursuant to which any Person is entitled to any preference or
priority with respect to the property or assets of another Person or the income
or profits of such other Person or which constitutes an interest in property to
secure an obligation; each of the foregoing whether consensual or non-consensual
and whether arising by way of agreement, operation of law, legal process or
otherwise.

 

(b)           The filing of any financing statement under the UCC or comparable
law of any jurisdiction.

 

“End Date”:  The date upon which both (a) all Liabilities have been indefeasibly
paid in full and (b) all obligations of the Agents and Lenders to make loans and
advances and to provide other financial accommodations to the Borrowers
hereunder shall have been irrevocably terminated.

 

“Environmental Laws”:  All of the following:

 

(a)           Any and all federal, state, local or municipal laws, rules,
orders, regulations, statutes, ordinances, codes, decrees or requirements which
regulate or relate to, or impose any standard of conduct or liability on account
of or in respect to environmental protection matters, including, without
limitation, Hazardous Materials, as are now or hereafter in effect.

 

(b)           The common law relating to damage to Persons or property from
Hazardous Materials.

 

“Equipment”:  Includes, without limitation, Obligors’ Goods which qualify as
“equipment” as defined in the UCC.

 

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“ERISA”:  The Employee Retirement Income Security Act of 1974, as amended,
together with all orders, regulations and interpretations thereunder or related
thereto.

 

“ERISA Affiliate”:  Any Person which is under common control with the Obligors
within the meaning of Section 4001 of ERISA or is part of a controlled group
including the Obligors and which would be treated as a single employer under
Section 414(b), (c), (m), and (o) of the Internal Revenue Code of 1986, as
amended.

 

“Events of Default”:  Defined in Article X.  Each reference to an “Event of
Default” is to an Event of Default that has not duly waived in writing by the
Administrative Agent.  In the event of such due waiver, the so-waived Event of
Default shall be deemed never to have occurred, other than with respect to any
post-default interest which accrued prior to such waiver and with respect to any
reimbursement obligation in respect of any Costs of Collection.

 

“Excess Availability”:  The difference of (a) Availability minus (b) all then
past due obligations of the Borrowers (other than those being contested in good
faith for which adequate reserves have been established by Borrowers), including
accounts payable which are beyond customary trade terms and rent obligations for
leases which are beyond applicable grace periods.

 

“Exempt DDA”:  A depository account maintained by any Obligor, the only contents
of which may be transfers from the Operating Account and actually used solely
(i) for petty cash purposes; or (ii) for payroll and payroll taxes, together
with such other depository accounts agreed to by Collateral Agent in writing as
constituting an Exempt DDA.

 

“Financial Covenant Adjusted Availability”: The sum of:

 

(i)            The lesser of (a) Borrowing Base A; or (b) the sum that the Lead
Borrower and those Obligors that are Restricted Subsidiaries (as defined in the
Indenture Agreement) are permitted to incur as Indebtedness (as defined in the
Indenture Agreement) hereunder on a consolidated basis without violating the
Indenture Agreement.

 

Minus

 

(ii)           The aggregate unpaid balance of the Loan Account

 

Minus

 

(iii)          The aggregate undrawn Stated Amount of all then outstanding
L/C’s.

 

“First Agreement”:  That certain Loan and Security Agreement dated May 24, 1998,
by and between Lead Borrower, Cave Springs and Fleet Capital Corporation,
successor-by-assignment to Fleet Retail Group, Inc., as amended.

 

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“Fiscal Year”:  Each Twelve (12) month accounting period of the Borrowers, which
ends on September 30th of each year.

 

“Fixed Charge Coverage Ratio”:  For any twelve month period, the ratio of
Borrowers’ consolidated (a) EBITDA minus non-financed Capital Expenditures minus
the payment of any dividends or other distributions on capital stock of the Lead
Borrower (except distributions in such stock), to (b) scheduled cash interest
expense, plus scheduled principal payments on account of current maturities of
long term Indebtedness, plus, without duplication, payments for the scheduled
redemption or acquisition of Securities, plus income taxes paid in cash, all as
determined in accordance with GAAP.

 

“Fixtures”:  Has the meaning given that term in the UCC.

 

“FNB”:  Fleet National Bank.

 

“GAAP”:  Principles which are consistent with those promulgated or adopted by
the Financial Accounting Standards Board and its predecessors (or successors) in
effect and applicable to that accounting period in respect of which reference to
GAAP is being made, provided, however, in the event of a Material Accounting
Change, then unless otherwise specifically agreed to by the Lead Borrower and
the Administrative Agent, (a) the Lead Borrower’s compliance with the financial
performance covenants imposed pursuant to Section 5.12 shall be determined as if
such Material Accounting Change had not taken place and (b) the Lead Borrower
shall include, with its monthly, quarterly, and annual financial statements a
schedule, certified by its chief financial officer, on which the effect of such
Material Accounting Change to the statement with which provided shall be
described.

 

“General Intangibles”:  Includes, without limitation, “general intangibles” as
defined in the UCC; and also all: rights to payment for credit extended;
deposits; amounts due to the Obligors; credit memoranda in favor of the
Obligors; warranty claims; tax refunds and abatements; insurance refunds and
premium rebates; all means and vehicles of investment or hedging, including,
without limitation, options, warrants, and futures contracts; records; customer
lists; telephone numbers; goodwill; causes of action; judgments; payments under
any settlement or other agreement; payments or right to receive payments on
account of any transfer of any interest in any Leasehold Interest; literary
rights; rights to performance; royalties; license and/or franchise fees; rights
of admission; licenses; franchises; license agreements, including all rights of
the Obligors to enforce the foregoing; permits, certificates of convenience and
necessity, and similar rights granted by any governmental authority; patents,
patent applications, patents pending, and other intellectual property; internet
addresses and domain names; developmental ideas and concepts; proprietary
processes; blueprints, drawings, designs, diagrams, plans, reports, and charts;
catalogs; manuals; technical data; computer software programs (including the
source and object codes therefor), computer

 

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records, computer software, rights of access to computer record service bureaus,
service bureau computer contracts, and computer data; tapes, disks,
semi-conductors chips and printouts; trade secrets rights, copyrights,
copyrightable materials, copyright registrations and applications, mask work
rights and interests, and derivative works and interests; user, technical
reference, and other manuals and materials; trade names, trademarks, service
marks, and all goodwill relating thereto; registrations, applications for
registration of the foregoing; and all other intangible property of the Obligors
in the nature of intellectual property; proposals; cost estimates, and
reproductions on paper, or otherwise, of any and all concepts or ideas, and any
matter related to, or connected with, the design, development, manufacture,
sale, marketing, leasing, or use of any or all property produced, sold, or
leased, by the Obligors or credit extended or services performed, by the
Obligors, whether intended for an individual customer or the general business of
the Obligors, or used or useful in connection with research and development by
the Obligors.

 

“Goods”:  Has the meaning given that term in the UCC.

 

“Gross Margin”:  With respect to the subject accounting period for which it is
being calculated, the decimal equivalent of the following:

 

Sales (Minus) Cost of Goods Sold

Sales

 

“Hazardous Materials”:  Any (a) hazardous materials, hazardous waste, hazardous
or toxic substances or petroleum products, which (as to any of the foregoing)
are defined or regulated as a hazardous material in or under any Environmental
Law and (b) oil in any physical state.

 

“Headquarters Facility”:  The Obligors’ headquarters building and related real
estate located at 456 North Fifth Street, Philadelphia, Pennsylvania  19123.

 

“Import Landing Costs”:  To the extent not included in the Stated Amount of an
L/C, Landing Costs for Inventory, the purchase of which is supported by such
L/C, or customs, duty, freight, and other out-of-pocket costs and expenses which
will be expended to “land” in transit Inventory and which is not included in
invoices for prepaid Inventory.

 

“Indebtedness”:  All indebtedness and obligations of or assumed by any Person on
account of or in respect to any of the following:

 

(a)           Money borrowed (including any indebtedness which is non-recourse
to the credit of such Person but which is secured by an Encumbrance on any asset
of such Person) whether or not evidenced by a promissory note, bond, debenture
or other written obligation to pay money;

 

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(b)           Any reimbursement obligations and other liabilities of such Person
with respect to surety bonds (whether bid, performance or otherwise) letter of
credit or acceptance transactions (including, without limitation, the Stated
Amount of all outstanding letters of credit and acceptances issued for the
account of such Person, and (without duplication) any amount for which such
Person would be obligated to provide reimbursement or for which such Person is
liable in connection with a letter of credit or acceptance transaction;

 

(c)           The provision of recourse in connection with the sale or discount
of Accounts or Chattel Paper of such Person;

 

(d)           On account of recourse or repayment obligations with respect to
deposits or advances;

 

(e)           As lessee under Capital Leases;

 

(f)            In connection with any sale and leaseback transaction.

 

(g)           All obligations with respect to redeemable stock and redemption or
repurchase obligations under any equity securities issued by such Person.

 

“Indebtedness” also includes:

 

(a)           Indebtedness of others secured by an Encumbrance on any asset of
such Person, whether or not such Indebtedness is assumed by or is a personal
liability of such Person.

 

(b)           Any guaranty, endorsement, suretyship or other undertaking
pursuant to which that Person may be liable on account of any obligation of any
third party other than on account of the endorsement of checks and other items
in the ordinary course.

 

(c)           The Indebtedness of a partnership or joint venture in which such
Person is a general partner or joint venturer.

 

“Indemnified Person”:  Defined in Section 14.13.

 

“Indenture Agreement”:  That certain Indenture Agreement dated as of August 5,
2002, by and between the Lead Borrower, as Issuer, Cave Springs, Inc.,
eSpeciality Brands, LLC, Dan Howard Industries, Inc., Mother’s Stores, Inc., as
subsidiary guarantors, and J.P. Morgan Trust Company, National Association, as
trustee, as amended, modified, or supplemented from time to time.

 

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“Index Business Day”:  Any day which is both a Business Day and a day on which
the principal market in LIBOR deposits in London in which FNB or its successors
participate is open for dealings in United States Dollar deposits.

 

“Index Loan”:  Any Revolving Credit Loan which bears interest at an Index Rate.

 

“Index Margin”:  As determined pursuant to the applicable section of the Margin
Pricing Grid set forth in Section 2.11(f), for loans initiated on or after the
date when so set, that is to say Index contracts in effect at the time of
increases/decreases in margin will remain in effect at the margin originally
utilized when the contract was opened.  The margin in effect at a given time
will apply to contracts opened at that time, and shall be based upon the Margin
Pricing Grid.

 

“Index Offer Rate”:  With respect to any Index Loan, the rate per annum (rounded
upwards, if necessary, to the next 1/100 of 1%) as determined by the
Administrative Agent to be the highest prevailing rate per annum at which
deposits on U.S. Dollars are offered to FNB or its successors, by first-class
banks in the LIBOR market in which FNB or its successors participates at or
about 11:00 a.m. (London Time) Two (2) Index Business Days before the first day
of the Interest Period for the subject Index Loan, for a deposit approximately
in the amount of the subject loan for a period of time approximately equal to
such Interest Period.  Such rate shall be determined on the basis of the highest
offered rates for deposits in U.S. Dollars, for a period of time comparable to
such Index Loan, which appears on Page 3750 on the Dow Jones Market Service
(formerly known as Telerate) as of 11:00 a.m. London time on the day which is
Two (2) Business Days preceding the first day of such Index Loan; provided,
however, if the rate described above does not appear on the Dow Jones Market
Service on any applicable interest determination date, the Index Offer Rate
shall be the highest rate (rounded upwards, if necessary, to the nearest one
hundred-thousandth of a percentage point) determined on the basis of the offered
rates for deposits in U.S. Dollars for a period of time comparable to such Index
Loan which are offered by four major banks in the London interbank market at
approximately 11:00 a.m. London time, on the day that is Two (2) Business Days
preceding the first day of such Index Loan as selected by the Administrative
Agent.  If such rate is unavailable, the rate for that date will be determined
on the basis of the highest rates quoted for loans in U.S. Dollars to leading
European banks for a period of time comparable to such Index Loan, offered by
major banks in New York City at approximately 11:00 a.m. New York City time, on
the day that is Two (2) Business days preceding the first day of such Index
Loan.  In the event that the Index Offer Rate for an Index Loan cannot be
determined through any of the methods provided above, it will be determined in
whatever manner Administrative Agent may reasonably determine or if
Administrative Agent deems that it cannot be determined, the Index Offer Rate
will be unavailable.

 

“Index Rate”:  That per annum rate (calculated on a 365/366-day year and actual
days elapsed) equal to the Index Offer Rate plus the Index Margin except that,
in the

 

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event that the Administrative Agent determines that any Lender may be subject to
the Reserve Percentage, the “Index Rate” shall mean, with respect to any Index
Loans then outstanding (from the date on which that Reserve Percentage first
became applicable to such loans), and with respect to all Index Loans thereafter
made, an interest rate per annum equal the sum of (a) plus (b), where:

 

(a) is the decimal equivalent of the following fraction:

 

Index Offer Rate

1 minus Reserve Percentage

 

(b) is the applicable Index Margin.

 

“Instruments”:  Has the meaning given that term in the UCC.

 

“Interest Payment Date”:  With reference to:

 

(a)           Each Index Loan: the earlier of the last day of the Interest
Period relating thereto or quarterly, whichever is earlier, and the Termination
Date and the End Date.

 

(b)           Each Base Margin Loan: the last Business Day of each month in
arrears; the Termination Date; and the End Date.

 

“Interest Period”:

 

(a)           With respect to each Index Loan: subject to Subsection (b), below,
the period commencing on the date of the making or continuation of, or
conversion to, the subject Index Loan and ending on the day that corresponds
numerically to such date, One (1), Two (2), Three (3), or Six (6) months
thereafter, as the Lead Borrower may elect by irrevocable notice (pursuant to
Section 2.5(b)) to the Administrative Agent.

 

(b)           The setting of Interest Periods is in all instances subject to the
following:

 

(i)            Any Interest Period for a Index Loan which would otherwise end on
a day that is not a Index Business Day shall be extended to the next succeeding
Index Business Day, unless that succeeding Index Business Day is in the next
calendar month, in which event such Interest Period shall end on the last Index
Business Day of the month during which the Interest Period ends.

 

(ii)           Subject to Subsections (iii) and (iv), below, any Interest Period
applicable to a Index Loan, which Interest Period begins on a day for which
there is no numerically corresponding day in the

 

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calendar month during which such Interest Period ends, shall end on the last
Index Business Day of the month during which that Interest Period ends.

 

(iii)          Any Interest Period which would otherwise end after the Revolving
Credit Termination Date shall end on the Revolving Credit Termination Date.

 

(iv)          The Lead Borrower shall not select, renew, or convert any interest
rate for a Revolving Credit Loan such that, in addition to interest at the Base
Margin Rate, there are more than Six (6) Interest Periods applicable to Index
Loans at any one time.

 

“Inventory”:  Includes, without limitation, “inventory” as defined in the UCC
and also all:  packaging, advertising, and shipping materials related to any of
the foregoing, and all names or marks affixed or to be affixed thereto for
identifying or selling the same; Goods held for sale or lease or furnished or to
be furnished under a contract or contracts of sale or service by the Obligors,
or used or consumed or to be used or consumed in the Obligors’ business; Goods
of said description in transit: returned, repossessed and rejected Goods of said
description; and all Documents (whether or not negotiable) which represent any
of the foregoing.

 

“Inventory Advance Rate”:  The following percentages for the applicable category
of Eligible Inventory:

 

Type of Eligible
Inventory

 

Percentage

 

Eligible Raw Materials Inventory

 

88

%

Eligible Finished Goods Inventory

 

88

%

Eligible L/C Inventory

 

88

%

Eligible In-Transit Inventory

 

88

%

 

provided, however, in the event that at any time or from time to time the ratio
of the Inventory Advance Rate to the Appraised Inventory Liquidation Percentage
exceeds the ratio of the Inventory Advance Rate to the Starting Inventory
Liquidation Percentage, then the Inventory Advance Rate shall be reduced to the
extent required so that the ratio of the Inventory Advance Rate (after giving
effect

 

25

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to such adjustment) to the Appraised Inventory Liquidation Percentage equals the
ratio of the Inventory Advance Rate to the Starting Inventory Liquidation
Percentage.

 

“Inventory Reserves”:  Such reserves as may be established from time to time by
the Collateral Agent in the Collateral Agent’s reasonable discretion with
respect to the determination (determined in accordance with customary credit
considerations) of the saleability, at Retail, of the Eligible Inventory or
which reflect such other factors as affect the market value of the Eligible
Inventory.  Without limiting the generality of the foregoing, Inventory Reserves
may include (but are not limited to) reserves based on the following:

 

(i)            Obsolescence (based upon Inventory on hand beyond a given number
of days).

 

(ii)           Seasonality.

 

(iii)          Shrinkage.

 

(iv)          Imbalance.

 

(v)           Change in Inventory character.

 

(vi)          Change in Inventory composition.

 

(vii)         Change in Inventory mix.

 

(viii)        Markdowns (both permanent and point of sale)

 

(ix)           Retail mark ons and markups inconsistent with prior period
practice and performance; industry standards; current business plans; or
advertising calendar and planned advertising events.

 

(x)            Return to vendors.

 

(xi)           Damage.

 

(xii)          Inventory in the possession of any bailee.

 

(xiii)         Design room Inventory.

 

“Investment Property”:  Has the meaning given that term in the UCC.

 

“Issuer”:  The issuer of any L/C.

 

“Landlord State”:  Initially Washington, Virginia, and Pennsylvania and such
other states in which a landlord’s claim for rent has priority over the
Encumbrances of the Collateral Agent in the Collateral.

 

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“L/C”:  Any letter of credit, the issuance of which is procured by the
Administrative Agent for the account of any Borrower and any acceptance made on
account of such letter of credit, including without limitation, any letter of
credit presently issued by FNB, including without limitation any letter of
credit issued under the First Agreement and the Special Purpose Letter of
Credit.

 

“Lease”:  Any lease or other agreement, no matter how styled or structured,
pursuant to which any Obligor is entitled to the use or occupancy of any space.

 

“Leasehold Interest”:  Shall mean the Obligors’ leasehold estate or interest in
each of the properties subject to a Lease at or upon which any Obligor conducts
business, offers any Inventory for sale, or maintains any of the Collateral,
whether or not for retail sale, together with the Obligors’ interest in any of
the improvements and fixtures located upon or appurtenant to each such estate or
interest, including without limitation, any rights of the Obligor to payment,
proceeds or value of any kind or nature realized upon the sale, transfer or
assignment of any such estate or interest, whether or not such sale, assignment
or transfer occurs during any case commenced under the Bankruptcy Code.

 

“Lender’s Special Counsel”: Shall mean counsel retained by the Lenders other
than the Agent.

 

“Letter-of-Credit Rights”:  Has the meaning given that term in the UCC and also
refers to any right to payment or performance under an L/C, whether or not the
beneficiary has demanded or is at the time entitled to demand payment or
performance.

 

“Liabilities”:  Includes, without limitation, the following:

 

(a)           All and each of the following, whether now existing or hereafter
arising under this Agreement or under any of the other Loan Documents:

 

(i)            Any and all direct and indirect liabilities, debts, and
obligations of the Obligors to any Agent or the Lenders, each of every kind,
nature, and description.

 

(ii)           Each obligation to repay any loan, advance, indebtedness, note,
obligation, overdraft, or amount now or hereafter owing by the Obligors to any
Agent or the Lenders, (including all future advances whether or not made
pursuant to a commitment by any Agent or the Lenders), whether or not any of
such are liquidated, unliquidated, primary, secondary, secured, unsecured,
direct, indirect, absolute, contingent, or of any other type, nature, or
description, or by reason of any cause of action which any Agent or the Lenders,
may hold against the Obligors.

 

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(iii)          All notes and other obligations of the Obligors now or hereafter
assigned to or held by any Agent or the Lenders, each of every kind, nature, and
description.

 

(iv)          All interest, fees, and charges and other amounts which may be
charged by any Agent or the Lenders, to the Obligors and/or which may be due
from the Obligors to any Agent or the Lenders, from time to time.

 

(v)           All costs and expenses incurred or paid by any Agent or the
Lenders, in respect of any agreement between the Obligors and any Agent or the
Lenders, or instrument furnished by the Obligors to any Agent or Lenders
(including, without limitation, Costs of Collection, attorneys’ reasonable fees,
including reasonable fees and expenses of Lenders’ Special Counsel), and all
court and litigation costs and expenses).

 

(vi)          Any and all covenants of the Obligors to or with any Agent or the
Lenders, and any and all obligations of the Obligors to act or to refrain from
acting in accordance with any agreement between the Obligors and any Agent or
the Lenders, or instrument furnished by the Obligors to any Agent or the
Lenders.

 

(vii)         Each of the foregoing as if each reference to “Agent,” were to
each Affiliate of such Agent and each of the foregoing as if each reference to
“Lenders,” were to each Affiliate of the Lenders.

 

(b)           Any and all direct or indirect liabilities, debts, and obligations
of the Obligors to any Agent or the Lenders or any Affiliate of any Agent or
Affiliate of the Lenders, each of every kind, nature, and description owing on
account of any service or accommodation provided to, or for the account of any
Obligors pursuant to this or any other Loan Document, including cash management
services and the issuances of L/C’s, including without limitation the Special
Purpose Credit.

 

“Liquidation”:  The exercise, by the Collateral Agent, of those rights accorded
to the Collateral Agent under the Loan Documents as a creditor of the Obligors
following and on account of the occurrence of an Event of Default looking
towards the realization on the Collateral.  Derivations of the word
“Liquidation” (such as “Liquidate”) are used with like meaning in this
Agreement.

 

“Liquid Collateral Investments”: The Borrower’s Investment Property in which the
Collateral Agent holds a first priority (other than a prior security interest
held by the securities intermediary maintaining a securities account in which
the Investment Property is maintained, to the extent such prior security
interest

 

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secures the securities intermediary’s customary fees and charges), perfected,
valid, and enforceable lien and security interest to secure the Liabilities,
which are not subject to any restriction on their use (other than restrictions
in favor of Collateral Agent).

 

“Loan Account”:  Defined in Section 2.8.

 

“Loan Documents”:  This Agreement, each instrument and document executed and/or
delivered as contemplated by Article III, below (including without limitation
the fee letters by and between any of the Agents and the Borrowers or any of the
Lenders and the Borrowers) and each other instrument or document from time to
time executed and/or delivered in connection with the arrangements contemplated
hereby or in connection with any transaction with any Agent or any Affiliate of
any Agent, including, without limitation, any transaction which arises out of
any cash management (including any ACH transfer arrangements), depository,
investment, letter of credit (including, without limitation, the Special Purpose
Credit), or interest rate protection, or equipment leasing services provided by
any Agent or any Affiliate of any Agent, as each may be amended from time to
time.

 

“Margin Adjustment Date”:  As defined in Section 2.11(f).

 

“Margin Pricing Grid”:  Provides for quarterly adjustment to the interest rate
to be charged on Revolving Credit Loans based upon the level of Pricing Adjusted
Availability then existing and is shown in Section 2.11(f).

 

“Master Letter of Credit Agreement”:  Defined in Section 2.18(d).

 

“Material Accounting Change”:  Any change in GAAP applicable to accounting
periods subsequent to the Borrowers’ fiscal year most recently completed prior
to the execution of this Agreement, if such change has a material effect on the
Borrowers’ financial condition or operating results, as reflected on financial
statements and reports prepared by or for the Borrowers, when compared with such
condition or results as if such change had not taken place, or where preparation
of the Borrowers’ statements and reports in compliance with such change results
in the breach of a financial performance covenant imposed pursuant to Section
5.12, where such a breach would not have occurred if such change had not taken
place or visa versa.

 

“Material Adverse Effect”: (a) Any material adverse change in the business,
prospects, operations, results of operations, assets, liabilities or condition
(financial or otherwise) of the Obligors (taken as a whole), (b) the material
impairment of the ability of any Obligors to perform its Liabilities, or of the
Agent’s ability to enforce the Liabilities or realize upon any portion of the
Collateral, or (c) a material impairment of the priority of the liens with
respect to the Collateral.

 

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“Maturity Date”:   October 15, 2009, or if such day is not a Business Day, the
next succeeding Business Day.

 

“Mortgage”:  Includes, but not limited to, that certain existing mortgage as
described in Section 8.3, as the same may be amended, modified, renewed,
extended, replaced, restated or substituted from time to time, executed by the
Lead Borrower and PIDC Financing Corporation in favor of the Collateral Agent,
for the benefit of the Lenders.

 

“Mortgaged Property”:  Includes the Headquarters Facility and any Real Estate
which is subject to any Mortgage.

 

“Notice Address”:         With respect to the Administrative Agent, as provided
in Section 12.1.

 

With respect to the Collateral Agent, as provided in Section 12.1.

 

With respect to any Lender, as indicated adjacent to such Lender’s signature at
the foot of this Agreement.  With respect to any Person who becomes a Lender
hereafter pursuant to Section 7.2 of the Agency Agreement, as indicated in the
Assignment and Acceptance of such Person.

 

Each Notice Address is subject to change as provided in Section 12.1.

 

“Obligor”:  Individually, each Guarantor and each Borrower, and, “Obligors”,
collectively, the Borrower and Guarantors.

 

“Operating Account”:   Defined in Section 7.3(a)(iii).

 

“Overloan”: A loan, advance, or providing of credit support (such as the
issuance of any L/C) to the extent that, at the time it is made, it exceeds
Availability immediately prior to the making of such loan, advance, or providing
of credit support.

 

“Participant”:  Defined in Section 14.16.

 

“Payment Intangible”:  Has the meaning given that term in the UCC and also
refers to any general intangible under which the Account Debtor’s primary
obligation is a monetary obligation.

 

“Percentage Commitment”:  As set forth on EXHIBIT 2.22, annexed hereto,
reflecting, with respect to any Lender, the ratio of (i) the amount of the
Dollar Commitment of such Lender to (ii) the aggregate amount of the Dollar
Commitments of all Lenders (as such percentage may change in accordance with the
provisions of this Agreement).

 

“Permissible Overloans”:  Defined in the Agency Agreement.

 

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“Permitted Acquisition”: Any acquisition by Borrowers, whether by purchase,
merger or otherwise, of all or substantially all of the assets of, of more than
50% of the capital stock of, or a business line or a division of, any Person;
provided:

 

(i)            immediately prior to, and after giving effect thereto, no
Suspension Event or Event of Default shall have occurred and be continuing or
would result therefrom;

 

(ii)           all transactions in connection therewith shall be consummated in
accordance with all applicable laws and in conformity with all applicable
governmental authorizations;

 

(iii)          all of the capital stock acquired or otherwise issued by such
Person or any newly formed Subsidiary of a Borrower in connection with such
acquisition shall be pledged to Collateral Agent, for the benefit of Lenders,
pursuant hereto, and Borrowers shall have taken, or caused to be taken, as of
the date such Person becomes a Subsidiary of Borrowers, each of the Permitted
Acquisition Requirements; and

 

(v)           all Persons, assets or divisions acquired shall be in the retail
business or such other lines of business as may be consented to by
Administrative Agent.

 

“Permitted Acquisition Requirements”: The Borrowers (a) immediately causing any
new Subsidiary to become a Borrower or guarantor hereunder, as determined by the
Administrative Agent, by executing and delivering to Administrative Agent a
counterpart agreement acceptable to Administrative Agent in its discretion, (b)
immediately thereupon, causing the Collateral Agent to hold in such acquired
assets or capital stock a first priority perfected Collateral Interest (subject
only to Permitted Encumbrances) to secure the Liabilities and (c) taking all
such actions and executing and delivering, or causing to be executed and
delivered, all such documents, instruments, agreements, and certificates as
Agent may require in its discretion.

 

“Permitted Creation”: Any creation by Borrowers of a Person wholly-owned by
Borrowers, provided:

 

(i)            immediately prior to, and after giving effect thereto, no
Suspension Event or Event of Default shall have occurred and be continuing or
would result therefrom;

 

(ii)           all transactions in connection therewith shall be consummated in
accordance with all applicable laws and in conformity with all applicable
governmental authorizations;

 

(iii)          all of the capital stock acquired or otherwise issued by such
Person or any newly formed Subsidiary of a Borrower in connection with such
acquisition shall be pledged to Collateral Agent, for the benefit of Lenders,
pursuant hereto, and Borrowers shall have taken, or caused to be taken, as

 

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of the date such Person becomes a Subsidiary of Borrowers, each of the Permitted
Creation Requirements; and

 

(v)           all Persons, assets or divisions created shall be in the retail
business or such other lines of business as may be consented to by
Administrative Agent.

 

“Permitted Creation Requirements” The Borrowers (a) immediately causing any new
Subsidiary to become a Borrower or guarantor hereunder, as determined by the
Administrative Agent, by executing and delivering to Administrative Agent a
counterpart agreement acceptable to Administrative Agent in its discretion, (b)
immediately thereupon, causing the Collateral Agent to hold in such acquired
assets or capital stock a first priority perfected Collateral Interest (subject
only to Permitted Encumbrances) to secure the Liabilities and (c) taking all
such actions and executing and delivering, or causing to be executed and
delivered, all such documents, instruments, agreements, and certificates as
Agent may require in its discretion.

 

“Permitted Encumbrances”:  The following:

 

(a)           Encumbrances in favor of the Collateral Agent.

 

(b)           Those Encumbrances (if any) listed on EXHIBIT 4.7, annexed hereto.

 

(c)           Liens securing the payment of taxes, either not yet overdue or the
validity of which is being contested in good faith by the Obligors and for which
the Obligors have established adequate cash reserve; non-consensual statutory
liens (other than liens securing the payment of taxes) arising in the ordinary
course of  Obligors’ business to the extent such liens secure (i) indebtedness
that is not overdue, or (ii) 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 are being contested by the Obligors in good
faith by appropriate proceedings diligently pursued, in each instance prior to
the commencement of foreclosure or other similar proceedings and provided that
adequate reserves therefor have been set aside on the  Obligors’ books
(provided, however, that the inclusion of any of the foregoing as “Permitted
Encumbrances” shall not affect their respective relative priorities vis a vis
the security interests created herein), or (iii) zoning restrictions, easements,
licenses, covenants and other restrictions affecting the use of real property.

 

(d)           Deposits under workmen’s compensation, unemployment insurance and
social security laws, or to secure the performance of bids, tenders, contracts
(other than for the repayment of borrowed

 

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money) or leases, or to secure statutory obligations or surety or appeal bonds,
or to secure indemnity, performance or other similar bonds arising in the
ordinary course of business.

 

(e)           Landlord’s liens arising by operation of law where waivers have
not been obtained.

 

(f)            Purchase money security interests or capitalized equipment leases
on any Equipment acquired or held by the Obligors and securing Indebtedness
incurred or assumed for the purpose of financing all or any part of the cost of
acquiring such Equipment; provided however that (i) any such Encumbrance
attaches to such property concurrently with or within twenty (20) days after the
acquisition thereof, (ii) such Encumbrance attaches solely to the Equipment so
acquired in such transaction, and (iii) the principal amount of the Indebtedness
secured thereby does not exceed 100% of the cost of such Equipment; provided,
however, that with respect to any Indebtedness on account of purchase money
security interests or capitalized leases on or of such Equipment that arises
during a period in which (x) the outstanding principal amount of Indebtedness
arising after the date hereof on account of purchase money security interests or
capitalized equipment leases on or of such Equipment exceeds (y) $5,000,000 (the
“Excess Indebtedness”), the holder of any such Excess Indebtedness shall have
agreed that the Collateral Agent shall have the right to utilize, at no cost or
expense to the Agents or Lenders (other than a pro rated amount for the period
in which the Collateral Agent is utilizing such Equipment), such Equipment to
the extent necessary or appropriate to sell, lease or otherwise dispose of the
Collateral, such agreement to be in form and substance satisfactory to the
Collateral Agent in its sole discretion, provided further, that the foregoing
proviso shall not apply to any Equipment that is located in the headquarters
portion, and not the Domestic Distribution Center portion, of the Headquarters
Facility.

 

(g)           Purchase money security interests on any Acquired Real Property
and securing Indebtedness incurred or assumed for the purpose of financing all
or any part of the cost of acquiring such Acquired Real Property; provided
however that (i) any such Encumbrance attaches to such Acquired Real Property
concurrently with or within twenty (20) days after the acquisition thereof, (ii)
such Encumbrance attaches solely to the Acquired Real Property so acquired in
such transaction or the improvements and fixtures thereon, and (iii) the
principal amount of the Indebtedness secured thereby does not exceed 100% of the
cost of such Acquired

 

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Real Property, together with the improvements and fixtures thereon.

 

(h)           Purchase money security interests on any improvements or fixtures
on Acquired Real Property securing Indebtedness incurred or assumed for the
purpose of financing all or any part of the cost of acquiring such improvements
or fixtures on the Acquired Real Property; provided however that (i) any such
Encumbrance attaches to such improvements or fixtures on the Acquired Real
Property concurrently with or within twenty (20) days after the acquisition
thereof, (ii) such Encumbrance attaches solely to Acquired Real Property or the
improvements or fixtures thereon, and (iii) the principal amount of the
Indebtedness secured thereby does not exceed 100% of the cost of the Acquired
Real Property, together with the improvements and fixtures thereon .

 

(i) Inclusive of those Encumbrances (if any) listed on EXHIBIT 4.7 in favor of
landlords, liens or security interests held by the Borrowers’ landlords for up
to a maximum of ten (10) store locations in the aggregate.

 

“Permitted Store Openings/Closings”: See Section 4.6(d)(ii).

 

“Person”:  Any  individual, sole proprietorship, partnership, joint venture,
trust, unincorporated organization, association, corporation, limited liability
company, institution, entity, party or foreign or United States government
(whether federal, state, county, city, municipal or otherwise), including,
without limitation, any instrumentality, division, agency, body or department
thereof.

 

“PIDA”: Pennsylvania Industrial Development Authority, a body corporate and
politic.

 

“PIDA Mortgage”: The existing mortgage held by PIDA on the Headquarters
Facility.

 

“PIDC Financing Corporation”: PIDC Financing Corporation, a Pennsylvania
non-profit corporation.

 

“Pricing Adjusted Availability”: The sum of:

 

(i)            The sum of (a) the lesser of (I) Borrowing Base A; or (II) the
sum that the Lead Borrower and those Obligors that are Restricted Subsidiaries
(as defined in the Indenture Agreement) are permitted to incur as Indebtedness
(as defined in the Indenture Agreement) hereunder on a consolidated basis
without violating the Indenture Agreement; plus (b) the average amount of Liquid
Collateral Investments for the applicable fiscal quarter (for purposes of the
calculation of this average amount, any “overnight funds” consisting of Liquid
Collateral Investments shall be included only on the date of purchase of such
overnight funds).

 

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Minus

 

(ii)           The aggregate unpaid balance of the Loan Account

 

Minus

 

(iii)          The aggregate undrawn Stated Amount of all then outstanding
L/C’s.

 

“Proceeds”:  Includes, without limitation, “Proceeds” as defined in the UCC
(defined below), and proceeds of all Collateral.

 

“Pro Forma Fixed Charge Coverage Ratio”: For any twelve month period, the ratio
of Borrowers’ consolidated (a) EBITDA during such period minus projected
Non-Financed Capital Expenditures for the following twelve month period minus
projected Distributions for the following twelve month period, to (b) projected
cash interest expense for the following twelve month period, plus projected
principal payments on account of current maturities of long term Indebtedness
for the following twelve month period, plus projected income taxes paid in cash
for the following twelve month period, all as determined in accordance with
GAAP.  Any projections used in computing Pro Forma Fixed Charge Coverage Ratio
shall be determined by the Borrowers and acceptable to the Administrative Agent
in its reasonable discretion.

 

“Property”:  Any interest in any kind of property or asset, whether real,
personal or mixed, or tangible or intangible.

 

“Pro Rata”:           (a) With respect to any Lender vis à vis any other Lender,
a fraction (expressed as a percentage), the numerator of which shall be the
amount of such Lender’s Dollar Commitment and the denominator of which shall be
the aggregate of all of the Lenders’ Dollar Commitments, as adjusted from time
to time in accordance with the provisions of Section 7.1 of the Agency
Agreement, provided that, if all Loan Commitments have been terminated, the
numerator shall be the unpaid amount of such Lender’s Loans and its interest in
L/C exposure and the denominator shall be the aggregate unpaid principal amount
of all unpaid Loans and L/C exposure.

 

“Real Estate”:  Includes all real property including the Headquarters Facility,
owned or leased (as lessee or sublessee) by the Borrowers or any of their
Subsidiaries.

 

“Real Estate Advance Rate”:  Sixty Percent (60%).

 

“Receipts”:  All cash, cash equivalents, checks, and credit card slips and
receipts as arise out of the sale of the Collateral.

 

“Receivables Collateral”:  That portion of the Collateral which consists of
rights to payment.

 

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“Regulatory Change”:  Defined in Section 2.21(c).

 

“Requirement of Law”:  As to any Person:

 

(a)           (i) All statutes, rules, regulations, orders, or other
requirements having the force of law and (ii) all court orders and injunctions,
arbitrator’s decisions, and/or similar rulings, in each instance ((i) and (ii))
of or by any federal, state, municipal, and other governmental authority, or
court, tribunal, panel, or other body which has or claims jurisdiction over such
Person, or any property of such Person, or of any other Person for whose conduct
such Person would be responsible.

 

(b)           That Person’s charter, certificate of incorporation, articles of
organization, and/or other organizational documents, as applicable; and

 

(c)           That Person’s by-laws and/or other instruments which deal with
corporate or similar governance, as applicable.

 

“Reserve Percentage”:   The decimal equivalent of that rate applicable to a
Lender under regulations issued from time to time by the Board of Governors of
the Federal Reserve System for determining the maximum reserve requirement of
that Lender with respect to “LIBOR liabilities” as defined in such regulations.
 The Reserve Percentage applicable to a particular Index Loan shall be based
upon that in effect during the subject Interest Period, with changes in the
Reserve Percentage which take effect during such Interest Period to take effect
(and to consequently change any interest rate determined with reference to the
Reserve Percentage) if and when such change is applicable to such loans.

 

“Reserves”:  The following: Availability Reserves and Inventory Reserves.

 

“Revolving Credit”:   Defined in Section 2.1(a).

 

“Revolving Credit Commitment Fee”:   Defined in Section 2.12.

 

“Revolving Credit Early Termination Fee”:   Defined in Section 2.15.

 

“Revolving Credit Loans”:  Defined in Section 2.1(a).

 

“Revolving Credit Loan Ceiling”:   $60,000,000, provided that at the written
request of the Borrowers, and with the prior written consent of the
Administrative Agent in its sole discretion, the Revolving Credit Loan Ceiling
shall be increased an additional $15,000,000, in increments of $2,500,000 up to
a maximum Revolving Credit Loan Ceiling of $75,000,000.  Notwithstanding the
foregoing, the Revolving Credit Loan Ceiling shall at no time exceed the amount
that the Indenture Agreement permits Borrowers and the Restricted Subsidiaries
(as

 

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defined in the Indenture) to incur as Indebtedness (as defined in the Indenture)
hereunder at such time.

 

“Revolving Credit Note”:  Defined in Section 2.9.

 

“Revolving Credit Obligations”:  The aggregate of the Borrowers’ liabilities,
obligations, and indebtedness of any character on account of or in respect to
the Revolving Credit.

 

“Second Mortgage Cap”: The amount as might be agreed to from time to time
between the Collateral Agent and PIDA as constituting the extent of the mortgage
lien evidenced by the PIDA Mortgage, subject to further reduction upon
Collateral Agent’s determination that the holder of the PIDA Mortgage has agreed
in writing to further limitations on the extent of its mortgage lien in the
Headquarters Facility.

 

“Security”:  Shall have the same meaning as in Section 2(1) of the Securities
Act of 1933, as amended.

 

“Series A Preferred Stock”:  All shares of Series A Preferred Stock of the Lead
Borrower that were issued and then redeemed by the Lead Borrower which shares
continue to be held as of the date hereof by
certain holders pending presentation by such holders of proper documentation to
the Lead Borrower required to receive payment in respect of such redemption.

 

“Special Purpose Credit”: Shall mean the letter of credit issued under that
certain Letter of Credit and Reimbursement Agreement dated as of July 1, 1998
among the Lead Borrower, Fleet Capital Corporation, as successor-in-interest to
the Administrative Agent as Lender, and Fleet National Bank, related to those
certain $4,000,000 Philadelphia Authority for Industrial Development
Variable/Fixed Rate Federally Taxable Economic Development Bonds (Mothers Work,
Inc. Project) Series of 1995, as it may be or may have been amended, modified,
restated, supplemented, replaced, or substituted.

 

“Starting Inventory Liquidation Percentage”: That percentage reflected on page 4
of the Inventory Valuation and Review with respect to the Borrowers, with a
report date of August 30, 2004, prepared by GB Asset Advisors, LLC, to reflect
the appraiser’s projection of the “[c]onsolidated net recovery (liquidation
value) as a percentage of cost including raw materials”.

 

“Stated Amount”:  The maximum amount for which an L/C may be honored, less any
amounts already drawn thereunder.

 

“Subordinated Debt”:  Includes unsecured Indebtedness of Borrowers that is
subordinated to the Liabilities in a manner, under terms and subject to a
written agreement satisfactory to Administrative Agent.

 

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“Subsidiary”:  Any corporation of which more than Fifty Percent (50%) of the
outstanding capital stock having ordinary voting power to elect a majority of
the board of directors of such corporation (irrespective of whether at the time
stock of any other class of such corporation shall have or might have voting
power by reason of the happening of any contingency) is at the time, directly or
indirectly, owned by any Obligor, or any partnership, joint venture or limited
liability company of which more than fifty percent (50%) of the outstanding
equity interests are at the time, directly or indirectly, owned by any Obligor
or any partnership of which any Obligor is a general partner.

 

“Supporting Obligation”:  Has the meaning given that term in the UCC and also
refers to a Letter-of-Credit Right or secondary obligation which supports the
payment or performance of an Account, Chattel Paper, a Document, a General
Intangible, an Instrument, or Investment Property.

 

“Survey”:  In relation to the Headquarters Facility, an instrument survey dated
as of a date within a reasonable period prior to the satisfaction of the Third
Mortgage Conditions which shall show the location of all buildings, structures,
easements and utility lines on such Headquarters Facility, shall be sufficient
to remove the survey exception from the applicable title policy, shall show that
all buildings and structures are within the lot lines of the Headquarters
Facility, shall not show any encroachments by others, shall show the zoning
district or districts in which the Headquarters Facility is located, shall show
any flood hazard district as established by the Federal Emergency Management
Agency or any successor agency or equivalent of any other governmental authority
and shall show whether the Headquarters Facility is located in any flood plain,
flood hazard or wetland protection district established by any Governmental
Authority.

 

“Surveyor Certificate”:  In relation to the Headquarters Facility, a certificate
executed by the surveyor who prepared such Survey dated as of date within a
reasonable period prior to the satisfaction of the Third Mortgage Conditions and
containing such information relating to such Headquarters Facility as the
Collateral Agent may require, such certificate to be satisfactory to the
Collateral Agent in form and substance.

 

 “Suspension Event”:  Any occurrence, circumstance, or state of facts with
respect to a Borrower which (a) is an Event of Default; or (b) would become an
Event of Default if any requisite notice were given and/or any requisite period
of time were to run and such occurrence, circumstance, or state of facts were
not cured within any applicable grace period.

 

“Sweep Period”: Defined in Section 7.3(c).

 

“Sweep Suspension”: Defined in Section 7.3(c).  

 

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 “SwingLine Lender”:  FNB or its successor, or another financial institution
designated by the Administrative Agent.

 

“SwingLine Loan Ceiling”:  $10,000,000.

 

“SwingLine Loans”:  Defined in Section 2.7(a).

 

“SwingLine Note”:  Defined in Section 2.7(c).

 

“Tax”:   In relation to any Index Loans and the applicable Index Rate, any tax,
levy, impost, duty, deduction, withholding or charges of whatever nature
required to be paid by the Agent and/or (ii) to be withheld or deducted from any
payment otherwise required hereby to be made by the Borrowers to the Agent;
provided, that the term “Tax” shall not include any taxes imposed upon the net
income of the Agent.

 

“Termination Date”:  The earliest of (a) the Maturity Date; or (b) the
occurrence of any event described in Section 10.11, below; or (c) the date set
as the Termination Date in a notice by the Administrative Agent to the Lead
Borrower on account of the occurrence of any Event of Default other than as
described in Section 10.11, below; or (d) the date of the Borrowers’ termination
of the Lenders’ commitments to advance Revolving Credit Loans hereunder.

 

“Third Mortgage Conditions”:  The satisfaction of all of the following
conditions on any date:

 

(a)  No Event of Default shall have occurred that is continuing;

 

(b)  The representations and warranties of the Obligors contained in this
Agreement shall be true and correct (except to the extent that such
representations and warranties expressly relate to an earlier date);

 

(c)  All other documents, instruments, certificates and information as the
Collateral Agent or its counsel reasonably requests shall have been delivered to
Lender by Obligors;

 

(d)  The Obligors shall have paid all of the Collateral Agent’s out-of-pocket
expenses, including reasonable attorneys’ fees in connection with the
transactions contemplated hereby and the matters referred to herein and the
other Loan Documents, including, without implied limitation, the Third Mortgage
Conditions;

 

(e)  The Collateral Agent, the Lead Borrower and PIDCFC shall have recorded an
amendment to the Mortgage in form and substance satisfactory to the Collateral
Agent (the “Mortgage Amendment”) to secure all Liabilities under this Agreement,
without limitation (such Liabilities, to the extent they exceed the existing
obligations secured by the Mortgage, the “Additional Mortgage

 

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Obligations”).  The Additional Mortgage Obligations shall be secured as a third
priority mortgage interest in the Mortgaged Property subject and subordinate
only to (i) the existing interest of Collateral Agent under the Mortgage, and
(ii) up to the Second Mortgage Cap, the interest of PIDA under the PIDA
Mortgage.

 

(f)  PIDA shall have amended its existing Subordination Agreement with
Collateral Agent (as successor in interest to Fleet Capital Corporation) in
order to confirm the effect of the Mortgage Amendment and its relative priority
of the obligation secured by the Mortgage and the PIDA Mortgage as described
above and to determine the Second Mortgage Cap;

 

(g)  Borrower shall have provided copies or originals as appropriate of the
resolutions of the board of directors of the Lead Borrower, PIDA, and PIDCFC and
any other usual evidence of authority and incumbency for the Lead Borrower,
PIDA, and PIDCFC to enter into all documents related to the Third Mortgage
Conditions;

 

(h)  An endorsement to the existing loan policy of title insurance issued with
respect to the Mortgaged Property in an amount and from a title insurance
company satisfactory to Collateral Agent and subject to only such exceptions as
may be acceptable to Collateral Agent and confirming that real estate taxes are
paid through the date of such policy;

 

(i)  Copies of UCC, tax lien and other searches reasonably requested by the
Collateral Agent in all appropriate search offices, together with termination
statements, mortgage discharges, and other discharges of all liens and security
interests other than those consented to by the Collateral Agent in its
discretion;

 

(j)  Copies of all consents or approvals that may required in connection with
the transactions contemplated by the Third Mortgage Conditions;

 

(k)  An updated Surveyor’s Certificate evidencing no material changes at the
Headquarters Facility and the date of the existing Survey, or, if applicable, an
update of the Survey showing all material changes at the Mortgaged Property; and

 

(l)  In the event that the Third Mortgage Conditions have not occurred on or
before February 28, 2005, updated environmental reports reasonably requested by
and satisfactory to the Collateral Agent in its discretion.

 

  “Transfer”:  Wire transfer pursuant to the wire transfer system maintained by
the Board of Governors of the Federal Reserve Board, or as otherwise may be
agreed to from time to time by the Administrative Agent. Wire instructions may
be changed in the same manner that Notice Addresses may be changed pursuant to
Section 12.1 of this  Agreement, except that no change of the wire instructions
for Transfers to the Administrative Agent shall be effective without the consent
of the Administrative Agent.

 

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“UCC”:  The Uniform Commercial Code as presently in effect in New York as used
herein in the context of any definitions; otherwise, as in effect from time to
time is New York.

 

“Unused Line Fee”:   Defined in Section 2.14.

 

“Voting Stock”:  Includes securities of any class or classes of a corporation
the holders of which are ordinarily, in the absence of contingencies, entitled
to elect a majority of the corporate directors (or Persons performing similar
functions).

 

ARTICLE II. - THE REVOLVING CREDIT

 

2.1  ESTABLISHMENT OF REVOLVING CREDIT.

 

(A)  THE LENDERS  HEREBY ESTABLISH A REVOLVING LINE OF CREDIT (THE “REVOLVING
CREDIT”) IN THE BORROWERS’ FAVOR PURSUANT TO WHICH THE LENDERS, ACTING THROUGH
THE ADMINISTRATIVE AGENT,  SHALL MAKE LOANS AND ADVANCES AND OTHERWISE PROVIDE
FINANCIAL ACCOMMODATIONS TO AND FOR THE ACCOUNT OF THE BORROWERS UNTIL THE
MATURITY DATE ITS PRO RATA SHARE OF ADVANCES (EACH, A “REVOLVING CREDIT LOAN”)
AS PROVIDED HEREIN IN EACH INSTANCE EQUAL TO ITS APPLICABLE PERCENTAGE
COMMITMENT OF  AVAILABILITY, UP TO A MAXIMUM AMOUNT OF ITS APPLICABLE DOLLAR
COMMITMENT.  THE OBLIGATIONS OF EACH LENDER HEREUNDER SHALL BE SEVERAL AND NOT
JOINT.

 

(B)  LOANS, ADVANCES, AND FINANCIAL ACCOMMODATIONS UNDER THE REVOLVING CREDIT
SHALL BE MADE WITH REFERENCE TO THE BORROWING BASE AND SHALL BE SUBJECT TO
AVAILABILITY.  THE BORROWING BASE AND AVAILABILITY SHALL BE DETERMINED BY THE
COLLATERAL AGENT BY REFERENCE TO BORROWING BASE CERTIFICATES FURNISHED AS
PROVIDED IN SECTION 5.4 BELOW (SUBJECT TO RESERVES ESTABLISHED BY THE COLLATERAL
AGENT):

 

(C)  THE COMMITMENT OF EACH LENDER TO PROVIDE SUCH LOANS, ADVANCES, AND
FINANCIAL ACCOMMODATIONS IS SUBJECT TO SECTION 2.2.

 

(D)  THE PROCEEDS OF BORROWINGS UNDER THE REVOLVING CREDIT SHALL BE USED SOLELY
FOR WORKING CAPITAL PURPOSES, DEBT PREPAYMENTS, DISTRIBUTIONS, CAPITAL
EXPENDITURES AND OTHER GENERAL CORPORATE PURPOSES OF THE BORROWERS, ALL SOLELY
TO THE EXTENT PERMITTED BY THIS AGREEMENT.  NO PROCEEDS OF A BORROWING UNDER THE
REVOLVING CREDIT MAY BE USED, NOR SHALL ANY BE REQUESTED, WITH A VIEW TOWARDS
THE ACCUMULATION OF ANY GENERAL FUND OR FUNDED RESERVE OF THE BORROWERS OTHER
THAN IN THE ORDINARY COURSE OF THE BORROWERS’ BUSINESS AND CONSISTENT WITH THE
PROVISIONS OF THIS AGREEMENT.

 

2.2  ADVANCES IN EXCESS OF BORROWING BASE (OVERLOANS).

 

(A)  NO LENDER HAS ANY OBLIGATION TO MAKE ANY LOAN OR ADVANCE, OR OTHERWISE TO
PROVIDE ANY CREDIT TO OR FOR THE BENEFIT OF THE BORROWERS WHERE THE RESULT OF
SUCH LOAN, ADVANCE, OR CREDIT IS AN OVERLOAN EXCEPT IN RESPECT TO PERMISSIBLE
OVERLOANS WHICH THE AGENTS DEEM PRUDENT.

 

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(B)  THE LENDERS’ OBLIGATIONS, AMONG THEMSELVES, ARE SUBJECT TO SECTION 3.3 OF
THE AGENCY AGREEMENT (WHICH RELATES TO EACH LENDER’S MAKING AMOUNTS AVAILABLE TO
THE ADMINISTRATIVE AGENT) AND TO SECTIONS 6.1(D) AND 6.5(A) OF THE AGENCY
AGREEMENT (WHICH RELATE TO PERMISSIBLE OVERLOANS).

 

(C)  THE LENDERS’ PROVIDING OF AN OVERLOAN ON ANY ONE OCCASION DOES NOT AFFECT
THE OBLIGATIONS OF THE BORROWERS HEREUNDER (SUCH AS THE BORROWERS’ OBLIGATION TO
IMMEDIATELY REPAY ANY AMOUNT WHICH OTHERWISE CONSTITUTES AN OVERLOAN) NOR SHALL
IT OBLIGATE THE LENDERS TO DO SO ON ANY OTHER OCCASION.

 

2.3  RISKS OF VALUE OF COLLATERAL.

 

Any reference to a given asset in connection with the making of loans, credits,
and advances and the providing of financial accommodations under the Revolving
Credit and/or the monitoring of compliance with the provisions hereof shall not
be deemed a determination by any Agent or the Lenders relative to the actual
value of the asset in question.  All risks concerning the value of the
Collateral are and remain upon the Obligors.  All Collateral secures the prompt,
punctual, and faithful performance of the Liabilities and, with respect to the
Guarantor, secures its Liabilities, whether or not relied upon by the Agents in
connection with the making of loans, credits, and advances and the providing of
financial accommodations under the Revolving Credit.

 

2.4  COMMITMENT TO MAKE REVOLVING CREDIT LOANS AND SUPPORT LETTERS OF CREDIT.

 

Subject to the provisions of this Agreement, the Lenders shall make a loan or
advance under the Revolving Credit and the Administrative Agent shall endeavor
to have an L/C issued for the account of the Borrowers, in each instance if duly
and timely requested by the Lead Borrower as provided herein provided that:

 

(A)  NO OVERLOAN IS THEN OUTSTANDING AND NONE WILL RESULT THEREFROM.

 

(B)  NO SUSPENSION EVENT OR EVENT OF DEFAULT HAS OCCURRED OR WOULD RESULT
THEREFROM.

 

2.5  REVOLVING CREDIT LOAN REQUESTS.

 

(A)  REQUESTS FOR LOANS AND ADVANCES UNDER THE REVOLVING CREDIT OR FOR THE
CONTINUANCE OR CONVERSION OF AN INTEREST RATE APPLICABLE TO A REVOLVING CREDIT
LOAN MAY BE REQUESTED BY THE LEAD BORROWER IN SUCH MANNER AS MAY FROM TIME TO
TIME BE REASONABLY ACCEPTABLE TO THE ADMINISTRATIVE AGENT.

 

(B)  SUBJECT TO THE PROVISIONS OF THIS AGREEMENT, THE LEAD BORROWER MAY REQUEST
A REVOLVING CREDIT LOAN AND ELECT AN INTEREST RATE AND INTEREST PERIOD TO BE
APPLICABLE TO THAT REVOLVING CREDIT LOAN BY GIVING NOTICE TO THE ADMINISTRATIVE
AGENT BY NO LATER THAN THE FOLLOWING:

 

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(I)            IF SUCH REVOLVING CREDIT LOAN IS TO BE OR IS TO BE CONVERTED TO A
BASE MARGIN LOAN: BY 1:00 P.M. ON THE BUSINESS DAY ON WHICH THE SUBJECT
REVOLVING CREDIT LOAN IS TO BE MADE OR IS TO BE SO CONVERTED .  BASE MARGIN
LOANS REQUESTED BY THE LEAD BORROWER, OTHER THAN THOSE RESULTING FROM THE
CONVERSION OF AN INDEX LOAN, SHALL NOT BE LESS THAN $10,000.00.

 

(II)           IF SUCH REVOLVING CREDIT LOAN IS TO BE OR IS TO BE CONVERTED TO
AN INDEX LOAN:  BY 1:00 P.M., THREE (3) INDEX BUSINESS DAYS BEFORE THE
COMMENCEMENT OF ANY NEW INTEREST PERIOD OR THE END OF THE THEN APPLICABLE
INTEREST PERIOD.  INDEX LOANS AND CONVERSIONS TO INDEX LOANS SHALL EACH BE NOT
LESS THAN $1,000,000.00 AND IN INCREMENTS OF $500,000.00 IN EXCESS OF SUCH
MINIMUM.

 

(III)          ANY INDEX LOAN WHICH MATURES WHILE A SUSPENSION EVENT OR EVENT OF
DEFAULT EXISTS, MAY BE CONVERTED, AT THE OPTION OF THE ADMINISTRATIVE AGENT, TO
A BASE MARGIN LOAN NOTWITHSTANDING ANY NOTICE FROM THE LEAD BORROWER THAT SUCH
REVOLVING CREDIT LOAN IS TO BE CONTINUED AS AN INDEX LOAN.

 

(C)  ANY REQUEST FOR A REVOLVING CREDIT LOAN OR FOR THE CONTINUANCE OR
CONVERSION OF A REVOLVING CREDIT LOAN WHICH IS MADE AFTER THE APPLICABLE
DEADLINE THEREFOR, AS SET FORTH ABOVE, SHALL BE DEEMED TO HAVE BEEN MADE AT THE
OPENING OF BUSINESS ON THE THEN NEXT BUSINESS DAY OR INDEX BUSINESS DAY, AS
APPLICABLE, UNLESS THE ADMINISTRATIVE AGENT, IN ITS DISCRETION, DETERMINES TO
DEEM IT TO HAVE BEEN MADE EARLIER.  EACH REQUEST FOR A REVOLVING CREDIT LOAN OR
FOR THE CONVERSION OF A REVOLVING CREDIT LOAN SHALL BE MADE IN SUCH MANNER AS
MAY FROM TIME TO TIME BE ACCEPTABLE TO THE ADMINISTRATIVE AGENT.

 

(D)  INTENTIONALLY OMITTED.

 

(E)  THE LEAD BORROWER MAY REQUEST THAT THE ADMINISTRATIVE AGENT CAUSE THE
ISSUANCE OF L/C’S FOR THE ACCOUNT OF THE BORROWERS AS PROVIDED IN SECTION 2.18.

 

(F)  THE ADMINISTRATIVE AGENT MAY RELY ON ANY REQUEST FOR A LOAN OR ADVANCE, OR
OTHER FINANCIAL ACCOMMODATION UNDER THE REVOLVING CREDIT WHICH THE
ADMINISTRATIVE AGENT, IN GOOD FAITH, BELIEVES TO HAVE BEEN MADE BY A PERSON DULY
AUTHORIZED TO ACT ON BEHALF OF THE LEAD BORROWER AND MAY DECLINE TO MAKE ANY
SUCH REQUESTED LOAN OR ADVANCE, OR ISSUANCE, OR TO PROVIDE ANY SUCH FINANCIAL
ACCOMMODATION PENDING THE ADMINISTRATIVE AGENT’S BEING FURNISHED WITH SUCH
DOCUMENTATION CONCERNING THAT PERSON’S AUTHORITY TO ACT AS MAY BE SATISFACTORY
TO THE ADMINISTRATIVE AGENT.  AS AN ACCOMMODATION TO BORROWERS, ADMINISTRATIVE
AGENT MAY IN ITS DISCRETION PERMIT TELEPHONIC REQUESTS FOR REVOLVING CREDIT
LOANS AND ELECTRONIC TRANSMITTAL OF INSTRUCTIONS, AUTHORIZATIONS, AGREEMENTS OR
REPORTS TO ADMINISTRATIVE AGENT BY BORROWERS,

 

43

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PROVIDED THAT ADMINISTRATIVE AGENT ONLY SHALL ACCEPT OR ACT UPON TELEPHONIC OR
ELECTRONIC COMMUNICATIONS FROM AN AUTHORIZED REPRESENTATIVE OF LEAD BORROWER, OR
SUCH OTHER INDIVIDUALS IDENTIFIED BY LEAD BORROWER FROM TIME TO TIME IN A
WRITTEN NOTICE DELIVERED TO ADMINISTRATIVE AGENT.  ADMINISTRATIVE AGENT AND
LENDERS SHALL HAVE NO LIABILITY TO BORROWERS FOR ANY LOSS OR DAMAGE SUFFERED BY
BORROWERS AS A RESULT OF ADMINISTRATIVE AGENT’S HONORING OF ANY REQUESTS,
EXECUTION OF ANY INSTRUCTIONS, AUTHORIZATIONS OR AGREEMENTS OR RELIANCE ON ANY
REPORTS COMMUNICATED TO IT TELEPHONICALLY OR ELECTRONICALLY AND PURPORTING TO
HAVE BEEN SENT TO ADMINISTRATIVE AGENT BY AN AUTHORIZED REPRESENTATIVE OF
BORROWERS, AND ADMINISTRATIVE AGENT SHALL HAVE NO DUTY TO VERIFY THE ORIGIN OF
ANY SUCH COMMUNICATION OR THE AUTHORITY OF THE PERSON SENDING IT.

 

(G)  A REQUEST BY THE LEAD BORROWER FOR LOAN OR ADVANCE OR OTHER FINANCIAL
ACCOMMODATION UNDER THE REVOLVING CREDIT SHALL BE IRREVOCABLE AND SHALL
CONSTITUTE CERTIFICATION BY EACH BORROWER THAT AS OF THE DATE OF SUCH REQUEST,
EACH OF THE FOLLOWING IS TRUE AND CORRECT:

 

(I)            THERE HAS BEEN NO MATERIAL ADVERSE CHANGE IN THE BORROWERS’
FINANCIAL CONDITION (TAKEN AS A WHOLE) FROM THE MOST RECENT FINANCIAL
INFORMATION FURNISHED ADMINISTRATIVE AGENT OR ANY LENDER PURSUANT TO THIS
AGREEMENT.

 

(II)           EACH REPRESENTATION, NOT RELATING TO A SPECIFIC DATE, WHICH IS
MADE HEREIN OR IN ANY OF THE LOAN DOCUMENTS IS THEN TRUE AND CORRECT IN ALL
MATERIAL RESPECTS AS OF AND AS IF MADE ON THE DATE OF SUCH REQUEST (EXCEPT (A)
TO THE EXTENT OF CHANGES RESULTING FROM TRANSACTIONS CONTEMPLATED OR PERMITTED
BY THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS AND CHANGES OCCURRING IN THE
ORDINARY COURSE OF BUSINESS WHICH SINGLY OR IN THE AGGREGATE WOULD NOT
REASONABLY BE EXPECTED TO HAVE A MATERIAL ADVERSE EFFECT AND (B) TO THE EXTENT
THAT SUCH REPRESENTATIONS AND WARRANTIES EXPRESSLY RELATE TO AN EARLIER DATE).

 

(III)          NO SUSPENSION EVENT OR EVENT OF DEFAULT HAS OCCURRED WHICH IS
CONTINUING.

 

(H)  IF, AT ANY TIME OR FROM TIME TO TIME, A SUSPENSION EVENT OR EVENT OF
DEFAULT EXISTS WHICH IS CONTINUING,

 

(I)            THE ADMINISTRATIVE AGENT MAY SUSPEND THE REVOLVING CREDIT
IMMEDIATELY, IN WHICH EVENT NEITHER THE ADMINISTRATIVE AGENT NOR THE LENDERS
SHALL BE OBLIGATED DURING SUCH SUSPENSION TO MAKE ANY LOANS OR ADVANCES OR TO
PROVIDE ANY FINANCIAL ACCOMMODATION HEREUNDER OR TO SEEK THE ISSUANCE OF ANY
L/C.

 

(II)           THE ADMINISTRATIVE AGENT MAY SUSPEND THE RIGHT OF THE LEAD
BORROWER TO REQUEST ANY INDEX LOAN OR TO CONVERT ANY BASE MARGIN LOAN TO AN
INDEX LOAN.

 

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2.6  MAKING OF REVOLVING CREDIT LOANS.

 

(A)  A LOAN OR ADVANCE UNDER THE REVOLVING CREDIT  SHALL BE MADE BY THE TRANSFER
OF THE PROCEEDS OF SUCH LOAN OR ADVANCE TO THE OPERATING ACCOUNT OR AS OTHERWISE
INSTRUCTED BY THE LEAD BORROWER.

 

(B)  A LOAN OR ADVANCE SHALL BE DEEMED TO HAVE BEEN MADE UNDER THE REVOLVING
CREDIT (AND THE BORROWERS SHALL BE INDEBTED TO THE AGENT OR LENDERS FOR THE
AMOUNT THEREOF IMMEDIATELY) UPON THE ADMINISTRATIVE AGENT’S INITIATION OF THE
TRANSFER OF THE PROCEEDS OF SUCH LOAN OR ADVANCE IN ACCORDANCE WITH THE LEAD
BORROWER’S INSTRUCTIONS (IF SUCH LOAN OR ADVANCE IS OF FUNDS REQUESTED BY THE
LEAD BORROWER) OR THE CHARGING OF THE AMOUNT OF SUCH LOAN TO THE LOAN ACCOUNT
(IN ALL OTHER CIRCUMSTANCES).

 

(C)  THERE SHALL NOT BE ANY RECOURSE TO OR LIABILITY OF THE AGENT OR LENDERS
(EXCEPT TO THE EXTENT CAUSED BY THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF
THE AGENT OR LENDERS AS DETERMINED BY A COURT OF COMPETENT JURISDICTION), ON
ACCOUNT OF:

 

(I)            ANY DELAY IN THE MAKING OF ANY LOAN OR ADVANCE REQUESTED UNDER
THE REVOLVING CREDIT.

 

(II)           ANY DELAY BY ANY BANK OR OTHER DEPOSITORY INSTITUTION IN TREATING
THE PROCEEDS OF ANY SUCH LOAN OR ADVANCE AS COLLECTED FUNDS.

 

(III)          ANY DELAY IN THE RECEIPT, AND/OR ANY LOSS, OF FUNDS WHICH
CONSTITUTE A LOAN OR ADVANCE UNDER THE REVOLVING CREDIT, THE WIRE TRANSFER OF
WHICH WAS PROPERLY INITIATED BY THE AGENT OR LENDERS IN ACCORDANCE WITH WIRE
INSTRUCTIONS PROVIDED TO THE ADMINISTRATIVE AGENT BY THE LEAD BORROWER).

 

2.7  SWINGLINE LOANS.

 

(A)  FOR EASE OF ADMINISTRATION OF REVOLVING CREDIT LOANS, REVOLVING CREDIT
LOANS WHICH ARE BASE MARGIN LOANS MAY BE MADE BY THE ADMINISTRATIVE AGENT, IN
ITS CAPACITY AS THE SWINGLINE LENDER (IN THE AGGREGATE, THE “SWINGLINE LOANS”)
IN ACCORDANCE WITH THE PROCEDURES SET FORTH IN THIS AGREEMENT FOR THE MAKING OF
REVOLVING CREDIT LOANS. THE UNPAID PRINCIPAL BALANCE OF THE SWINGLINE LOANS
SHALL NOT AT ANY ONE TIME BE IN EXCESS OF THE SWINGLINE LOAN CEILING (WHICH
SWINGLINE LOAN CEILING IS SUBJECT TO AMENDMENT FROM TIME TO TIME, BY REASONABLE
ADVANCE NOTICE BY THE ADMINISTRATIVE AGENT TO THE LEAD BORROWER).

 

(B)  THE AGGREGATE UNPAID PRINCIPAL BALANCE OF SWINGLINE LOANS SHALL BEAR
INTEREST AT THE RATE APPLICABLE TO BASE MARGIN LOANS AND SHALL BE REPAYABLE AS A
REVOLVING CREDIT LOAN UNDER THE REVOLVING CREDIT.

 

(C)  THE BORROWER’S OBLIGATION TO REPAY SWINGLINE LOANS MAY BE EVIDENCED BY A
NOTE IN THE FORM OF EXHIBIT 2.7 (“SWINGLINE NOTE”), EXECUTED BY THE BORROWERS
AND PAYABLE TO THE ADMINISTRATIVE AGENT.  NEITHER THE ORIGINAL NOR A COPY OF THE
SWINGLINE NOTE SHALL BE REQUIRED  TO ESTABLISH OR PROVE ANY LIABILITY.   UPON
THE LEAD BORROWER BEING PROVIDED WITH AN

 

45

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affidavit (which shall include an indemnity reasonably satisfactory to the Lead
Borrower) from the Administrative Agent to the effect that the SwingLine Note
has been lost, mutilated, or destroyed, the Borrowers shall execute and deliver
a replacement of any SwingLine Note to the Administrative Agent.

 

(D)  FOR ALL PURPOSES OF THIS LOAN AGREEMENT, THE SWINGLINE LOANS AND THE
BORROWER’S OBLIGATIONS TO THE ADMINISTRATIVE AGENT CONSTITUTE REVOLVING CREDIT
LOANS AND ARE SECURED AS “LIABILITIES”.

 

(E)  SWINGLINE LOANS MAY BE SUBJECT TO PERIODIC SETTLEMENT WITH THE LENDERS.

 

2.8  THE LOAN ACCOUNT.

 

(A)  AN ACCOUNT (“LOAN ACCOUNT”) SHALL BE OPENED ON THE BOOKS OF THE
ADMINISTRATIVE AGENT IN WHICH A RECORD SHALL BE KEPT OF ALL LOANS AND ADVANCES
MADE UNDER THE REVOLVING CREDIT.

 

(B)  THE ADMINISTRATIVE AGENT MAY ALSO KEEP A RECORD (EITHER IN THE LOAN ACCOUNT
OR ELSEWHERE, AS THE ADMINISTRATIVE AGENT MAY FROM TIME TO TIME ELECT) OF ALL
INTEREST, FEES, SERVICE CHARGES, COSTS, EXPENSES, AND OTHER DEBITS OWED TO THE
AGENT AND THE LENDER ON ACCOUNT OF THE LIABILITIES AND OF ALL CREDITS AGAINST
SUCH AMOUNTS SO OWED.

 

(C)  ALL CREDITS AGAINST THE LIABILITIES SHALL BE CONDITIONAL UPON RECEIPT OF
FINAL PAYMENT TO THE ADMINISTRATIVE AGENT AND THE LENDERS OF THE ITEMS GIVING
RISE TO SUCH CREDITS.  THE AMOUNT OF ANY ITEM CREDITED AGAINST THE LIABILITIES
WHICH IS CHARGED BACK AGAINST THE AGENT OR THE LENDERS FOR ANY REASON OR IS NOT
SO PAID SHALL BE A LIABILITY AND SHALL BE ADDED TO THE LOAN ACCOUNT, WHETHER OR
NOT THE ITEM SO CHARGED BACK OR NOT SO PAID IS RETURNED.

 

(D)  EXCEPT AS OTHERWISE PROVIDED HEREIN, ALL FEES, SERVICE CHARGES, COSTS, AND
EXPENSES FOR WHICH THE BORROWERS ARE OBLIGATED HEREUNDER ARE PAYABLE ON DEMAND. 
IN THE DETERMINATION OF AVAILABILITY, THE ADMINISTRATIVE AGENT MAY DEEM FEES,
SERVICE CHARGES, ACCRUED INTEREST (EXCEPT FOR INTEREST CHARGED ON INDEX LOANS,
WHICH, UNLESS CHARGED EARLIER, SHALL BE CHARGED ON THE INTEREST PAYMENT DATE),
AND OTHER PAYMENTS WHICH WILL BE DUE AND PAYABLE BETWEEN THE DATE OF SUCH
DETERMINATION AND THE FIRST DAY OF THE THEN NEXT SUCCEEDING MONTH AS HAVING BEEN
ADVANCED UNDER THE REVOLVING CREDIT WHETHER OR NOT SUCH AMOUNTS ARE THEN DUE AND
PAYABLE.

 

(E)  THE ADMINISTRATIVE AGENT, WITHOUT THE REQUEST OF THE LEAD BORROWER, MAY
ADVANCE UNDER THE REVOLVING CREDIT ANY INTEREST, FEE, SERVICE CHARGE, OR OTHER
PAYMENT TO WHICH THE AGENT OR ANY LENDER IS ENTITLED FROM THE BORROWERS PURSUANT
HERETO AND MAY CHARGE THE SAME TO THE LOAN ACCOUNT NOTWITHSTANDING THAT SUCH
AMOUNT SO ADVANCED MAY RESULT IN BORROWING BASE BEING EXCEEDED.  ANY AMOUNT
WHICH IS ADDED TO THE PRINCIPAL BALANCE OF THE LOAN ACCOUNT AS PROVIDED IN THIS
SECTION 2.8(E) SHALL BEAR INTEREST, AT THE INTEREST RATE THEN AND THEREAFTER
APPLICABLE TO BASE MARGIN LOANS.  SUCH ACTION ON THE PART OF THE ADMINISTRATIVE
AGENT SHALL NOT CONSTITUTE A WAIVER OF THE ADMINISTRATIVE AGENT’S RIGHT OR THE
BORROWERS’ OBLIGATIONS UNDER SECTION 2.10(B).

 

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(F)  ANY STATEMENT RENDERED BY THE AGENT OR THE LENDERS TO THE BORROWERS
CONCERNING THE LIABILITIES SHALL, IN THE ABSENCE OF MANIFEST ERROR, BE
CONSIDERED CORRECT AND ACCEPTED BY THE BORROWERS AND SHALL BE CONCLUSIVELY
BINDING UPON THE BORROWERS UNLESS THE LEAD BORROWER PROVIDES THE ADMINISTRATIVE
AGENT WITH WRITTEN OBJECTION THERETO WITHIN TWENTY (20) DAYS FROM THE MAILING OF
SUCH STATEMENT, WHICH WRITTEN OBJECTION SHALL INDICATE, WITH PARTICULARITY, THE
REASON FOR SUCH OBJECTION.  IN THE ABSENCE OF MANIFEST ERROR, THE LOAN ACCOUNT
AND THE AGENT’S AND LENDERS’ BOOKS AND RECORDS CONCERNING THE LOAN ARRANGEMENT
CONTEMPLATED HEREIN AND THE LIABILITIES SHALL BE PRIMA FACIE EVIDENCE AND PROOF
OF THE ITEMS DESCRIBED THEREIN.

 

2.9  THE REVOLVING CREDIT NOTE.

 

The Borrowers’ obligation to repay loans and advances under the Revolving
Credit, with interest as provided herein, may be evidenced by a Note or Notes
(each, individually, and collectively, in the aggregate, a “Revolving Credit
Note”) in the form of EXHIBIT 2.9, annexed hereto, executed by the Lead Borrower
and the other Borrowers, payable to the applicable Lender.  Neither the original
nor a copy of any Revolving Credit Note shall be required, however, to establish
or prove any Liability.  Upon the Lead Borrower being provided with an affidavit
(which shall include an indemnity reasonably satisfactory to the Lead Borrower)
from any Lender to the effect that a Revolving Credit Note has been lost,
mutilated, or destroyed, the Lead Borrower and the other Borrowers shall execute
and deliver a replacement thereof to such Lender.

 

2.10                PAYMENT OF THE LOAN ACCOUNT.

 

(A)  THE BORROWERS MAY REPAY ALL OR ANY PORTION OF THE PRINCIPAL BALANCE OF THE
LOAN ACCOUNT FROM TIME TO TIME UNTIL THE TERMINATION DATE, WITHOUT PREMIUM OR
PENALTY EXCEPT AS EXPRESSLY SET FORTH HEREIN.

 

(B)  THE BORROWERS, WITHOUT NOTICE OR DEMAND FROM THE ADMINISTRATIVE AGENT,
SHALL PAY THE ADMINISTRATIVE AGENT THAT AMOUNT, FROM TIME TO TIME, WHICH IS
NECESSARY SO THAT THERE IS NO OVERLOAN OUTSTANDING.

 

(C)  THE BORROWERS SHALL REPAY THE THEN ENTIRE UNPAID BALANCE OF THE REVOLVING
CREDIT AND ALL OTHER LIABILITIES ON THE TERMINATION DATE.

 

(D)  THE ADMINISTRATIVE AGENT SHALL CAUSE PAYMENTS, PURSUANT TO SECTIONS 2.10(A)
AND 2.10(B), TO BE APPLIED IN ACCORDANCE WITH SECTION 7.5(A) OF THIS AGREEMENT,
PROVIDED THAT THE ADMINISTRATIVE AGENT SHALL CAUSE THOSE APPLICATION OF PAYMENTS
(IF ANY), PURSUANT TO SECTIONS 2.10(A) AND 2.10(B) AGAINST INDEX LOANS THEN
OUTSTANDING IN SUCH MANNER AS RESULTS IN THE LEAST COST TO THE BORROWERS, BUT
SHALL NOT HAVE ANY AFFIRMATIVE OBLIGATION TO DO SO NOR LIABILITY ON ACCOUNT OF
THE ADMINISTRATIVE AGENT’S FAILURE TO HAVE DONE SO.  IN NO EVENT SHALL ACTION OR
INACTION TAKEN BY THE ADMINISTRATIVE AGENT EXCUSE THE BORROWERS FROM ANY
INDEMNIFICATION OBLIGATION UNDER SECTION 2.10(E).

 

(E)  UPON THE REQUEST OF THE ADMINISTRATIVE AGENT, EACH BORROWER, JOINTLY AND
SEVERALLY, SHALL INDEMNIFY THE AGENT AND LENDERS AND HOLD THE AGENT AND LENDERS
HARMLESS FROM

 

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and against any loss, cost or expense (including loss of anticipated profits)
which the Agent or Lenders may sustain or incur (including, without limitation,
by virtue of acceleration after the occurrence of any Event of Default) as a
consequence of any of the following:

 

(I)            DEFAULT BY THE BORROWERS IN PAYMENT OF THE PRINCIPAL AMOUNT OF OR
ANY INTEREST ON ANY INDEX LOAN AS AND WHEN DUE AND PAYABLE, INCLUDING ANY SUCH
LOSS OR EXPENSE ARISING FROM INTEREST OR FEES PAYABLE BY THE AGENT OR LENDERS IN
ORDER TO MAINTAIN ITS INDEX LOANS.

 

(II)           DEFAULT BY THE BORROWERS IN MAKING A BORROWING OR CONVERSION 
AFTER THE BORROWERS HAS GIVEN (OR IS DEEMED TO HAVE GIVEN) A REQUEST FOR A
REVOLVING CREDIT LOAN OR A REQUEST TO CONVERT A REVOLVING CREDIT LOAN FROM ONE
APPLICABLE INTEREST RATE TO ANOTHER.

 

(III)          THE MAKING OF ANY PAYMENT ON AN INDEX LOAN OR THE MAKING OF ANY
CONVERSION OF ANY SUCH LOAN TO A BASE MARGIN LOAN ON A DAY THAT IS NOT THE LAST
DAY OF THE APPLICABLE INTEREST PERIOD WITH RESPECT THERETO, INCLUDING INTEREST
OR FEES PAYABLE BY THE AGENT AND LENDERS AS “BREAKAGE FEES”.

 

2.11                INTEREST ON REVOLVING CREDIT LOANS.

 

(A)  EACH REVOLVING CREDIT LOAN WHICH CONSISTS OF A BASE MARGIN LOAN SHALL BEAR
INTEREST AT THE BASE MARGIN RATE (DETERMINED BASED UPON A 365/366-DAY YEAR AND
ACTUAL DAYS ELAPSED), UNLESS AND UNTIL IT IS MADE AS, OR IS CONVERTED TO, AN
INDEX LOAN PURSUANT TO SECTION 2.5 HEREOF.

 

(B)  EACH REVOLVING CREDIT LOAN WHICH CONSISTS OF AN INDEX LOAN SHALL BEAR
INTEREST AT THE APPLICABLE INDEX RATE (DETERMINED BASED UPON A 365/366-DAY YEAR
AND ACTUAL DAYS ELAPSED).

 

(C)  SUBJECT TO, AND IN ACCORDANCE WITH, THE PROVISIONS OF THIS AGREEMENT, THE
LEAD BORROWER MAY CAUSE ALL OR A PART OF THE UNPAID PRINCIPAL BALANCE OF
REVOLVING CREDIT LOANS TO BEAR INTEREST AT THE BASE MARGIN RATE OR THE INDEX
RATE AS SPECIFIED FROM TIME TO TIME BY THE LEAD BORROWER.

 

(D)  THE LEAD BORROWER SHALL NOT SELECT, RENEW, OR CONVERT ANY INTEREST RATE FOR
A REVOLVING CREDIT LOAN SUCH THAT THERE ARE MORE THAN SIX (6) INTEREST PERIODS
APPLICABLE TO THE OUTSTANDING INDEX LOANS AT ANY ONE TIME.

 

(E)  THE BORROWERS SHALL PAY ACCRUED AND UNPAID INTEREST ON EACH REVOLVING
CREDIT LOAN IN ARREARS ON THE APPLICABLE INTEREST PAYMENT DATE THEREFOR. 
FOLLOWING THE OCCURRENCE AND DURING THE CONTINUANCE OF ANY EVENT OF DEFAULT (AND
WHETHER OR NOT THE AGENT EXERCISES THE AGENT’S RIGHTS ON ACCOUNT THEREOF), ALL
REVOLVING CREDIT LOANS SHALL BEAR INTEREST, AT THE OPTION OF THE AGENT, AT RATE
WHICH IS THE AGGREGATE IN THE CASE OF BASE MARGIN LOAN, OF THE THEN APPLICABLE

 

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Base Margin Rate plus Two Percent (2.00%) per annum, and in the case of Index
Loans, the then applicable Index Rate plus Two Percent (2.00%) per annum.

 

(F)  THE INDEX MARGIN AND BASE MARGIN SHALL BE RESET FOR EACH FISCAL QUARTER AS
OF THE FIRST (1ST) DAY OF SUCH FISCAL QUARTER (THE “MARGIN ADJUSTMENT DATE”)
BASED UPON THE MARGIN PRICING GRID SET FORTH BELOW FOR THE PRIOR FISCAL QUARTER,
SUBJECT TO THE PROVISIONS IN THE DEFINITIONS OF “BASE MARGIN” AND “INDEX
MARGIN”:

 

MARGIN PRICING GRID

 

Tier

 

Pricing Adjusted
Availability*

 

INDEX
MARGIN
(Percentage)

 

BASE
MARGIN
(Percentage)

 

I

 

>$35,000,000

 

1.25

%

0.00

%

II

 

>$17,500,000 and < $35,000,000

 

1.50

%

0.00

%

III

 

<$17, 500,000

 

1.75

%

0.00

%

 

*Pricing Adjusted Availability will be determined based upon a Certificate by an
Authorized Officer delivered to the Administrative Agent no later than ten (10)
days after the end of each fiscal quarter certifying as to average Pricing
Adjusted Availability maintained for the prior fiscal quarter.  If there is a
change in the applicable Index Margin or Base Margin, the Administrative Agent
and Borrower agree that all such changes shall be retroactive to the Margin
Adjustment Date.  Failure of the Administrative Agent to receive such
Certificate within the time frame specified shall, in addition to any other
remedy provided for in this Agreement, result in an increase in the Index Margin
and the Base Margin to the highest level set forth in the foregoing grid, until
next Margin Adjustment Date following receipt of such Certificate demonstrating
that such an increase is not required.  If an Event of Default has occurred and
is continuing at the time any reduction in the Index Margin and Base Margin is
to be implemented, that reduction shall be deferred until the next Margin
Adjustment Date following the date on which such Event of Default is waived or
cured.

 

2.12                REVOLVING CREDIT COMMITMENT FEE.

 

AS COMPENSATION FOR THE RESPECTIVE COMMITMENTS OF THE LENDERS AT THE EXECUTION
OF THIS AGREEMENT TO MAKE LOANS AND ADVANCES TO THE BORROWERS UNDER THE
REVOLVING CREDIT AND AS COMPENSATION FOR THE LENDERS’ MAINTENANCE OF SUFFICIENT
FUNDS AVAILABLE FOR SUCH PURPOSE, THE LENDERS SHALL  HAVE EARNED AS OF THE
CLOSING DATE THE “REVOLVING CREDIT COMMITMENT FEE” IN THE AMOUNT SET FORTH IN
THE AGENT’S FEE LETTER.

 

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2.13                INTENTIONALLY OMITTED.

 

2.14                UNUSED LINE FEE.

 

In addition to any other fee to be paid by the Borrowers on account of the
Revolving Credit, the Borrowers shall pay the Administrative Agent, for the
benefit of the Lenders, an “Unused Line Fee”.  The Unused Line Fee shall equal
Two-Tenths of One Percent (0.20%) per annum of the average difference, during
the fiscal quarter just ended (or relevant period with respect to the payment
being made on the Termination Date) between the Revolving Credit Loan Ceiling
and the sum of (i) the unpaid principal balance of the Loan Account and (ii) the
Stated Amount of L/Cs.  The Unused Line Fee shall be paid in arrears, on the
first day of each fiscal quarter after the execution of this Agreement and on
the Termination Date.

 

2.15                EARLY TERMINATION FEE.

 

In the event that the Termination Date occurs, for any reason, prior to the
Maturity Date, the Borrowers shall pay to the Administrative Agent, for the
benefit of the Lenders, the “Revolving Credit Early Termination Fee” determined
and payable as follows:

 

(A)  ONE-HALF OF ONE PERCENT (0.50%) OF THE REVOLVING CREDIT LOANS AS IN EFFECT
IMMEDIATELY PRIOR TO SUCH TERMINATION OR REDUCTION IN THE EVENT TERMINATION
OCCURS PRIOR TO OCTOBER 15, 2006; OR

 

(b)  Three-Eighths of One Percent (0.375%) of the Revolving Credit Loans as in
effect immediately prior to such termination or reduction in the event
termination occurs on or after October 15, 2006, but prior to October 15, 2007;
or

 

(c)  Zero Percent (0.00%) of the Revolving Credit Loans as in effect immediately
prior to such termination or reduction in the event termination occurs on or
after October 15, 2007.

 

Notwithstanding the foregoing, the Administrative Agent and Lenders agree to
waive the Revolving Credit Early Termination Fee in the event that the Borrowers
refinance the Revolving Credit with Bank of America, N.A. or any of its
Affiliates, it being understood that, neither Bank of America, N.A. nor any of
its Affiliates are hereby committing to provide such refinancing.

 

2.16                CONCERNING FEES.

 

THE BORROWERS SHALL NOT BE ENTITLED TO ANY CREDIT, REBATE OR REPAYMENT OF THE
REVOLVING CREDIT COMMITMENT FEE, UNUSED LINE FEE, REVOLVING CREDIT EARLY
TERMINATION FEE, OR OTHER FEE EARNED BY THE AGENT OR LENDERS PURSUANT TO THIS
AGREEMENT OR ANY LOAN DOCUMENT NOTWITHSTANDING ANY TERMINATION OF THIS AGREEMENT
OR SUSPENSION OR TERMINATION OF THE AGENT’S OR LENDERS’ OBLIGATION TO MAKE LOANS
AND ADVANCES HEREUNDER.

 

2.17                INTENTIONALLY OMITTED.

 

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2.18                PROCEDURES FOR ISSUANCE OF L/C’S.

 

(A)  THE LEAD BORROWER MAY REQUEST THAT THE ADMINISTRATIVE AGENT CAUSE THE
ISSUANCE OF L/C’S FOR THE ACCOUNT OF THE BORROWER.  EACH SUCH REQUEST SHALL BE
IN SUCH MANNER AS MAY FROM TIME TO TIME BE ACCEPTABLE TO THE ADMINISTRATIVE
AGENT.

 

(B)  THE ADMINISTRATIVE AGENT WILL ENDEAVOR TO CAUSE THE ISSUANCE OF ANY L/C SO
REQUESTED BY THE LEAD BORROWER, PROVIDED THAT, AT THE TIME THAT THE REQUEST IS
MADE, THE REVOLVING CREDIT HAS NOT BEEN SUSPENDED AS PROVIDED IN SECTION 2.5(H)
AND IF SO ISSUED:

 

(I)            THE AGGREGATE STATED AMOUNT OF ALL L/C’S THEN OUTSTANDING (GIVING
EFFECT TO THE ISSUANCE OF THE REQUESTED L/C), DOES NOT EXCEED  THIRTY MILLION
DOLLARS ($30,000,000);

 

(II)           THE EXPIRY OF THE REQUESTED L/C IS NOT LATER THAN THE EARLIER OF
THIRTY (30) DAYS PRIOR TO THE MATURITY DATE OR THE FOLLOWING:

 

(A)          FOR STANDBY L/C’S: ONE (1) YEAR FROM INITIAL ISSUANCE.

 

(B)           FOR DOCUMENTARY L/C’S: ONE HUNDRED (120) DAYS FROM ISSUANCE; AND

 

(III)          AN OVERLOAN WILL NOT RESULT FROM THE ISSUANCE OF THE SUBJECT L/C.

 

(C)  UNLESS OTHERWISE AGREED BETWEEN THE LEAD BORROWER AND THE ADMINISTRATIVE
AGENT, THE ISSUER OF ALL L/C’S SHALL BE FNB AND ANY SUCCESSOR TO FNB.

 

(D)  THE LEAD BORROWER SHALL ALSO EXECUTE SUCH OTHER DOCUMENTATION TO APPLY FOR
AND SUPPORT THE ISSUANCE OF AN L/C AS MAY BE REQUIRED BY FNB OR ITS SUCCESSOR OR
ANY OTHER  ISSUER, INCLUDING, WITHOUT LIMITATION, IN RESPECT OF THE SPECIAL
PURPOSE CREDIT. THIS AGREEMENT SHALL CONTROL ANY CONFLICT BETWEEN THIS AGREEMENT
AND ANY SUCH DOCUMENTATION.

 

(E)           THERE SHALL NOT BE ANY RECOURSE TO, NOR LIABILITY OF, THE AGENT OR
LENDERS ON ACCOUNT OF

 

(I)            ANY DELAY OR REFUSAL BY AN ISSUER TO ISSUE AN L/C; OR

 

(II)           ANY ACTION OR INACTION OF AN ISSUER ON ACCOUNT OF OR IN RESPECT
TO, ANY L/C.

 

(F)  THE BORROWERS SHALL REIMBURSE THE ISSUER FOR THE AMOUNT OF ANY HONORING OF
A DRAWING UNDER AN L/C ON THE SAME DAY ON WHICH SUCH HONORING TAKES PLACE. THE
BORROWERS AUTHORIZE THE ADMINISTRATIVE AGENT AND THE ISSUER TO CHARGE BORROWERS’
OPERATING ACCOUNT FOR SUCH PURPOSE.  IN THE EVENT THE FUNDS IN THE OPERATING
ACCOUNT ARE NOT SUFFICIENT, THE ADMINISTRATIVE AGENT OR LENDERS, WITHOUT THE
REQUEST OF THE LEAD BORROWER, MAY ADVANCE UNDER THE REVOLVING CREDIT (AND CHARGE
TO THE LOAN ACCOUNT) THE AMOUNT OF ANY HONORING OF ANY L/C AND OTHER AMOUNT FOR
WHICH THE BORROWERS, THE LENDERS, THE AGENT, OR THE ISSUER BECOMES OBLIGATED ON
ACCOUNT OF, OR IN RESPECT TO, ANY L/C.  SUCH ADVANCE SHALL BE MADE WHETHER OR
NOT A

 

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Suspension Event exists or such advance would result in an Overloan.  Such
action shall not constitute a waiver of the Administrative Agent’s rights under
Section 2.10(b) hereof.

 

2.19                FEES FOR L/C’S.

 

(A)  THE BORROWERS SHALL PAY TO THE ADMINISTRATIVE AGENT A FEE, FOR THE BENEFIT
OF THE LENDERS, ON ACCOUNT OF EACH L/C PROCURED BY THE ADMINISTRATIVE AGENT,
QUARTERLY IN ARREARS, AND ON THE TERMINATION DATE AND ON THE END DATE, EQUAL TO
THE FOLLOWING:

 

(I)            FOR STANDBY L/C’S:   (A) FOR THE FIRST $8,500,000 OF THE STATED
AMOUNT OF SUCH STANDBY L/CS, THE APPLICABLE INDEX MARGIN LESS ONE-HALF OF ONE
PERCENT (0.50%) PER ANNUM, OF THE STATED AMOUNT OF SUCH STANDBY L/CS, AND (B)
FOR THE EXCESS, IF ANY, OVER $8,500,000, THE APPLICABLE INDEX MARGIN, OF THE
STATED AMOUNT OF SUCH STANDBY L/CS, IN EACH CASE PAYABLE ON THE STATED AMOUNT OF
EACH OUTSTANDING STANDBY L/C QUARTERLY IN ARREARS ON THE FIRST DAY OF EACH
FISCAL QUARTER.

 

(II)           FOR DOCUMENTARY L/C’S:  THE APPLICABLE INDEX MARGIN LESS ONE-HALF
OF ONE PERCENT (0.50%) PER ANNUM, PAYABLE ON THE WEIGHTED AVERAGE OF THE STATED
AMOUNT OF SUCH DOCUMENTARY L/C OUTSTANDING AT ANY TIME DURING THE PERIOD SINCE
THE THEN MOST RECENT PAYMENT OF SUCH FEE, PAYABLE QUARTERLY IN ARREARS, ON THE
FIRST DAY OF EACH FISCAL QUARTER, AND ON THE END DATE.

 

(III)          NOTWITHSTANDING SUBSECTIONS (I) AND (II), ABOVE, FOLLOWING THE
OCCURRENCE OF ANY EVENT OF DEFAULT (AND WHETHER OR NOT THE ADMINISTRATIVE AGENT
EXERCISES THE ADMINISTRATIVE AGENT’S RIGHTS ON ACCOUNT THEREOF), THE ABOVE FEES,
AT THE OPTION OF THE ADMINISTRATIVE AGENT, SHALL BE TWO PERCENT (2.00%) PER
ANNUM ABOVE THE APPLICABLE RATES ABOVE.

 

(B)  IN ADDITION TO THE FEE TO BE PAID AS PROVIDED IN SECTION 2.19(A), ABOVE,
THE BORROWERS SHALL PAY TO THE ADMINISTRATIVE AGENT (OR TO THE ISSUER, IF SO
REQUESTED BY ADMINISTRATIVE AGENT), ON DEMAND, ALL ISSUANCE, PROCESSING,
NEGOTIATION, AMENDMENT, AND ADMINISTRATIVE FEES AND OTHER AMOUNTS CHARGED BY THE
ISSUER ON ACCOUNT OF, OR IN RESPECT TO, ANY L/C.

 

(C)  IF ANY CHANGE IN ANY LAW, EXECUTIVE ORDER OR REGULATION, OR ANY DIRECTIVE
OF ANY ADMINISTRATIVE OR GOVERNMENTAL AUTHORITY (WHETHER OR NOT HAVING THE FORCE
OF LAW), OR IN THE INTERPRETATION THEREOF BY ANY COURT OR ADMINISTRATIVE OR
GOVERNMENTAL AUTHORITY CHARGED WITH THE ADMINISTRATION THEREOF, SHALL EITHER:

 

(I)            IMPOSE, MODIFY OR DEEM APPLICABLE ANY RESERVE, SPECIAL DEPOSIT OR
SIMILAR REQUIREMENTS AGAINST LETTERS OF CREDIT HERETOFORE OR HEREAFTER ISSUED BY
ANY ISSUER OR WITH RESPECT TO WHICH THE AGENT, THE

 

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LENDERS OR ANY ISSUER HAS AN OBLIGATION TO LEND TO FUND DRAWINGS UNDER ANY L/C;
OR

 

(II)           IMPOSE ON ANY ISSUER ANY OTHER CONDITION OR REQUIREMENTS RELATING
TO ANY SUCH LETTERS OF CREDIT;

 

and the result of any event referred to in Section 2.19(c)(i) or 2.19(c)(ii),
above, shall be to increase the cost to the Agent, the Lenders or any Issuer
issuing or maintaining any L/C (which increase in cost shall be the result of
such Issuer’s reasonable allocation among that Issuer’s letter of credit
customers of the aggregate of such cost increases resulting from such events),
then, upon demand by the Administrative Agent and delivery by the Administrative
Agent to the Lead Borrower of a certificate of an officer of the Administrative
Agent or the subject Issuer describing such change in law, executive order,
regulation, directive, or interpretation thereof, its effect on such Issuer, and
the basis for determining such increased costs and their allocation, the
Borrowers shall immediately pay to the Administrative Agent, from time to time
as specified by the Administrative Agent, such amounts as shall be sufficient to
compensate the Agent, the Lenders or the subject Issuer for such increased
cost.  Any Issuer’s determination of costs incurred under Section 2.19(c)(i) or
2.19(c)(ii), above, and the allocation, if any, of such costs among the
Borrowers and other letter of credit customers of such Issuer, if done in good
faith and made on an equitable basis and in accordance with such officer’s
certificate, shall be conclusive and binding on the Borrowers.

 

2.20                CONCERNING L/C’S.

 

(A)  NONE OF THE ISSUER, THE ISSUER’S CORRESPONDENTS, OR ANY ADVISING,
NEGOTIATING, OR PAYING BANK WITH RESPECT TO ANY L/C SHALL BE RESPONSIBLE IN ANY
WAY FOR:

 

(I)            THE PERFORMANCE BY ANY BENEFICIARY UNDER ANY L/C OF THAT
BENEFICIARY’S OBLIGATIONS TO ANY BORROWER.

 

(II)           THE FORM, SUFFICIENCY, CORRECTNESS, GENUINENESS, AUTHORITY OF ANY
PERSON SIGNING, FALSIFICATION, OR THE LEGAL EFFECT OF, ANY DOCUMENTS CALLED FOR
UNDER ANY L/C IF SUCH DOCUMENTS ON THEIR FACE APPEAR TO BE IN ORDER.

 

(B)  THE ISSUER MAY HONOR, AS COMPLYING WITH THE TERMS OF ANY L/C AND OF ANY
DRAWING THEREUNDER, ANY DRAFTS OR OTHER DOCUMENTS OTHERWISE IN ORDER, BUT SIGNED
OR ISSUED BY AN ADMINISTRATOR, EXECUTOR, CONSERVATOR, TRUSTEE IN BANKRUPTCY,
DEBTOR IN POSSESSION, ASSIGNEE FOR THE BENEFIT OF CREDITORS, LIQUIDATOR,
RECEIVER, OR OTHER LEGAL REPRESENTATIVE OF THE PARTY AUTHORIZED UNDER SUCH L/C
TO DRAW OR ISSUE SUCH DRAFTS OR OTHER DOCUMENTS.

 

(C)  UNLESS THE LEAD BORROWER ON BEHALF OF ITSELF AND THE OTHER BORROWERS
INSTRUCTS ANY ISSUER OTHERWISE, IN THE PARTICULAR INSTANCE, THE LEAD BORROWER
HEREBY AUTHORIZES ANY ISSUER TO:

 

(I)            SELECT AN ADVISING BANK;

 

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(II)           SELECT A PAYING BANK; AND

 

(III)          SELECT A NEGOTIATING BANK.

 

(D)  ALL DIRECTIONS, CORRESPONDENCE, AND FUNDS TRANSFERS RELATING TO ANY L/C ARE
AT THE RISK OF THE BORROWERS.  THE ISSUER SHALL HAVE DISCHARGED THE ISSUER’S
OBLIGATIONS UNDER ANY L/C OR THE DRAWING THEREUNDER WHICH INCLUDES PAYMENT
INSTRUCTIONS IF THE ISSUER INITIATES THE METHOD OF PAYMENT CALLED FOR THEREBY
(OR INITIATES ANY OTHER COMMERCIALLY REASONABLE AND COMPARABLE METHOD). NONE OF
THE AGENT, THE LENDERS OR THE ISSUER SHALL HAVE ANY RESPONSIBILITY FOR ANY
INACCURACY, INTERRUPTION, ERROR, OR DELAY IN TRANSMISSION OR DELIVERY BY POST,
TELEGRAPH OR CABLE, OR FOR ANY INACCURACY OF TRANSLATION, EXCEPTING GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT.

 

(E)  THE AGENT’S, THE LENDERS’ AND THE ISSUER’S RIGHTS, POWERS, PRIVILEGES AND
IMMUNITIES SPECIFIED IN OR ARISING UNDER THIS AGREEMENT ARE IN ADDITION TO ANY
HERETOFORE OR AT ANY TIME HEREAFTER OTHERWISE CREATED OR ARISING, WHETHER BY
STATUTE OR RULE OF LAW OR CONTRACT.

 

(F)  EXCEPT TO THE EXTENT OTHERWISE EXPRESSLY PROVIDED HEREUNDER OR AGREED TO IN
WRITING BY THE ISSUER AND THE LEAD BORROWER, THE L/C WILL BE GOVERNED BY EITHER,
AT THE ELECTION OF THE ISSUER, THE UNIFORM CUSTOMS AND PRACTICE FOR DOCUMENTARY
CREDITS, INTERNATIONAL CHAMBER OF COMMERCE, PUBLICATION NO. 500, AND ANY
SUBSEQUENT REVISIONS THEREOF, OR THE INTERNATIONAL STANDBY PRACTICES - ISP 98,
INTERNATIONAL CHAMBER OF COMMERCE PUBLICATION, NO 590, AND SUBSEQUENT REVISIONS
THERETO.

 

THE OBLIGATIONS OF THE BORROWERS UNDER THIS AGREEMENT WITH RESPECT TO L/C’S ARE
ABSOLUTE, UNCONDITIONAL, AND IRREVOCABLE AND SHALL BE PERFORMED STRICTLY IN
ACCORDANCE WITH THE TERMS HEREOF UNDER ALL CIRCUMSTANCES, WHATSOEVER INCLUDING,
WITHOUT LIMITATION, THE FOLLOWING:

 

(I)            ANY LACK OF VALIDITY OR ENFORCEABILITY OR RESTRICTION, RESTRAINT,
OR STAY IN THE ENFORCEMENT OF THIS AGREEMENT, ANY L/C, OR ANY OTHER AGREEMENT OR
INSTRUMENT RELATING THERETO;

 

(II)           ANY AMENDMENT OR WAIVER OF, OR CONSENT TO THE DEPARTURE FROM, ANY
L/C;

 

(III)          THE EXISTENCE OF ANY CLAIM, SET-OFF, DEFENSE, OR OTHER RIGHT
WHICH THE BORROWERS MAY HAVE AT ANY TIME AGAINST THE BENEFICIARY OF ANY L/C; AND

 

(IV)          ANY GOOD FAITH HONORING OF A DRAWING UNDER ANY L/C, WHICH DRAWING
POSSIBLY COULD HAVE BEEN DISHONORED BASED UPON A STRICT CONSTRUCTION OF THE
TERMS OF THE L/C.

 

2.21                CHANGED CIRCUMSTANCES.

 

(A)  SUBJECT TO THE PROVISIONS OF THIS AGREEMENT, THE BORROWERS SHALL HAVE THE
OPTION (A) AS OF ANY DATE, TO CONVERT ALL OR ANY PART OF BASE MARGIN LOANS TO,
OR REQUEST THAT NEW REVOLVING CREDIT LOANS BE MADE AS, INDEX LOANS OF VARIOUS
INTEREST PERIODS, (B) AS OF THE LAST

 

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day of any Interest Period, to continue all or any portion of the relevant Index
Loans as Index  Loans; (C) as of the last day of any Interest Period, to convert
all or any portion of the Index Loans to Base Margin Loans; and (D) at any time,
to request new Revolving Credit Loans as Base Margin Loans; provided, that
Revolving Credit Loans may not be continued as or converted to Index Loans, if
the continuation or conversion thereof would violate the provisions of Sections
2.21(b) or 2.21(c) of this Agreement or if an Event of Default has occurred and
is continuing.

 

(B)  THE ADMINISTRATIVE AGENT’S DETERMINATION OF THE INDEX RATE AS PROVIDED
ABOVE SHALL BE CONCLUSIVE.  FURTHERMORE, IF THE ADMINISTRATIVE AGENT OR THE
LENDERS DETERMINES, IN GOOD FAITH (WHICH DETERMINATION SHALL BE CONCLUSIVE),
PRIOR TO THE COMMENCEMENT OF ANY INTEREST PERIOD THAT (A) U.S. DOLLAR DEPOSITS
OF SUFFICIENT AMOUNT AND MATURITY FOR FUNDING THE REVOLVING CREDIT LOANS ARE NOT
AVAILABLE TO THE ADMINISTRATIVE AGENT OR THE LENDERS IN THE LONDON INTERBANK
EURODOLLAR MARKET IN THE ORDINARY COURSE OF BUSINESS, OR (B) BY REASON OF
CIRCUMSTANCES AFFECTING THE LONDON INTERBANK EURODOLLAR MARKET, ADEQUATE AND
FAIR MEANS DO NOT EXIST FOR ASCERTAINING THE RATE OF INTEREST TO BE APPLICABLE
TO THE REVOLVING CREDIT LOANS REQUESTED BY THE BORROWERS TO BE INDEX LOANS OR
THE REVOLVING CREDIT LOANS BEARING INTEREST AT THE RATES SET FORTH IN THIS
AGREEMENT SHALL NOT REPRESENT THE EFFECTIVE PRICING TO THE ADMINISTRATIVE AGENT
FOR U.S. DOLLAR DEPOSITS OF A COMPARABLE AMOUNT FOR THE RELEVANT PERIOD (SUCH AS
FOR EXAMPLE, BUT NOT LIMITED TO, OFFICIAL RESERVE REQUIREMENTS REQUIRED BY
REGULATION D TO THE EXTENT NOT GIVEN EFFECT IN DETERMINING THE RATE), THE
ADMINISTRATIVE AGENT SHALL PROMPTLY NOTIFY THE LEAD BORROWER AND (1) ALL
EXISTING INDEX LOANS SHALL CONVERT TO BASE MARGIN LOANS UPON THE END OF THE
APPLICABLE INTEREST PERIOD, AND (2) NO ADDITIONAL INDEX LOANS SHALL BE MADE
UNTIL SUCH CIRCUMSTANCES ARE CURED.

 

(C)  IF, AFTER THE DATE HEREOF, THE INTRODUCTION OF, OR ANY CHANGE IN ANY
APPLICABLE LAW, TREATY, RULE, REGULATION OR GUIDELINE OR IN THE INTERPRETATION
OR ADMINISTRATION THEREOF BY ANY GOVERNMENTAL AUTHORITY OR ANY CENTRAL BANK OR
OTHER FISCAL, MONETARY OR OTHER AUTHORITY HAVING JURISDICTION OVER THE AGENT,
THE LENDERS OR THEIR RESPECTIVE LENDING OFFICES (A “REGULATORY CHANGE”), SHALL,
IN THE OPINION OF COUNSEL TO THE AGENT OR THE LENDERS, MAKE IT UNLAWFUL FOR THE
AGENT OR THE LENDERS TO MAKE OR MAINTAIN INDEX LOANS, THEN THE ADMINISTRATIVE
AGENT SHALL PROMPTLY NOTIFY THE LEAD BORROWER AND (A) THE INDEX LOANS SHALL
IMMEDIATELY CONVERT TO BASE MARGIN LOANS ON THE LAST BUSINESS DAY OF THE THEN
EXISTING INTEREST PERIOD OR ON SUCH EARLIER DATE AS REQUIRED BY LAW AND (B) NO
ADDITIONAL INDEX LOANS SHALL BE MADE UNTIL SUCH CIRCUMSTANCE IS CURED.

 

(D)  IF, FOR ANY REASON, AN INDEX LOAN IS PAID PRIOR TO THE LAST BUSINESS DAY OF
ANY INTEREST PERIOD OR IF AN INDEX LOAN DOES NOT OCCUR ON A DATE SPECIFIED BY
THE LEAD BORROWER IN ITS REQUEST (OTHER THAN AS A RESULT OF A DEFAULT BY THE
AGENT OR THE LENDERS), THE BORROWERS AGREE TO INDEMNIFY THE AGENT AND THE
LENDERS AGAINST ANY LOSS (INCLUDING ANY LOSS ON REDEPLOYMENT OF THE DEPOSITS OR
OTHER FUNDS ACQUIRED BY THE AGENT OR THE LENDERS TO FUND OR MAINTAIN SUCH INDEX
RATE LOAN) COST OR EXPENSE INCURRED BY THE AGENT OR THE LENDERS AS A RESULT OF
SUCH PREPAYMENT OR FAILURE TO OCCUR.

 

(E)  IF ANY REGULATORY CHANGE (WHETHER OR NOT HAVING THE FORCE OF LAW) SHALL (A)
IMPOSE, MODIFY OR DEEM APPLICABLE ANY ASSESSMENT, RESERVE, SPECIAL DEPOSIT OR
SIMILAR REQUIREMENT AGAINST ASSETS HELD BY, OR DEPOSITS IN OR FOR THE ACCOUNT OF
OR LOANS BY, OR ANY OTHER

 

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acquisition of funds or disbursements by, the Agent or the Lenders; (B) subject
the Agent, the Lenders or the Index Loans to any Tax or change the basis of
taxation of payments to the Agent or the Lenders of principal or interest due
from the Borrowers to the Agent or the Lenders hereunder (other than a change in
the taxation of the overall net income of the Agent or the Lenders); or (C)
impose on the Agent or the Lenders any other condition regarding the Index Loans
or the Agent’s or Lenders’ funding thereof, and the Administrative Agent or
Lenders shall determine (which determination shall be conclusive) that the
result of the foregoing is to increase the cost to the Agent or the Lenders of
making or maintaining the Index Loans or to reduce the amount of principal or
interest received by the Agent or Lenders hereunder, then the Borrowers shall
pay to the Agent or the Lenders, on demand, such additional amounts as the
Administrative Agent or the Lenders shall, from time to time, determine are
sufficient to compensate and indemnify the Agent or Lenders from such increased
cost or reduced amount.  Each Lender will use reasonable efforts to designate a
different lending office for the Liabilities if such designation will avoid the
need for, or reduce the amount of such compensation and will not, in the
reasonable opinion of such Lender (including, without limitation, by reason of
any economic, legal, or regulatory cost or disadvantage that such Lender may
bear or suffer by reason of such designation).

 

(F)  THE AGENT AND LENDERS SHALL RECEIVE PAYMENTS OF AMOUNTS OF PRINCIPAL OF AND
INTEREST WITH RESPECT TO THE INDEX LOANS FREE AND CLEAR OF, AND WITHOUT
DEDUCTION FOR, ANY TAXES.  IF (A) THE AGENT OR ANY LENDER SHALL BE SUBJECT TO
ANY TAX IN RESPECT OF ANY INDEX LOANS OR ANY PART THEREOF OR, (B) THE BORROWERS
SHALL BE REQUIRED TO WITHHOLD OR DEDUCT ANY TAX FROM ANY SUCH AMOUNT, THE INDEX
RATE APPLICABLE TO SUCH INDEX LOANS SHALL BE ADJUSTED BY THE ADMINISTRATIVE
AGENT OR SUCH LENDER TO REFLECT ALL ADDITIONAL COSTS INCURRED BY THE AGENT OR
SUCH LENDER IN CONNECTION WITH THE PAYMENT BY THE AGENT OR SUCH LENDER OR THE
WITHHOLDING BY THE BORROWERS OF SUCH TAX AND THE BORROWERS SHALL PROVIDE THE
AGENT OR SUCH LENDER WITH A STATEMENT DETAILING THE AMOUNT OF ANY SUCH TAX
ACTUALLY PAID BY THE BORROWERS. DETERMINATION BY THE ADMINISTRATIVE AGENT OR
SUCH LENDER OF THE AMOUNT OF SUCH COSTS SHALL BE CONCLUSIVE ABSENT MANIFEST
ERROR.  IF AFTER ANY SUCH ADJUSTMENT ANY PART OF ANY TAX PAID BY THE AGENT OR
SUCH LENDER IS SUBSEQUENTLY RECOVERED BY THE AGENT OR SUCH LENDER, THE AGENT OR
SUCH LENDER, AS APPLICABLE, SHALL REIMBURSE THE BORROWERS TO THE EXTENT OF THE
AMOUNT SO RECOVERED.  A CERTIFICATE OF AN OFFICER OF THE ADMINISTRATIVE AGENT OR
SUCH LENDER SETTING FORTH THE AMOUNT OF SUCH RECOVERY AND THE BASIS THEREFOR
SHALL BE CONCLUSIVE ABSENT MANIFEST ERROR.

 

2.22                LENDERS’ COMMITMENTS.

 

(A)  SUBJECT TO SECTION 7.1 OF THE AGENCY AGREEMENT (WHICH PROVIDES FOR
ASSIGNMENTS AND ASSUMPTIONS OF COMMITMENTS), EACH LENDER’S “PERCENTAGE
COMMITMENT”, AND “DOLLAR COMMITMENT” IS SET FORTH ON EXHIBIT 2.22(A).

 

(B)  THE OBLIGATIONS OF EACH LENDER ARE SEVERAL AND NOT JOINT.  NO LENDER SHALL
HAVE ANY OBLIGATION TO MAKE ANY LOAN OR ADVANCE UNDER THE REVOLVING CREDIT IN
EXCESS OF THE LESSER OF THE FOLLOWING:

 

(I)            THAT LENDER’S PERCENTAGE COMMITMENT OF THE SUBJECT LOAN OR
ADVANCE OR OF AVAILABILITY; AND

 

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(II)           THAT LENDER’S UNUSED DOLLAR COMMITMENT.

 

(C)  NO LENDER SHALL HAVE ANY LIABILITY TO THE BORROWERS ON ACCOUNT OF THE
FAILURE OF ANY OTHER LENDER TO PROVIDE ANY LOAN OR ADVANCE UNDER THE REVOLVING
CREDIT NOR ANY OBLIGATION TO MAKE UP ANY SHORTFALL WHICH MAY BE CREATED BY SUCH
FAILURE.

 

(D)  THE DOLLAR COMMITMENTS, PERCENTAGE COMMITMENTS, AND IDENTITIES OF THE
LENDERS MAY BE CHANGED, FROM TIME TO TIME BY THE REALLOCATION OR ASSIGNMENT OF
DOLLAR COMMITMENTS AND PERCENTAGE COMMITMENTS AMONGST THE LENDERS OR WITH OTHER
PERSONS WHO BECOME “LENDERS”, PROVIDED, HOWEVER UNLESS AN EVENT OF DEFAULT HAS
OCCURRED (IN WHICH EVENT, NO CONSENT OF THE LEAD BORROWER IS REQUIRED) ANY
ASSIGNMENT TO A PERSON NOT THEN A LENDER SHALL BE SUBJECT TO THE PRIOR WRITTEN
CONSENT OF THE LEAD BORROWER (NOT TO BE UNREASONABLY WITHHELD), WHICH CONSENT
WILL BE DEEMED GIVEN UNLESS THE LEAD BORROWER PROVIDES THE ADMINISTRATIVE AGENT
WITH WRITTEN OBJECTION, NOT MORE THAN FIVE (5) BUSINESS DAYS AFTER THE
ADMINISTRATIVE AGENT SHALL HAVE GIVEN THE LEAD BORROWER WRITTEN NOTICE OF A
PROPOSED ASSIGNMENT.

 

(E)  UPON WRITTEN NOTICE GIVEN THE LEAD BORROWER FROM TIME TO TIME BY THE
ADMINISTRATIVE AGENT, OF ANY ASSIGNMENT OR ALLOCATION REFERENCED IN SECTION
2.22(D):

 

(I)            THE LEAD BORROWER AND THE OTHER BORROWERS, IF REQUIRED BY THE
ADMINISTRATIVE AGENT, SHALL EXECUTE ONE OR MORE REVOLVING CREDIT NOTES (WHICH
NOTES SHALL REPLACE ANY REVOLVING CREDIT NOTES THERETOFORE PROVIDED BY THE
BORROWERS) TO REFLECT SUCH CHANGED DOLLAR COMMITMENTS, PERCENTAGE COMMITMENTS,
AND IDENTITIES AND SHALL DELIVER SUCH REVOLVING CREDIT NOTES TO THE
ADMINISTRATIVE AGENT (WHICH PROMPTLY THEREAFTER SHALL CANCEL AND DELIVER TO THE
LEAD BORROWER THE REVOLVING CREDIT NOTES SO REPLACED, IF ANY).   IN THE EVENT
THAT THE ADMINISTRATIVE AGENT DOES NOT REQUIRE THE DELIVERY OF REVOLVING CREDIT
NOTES OR THAT IN THE EVENT THAT A REVOLVING CREDIT NOTE IS TO BE EXCHANGED
FOLLOWING ITS ACCELERATION OR THE ENTRY OF AN ORDER FOR RELIEF UNDER THE
BANKRUPTCY CODE WITH RESPECT TO THE BORROWERS, THE ADMINISTRATIVE AGENT, IN LIEU
OF CAUSING THE LEAD BORROWER TO EXECUTE ONE OR MORE NEW REVOLVING CREDIT NOTES,
MAY ISSUE THE ADMINISTRATIVE AGENT’S CERTIFICATE CONFIRMING THE RESULTING DOLLAR
COMMITMENTS AND PERCENTAGE COMMITMENTS.

 

(II)           SUCH CHANGE SHALL BE EFFECTIVE FROM THE EFFECTIVE DATE SPECIFIED
IN SUCH WRITTEN NOTICE AND ANY PERSON ADDED AS A LENDER SHALL HAVE ALL RIGHTS
AND PRIVILEGES OF A LENDER HEREUNDER THEREAFTER AS IF SUCH PERSON HAD BEEN A
SIGNATORY TO THIS AGREEMENT AND ANY OTHER LOAN DOCUMENT TO WHICH A LENDER IS A
SIGNATORY AND ANY PERSON REMOVED AS A LENDER SHALL BE RELIEVED OF ANY
OBLIGATIONS OR RESPONSIBILITIES OF A LENDER HEREUNDER THEREAFTER.

 

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2.23                DESIGNATION OF LEAD BORROWER AS BORROWERS’ AGENT.

 

(A)  EACH BORROWER HEREBY IRREVOCABLY DESIGNATES AND APPOINTS THE LEAD BORROWER
AS THAT BORROWER’S AGENT TO OBTAIN LOANS AND ADVANCES UNDER THE REVOLVING
CREDIT, THE PROCEEDS OF WHICH SHALL BE AVAILABLE TO EACH BORROWER FOR THOSE USES
AS THOSE SET FORTH IN THIS AGREEMENT.  AS THE DISCLOSED PRINCIPAL FOR ITS AGENT,
EACH BORROWER SHALL BE OBLIGATED TO THE AGENT AND LENDERS ON ACCOUNT OF LOANS
AND ADVANCES SO MADE AS IF MADE DIRECTLY BY THE AGENT OR LENDERS TO THAT
BORROWER, NOTWITHSTANDING THE MANNER BY WHICH SUCH LOANS AND ADVANCES ARE
RECORDED ON THE BOOKS AND RECORDS OF THE LEAD BORROWER AND OF ANY BORROWER.

 

(B)  EACH BORROWER RECOGNIZES THAT CREDIT AVAILABLE TO IT UNDER THE REVOLVING
CREDIT IS IN EXCESS OF AND ON BETTER TERMS THAN IT OTHERWISE COULD OBTAIN ON AND
FOR ITS OWN ACCOUNT AND THAT ONE OF THE REASONS THEREFOR IS ITS JOINING IN THE
CREDIT FACILITY CONTEMPLATED HEREIN WITH ALL OTHER BORROWERS.  CONSEQUENTLY,
EACH BORROWER HEREBY ASSUMES AND AGREES TO DISCHARGE ALL LIABILITIES OF EACH OF
THE OTHER BORROWERS AS IF THE BORROWER WHICH IS SO ASSUMING AND AGREEING WERE
EACH OF THE OTHER BORROWERS.

 

(C)  THE LEAD BORROWER SHALL ACT AS A CONDUIT FOR EACH BORROWER (INCLUDING
ITSELF, AS A “BORROWER”) ON WHOSE BEHALF THE LEAD BORROWER HAS REQUESTED A
REVOLVING CREDIT LOAN.

 

(D)  THE PROCEEDS OF EACH LOAN AND ADVANCE PROVIDED UNDER THE REVOLVING CREDIT
WHICH IS REQUESTED BY THE LEAD BORROWER SHALL BE DEPOSITED INTO THE OPERATING
ACCOUNT OR AS OTHERWISE INDICATED BY THE LEAD BORROWER.  THE LEAD BORROWER SHALL
CAUSE THE TRANSFER OF THE PROCEEDS THEREOF TO THE BORROWER(S) ON WHOSE BEHALF
SUCH LOAN AND ADVANCE WAS OBTAINED.  THE AGENT AND LENDERS SHALL NOT HAVE ANY
OBLIGATION TO ASSURE THE PROPER APPLICATION OF SUCH PROCEEDS.

 

ARTICLE III. — CONDITIONS PRECEDENT:

 

As a condition to the effectiveness of this Agreement, the establishment of the
Revolving Credit, the procurement of the initial L/C issued hereunder, and the
making of the first loan under the Revolving Credit, each of the documents
respectively described in Sections 3.1 through and including 3.4 (each in form
and substance satisfactory to the Agent) shall have been delivered to the Agent,
and the conditions respectively described in Sections 3.5 through and including
3.9, shall have been satisfied as of the Closing Date:

 

3.1  CORPORATE DUE DILIGENCE.

 

(A)  A CERTIFICATE OF CORPORATE GOOD STANDING ISSUED WITH RESPECT TO EACH
OBLIGOR BY THE SECRETARY OF STATE OF THE STATE IN WHICH THAT OBLIGOR WAS
ORGANIZED.

 

(B)  CERTIFICATES OF QUALIFICATION TO DO BUSINESS AS A FOREIGN CORPORATION,
ISSUED BY THE SECRETARY(IES) OF STATE OF EACH STATE IN WHICH SUCH  OBLIGOR’S
CONDUCT OF BUSINESS OR OWNERSHIP OF ASSETS OF REQUIRES SUCH QUALIFICATION,
EXCEPT WHERE THE FAILURE TO SO QUALIFY WOULD NOT HAVE A MATERIAL ADVERSE EFFECT.

 

(C)  A CERTIFICATE OF EACH  OBLIGOR’S RESPECTIVE SECRETARY AS TO THE DUE
ADOPTION AND CONTINUED EFFECTIVENESS OF, EACH CORPORATE RESOLUTION ADOPTED IN
CONNECTION WITH THE ESTABLISHMENT OF THE LOAN ARRANGEMENT CONTEMPLATED BY THE
LOAN DOCUMENTS AND ATTESTING TO THE

 

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true signatures of each Person authorized as a signatory to any of the Loan
Documents, such certificate to set forth the text of each such resolution in an
attachment thereto.

 

3.2  OPINION.

 

An opinion of counsel to the Obligors in form and substance satisfactory to the
Agent.

 

3.3  OFFICERS’ CERTIFICATES.

 

Certificates executed by the Chief Executive Officer, President or Chief
Financial Officer of each Obligor stating that the representations and
warranties made by such Obligor to the Agent in the Loan Documents are true and
complete as of the date of such certificate, and that no event has occurred
which is or which, solely with the giving of notice or passage of time (or
both), would be an Event of Default.

 

3.4  ADDITIONAL DOCUMENTS.

 

Such additional instruments and documents as the Agent or its counsel reasonably
may require or request including, without limitation, the following:

 

(A)  LOAN DOCUMENTS.  EACH OF THE LOAN DOCUMENTS SHALL HAVE BEEN DULY EXECUTED
AND DELIVERED BY THE RESPECTIVE PARTIES THERETO SHALL BE IN FULL FORCE AND
EFFECT AND SHALL BE IN FORM AND SUBSTANCE SATISFACTORY TO AGENT.

 

(B)  ASSIGNMENT. AN ASSIGNMENT OF FLEET CAPITAL CORPORATION’S RIGHT, TITLE AND
INTEREST IN AND TO THE FIRST AGREEMENT.

 

(C)  AGENCY AGREEMENT.  AN EXECUTED COPY OF THE AGENCY AGREEMENT DATED AS OF THE
CLOSING DATE, BY AND BETWEEN THE ADMINISTRATIVE AGENT, THE COLLATERAL AGENT AND
THE LENDERS.

 

(d)  Certificates of Insurance.  (a) A certificate of insurance from an
independent insurance broker dated as of the Closing Date, identifying insurers,
types of insurance, insurance limits, policy terms and otherwise describing the
insurance obtained in accordance with this Agreement, and (b) copies of all
policies evidencing such insurance.

 

(e)  Blocked Account Agreements.

 

(i)  Duly executed and delivered Blocked Account Agreement by and between
Collateral Agent, Lead Borrower and Bank One, N.A., in form and substance
satisfactory to Collateral Agent,

 

(ii)  Intentionally Omitted;

 

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(iii)  Duly executed and delivered Blocked Account Agreement by and between
Collateral Agent, Lead Borrower and Wells Fargo Bank, N.A., in form and
substance satisfactory to Collateral Agent;

 

(iv)  Duly executed and delivered Blocked Account Agreement by and between
Collateral Agent, Lead Borrower and Fleet National Bank, in form and substance
satisfactory to Collateral Agent; and

 

(v)  Duly executed and delivered Blocked Account Agreement by and between
Collateral Agent, Lead Borrower and Bank of America, N.A., in form and substance
satisfactory to Collateral Agent.

 

(f)  Credit Card Notifications.  Delivery of notification, executed on behalf of
the Borrowers, to each of the Borrowers’ credit card processors of notice (in
form satisfactory to Collateral Agent), which notice provides that payment of
all credit card charges submitted by the Borrowers to that processor and any
other amount payable to the Borrowers by such processor shall be directed to the
Operating Account or as otherwise designated from time to time by the Collateral
Agent.

 

(g)  Borrowing Base Certificate.  Delivery of the initial Borrowing Base
Certificate dated as of the Closing Date.

 

(h)  Financial Projections.  Delivery of financial projections and business
assumptions for the following fiscal year after the Closing Date in form and
substance satisfactory to Administrative Agent.

 

(i)  Letter Agreement.  Delivery of the Letter Agreement by and between the
Obligors, Administrative Agent and Collateral Agent regarding the Leased
Department Agreements, Marketing Partnership Agreements, Licensing Agreements
and Internet Agreements, in form and substance satisfactory to the
Administrative Agent.

 

(j)  Pledge Agreements.  (i)  Delivery of the Pledge Agreement from Mothers
Work, Inc. to the Collateral Agent, for stock in Cave Springs, Inc., and up to
66% of the stock in Mothers Work Canada, Inc., in form and substance
satisfactory to the Collateral Agent; and (ii) Delivery of the Pledge Agreement
from Mothers Work Canada, Inc. to the Collateral Agent, for up to 66% of the
stock in stock in Maternity Factory Warehouse Centre, Inc., in form and
substance satisfactory to the Collateral Agent.

 

(k)  Collateral Agent’s Fee Letter.  Side Letter dated as of the Closing Date by
and between the Collateral Agent and the Borrowers.

 

(l)  Trademark Security Agreement.  Duly executed and delivered Trademark
Security Agreement dated as of the Closing Date, by and between Obligors and
Collateral Agent.

 

(m)  Landlord Waivers.  Duly executed and delivered Collateral Access Agreements
for the Domestic Distribution Centers.

 

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(n)  Environmental Site Assessment.  Delivery of an environmental site
assessment in form and substance and from environmental consultants satisfactory
to Collateral Agent, with respect to the Eligible Fixed Assets.

 

(o)  Guaranties.  Delivery of the Guaranty by Mothers Work Canada, Inc. in favor
of the Collateral Agent and Administrative Agent for the benefit of the Lenders,
in form and substance satisfactory to Collateral Agent.

 

(p)  Lender’s Fee Letter.  Side Letter dated as of the Closing Date by and
between the Lender and the Borrowers.

 

(q)  Assignment of Mortgage.  Delivery of an Assignment of Original Mortgage for
the Headquarters Facility from Fleet Capital Corporation to Fleet Retail Group,
Inc., in form and substance satisfactory to Collateral Agent.

 

(r)  Customs Broker Agreement.  (i)  Delivery of a Customs Broker Agreement by
and between Lead Borrower and Barthco International, in form and substance
satisfactory to Collateral Agent; (ii) Delivery of a Customs Broker Agreement by
and between Lead Borrower and Jose David Gonzalez, in form and substance
satisfactory to Collateral Agent; (iii) Delivery of a Customs Broker Agreement
by and between Lead Borrower and Excel, in form and substance satisfactory to
Collateral Agent; and (iv) Delivery of a Customs Broker Agreement by and between
Lead Borrower and Garden City Customs Services, in form and substance
satisfactory to Collateral Agent.

 

(s)  DDA Notifications.  Delivery of notification, executed on behalf of a
Borrower, to each depository institution in which any DDA is maintained (in form
satisfactory to Collateral Agent).

 

(t)  Title Policy.  An endorsement to the existing loan policy of title
insurance issued with respect to the Mortgaged Property in an amount and from a
title insurance company satisfactory to Collateral Agent and subject to only
such exceptions as may be acceptable to Collateral Agent and confirming that
real estate taxes are paid through the date of such policy;

 

3.5  REPRESENTATIONS AND WARRANTIES.

 

Each of the representations made by or on behalf of the Obligors in this
Agreement or in any of the other Loan Documents or in any other report,
statement, document, or paper provided by or on behalf of the Borrowers shall be
true and complete as of the date as of which such representation or warranty was
made, except to the extent it specifically relates solely to an earlier date.

 

3.6  MINIMUM DAY ONE EXCESS AVAILABILITY.

 

After giving effect to the first funding  under the Revolving Credit, all then
held checks (if any), accounts payable which are beyond credit terms then
accorded the Borrowers, overdrafts, any charges to the Loan Account made in
connection with the establishment of the

 

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credit facility contemplated hereby; and L/C’s to be issued at, or immediately
subsequent to, such establishment, Excess Availability shall not be less than
$30,000,000.

 

3.7  ALL FEES AND EXPENSES PAID.

 

All fees due at or immediately after the first funding under the Revolving
Credit and all costs and expenses incurred by the Agent and Lenders in
connection with the establishment of the credit facility contemplated hereby
(including the reasonable fees and expenses of counsel to the Agent and Lenders)
shall have been paid in full.

 

3.8  NO BORROWER DEFAULT.

 

No Suspension Event or Event of Default has occurred which is continuing.

 

3.9  NO ADVERSE CHANGE.

 

No event shall have occurred or failed to occur, which occurrence or failure is
or could have a materially adverse effect upon the Borrowers’ financial
condition when compared with such financial condition or circumstances at June
30, 2004.

 

3.10                VALIDITY OF LIENS.

 

All filings, recordings, deliveries of instruments and other actions necessary
or desirable in the opinion of the Collateral Agent to protect and preserve such
Collateral Interests shall have been duly effected.  The Collateral Agent shall
have received evidence thereof in form and substance satisfactory to the
Collateral Agent.

 

3.11                DOCUMENTS.

 

No document shall be deemed delivered to the Agent until received and accepted
by the Agent at its offices in Boston, Massachusetts or at such other office as
any Agent may advise Obligors in writing.  Under no circumstances shall this
Agreement take effect until executed and accepted by the Agent at said office.

 

ARTICLE IV. - GENERAL REPRESENTATIONS, COVENANTS AND WARRANTIES:

 

To induce the Agent and Lenders to establish the credit facility contemplated
herein and to make loans and advances and to provide financial accommodations
under this Agreement (each of which loans shall be deemed to have been made in
reliance thereupon) the Obligors, in addition to all other representations,
warranties, and covenants made by the Obligors in any other Loan Document,
represents, warrants, and covenants as follows:

 

4.1  PAYMENT AND PERFORMANCE OF LIABILITIES.

 

The Obligors shall pay each Liability when due (or when demanded, if payable on
demand) and shall promptly, punctually, and faithfully perform each other
Liability.

 

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4.2  DUE ORGANIZATION. CORPORATE AUTHORIZATION. NO CONFLICTS.

 

(A)  THE EXACT NAME OF EACH OBLIGORS, AS SET FORTH IN EACH OBLIGOR’S
ORGANIZATIONAL DOCUMENTS, IS SET FORTH IN EXHIBIT 4.2 HEREOF.  EACH OBLIGOR
PRESENTLY IS AND SHALL HEREAFTER REMAIN IN GOOD STANDING AS THE TYPE OF ENTITY
INDICATED ON EXHIBIT 4.2 HEREOF AND BE DULY ORGANIZED UNDER THE LAWS OF THE
STATE OF ITS INCORPORATION INDICATED IN EXHIBIT 4.2 HEREOF AND SHALL HEREAFTER
REMAIN DULY QUALIFIED AND IN GOOD STANDING IN EVERY OTHER STATE IN WHICH, BY
REASON OF THE NATURE OR LOCATION OF THAT  OBLIGOR’S ASSETS OR OPERATION OF THAT 
BORROWER’S BUSINESS, SUCH QUALIFICATION MAY BE NECESSARY, EXCEPT WHERE THE
FAILURE TO SO QUALIFY OR BE IN GOOD STANDING WOULD NOT HAVE A MATERIAL ADVERSE
EFFECT.  EXHIBIT 4.2 ACCURATELY DESCRIBES THE CORPORATE STRUCTURE OF THE
OBLIGORS AND ANY AFFILIATES, INCLUDING THE IDENTITY OF SHAREHOLDERS HOLDING MORE
THAN 25% OF THE ISSUED AND OUTSTANDING STOCK HAVING THE RIGHT TO VOTE, LIMITED
AND GENERAL PARTNERS, OR MEMBERS, AS THE CASE MAY BE.

 

(B)  EACH AFFILIATE OF THE OBLIGORS IS LISTED ON EXHIBIT 4.2. THE LEAD BORROWER
SHALL PROVIDE THE ADMINISTRATIVE AGENT WITH PRIOR WRITTEN NOTICE OF ANY ENTITY’S
BECOMING OR CEASING TO BE AN AFFILIATE (PROVIDED, HOWEVER, THAT WITH RESPECT TO
ANY AFFILIATE THAT BECOME OR CEASE TO BECOME AFFILIATE SOLELY DUE TO ISSUANCES
OR EXCHANGES OF THE PUBLICLY-TRADED STOCK OF THE LEAD BORROWER, THE LEAD
BORROWER SHALL PROVIDE THE ADMINISTRATIVE AGENT WITH WRITTEN NOTICE THEREOF ON
OR BEFORE THE THIRTIETH (30TH) DAY OF THE NEXT MONTH THEREAFTER).

 

(C)  NO OBLIGOR SHALL CHANGE ITS STATE OF INCORPORATION OR ITS TAXPAYER
IDENTIFICATION NUMBER WITHOUT TWENTY-ONE (21) DAYS PRIOR WRITTEN NOTICE TO
ADMINISTRATIVE AGENT AND ITS COUNSEL, PROVIDED THAT NO SUCH CHANGE SHALL OCCUR
UNLESS NO SUSPENSION EVENT HAS OCCURRED THAT IS CONTINUING.

 

(D)  EACH OBLIGOR HAS ALL REQUISITE CORPORATE POWER AND AUTHORITY TO EXECUTE AND
DELIVER ALL LOAN DOCUMENTS TO WHICH THE OBLIGOR IS A PARTY AND HAS AND WILL
HEREAFTER RETAIN ALL REQUISITE CORPORATE POWER TO PERFORM ALL LIABILITIES.

 

(E)  THE EXECUTION AND DELIVERY BY EACH OBLIGOR OR BY THE LEAD BORROWER OF EACH
LOAN DOCUMENT ON BEHALF OF EACH OBLIGOR THAT IS A PARTY THERETO, SUCH  OBLIGOR’S
CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED BY SUCH LOAN DOCUMENTS (INCLUDING,
WITHOUT LIMITATION, THE CREATION OF COLLATERAL INTERESTS BY SUCH OBLIGOR TO
SECURE THE LIABILITIES), SUCH BORROWER’S PERFORMANCE UNDER SUCH LOAN DOCUMENT,
THE BORROWINGS HEREUNDER, AND THE USE OF THE PROCEEDS THEREOF:

 

(I)            HAVE BEEN DULY AUTHORIZED BY ALL NECESSARY CORPORATE ACTION ON
THE PART OF SUCH OBLIGOR;

 

(II)           DO NOT, AND WILL NOT, CONTRAVENE IN ANY MATERIAL RESPECT ANY
PROVISION OF ANY REQUIREMENT OF LAW OR MATERIAL OBLIGATION OF SUCH OBLIGOR; AND

 

(III)          WILL NOT RESULT IN THE CREATION OR IMPOSITION OF, OR THE
OBLIGATION TO CREATE OR IMPOSE, ANY ENCUMBRANCE UPON ANY ASSETS OF SUCH OBLIGOR
PURSUANT TO ANY REQUIREMENT OF LAW OR OBLIGATION OF SUCH OBLIGOR, EXCEPT
PURSUANT TO THE LOAN DOCUMENTS.

 

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(F)  THE LOAN DOCUMENTS HAVE BEEN DULY EXECUTED AND DELIVERED BY THE LEAD AND
THE OTHER BORROWERS OR BY THE LEAD BORROWER ON BEHALF OF ITSELF AND THE OTHER
BORROWERS AND BY THE GUARANTOR, AS THE CASE MAY BE AND ARE THE LEGAL, VALID AND
BINDING OBLIGATIONS OF THE OBLIGORS, ENFORCEABLE AGAINST THE OBLIGORS IN
ACCORDANCE WITH THEIR RESPECTIVE TERMS, EXCEPT TO THE EXTENT ENFORCEABILITY MAY
BE LIMITED BY APPLICABLE BANKRUPTCY, INSOLVENCY, MORATORIUM, OR OTHER SIMILAR
LAWS AFFECTING THE ENFORCEMENT OF CREDITORS’ RIGHTS GENERALLY AND BY GENERAL
PRINCIPLES OF EQUITY.

 

4.3  TRADE NAMES.

 

(A)  EXHIBIT 4.3 IS A LISTING OF:

 

(I)            ALL NAMES UNDER WHICH EACH OBLIGOR HAS CONDUCTED ITS BUSINESS
WITHIN THE PAST FIVE (5) YEARS, AND

 

(II)           ALL ENTITIES AND/OR PERSONS WITH WHOM EACH OBLIGOR EVER
CONSOLIDATED OR MERGED WITHIN THE PAST FIVE (5) YEARS, OR FROM WHOM EACH OBLIGOR
EVER ACQUIRED IN A SINGLE TRANSACTION OR IN A SERIES OF RELATED TRANSACTIONS
SUBSTANTIALLY ALL OF SUCH ENTITY’S OR PERSON’S ASSETS WITHIN THE PAST FIVE (5)
YEARS.

 

(B)  THE LEAD BORROWER WILL PROVIDE THE ADMINISTRATIVE AGENT WITH NOT LESS THAN
TWENTY-ONE (21) DAYS PRIOR WRITTEN NOTICE (WITH REASONABLE PARTICULARITY) OF ANY
CHANGE TO ANY  OBLIGOR’S NAME FROM THAT UNDER WHICH SUCH OBLIGOR IS CONDUCTING
ITS BUSINESS AT THE EXECUTION OF THIS AGREEMENT AND SUCH OBLIGOR WILL NOT EFFECT
SUCH CHANGE UNLESS NO SUSPENSION EVENT HAS OCCURRED THAT IS CONTINUING.

 

4.4  INFRASTRUCTURE.

 

(A)  THE OBLIGOR HAVE AND WILL MAINTAIN A SUFFICIENT INFRASTRUCTURE TO CONDUCT
THEIR BUSINESS AS PRESENTLY CONDUCTED AND AS CONTEMPLATED TO BE CONDUCTED AS
DESCRIBED IN THE BUSINESS PLAN.

 

(B)  EACH OBLIGOR OWNS AND POSSESSES, OR HAS THE RIGHT TO USE (AND WILL
HEREAFTER OWN, POSSESS, OR HAVE SUCH RIGHT TO USE) ALL PATENTS, INDUSTRIAL
DESIGNS, TRADEMARKS, TRADE NAMES, TRADE STYLES, BRAND NAMES, SERVICE MARKS,
LOGOS, COPYRIGHTS, TRADE SECRETS, KNOW-HOW, CONFIDENTIAL INFORMATION, AND OTHER
INTELLECTUAL OR PROPRIETARY PROPERTY OF ANY THIRD PERSON NECESSARY FOR THE 
OBLIGORS’ CONDUCT OF THE  OBLIGOR’ BUSINESS.

 

(C)  THE CONDUCT BY THE OBLIGORS OF THE  OBLIGORS’ BUSINESS DOES NOT PRESENTLY
INFRINGE (NOR WILL THE OBLIGORS CONDUCT THEIR BUSINESS IN THE FUTURE SO AS TO
INFRINGE) THE PATENTS, INDUSTRIAL DESIGNS, TRADEMARKS, TRADE NAMES, TRADE
STYLES, BRAND NAMES, SERVICE MARKS, LOGOS, COPYRIGHTS, TRADE SECRETS, KNOW-HOW,
CONFIDENTIAL INFORMATION, OR OTHER INTELLECTUAL OR PROPRIETARY PROPERTY OF ANY
THIRD PERSON.

 

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4.5  GUARANTOR.

 

The Guarantor will not conduct any business in the United States or hold any
assets in the United States, other than (i) holding the leases for certain
stores in Canada that sell the Borrowers’ inventory; and (ii) holding assets in
the corporate headquarters portion of the Headquarters Facility.

 

4.6  LOCATIONS.

 

(A)  THE COLLATERAL, AND THE BOOKS, RECORDS, AND PAPERS OF THE OBLIGORS
PERTAINING THERETO, ARE KEPT AND MAINTAINED SOLELY AT THE OBLIGORS’ CHIEF
EXECUTIVE OFFICES AND THOSE LOCATIONS WHICH ARE LISTED ON EXHIBIT 4.6(A), WHICH
INCLUDES, WITH RESPECT TO EACH SUCH LOCATION, THE NAME AND ADDRESS OF THE
LANDLORD ON THE LEASE WHICH COVERS SUCH LOCATION (OR AN INDICATION THAT THE
OBLIGORS OWN THE SUBJECT LOCATION) AND OF ALL SERVICE BUREAUS WITH WHICH ANY
SUCH RECORDS ARE MAINTAINED.  THE OBLIGORS SHALL SUPPLEMENT EXHIBIT 4.6(A) ON A
MONTHLY BASIS AFTER THE DATE HEREOF TO REFLECT ANY PERMITTED STORE
OPENINGS/CLOSINGS, ADDITIONAL DOMESTIC DISTRIBUTION CENTERS (FOR WHICH PRIOR
NOTICE HAS BEEN GIVEN PURSUANT TO THE DEFINITION THEREOF), OR NEW CHIEF
EXECUTIVE OFFICES.

 

(B)  THE OBLIGORS SHALL NOT REMOVE ANY OF THE COLLATERAL FROM SUCH CHIEF
EXECUTIVE OFFICE OR THOSE LOCATIONS LISTED ON EXHIBIT 4.6(A) EXCEPT TO:

 

(I)            ACCOMPLISH THE COSTA RICAN TRANSACTION;

 

(II)           ACCOMPLISH SALES OF INVENTORY IN THE ORDINARY COURSE OF BUSINESS;

 

(III)          MOVE INVENTORY FROM ONE SUCH LOCATION TO ANOTHER SUCH LOCATION;

 

(IV)          UTILIZE SUCH OF THE COLLATERAL AS IS REMOVED FROM SUCH LOCATIONS
IN THE ORDINARY COURSE OF BUSINESS (SUCH AS MOTOR VEHICLES); OR

 

(V)           MOVE INVENTORY FROM ONE STORE TO ANOTHER STORE IN CONNECTION WITH
PERMITTED STORE OPENINGS/CLOSINGS.

 

(C)  THE BORROWERS SHALL USE THEIR REASONABLE EFFORTS TO PROVIDE THE COLLATERAL
AGENT WITH LANDLORD WAIVERS OR SUBORDINATIONS, IN SUBSTANTIALLY THE FORM ANNEXED
HERETO AS EXHIBIT 4.6(C) FOR EACH OF THE BORROWERS’ LOCATIONS IN ANY OF THE
LANDLORD STATES OR THE CHIEF EXECUTIVE OFFICE (IF IT IS NOT LOCATED IN THE
HEADQUARTERS FACILITY) OR ANY NEW DOMESTIC DISTRIBUTION CENTER.  THE COLLATERAL
AGENT MAY ESTABLISH AN AVAILABILITY RESERVE FOR EACH SUCH LOCATION AS TO WHICH
SUCH A WAIVER IS NOT SO DELIVERED, WHICH AVAILABILITY RESERVE SHALL BE REDUCED
OR ELIMINATED UPON DELIVERY OF A WAIVER FOR SUCH LOCATION.

 

(D)  THE BORROWERS WILL NOT:

 

(I)            EXECUTE, ALTER, MODIFY, OR AMEND ANY LEASE FOR THE HEADQUARTERS
FACILITY OR THE DOMESTIC DISTRIBUTION FACILITIES, UNLESS SUCH ALTERATION,
MODIFICATION OR AMENDMENT IS FOR MORE ECONOMICALLY FAVORABLE TERMS FOR THE
BORROWERS.

 

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(II)           COMMIT TO, OR OPEN OR CLOSE ANY LOCATION AT WHICH THE BORROWERS
MAINTAINS, OFFERS FOR SALES, OR STORES ANY OF THE COLLATERAL, EXCEPT THAT (A)
THE BORROWERS MAY OPEN OR CLOSE, IN THEIR BUSINESS JUDGMENT, LOCATIONS WITHIN
DEPARTMENT OR SPECIALTY STORES OR OTHER LOCATIONS IN WHICH A BORROWER LEASES OR
LICENSES A PORTION OF THE SPACE IN SUCH STORE; AND (B) THE BORROWERS MAY: (I)
OPEN, DURING ANY FISCAL YEAR, NEW STORES IN AN AMOUNT NOT TO EXCEED TWENTY
PERCENT (20%) OF THE NUMBER OF STORES (OTHER THAN LOCATIONS WITHIN DEPARTMENT OR
SPECIALTY STORES OR OTHER LOCATIONS IN WHICH A BORROWER LEASES OR LICENSES A
PORTION OF THE SPACE IN SUCH STORE) EXISTING AS OF THE FIRST DAY OF SUCH FISCAL
YEAR (INCLUDING STORES THAT HAVE CLOSED SINCE SUCH FIRST DAY), AND (II) CLOSE,
DURING ANY FISCAL YEAR, STORES IN AN AMOUNT NOT TO EXCEED TWENTY PERCENT (20%)
OF THE NUMBER OF STORES (OTHER THAN LOCATIONS WITHIN DEPARTMENT OR SPECIALTY
STORES OR OTHER LOCATIONS IN WHICH A BORROWER LEASES OR LICENSES A PORTION OF
THE SPACE IN SUCH STORE) EXISTING AS OF THE FIRST DAY OF SUCH FISCAL YEAR (NOT
INCLUDING STORES THAT HAVE OPENED SINCE SUCH FIRST DAY) (“PERMITTED STORE
OPENINGS/CLOSINGS”).

 

(E)  NO TANGIBLE PERSONAL PROPERTY OF THE BORROWERS IS IN THE CARE OR CUSTODY OF
ANY THIRD PARTY OR STORED OR ENTRUSTED WITH A BAILEE OR OTHER THIRD PARTY AND
NONE SHALL HEREAFTER BE PLACED UNDER SUCH CARE, CUSTODY, STORAGE, OR
ENTRUSTMENT, EXCEPT (I) AS OTHERWISE DISCLOSED PURSUANT TO, OR PERMITTED BY,
THIS SECTION 4.6, (II) FOR INVENTORY LOCATED IN DEPARTMENT OR SPECIALTY STORES
OR OTHER LOCATIONS IN WHICH A BORROWER LEASES OR LICENSES A PORTION OF THE SPACE
IN SUCH STORE; (III) FOR GOODS IN CONTROL OF A CUSTOMS BROKER, WHICH HAS ENTERED
INTO A CUSTOMS BROKERS AGREEMENT, (IV) FOR WORK-IN-PROGRESS AT CONTRACTORS
(WHETHER OR NOT IN THE UNITED STATES), AND (III) TO THE EXTENT SUCH GOODS DO NOT
CONSTITUTE ELIGIBLE INVENTORY, ELIGIBLE IN-TRANSIT INVENTORY OR ELIGIBLE L/C
INVENTORY, ANY RAW MATERIALS AT CONTRACTORS (WHETHER OR NOT IN THE UNITED
STATES), FINISHED GOODS OUT FOR RE-WORKING, AND GOODS IN TRANSIT.

 

4.7  TITLE TO ASSETS.

 

(A)  THE OBLIGORS ARE, AND SHALL HEREAFTER REMAIN, THE OWNERS OF THE COLLATERAL
FREE AND CLEAR OF ALL ENCUMBRANCES OTHER THAN ENCUMBRANCES OR EXCEPTIONS TO
OWNERSHIP LISTED ON EXHIBIT 4.7(A) AND OTHER PERMITTED ENCUMBRANCES. THE
OBLIGORS DO NOT AND SHALL NOT HAVE POSSESSION OF ANY PROPERTY ON CONSIGNMENT TO
THE OBLIGORS.

 

(B)  THE OBLIGORS SHALL NOT ACQUIRE OR OBTAIN THE RIGHT TO USE ANY EQUIPMENT IN
WHICH EQUIPMENT ANY THIRD PARTY HAS AN INTEREST (NOTWITHSTANDING THAT THE
ACQUISITION OR RIGHT TO USE OF SUCH EQUIPMENT IS OTHERWISE PERMITTED BY THIS
AGREEMENT), EXCEPT FOR:

 

(I)            EQUIPMENT WHICH IS MERELY INCIDENTAL TO THE CONDUCT OF THE
OBLIGORS’ BUSINESS.

 

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(II)           EQUIPMENT SUBJECT TO (A) CAPITAL LEASES OR PURCHASE MONEY
SECURITY INTERESTS COMPRISED IN EACH CASE OF PERMITTED ENCUMBRANCES; AND (B)
OPERATING LEASES.

 

(C)  THE OBLIGORS DO NOT HAVE ANY GOODS, DOCUMENTS OF TITLE OR OTHER COLLATERAL
IN THE CUSTODY, CONTROL, OR POSSESSION OF A THIRD PARTY, EXCEPT AS SET FORTH IN
EXHIBIT 4.7(D) AND EXCEPT FOR GOODS LOCATED IN THE UNITED STATES IN TRANSIT TO A
LOCATION OF THE BORROWERS PERMITTED HEREIN OR IN THE ORDINARY COURSE OF BUSINESS
OF THE OBLIGORS IN THE POSSESSION OF THE CARRIER TRANSPORTING SUCH GOODS.  IN
THE EVENT THAT ANY GOODS, DOCUMENTS OF THE TITLE OR OTHER COLLATERAL ARE AT ANY
TIME AFTER THE DATE HEREOF IN THE CUSTODY, CONTROL OR POSSESSION OF ANY OTHER
PERSON NOT REFERRED TO IN EXHIBIT 4.7(D) OR SUCH CARRIERS, OBLIGORS SHALL
PROMPTLY NOTIFY THE COLLATERAL AGENT THEREOF IN WRITING.  PROMPTLY UPON
COLLATERAL AGENT’S REQUEST, THE OBLIGORS SHALL DELIVER TO THE AGENT A COLLATERAL
ACCESS AGREEMENT, IN FORM AND SUBSTANCE ACCEPTABLE TO THE COLLATERAL AGENT IN
ITS SOLE DISCRETION, DULY AUTHORIZED, EXECUTED AND DELIVERED BY SUCH PERSON AND
BORROWERS.

 

(D)  EXHIBIT 4.7(D) IS A SCHEDULE OF ALL CUSTOMS BROKERS EMPLOYED BY THE
OBLIGORS FOR THE TRANSPORT OF GOODS IN THE ORDINARY COURSE OF THE BUSINESS OF
THE OBLIGORS.  THE OBLIGORS SHALL NOT EMPLOY ANY OTHER CUSTOMS BROKERS UNLESS
(I) THE OBLIGORS HAVE PROVIDED THE COLLATERAL AGENT WITH THIRTY (30) DAYS PRIOR
NOTICE THEREOF AND (II) SUCH CUSTOMS BROKER HAS EXECUTED AND DELIVERED TO THE
COLLATERAL AGENT A CUSTOMS BROKER AGREEMENT.  THE COLLATERAL AGENT SHALL NOT
GIVE NOTICE TO ANY OF THE OBLIGORS’ CUSTOMS BROKERS TO FOLLOW THE INSTRUCTIONS
OF THE COLLATERAL AGENT AS PROVIDED IN ANY CUSTOMS BROKERS AGREEMENT EXCEPT UPON
OR FOLLOWING THE OCCURRENCE AND DURING THE CONTINUANCE OF AN EVENT OF DEFAULT.

 

4.8  INDEBTEDNESS.

 

(A)  THE OBLIGORS DO NOT AND SHALL NOT HEREAFTER HAVE ANY INDEBTEDNESS WITH THE
EXCEPTIONS OF:

 

(I)            ANY INDEBTEDNESS ON ACCOUNT OF THE REVOLVING CREDIT;

 

(II)           THE INDEBTEDNESS (IF ANY) LISTED ON EXHIBIT 4.8, ANNEXED HERETO;

 

(III)          INDEBTEDNESS FOR EQUIPMENT OR REAL ESTATE SECURED BY PURCHASE
MONEY SECURITY INTERESTS OR PURCHASE MONEY LIENS THAT ARE PERMITTED
ENCUMBRANCES;

 

(IV)          CAPITAL LEASES THAT ARE PERMITTED ENCUMBRANCES FOR THE ACQUISITION
OF EQUIPMENT OR REAL ESTATE;

 

(v)           Subordinated Debt, and any other Indebtedness up to the aggregate
amount of $5,000,000;

 

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(vi)          Indebtedness of Guarantor to Borrowers up to the amount equal to
Fifteen Million Dollars ($15,000,000) less the amount of any capital
contributions or other investments by Borrowers to Guarantor or its Subsidiaries
made after the date hereof, in the aggregate;

 

(vii)         Any Indebtedness related to the redemption of the Series A
Preferred Stock; and

 

(viii)        Any Indebtedness between any of the Borrowers.

 

provided, that, the amount of any Capital Leases and Indebtedness for Equipment
is in compliance with the provision on Capital Expenditures set forth in EXHIBIT
5.12(a).

 

(B)  THE OBLIGORS SHALL NOT PERMIT MORE THAN 25% OF THAT PORTION OF THE
AGGREGATE OF THEIR INDEBTEDNESS FOR THE PURCHASE OF GOODS OR SERVICES WHICH IS
NOT THE SUBJECT OF A GOOD FAITH DISPUTE TO REMAIN UNPAID MORE THAN 30 DAYS
BEYOND THEN CURRENT TRADE TERMS PROVIDED TO THE SUBJECT BORROWER BY THE SUPPLIER
OF SUCH GOODS AND SERVICES.

 

(C)           OBLIGORS SHALL NOT PREPAY OTHER INDEBTEDNESS (OTHER THAN THE
LIABILITIES), EXCEPT AS FOLLOWS: (I) IN AN AMOUNT UP TO $50,000,000 IN THE
AGGREGATE FOLLOWING THE CLOSING DATE, PROVIDED THAT (A) NO SUSPENSION EVENT OR
EVENT OF DEFAULT HAS OCCURRED WHICH IS CONTINUING AT THE TIME OF SUCH PAYMENT,
AND (B) PRO FORMA EXCESS AVAILABILITY IS AT LEAST $15,000,000 AT THE TIME OF
SUCH PAYMENT AND IMMEDIATELY AFTER GIVING EFFECT TO SUCH PREPAYMENT, OR (II) IN
AN UNLIMITED AMOUNT IN THE AGGREGATE FOLLOWING THE CLOSING DATE, PROVIDED THAT
(A) NO SUSPENSION EVENT OR EVENT OF DEFAULT HAS OCCURRED WHICH IS CONTINUING AT
THE TIME OF SUCH PAYMENT, AND (B) PRO FORMA EXCESS AVAILABILITY IS AT LEAST
$25,000,000 AT THE TIME OF SUCH PAYMENT AND IMMEDIATELY AFTER GIVING EFFECT TO
SUCH PREPAYMENT, PROVIDED THAT NONE OF THE LIMITS AND REQUIREMENTS SET FORTH IN
THIS CLAUSE (C) SHALL APPLY TO THE REPURCHASE OF ANY REMAINING SHARES OF SERIES
A PREFERRED STOCK IN AN AMOUNT NOT TO EXCEED $1,050,000 IN THE AGGREGATE
(WITHOUT DUPLICATION OF THE PERMITTED REPURCHASES SET FORTH IN SECTION 4.20).

 

(D)           EXCEPT FOR PREPAYMENTS PERMITTED UNDER SECTION 4.8(C), THE
BORROWERS SHALL NOT MAKE ANY PAYMENT OF ANY PART OR ALL OF ANY SUBORDINATED DEBT
OR TAKE ANY OTHER ACTION OR OMIT TO TAKE ANY OTHER ACTION IN RESPECT OF ANY
SUBORDINATED DEBT IN CONTRAVENTION OF THE WRITTEN TERMS OF ANY INSTRUMENT
EVIDENCING SUCH SUBORDINATED DEBT, OR ENTER INTO ANY AGREEMENT (WRITTEN OR ORAL)
WHICH COULD IN ANY WAY BE CONSIDERED TO AMEND, MODIFY OR TERMINATE ANY
INSTRUMENT OR AGREEMENT EVIDENCING OR RELATING TO SUBORDINATED DEBT.

 

4.9  INSURANCE.

 

(A)  EXHIBIT 4.9, IS A SCHEDULE OF ALL INSURANCE POLICIES OWNED BY THE OBLIGORS
OR UNDER WHICH THE OBLIGORS ARE THE NAMED INSURED.  EACH OF SUCH POLICIES IS IN
FULL FORCE AND EFFECT.  THE OBLIGORS ARE NOT IN MATERIAL DEFAULT OR VIOLATION OF
ANY SUCH POLICY AND, TO THEOBLIGOR’S KNOWLEDGE, NO ISSUER IS IN MATERIAL DEFAULT
OR VIOLATION OF ANY SUCH POLICY.

 

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(B)  THE OBLIGORS SHALL HAVE AND MAINTAIN AT ALL TIMES INSURANCE COVERING SUCH
RISKS, IN SUCH AMOUNTS, CONTAINING SUCH TERMS, IN SUCH FORM, AND FOR SUCH
PERIODS CUSTOMARY FOR ENTITIES IN SIMILAR INDUSTRIES AND IN SIMILAR LOCATIONS AS
OBLIGORS, AND WRITTEN BY SUCH COMPANIES AS MAY BE REASONABLY SATISFACTORY TO THE
AGENT.

 

(C)  ALL INSURANCE CARRIED BY THE OBLIGORS SHALL PROVIDE FOR A MINIMUM OF THIRTY
(30) DAYS’ WRITTEN NOTICE OF CANCELLATION TO THE COLLATERAL AGENT AND ALL SUCH
INSURANCE WHICH COVERS THE COLLATERAL SHALL INCLUDE AN ENDORSEMENT IN FAVOR OF
THE COLLATERAL AGENT THAT IS REASONABLY ACCEPTABLE TO THE COLLATERAL AGENT.

 

(D)  THE COVERAGE REFLECTED ON EXHIBIT 4.9 PRESENTLY SATISFIES THE FOREGOING
REQUIREMENTS, IT BEING RECOGNIZED BY THE OBLIGORS, HOWEVER, THAT SUCH
REQUIREMENTS MAY CHANGE HEREAFTER TO REFLECT CHANGING CIRCUMSTANCES.

 

(E)  THE OBLIGORS SHALL FURNISH THE AGENT FROM TIME TO TIME WITH CERTIFICATES OR
OTHER EVIDENCE REASONABLY SATISFACTORY TO THE AGENT REGARDING COMPLIANCE BY THE
BORROWERS WITH THE FOREGOING REQUIREMENTS.

 

(F)  IN THE EVENT OF THE FAILURE BY THE OBLIGORS TO MAINTAIN INSURANCE AS
REQUIRED HEREIN, THE COLLATERAL AGENT, AT ITS OPTION, MAY OBTAIN SUCH INSURANCE,
PROVIDED, HOWEVER, THE COLLATERAL AGENT’S OBTAINING OF SUCH INSURANCE SHALL NOT
CONSTITUTE A CURE OR WAIVER OF ANY EVENT OF DEFAULT OCCASIONED BY THE OBLIGORS’
FAILURE TO HAVE MAINTAINED SUCH INSURANCE.

 

(G)  THE LEAD BORROWER SHALL ADVISE THE COLLATERAL AGENT OF EACH CLAIM IN EXCESS
OF $1,000,000 (OR, FOLLOWING THE OCCURRENCE AND DURING THE CONTINUANCE OF AN
EVENT OF DEFAULT, $100,000) MADE BY ANY OBLIGOR UNDER ANY POLICY OF INSURANCE
WHICH COVERS THE COLLATERAL AND WILL PERMIT THE COLLATERAL AGENT, AT THE
COLLATERAL AGENT’S OPTION IN EACH INSTANCE, TO THE EXCLUSION OF THE OBLIGORS, TO
CONDUCT THE ADJUSTMENT OF EACH SUCH CLAIM IN EXCESS OF SUCH AMOUNTS (AND, AT THE
COLLATERAL AGENT’S OPTION IN EACH INSTANCE, OF ALL CLAIMS FOLLOWING THE
OCCURRENCE OF ANY EVENT OF DEFAULT).  UPON AND FOLLOWING THE OCCURRENCE AND
DURING THE CONTINUATION OF AN EVENT OF DEFAULT, THE OBLIGORS HEREBY APPOINT THE
COLLATERAL AGENT AS THE OBLIGORS’ ATTORNEY IN FACT TO OBTAIN, ADJUST, SETTLE,
AND CANCEL ANY INSURANCE DESCRIBED IN THIS SECTION AND TO ENDORSE IN FAVOR OF
THE COLLATERAL AGENT ANY AND ALL DRAFTS AND OTHER INSTRUMENTS WITH RESPECT TO
SUCH INSURANCE.  THE WITHIN APPOINTMENT, BEING COUPLED WITH AN INTEREST, IS
IRREVOCABLE UNTIL THIS AGREEMENT IS TERMINATED BY A WRITTEN INSTRUMENT EXECUTED
BY A DULY AUTHORIZED OFFICER OF THE COLLATERAL AGENT. THE AGENT SHALL NOT BE
LIABLE ON ACCOUNT OF ANY EXERCISE PURSUANT TO SAID POWER EXCEPT WHERE THERE HAS
BEEN A FINAL JUDICIAL DETERMINATION (IN A PROCEEDING IN WHICH THE AGENT HAD AN
OPPORTUNITY TO BE HEARD) THAT SUCH EXERCISE WAS CONDUCTED IN A GROSSLY NEGLIGENT
MANNER OR IN WILLFUL MISCONDUCT.  THE ADMINISTRATIVE AGENT MAY APPLY ANY
PROCEEDS OF SUCH INSURANCE AGAINST THE LIABILITIES, WHETHER OR NOT SUCH HAVE
MATURED, IN SUCH ORDER OF APPLICATION AS THE ADMINISTRATIVE AGENT MAY DETERMINE.

 

4.10                LICENSES; MATERIAL CONTRACTS.

 

EXHIBIT 4.10 is a schedule of all presently effective material agreements and
licenses, distributorships, franchises, and similar agreements, copies of which
have previously been

 

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delivered (in final, executed form, subject to such exceptions as are
satisfactory to the Administrative Agent) to the Administrative Agent.  Each
agreement, license, distributorship, franchise, and similar agreement issued to
the Obligor, or to which the Obligor is a party is in full force and effect in
each case except those the failure of which to be in full force and effect do
not have a Material Adverse Effect.  No party to any such license or agreement
is in default or violation thereof in each case except those the default or
violation of which do not have a Material Adverse Effect. The Obligors have not
received any notice or threat of cancellation of any such license or agreement.

 

4.11                LEASES.

 

EXHIBIT 4.11 is a schedule of all presently effective Capital Leases and
includes a list of all other presently effective Leases.  Each of such Leases
and Capital Leases is in full force and effect.  No party to any such Lease or
Capital Lease is in default or violation of any such Lease or Capital Lease and
none of the Obligors have received any notice or threat of cancellation of any
such Lease or Capital Lease which in any such case could reasonably be expected
to have a Material Adverse Effect.  After the occurrence and during the
continuance of an Event of Default, the Obligors hereby authorize the Agent at
any time and from time to time to contact any of the Obligors’ landlords in
order to confirm the continued compliance by any Obligor with the terms and
conditions of the Lease(s) between such Borrower and that landlord and to
discuss such issues, concerning such Obligor’s occupancy under such Lease(s), as
the Agent may reasonably determine.

 

4.12                REQUIREMENTS OF LAW.

 

The Obligors are in compliance with, and shall hereafter comply with and use
their respective assets in compliance with, all Requirements of Law except where
the failure of such compliance will not have a Material Adverse Effect.  No
Obligor has received any notice of any violation of any Requirement of Law
(other than of a violation which has no Material Adverse Effect, or any such
violations that have been cured or otherwise remedied).

 

4.13                LABOR RELATIONS.

 

(A)  NO OBLIGOR HAS BEEN AND IS PRESENTLY A PARTY TO ANY COLLECTIVE BARGAINING
OR OTHER LABOR CONTRACT.

 

(B)  THERE IS NOT PRESENTLY PENDING AND, TO THE OBLIGORS’ KNOWLEDGE, THERE IS
NOT THREATENED ANY OF THE FOLLOWING:

 

(I)            ANY STRIKE, SLOWDOWN, PICKETING, WORK STOPPAGE, OR EMPLOYEE
GRIEVANCE PROCESS;

 

(II)           ANY PROCEEDING AGAINST OR AFFECTING ANY OBLIGOR RELATING TO THE
ALLEGED VIOLATION OF ANY REQUIREMENT OF LAW PERTAINING TO LABOR RELATIONS OR
NATIONAL LABOR RELATIONS BOARD, THE EQUAL EMPLOYMENT OPPORTUNITY COMMISSION, OR
ANY COMPARABLE GOVERNMENTAL BODY, ORGANIZATIONAL ACTIVITY, OR OTHER LABOR OR

 

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EMPLOYMENT DISPUTE AGAINST OR AFFECTING ANY OBLIGOR, WHICH, IF DETERMINED
ADVERSELY TO SUCH OBLIGOR COULD NOT HAVE A MATERIAL ADVERSE EFFECT;

 

(III)          ANY LOCKOUT OF ANY EMPLOYEES BY ANY OBLIGOR, (AND NO SUCH ACTION
IS CONTEMPLATED BY ANY OBLIGOR); OR

 

(IV)          ANY APPLICATION FOR THE CERTIFICATION OF A COLLECTIVE BARGAINING
AGENT.

 

(C)  NO WORK STOPPAGE OR OTHER LABOR DISPUTE EXISTS, AND, TO OBLIGORS’
KNOWLEDGE, NO EVENT HAS OCCURRED OR CIRCUMSTANCE EXISTS THAT COULD PROVIDE THE
BASIS FOR ANY WORK STOPPAGE OR OTHER LABOR DISPUTE.

 

(D)  EACH OBLIGOR:

 

(I)            (A) HAS COMPLIED IN ALL MATERIAL RESPECTS WITH ALL REQUIREMENTS
OF LAW RELATING TO EMPLOYMENT, EQUAL EMPLOYMENT OPPORTUNITY, NONDISCRIMINATION,
IMMIGRATION, WAGES, HOURS, BENEFITS, AND OCCUPATIONAL SAFETY AND HEALTH, EXCEPT
SUCH NONCOMPLIANCE WHICH WOULD NOT REASONABLY BE EXPECTED TO HAVE A MATERIAL
ADVERSE EFFECT; AND (B) HAS COMPLIED IN ALL MATERIAL RESPECTS WITH ALL
REQUIREMENTS OF LAW RELATING TO COLLECTIVE BARGAINING, THE PAYMENT OF SOCIAL
SECURITY AND SIMILAR TAXES, AND PLANT CLOSING.

 

(II)           IS NOT LIABLE FOR THE PAYMENT OF MORE THAN A DE MINIMUS AMOUNT OF
COMPENSATION, DAMAGES, TAXES, FINES, PENALTIES, OR OTHER AMOUNTS, HOWEVER
DESIGNATED, FOR SUCH OBLIGOR’S FAILURE TO COMPLY WITH ANY REQUIREMENT OF LAW
REFERENCED IN SECTION 4.12.

 

4.14                MAINTAIN PROPERTIES.

 

Each Obligor shall:

 

(A)  KEEP THE COLLATERAL IN GOOD ORDER AND REPAIR (ORDINARY REASONABLE WEAR AND
TEAR AND INSURED CASUALTY EXCEPTED);

 

(B)  NOT SUFFER OR CAUSE THE WASTE OR DESTRUCTION OF ANY MATERIAL PART OF THE
COLLATERAL;

 

(C)  NOT USE ANY OF THE COLLATERAL IN MATERIAL VIOLATION OF ANY POLICY OF
INSURANCE THEREON; AND

 

(D)  NOT SELL, LEASE, OR OTHERWISE DISPOSE OF ANY OF THE COLLATERAL, OTHER THAN
THE FOLLOWING:

 

(I)            THE COSTA RICAN TRANSACTION;

 

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(II)           THE SALE OF INVENTORY IN COMPLIANCE WITH THIS AGREEMENT;

 

(III)          THE DISPOSAL OF EQUIPMENT WHICH IS OBSOLETE, WORN OUT, OR DAMAGED
BEYOND REPAIR, WHICH EQUIPMENT IS REPLACED TO THE EXTENT NECESSARY TO PRESERVE
OR IMPROVE THE OPERATING EFFICIENCY OF SUCH BORROWER;

 

(IV)          THE TURNING OVER TO THE AGENT OF ALL RECEIPTS AS PROVIDED HEREIN;
AND

 

(V)           THE SALE, LEASE, OR DISPOSITION OF COLLATERAL IN CONNECTION WITH
THE MOVEMENT OF INVENTORY FROM ONE STORE TO ANOTHER STORE IN CONNECTION WITH
PERMITTED STORE OPENINGS/CLOSINGS.

 

4.15                TAXES.

 

(A)  EACH OBLIGOR HAS FILED, OR CAUSED TO BE FILED, IN A TIMELY MANNER ALL
FEDERAL, STATE AND OTHER MATERIAL TAX RETURNS, REPORTS AND DECLARATIONS WHICH
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
OBLIGOR HAS PAID OR CAUSED TO BE PAID ALL TAXES DUE AND PAYABLE OR CLAIMED DUE
AND PAYABLE IN ANY ASSESSMENT RECEIVED BY IT, WHICH, IF UNPAID, WOULD RESULT IN
A MATERIAL ENCUMBRANCE ON ANY OF ITS PROPERTIES OR ASSETS, EXCEPT TAXES THE
VALIDITY OF WHICH ARE BEING CONTESTED IN GOOD FAITH BY APPROPRIATE PROCEEDINGS
DILIGENTLY PURSUED AND AVAILABLE TO SUCH BORROWER AND WITH RESPECT TO WHICH
ADEQUATE RESERVES IN CONFORMITY WITH GAAP HAVE BEEN SET ASIDE ON ITS BOOKS. 
ADEQUATE PROVISION HAS BEEN MADE FOR THE PAYMENT OF ALL ACCRUED AND UNPAID
FEDERAL, STATE, COUNTY, LOCAL, FOREIGN AND OTHER TAXES WHETHER OR NOT YET DUE
AND PAYABLE AND WHETHER OR NOT DISPUTED.

 

(B)  NO AGREEMENT IS EXTANT WHICH WAIVES OR EXTENDS ANY STATUTE OF LIMITATIONS
APPLICABLE TO THE RIGHT OF THE INTERNAL REVENUE SERVICE OR ANY STATE TAXING
AUTHORITY TO ASSERT A DEFICIENCY OR MAKE ANY OTHER CLAIM FOR OR IN RESPECT TO
ANY FEDERAL OR STATE TAXES.  NO ISSUE HAS BEEN RAISED IN ANY SUCH EXAMINATION
WHICH, BY APPLICATION OF SIMILAR PRINCIPLES, REASONABLY COULD BE EXPECTED TO
RESULT IN THE ASSERTION OF A DEFICIENCY FOR ANY FISCAL YEAR OPEN FOR
EXAMINATION, ASSESSMENT, OR CLAIM BY ANY FEDERAL OR STATE OR LOCAL TAXING
AUTHORITY.

 

(C)  EXCEPT AS DISCLOSED ON EXHIBIT 4.15, THERE ARE NO EXAMINATIONS OF OR WITH
RESPECT TO THE OBLIGORS PRESENTLY BEING CONDUCTED BY THE INTERNAL REVENUE
SERVICE OR ANY OTHER TAXING AUTHORITY.

 

(D)  THE OBLIGORS HAVE, AND HEREAFTER SHALL: PAY, AS THEY BECOME DUE AND
PAYABLE, ALL TAXES AND UNEMPLOYMENT CONTRIBUTIONS AND OTHER CHARGES OF ANY KIND
OR NATURE LEVIED, ASSESSED OR CLAIMED AGAINST ANY OBLIGOR OR THE COLLATERAL BY
ANY PERSON OR ENTITY WHOSE CLAIM COULD RESULT IN AN ENCUMBRANCE UPON ANY ASSET
OF ANY OBLIGOR OR BY ANY GOVERNMENTAL AUTHORITY (OTHER THAN TAXES AND CHARGES
BEING CONTESTED IN GOOD FAITH AND FOR WHICH ADEQUATE RESERVES HAVE BEEN
ESTABLISHED); PROPERLY EXERCISE ANY TRUST RESPONSIBILITIES IMPOSED UPON THE
OBLIGORS BY

 

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REASON OF WITHHOLDING FROM EMPLOYEES’ PAY OR BY REASON OF THE OBLIGORS’ RECEIPT
OF SALES TAX OR OTHER FUNDS FOR THE ACCOUNT OF ANY THIRD PARTY; TIMELY MAKE ALL
CONTRIBUTIONS AND OTHER PAYMENTS AS MAY BE REQUIRED PURSUANT TO ANY EMPLOYEE
BENEFIT PLAN NOW OR HEREAFTER ESTABLISHED BY THE OBLIGORS; AND TIMELY FILE ALL
TAX AND OTHER RETURNS AND OTHER REPORTS WITH EACH GOVERNMENTAL AUTHORITY TO WHOM
THE OBLIGORS ARE OBLIGATED TO SO FILE, EXCEPT IN THOSE CASES WHERE EXTENSIONS
HAVE BEEN GRANTED OR ARE PERMITTED OF WHICH THE OBLIGORS HAVE GIVEN THE
ADMINISTRATIVE AGENT WRITTEN NOTICE.

 

(E)  AT ITS OPTION, THE AGENT MAY, BUT SHALL NOT BE OBLIGATED TO, PAY ANY TAXES,
UNEMPLOYMENT CONTRIBUTIONS, AND ANY AND ALL OTHER CHARGES LEVIED OR ASSESSED
UPON THE OBLIGORS OR THE COLLATERAL BY ANY PERSON OR ENTITY OR GOVERNMENTAL
AUTHORITY (PROVIDED THAT, IF NO LIABILITIES (OTHER THAN LIABILITIES SOLELY
ATTRIBUTABLE TO THE L/C’S) ARE OUTSTANDING, THEN AGENT MAY PAY SUCH AMOUNTS ONLY
IF THE OBLIGORS HAVE NOT PAID THEM WHEN DUE), AND MAKE ANY CONTRIBUTIONS OR
OTHER PAYMENTS ON ACCOUNT OF THE OBLIGORS’ EMPLOYEE BENEFIT PLAN AS THE AGENT,
IN THE AGENT’S DISCRETION, MAY DEEM NECESSARY OR DESIRABLE, TO PROTECT,
MAINTAIN, PRESERVE, COLLECT, OR REALIZE UPON ANY OR ALL OF THE COLLATERAL OR THE
VALUE THEREOF OR ANY RIGHT OR REMEDY PERTAINING THERETO, PROVIDED, HOWEVER, THE
AGENT’S MAKING OF ANY SUCH PAYMENT SHALL NOT CONSTITUTE A CURE OR WAIVER OF ANY
EVENT OF DEFAULT OCCASIONED BY THE OBLIGORS’ FAILURE TO HAVE MADE SUCH PAYMENT.

 

4.16                NO MARGIN STOCK OR SECURITIES.

 

THE OBLIGORS ARE NOT ENGAGED IN THE BUSINESS OF EXTENDING CREDIT FOR THE PURPOSE
OF PURCHASING OR CARRYING ANY MARGIN STOCK (WITHIN THE MEANING OF REGULATIONS U,
T, AND X OF THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM OF THE UNITED
STATES).  NO PART OF THE PROCEEDS OF ANY BORROWING HEREUNDER WILL BE USED AT ANY
TIME TO PURCHASE OR CARRY ANY SUCH MARGIN STOCK OR TO EXTEND CREDIT TO OTHERS
FOR THE PURPOSE OF PURCHASING OR CARRYING ANY SUCH MARGIN STOCK.

 

4.17                ERISA.

 

Neither the Obligors nor any ERISA Affiliate ever has or hereafter shall:

 

(A)  VIOLATE OR FAIL TO BE IN MATERIAL COMPLIANCE WITH EMPLOYEE BENEFIT PLAN
MAINTAINED BY THE OBLIGORS;

 

(B)  EXCEPT AS SET FORTH IN EXHIBIT 4.17, FAIL TIMELY TO FILE ALL REPORTS AND
FILINGS REQUIRED BY ERISA TO BE FILED BY THE BORROWERS;

 

(C)  ENGAGE IN ANY “PROHIBITED TRANSACTIONS” OR “REPORTABLE EVENTS”
(RESPECTIVELY AS DESCRIBED IN ERISA);

 

(D)  ENGAGE IN, OR COMMIT, ANY ACT SUCH THAT A TAX OR PENALTY COULD BE IMPOSED
UPON THE OBLIGORS ON ACCOUNT THEREOF PURSUANT TO ERISA;

 

(E)  ACCUMULATE ANY MATERIAL FUNDING DEFICIENCY WITHIN THE MEANING OF ERISA;

 

(F)  TERMINATE ANY EMPLOYEE BENEFIT PLAN SUCH THAT A LIEN COULD BE ASSERTED
AGAINST ANY ASSETS OF THE OBLIGORS ON ACCOUNT THEREOF PURSUANT TO ERISA; OR

 

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(G)  BE A MEMBER OF, CONTRIBUTE TO, OR HAVE ANY OBLIGATION UNDER ANY EMPLOYEE
BENEFIT PLAN WHICH IS A MULTIEMPLOYER PLAN WITHIN THE MEANING OF SECTION 4001(A)
OF ERISA.

 

4.18                HAZARDOUS MATERIALS AND ENVIRONMENTAL COMPLIANCE.

 

(A)  THE OBLIGORS HAVE NEVER:

 

(I)            BEEN LEGALLY RESPONSIBLE FOR ANY RELEASE OR THREAT OF RELEASE OF
ANY HAZARDOUS MATERIAL; OR

 

(II)           RECEIVED NOTIFICATION OF ANY RELEASE OR THREAT OF RELEASE OF ANY
HAZARDOUS MATERIAL FROM ANY SITE OR VESSEL OCCUPIED OR OPERATED BY THE BORROWERS
AND/OR OF THE INCURRENCE OF ANY EXPENSE OR LOSS IN CONNECTION WITH THE
ASSESSMENT, CONTAINMENT, OR REMOVAL OF ANY RELEASE OR THREAT OF RELEASE OF ANY
HAZARDOUS MATERIAL FROM ANY SUCH SITE OR VESSEL.

 

(B)  THE OBLIGORS SHALL:

 

(I)            DISPOSE OF ANY HAZARDOUS MATERIAL ONLY IN COMPLIANCE WITH ALL
ENVIRONMENTAL LAWS; AND

 

(II)           NOT STORE ON ANY SITE OR VESSEL OCCUPIED OR OPERATED BY THE
OBLIGORS AND NOT TRANSPORT OR ARRANGE FOR THE TRANSPORT OF ANY HAZARDOUS
MATERIAL, EXCEPT IF SUCH STORAGE OR TRANSPORT IS IN THE ORDINARY COURSE OF THE
OBLIGORS’ BUSINESS AND IS IN COMPLIANCE WITH ALL ENVIRONMENTAL LAWS.

 

(C)  THE LEAD BORROWER SHALL PROVIDE THE ADMINISTRATIVE AGENT WITH WRITTEN
NOTICE UPON OBTAINING KNOWLEDGE OF ANY EXPENSE OR LOSS INCURRED BY ANY
GOVERNMENTAL AUTHORITY OR OTHER PERSON IN CONNECTION WITH THE ASSESSMENT,
CONTAINMENT, OR REMOVAL OF ANY HAZARDOUS MATERIAL, FOR WHICH EXPENSE OR LOSS THE
BORROWERS MAY BE LIABLE.

 

(d)  The Borrowers have taken all necessary steps to investigate the past and
present condition and usage of the Headquarters Facility and the Domestic
Distribution Facilities and the operations conducted thereon and, based upon
such diligent investigation, has determined that:

 

(i)            none of the Borrowers, their Subsidiaries or any operator of the
Headquarters Facility and the Domestic Distribution Facilities or any operations
thereon is in violation, or alleged violation, of any judgment, decree, order,
law, license, rule or regulation pertaining to environmental matters, including
without limitation, those arising under the Resource Conservation and Recovery
Act (“RCRA”), the Comprehensive Environmental Response,

 

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Compensation and Liability Act of 1980 as amended (“CERCLA”), the Superfund
Amendments and Reauthorization Act of 1986 (“SARA”), the Federal Clean Water
Act, the Federal Clean Air Act, the Toxic Substances Control Act, or any state,
local or foreign law, statute, regulation, ordinance, order or decree relating
to health, safety or the environment (hereinafter “Environmental Laws”), which
violation would have a material adverse effect on the environment or a Material
Adverse Effect, provided that for operators or operation prior to the time that
Borrowers owned or operated such real estate, said representation shall be
limited to Borrower’s knowledge;

 

(ii)           neither the Borrowers nor any of their Subsidiaries has received
notice from any third party including, without limitation, any Governmental
Authority, (A) that any one of them has been identified by the United States
Environmental Protection Agency (“EPA”) as a potentially responsible party under
CERCLA with respect to a site listed on the National Priorities List, 40 C.F.R.
Part 300 Appendix B; (B) that any hazardous waste, as defined by 42 U.S.C.
§6903(5), any hazardous substances as defined by 42 U.S.C. §9601(14), any
pollutant or contaminant as defined by 42 U.S.C. §9601(33) and any toxic
substances, oil or hazardous materials or other chemicals or substances
regulated by any Environmental Laws (“Hazardous Substances”) which any one of
them has generated, transported or disposed of has been found at any site at
which a Governmental Authority has conducted or has ordered that any Borrowers
or any of their Subsidiaries conduct a remedial investigation, removal or other
response action pursuant to any Environmental Law; or (iii) that it is or shall
be a named party to any claim, action, cause of action, complaint, or legal or
administrative proceeding (in each case, contingent or otherwise) arising out of
any third party’s incurrence of costs, expenses, losses or damages of any kind
whatsoever in connection with the release of Hazardous Substances;

 

(iii)        except as set forth on EXHIBIT 4.18 attached hereto: (A) no portion
of the Headquarters Facility and the Domestic Distribution Facilities has been
used for the handling, processing, storage or disposal of Hazardous Substances
except in accordance with applicable Environmental Laws; and no underground tank
or other underground storage receptacle for Hazardous Substances is located on
any portion of the Headquarters Facility and the Domestic Distribution
Facilities; (B) in the course of any activities conducted by the Borrowers,
their Subsidiaries or operators of its properties,

 

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no Hazardous Substances have been generated or are being used on the
Headquarters Facility and the Domestic Distribution Facilities except in
accordance with applicable Environmental Laws; (C) there have been no releases
(i.e. any past or present releasing, spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, disposing or dumping) or
threatened releases of Hazardous Substances on, upon, into or from the
properties of the Borrowers or their Subsidiaries, which releases would have a
material adverse effect on the value of any of the Headquarters Facility and the
Domestic Distribution Facilities or adjacent properties or the environment; (iv)
to the best of the Borrowers’ knowledge, there have been no releases on, upon,
from or into any real property in the vicinity of any of the Headquarters
Facility and the Domestic Distribution Facilities which, through soil or
groundwater contamination, may have come to be located on, and which would have
a material adverse effect on the value of, the Headquarters Facility and the
Domestic Distribution Facilities ; and (v) in addition, any Hazardous Substances
that have been generated on any of the Headquarters Facility and the Domestic
Distribution Facilities have been transported offsite only by carriers having an
identification number issued by the EPA (or the equivalent thereof in any
foreign jurisdiction), treated or disposed of only by treatment or disposal
facilities maintaining valid permits as required under applicable Environmental
Laws, which transporters and facilities have been and are, to the best of the
Borrowers’ knowledge, operating in compliance with such permits and applicable
Environmental Laws provided that for purposes of this clause (iii),
representations relating to real property for a period prior to the operation or
occupation by Borrowers shall be to Borrowers’ knowledge; and

 

(iv)        none of the Borrowers and their Subsidiaries, any Mortgaged Property
or the Headquarters Facility and the Domestic Distribution Facilities is subject
to any applicable Environmental Law requiring the performance of Hazardous
Substances site assessments, or the removal or remediation of Hazardous
Substances, or the giving of notice to any Governmental Authority or the
recording or delivery to other Persons of an environmental disclosure document
or statement by virtue of the transactions set forth herein and contemplated
hereby, or as a condition to the recording of any Mortgage or to the
effectiveness of any other transactions contemplated hereby.

 

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4.19                LITIGATION.

 

Except as described in EXHIBIT 4.19 there is not presently pending or threatened
by or against any Obligor any suit, action, proceeding, or investigation which,
if determined adversely to such Obligor, would have a Material Adverse Effect.

 

4.20                DIVIDENDS; INVESTMENTS; CORPORATE ACTION.

 

(a)  The Obligors shall not, except as set forth in EXHIBIT 4.20:

 

(i)  Pay any cash dividend or make any other distribution in respect of any
class of the Obligors’ capital stock (except as permitted in Section 4.20(b));

 

(ii)  Redeem, retire, purchase, or acquire any Obligor’s capital stock or
Securities, except as permitted under Section 4.20(b), and, in any event, unless
such stock repurchases are approved by the Lead Borrower’s Board of Directors
and be no be less favorable to the Borrowers than those which would have been
charged and imposed in an arms length transaction;

 

(III)  INVEST IN OR PURCHASE ANY STOCK OR SECURITIES OR RIGHTS TO PURCHASE ANY
SUCH STOCK OR SECURITIES, OF ANY CORPORATION OR OTHER ENTITY (EXCEPT (A) IN
ELIGIBLE LIQUID COLLATERAL, (B) INVESTMENTS (INCLUDING, WITHOUT LIMITATION,
CAPITAL CONTRIBUTIONS AND LOANS) TO GUARANTOR OR ITS SUBSIDIARIES, IN AN
AGGREGATE AMOUNT NOT TO EXCEED FIFTEEN MILLION DOLLARS ($15,000,000) (WITHOUT
DUPLICATION OF THE ADVANCES PERMITTED UNDER SECTION 4.21(E) HEREOF); AND (C) AS
PERMITTED IN SECTION 4.20(C));

 

(IV)  MERGE OR CONSOLIDATE OR BE MERGED OR CONSOLIDATED WITH OR INTO ANY OTHER
CORPORATION OR OTHER ENTITY (EXCEPT AS PERMITTED IN SECTION 4.20(C));

 

(V)  CONSOLIDATE ANY OF THE OBLIGORS’ OPERATIONS WITH THOSE OF ANY OTHER
CORPORATION OR OTHER ENTITY (OTHER THAN WITH ANY OTHER PRESENT OR FUTURE
OBLIGOR) (EXCEPT AS PART OF A PERMITTED ACQUISITION OR PERMITTED CREATION);

 

(VI)  ORGANIZE ANY AFFILIATE (EXCEPT AS PERMITTED IN SECTION 4.20(C)), OR CREATE
ANY AFFILIATE, EXCEPT PURSUANT TO A PERMITTED CREATION;

 

(VII)  SUBORDINATE ANY DEBTS OR OBLIGATIONS OWED TO THE OBLIGORS BY ANY THIRD
PARTY TO ANY OTHER DEBTS OWED BY SUCH THIRD PARTY TO ANY OTHER PERSON;

 

(VIII)  ACQUIRE ANY ASSETS OTHER THAN IN THE ORDINARY COURSE AND CONDUCT OF THE
OBLIGORS’ BUSINESS AS CONDUCTED AT THE EXECUTION OF THIS AGREEMENT (EXCEPT AS
PERMITTED IN SECTION 4.20(C)); OR

 

(IX)  MAKE ANY LOANS EXCEPT AS PERMITTED IN SECTION 4.21.

 

(b)  Borrowers may make dividends, distributions and common stock buybacks (i)
in an amount up to $20,000,000 in the aggregate following the Closing Date,
provided that (A) no Suspension Event or Event of Default has occurred which is
continuing at the time of such dividend, distribution, or buyback, and (B)
Excess Availability is at least $15,000,000 at the

 

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time of such dividend, distribution, or buyback and immediately after giving
effect to paying such dividends, making such distribution and/or making such
buybacks, or (ii) in an unlimited aggregate amount following the Closing Date,
provided that (A) no Suspension Event or Event of Default has occurred which is
continuing at the time of such dividend, distribution, or buyback, and (B)
Borrowers’ Consolidated pro forma Excess Availability is at least $25,000,000 at
the time of such dividend, distribution, or buyback and immediately after giving
effect to paying such dividends, making such distribution and/or buying back
such common stock, provided further that the pro forma Excess Availability
requirements set forth in this clause (b) shall not apply to the repurchase of
any remaining shares of Series A Preferred Stock in an amount not to exceed
$1,050,000 in the aggregate (without duplication of the permitted repurchases
set forth in Section 4.8).

 

(c)  So long as there is no Suspension Event that has occurred or would occur as
a result thereof, the Borrowers may make Permitted Acquisitions and Permitted
Creations, provided, that, the aggregate amount of consideration for all
Permitted Acquisitions and Permitted Creations (including all Indebtedness
incurred, repaid or assumed in connection with all acquisitions occurring after
the Closing Date and net of cash and cash equivalents acquired), cash paid, and
capital stock issued or expended in respect of all such acquisitions after the
Closing Date shall not exceed $40,000,000 (exclusive of any consideration
delivered to another Borrower, whether such Borrower is now a Borrower or
becomes a Borrower prior to delivery of such consideration (whether in the form
of cash of capital stock)) in the aggregate following the Closing Date, and
provided, further, that:

 

(i) if the aggregate amount of consideration for all Permitted Acquisitions and
Permitted Creations (including all Indebtedness incurred, repaid or assumed in
connection with Permitted Acquisitions and Permitted Creations occurring after
the Closing Date and net of cash and cash equivalents acquired), cash paid, and
capital stock issued or expended in respect of all such Permitted Acquisitions
and Permitted Creations after the Closing Date is equal to or less than
$15,000,000 (exclusive of any consideration delivered to another Borrower,
whether such Borrower is now a Borrower or becomes a Borrower prior to delivery
of such consideration (whether in the form of cash of capital stock)), then the
Borrowers shall demonstrate to the reasonable satisfaction of the Administrative
Agent that: (A) Pro Forma Fixed Charge Coverage Ratio shall be at least 1.10 to
1.00 immediately after giving effect to such Permitted Acquisition or Permitted
Creation, as applicable, and (B) pro forma Excess Availability shall be at least
$15,000,000 immediately after giving effect to such Permitted Acquisition or
Permitted Creation, as applicable; and

 

(II) IN ALL OTHER CASES, THEN THE BORROWERS SHALL DEMONSTRATE TO THE REASONABLE
SATISFACTION OF THE ADMINISTRATIVE AGENT THAT: (A) PRO FORMA FIXED CHARGE
COVERAGE RATIO SHALL BE AT LEAST 1.30 TO 1.00 IMMEDIATELY AFTER GIVING EFFECT TO
SUCH PERMITTED ACQUISITION OR PERMITTED CREATION, AS APPLICABLE, AND (B) PRO
FORMA EXCESS AVAILABILITY SHALL BE AT LEAST $25,000,000 IMMEDIATELY AFTER GIVING
EFFECT TO SUCH PERMITTED ACQUISITION OR PERMITTED CREATION, AS APPLICABLE.

 

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4.21                LOANS.

 

The Obligors shall not make any loans or advances to, nor acquire the
Indebtedness of, any Person, provided, however, the foregoing does not prohibit
any of the following:

 

(A)  ADVANCE PAYMENTS MADE TO THE OBLIGORS’ SUPPLIERS IN THE ORDINARY COURSE;
AND

 

(B)  ADVANCES TO THE OBLIGORS’ OFFICERS, EMPLOYEES, AND SALESPERSONS WITH
RESPECT TO REASONABLE EXPENSES TO BE INCURRED BY SUCH OFFICERS, EMPLOYEES, AND
SALESPERSONS FOR THE BENEFIT OF THE OBLIGORS, WHICH EXPENSES ARE PROPERLY
SUBSTANTIATED BY THE PERSON SEEKING SUCH ADVANCE AND PROPERLY REIMBURSABLE BY
THE OBLIGORS.

 

(C)  ADDITIONAL ADVANCES TO THE OBLIGORS’ OFFICERS APPROVED BY THE BOARD OF
DIRECTORS OF THE OBLIGORS, IN AN AMOUNT NOT MORE THAN $1,000,000 IN THE
AGGREGATE.

 

(D)  ADVANCES FROM A BORROWER TO ANOTHER BORROWER.

 

(E)  ADVANCES TO GUARANTORS AND THEIR SUBSIDIARIES, IN AN AGGREGATE AMOUNT NOT
TO EXCEED FIFTEEN MILLION DOLLARS ($15,000,000) (WITHOUT DUPLICATION OF THE
INVESTMENTS PERMITTED UNDER SECTION 4.20(A)(III)(B)).

 

4.22                PROTECTION OF ASSETS.

 

The Agent may in its discretion from time to time, discharge any tax or
Encumbrance on any of the Collateral, or take any other action which the Agent
may deem necessary or desirable to repair, insure, maintain, preserve, collect,
or realize upon any of the Collateral.  The Agent shall not have any obligation
to undertake any of the foregoing and shall have no liability on account of any
action so undertaken except where there is a specific finding in a judicial
proceeding (in which the Agent has had an opportunity to be heard), from which
finding no further appeal is available, that the Agent had acted in actual bad
faith or in a grossly negligent manner.  The Borrowers shall pay to the
Administrative Agent, on demand, or the Administrative Agent, in its discretion,
may add to the Loan Account, all amounts paid or incurred by the Agent pursuant
to this Section 4.22.  The obligation of the Borrowers to pay such amounts is a
Liability.

 

4.23                LINE OF BUSINESS.

 

The Obligors shall not engage in any business other than the business in which
it is currently engaged or a business reasonably related thereto.

 

4.24                AFFILIATE TRANSACTIONS.

 

THE OBLIGORS SHALL NOT MAKE ANY PAYMENT, NOR GIVE ANY VALUE TO ANY AFFILIATE
EXCEPT FOR GOODS AND SERVICES ACTUALLY PURCHASED BY THE OBLIGORS FROM, OR SOLD
BY THE BORROWERS TO, SUCH AFFILIATE FOR A PRICE AND ON TERMS WHICH SHALL BE NO
BE LESS FAVORABLE TO THE BORROWERS THAN THOSE WHICH WOULD HAVE BEEN CHARGED AND
IMPOSED IN AN ARMS LENGTH TRANSACTION, PROVIDED, HOWEVER, THAT UNDER NO
CIRCUMSTANCES SHALL INVESTMENTS, LOANS, AND CAPITAL CONTRIBUTIONS FROM

 

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BORROWERS IN OR TO GUARANTORS, OR THEIR SUBSIDIARIES, INCLUDING, WITHOUT
LIMITATION, MATERNITY FACTORY WAREHOUSE CENTRE, INC., EXCEED, IN THE AGGREGATE,
FIFTEEN MILLION DOLLARS ($15,000,000) (INCLUSIVE OF THE INVESTMENTS PERMITTED
UNDER SECTION 4.20(A)(III)(B) AND THE CAPITAL CONTRIBUTIONS AND LOANS PERMITTED
UNDER SECTION 4.20(E) HEREOF).

 

4.25                FURTHER ASSURANCES.

 

(A)  OTHER THAN PROPERTY AND ASSETS IN CANADA AND AS OTHERWISE PROVIDED IN THIS
AGREEMENT, THE OBLIGORS ARE NOT THE OWNER OF, NOR HAVE THEY ANY INTEREST IN, ANY
PROPERTY OR ASSET IN WHICH A COLLATERAL INTEREST IS REQUIRED TO BE GRANTED
HEREUNDER WHICH, IMMEDIATELY UPON THE SATISFACTION OF THE CONDITIONS PRECEDENT
TO THE EFFECTIVENESS OF THE CREDIT FACILITY CONTEMPLATED HEREBY (ARTICLE III)
WILL NOT BE SUBJECT TO PERFECTED COLLATERAL INTERESTS IN FAVOR OF THE COLLATERAL
AGENT (SUBJECT ONLY TO PERMITTED ENCUMBRANCES) TO SECURE THE LIABILITIES.

 

(B)  THE OBLIGORS WILL NOT HEREAFTER ACQUIRE ANY ASSET OR ANY INTEREST IN
PROPERTY IN WHICH A COLLATERAL INTEREST IS REQUIRED TO BE GRANTED HEREUNDER
WHICH IS NOT, IMMEDIATELY UPON SUCH ACQUISITION, SUBJECT TO SUCH A PERFECTED
COLLATERAL INTEREST IN FAVOR OF THE COLLATERAL AGENT (SUBJECT ONLY TO PERMITTED
ENCUMBRANCES) TO SECURE THE LIABILITIES.

 

(C)  THE OBLIGORS SHALL EXECUTE AND DELIVER TO THE AGENT SUCH INSTRUMENTS,
DOCUMENTS, AND PAPERS, AND SHALL DO ALL SUCH THINGS FROM TIME TO TIME HEREAFTER
AS THE AGENT MAY REASONABLY REQUEST TO CARRY INTO EFFECT THE PROVISIONS AND
INTENT OF THIS AGREEMENT; TO PROTECT AND PERFECT THE AGENT’S COLLATERAL
INTERESTS IN THE COLLATERAL; AND TO COMPLY WITH ALL APPLICABLE STATUTES AND
LAWS; AND FACILITATE THE COLLECTION OF THE RECEIVABLES COLLATERAL.  THE OBLIGORS
SHALL EXECUTE ALL SUCH INSTRUMENTS AS MAY BE REASONABLY REQUIRED BY THE AGENT
WITH RESPECT TO THE RECORDATION AND/OR PERFECTION OF THE COLLATERAL INTERESTS
CREATED OR CONTEMPLATED HEREIN.

 

(D)  THE OBLIGORS HEREBY DESIGNATE THE AGENT AS AND FOR THE OBLIGORS’ TRUE AND
LAWFUL ATTORNEY, WITH FULL POWER OF SUBSTITUTION, TO SIGN AND FILE ANY FINANCING
STATEMENTS IN ORDER TO PERFECT OR PROTECT THE AGENT’S COLLATERAL INTERESTS IN
THE COLLATERAL.

 

(E)  A CARBON, PHOTOGRAPHIC, OR OTHER REPRODUCTION OF THIS AGREEMENT OR OF ANY
FINANCING STATEMENT OR OTHER INSTRUMENT EXECUTED PURSUANT TO THIS SECTION 4.25
SHALL BE SUFFICIENT FOR FILING TO PERFECT THE SECURITY INTERESTS GRANTED HEREIN.

 

4.26                ADEQUACY OF DISCLOSURE.

 

(A)  ALL FINANCIAL STATEMENTS FURNISHED TO THE AGENT OR THE LENDERS BY THE
OBLIGORS HAVE BEEN PREPARED IN ACCORDANCE WITH GAAP CONSISTENTLY APPLIED AND
PRESENT FAIRLY THE CONSOLIDATED CONDITION OF THE OBLIGORS AT THE DATE(S) THEREOF
AND THE CONSOLIDATED RESULTS OF OPERATIONS AND CASH FLOWS OF THE OBLIGORS FOR
THE PERIOD(S) COVERED SUBJECT, IN THE CASE OF INTERIM FINANCIALS, TO NORMAL YEAR
END ADJUSTMENTS.  THERE HAS BEEN NO CHANGE IN THE FINANCIAL CONDITION, RESULTS
OF OPERATIONS, OR CASH FLOWS OF THE OBLIGORS SINCE THE DATE(S) OF SUCH FINANCIAL
STATEMENTS, OTHER THAN CHANGES IN THE ORDINARY COURSE OF BUSINESS, WHICH CHANGES
HAVE NOT BEEN MATERIALLY ADVERSE, EITHER SINGULARLY OR IN THE AGGREGATE.

 

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(B)  THE OBLIGORS DO NOT HAVE ANY CONTINGENT OBLIGATIONS OR OBLIGATION UNDER ANY
LEASE OR CAPITAL LEASE WHICH IS NOT NOTED IN THE OBLIGORS’ MOST RECENT
CONSOLIDATED FINANCIAL STATEMENTS FURNISHED TO THE AGENT OR THE LENDERS PRIOR TO
THE EXECUTION OF THIS AGREEMENT WHICH WOULD HAVE A MATERIAL ADVERSE EFFECT.

 

(C)  NO DOCUMENT, INSTRUMENT, AGREEMENT, OR PAPER NOW OR HEREAFTER GIVEN THE
AGENT OR THE LENDERS BY OR ON BEHALF OF THE OBLIGORS OR ANY GUARANTOR OF THE
LIABILITIES IN CONNECTION WITH THE EXECUTION OF THIS AGREEMENT BY THE AGENT OR
LENDERS CONTAINS OR WILL CONTAIN ANY UNTRUE STATEMENT OF A MATERIAL FACT OR
OMITS OR WILL OMIT TO STATE A MATERIAL FACT NECESSARY IN ORDER TO MAKE THE
STATEMENTS THEREIN NOT MISLEADING.  THERE IS NO FACT KNOWN TO THE BORROWERS
WHICH HAS, OR WHICH, IN THE FORESEEABLE FUTURE COULD HAVE, A MATERIAL ADVERSE
EFFECT ON THE FINANCIAL CONDITION OF THE OBLIGORS OR ANY SUCH GUARANTOR WHICH
HAS NOT BEEN DISCLOSED IN WRITING TO THE AGENT OR LENDERS.

 

4.27                NO RESTRICTIONS ON LIABILITIES.

 

No Obligor shall enter into or become subject to, directly or indirectly, any
agreement (other than the Indenture, as in effect as of the date hereof and
without giving effect to any subsequent amendment, modification, replacement, or
substitution thereof) prohibiting or restricting (other than with respect to
Permitted Encumbrances), in any manner (including, without limitation, by way of
covenant, representation, or event of default) any of the following:

 

(A)  THE GRANTING OF COLLATERAL INTERESTS IN FAVOR OF THE AGENT ON ANY ASSET OF
ANY OBLIGOR; OR

 

(B)  THE INCURRENCE OF ANY OF THE LIABILITIES.

 

4.28                OTHER COVENANTS.

 

No Obligor shall indirectly do or cause to be done any act which, if done
directly by such Obligor or Obligors, would breach any covenant contained in
this Agreement.

 

ARTICLE V. - FINANCIAL REPORTING AND PERFORMANCE COVENANTS:

 

5.1  MAINTAIN RECORDS.

 

The Obligors shall:

 

(A)  AT ALL TIMES, KEEP PROPER BOOKS OF ACCOUNT, IN WHICH FULL, TRUE, AND
ACCURATE ENTRIES SHALL BE MADE OF ALL OF THE OBLIGORS’ TRANSACTIONS, ALL IN
ACCORDANCE WITH GAAP APPLIED CONSISTENTLY WITH PRIOR PERIODS TO FAIRLY REFLECT
THE FINANCIAL CONDITION OF THE OBLIGORS AT THE CLOSE OF, AND ITS RESULTS OF
OPERATIONS FOR, THE PERIODS IN QUESTION.

 

(B)  TIMELY PROVIDE THE AGENT WITH THOSE FINANCIAL REPORTS, STATEMENTS, AND
SCHEDULES REQUIRED BY THIS ARTICLE V OR OTHERWISE, EACH OF WHICH REPORTS,
STATEMENTS AND

 

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SCHEDULES SHALL BE PREPARED, TO THE EXTENT APPLICABLE, IN ACCORDANCE WITH GAAP
APPLIED CONSISTENTLY WITH PRIOR PERIODS TO FAIRLY REFLECT THE FINANCIAL
CONDITION OF THE OBLIGORS AT THE CLOSE OF, AND ITS RESULTS OF OPERATIONS FOR,
THE PERIOD(S) COVERED THEREIN.

 

(C)  AT ALL TIMES, KEEP ACCURATE CURRENT RECORDS OF THE COLLATERAL INCLUDING,
WITHOUT LIMITATION, ACCURATE CURRENT STOCK, COST, AND SALES RECORDS OF ITS
INVENTORY, ACCURATELY AND SUFFICIENTLY ITEMIZING AND DESCRIBING THE KINDS,
TYPES, AND QUANTITIES OF INVENTORY AND THE COST AND SELLING PRICES THEREOF.

 

(D)  AT ALL TIMES, RETAIN INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS WHO ARE
REASONABLY SATISFACTORY TO THE ADMINISTRATIVE AGENT AND INSTRUCT SUCH
ACCOUNTANTS TO FULLY COOPERATE WITH, AND BE AVAILABLE TO, THE ADMINISTRATIVE
AGENT TO DISCUSS THE OBLIGORS’ FINANCIAL PERFORMANCE, FINANCIAL CONDITION,
OPERATING RESULTS, CONTROLS, AND SUCH OTHER MATTERS, WITHIN THE SCOPE OF THE
RETENTION OF SUCH ACCOUNTANTS, AS MAY BE RAISED BY THE ADMINISTRATIVE AGENT.

 

(E)  NOT CHANGE THEIR RESPECTIVE FISCAL YEARS, TAX IDENTIFICATION NUMBERS, OR
STATE OF INCORPORATION, EXCEPT AS SET FORTH HEREIN.

 

5.2  ACCESS TO RECORDS.

 

(A)  THE OBLIGORS SHALL ACCORD THE AGENT AND THE AGENT’S REPRESENTATIVES ACCESS
FROM TIME TO TIME AS THE AGENT AND SUCH REPRESENTATIVES MAY REQUIRE TO ALL
PROPERTIES OWNED BY OR OVER WHICH ANY OBLIGOR HAS CONTROL.  THE AGENT AND SUCH
REPRESENTATIVES SHALL HAVE THE RIGHT, AND THE OBLIGORS WILL PERMIT THE AGENT AND
THE AGENT’S REPRESENTATIVES FROM TIME TO TIME (UPON PRIOR NOTICE AND DURING
NORMAL BUSINESS HOURS, IF PRIOR TO THE OCCURRENCE AND CONTINUANCE OF A
SUSPENSION EVENT) AS AGENT AND SUCH REPRESENTATIVES MAY REQUEST, TO EXAMINE,
INSPECT, COPY, AND MAKE EXTRACTS FROM ANY AND ALL OF THE OBLIGORS’ BOOKS,
RECORDS, ELECTRONICALLY STORED DATA, PAPERS, AND FILES.  THE OBLIGORS SHALL MAKE
ALL OF THE OBLIGORS’ COPYING FACILITIES AVAILABLE TO THE AGENT AND THE AGENT’S
REPRESENTATIVES.

 

(B)  THE OBLIGORS HEREBY AUTHORIZE THE AGENT AND THE AGENT’S REPRESENTATIVES TO:

 

(I)            SUBJECT TO SECTION 14.26, INSPECT, COPY, DUPLICATE, REVIEW, CAUSE
TO BE REDUCED TO HARD COPY, RUN OFF, DRAW OFF, AND OTHERWISE USE ANY AND ALL
COMPUTER OR ELECTRONICALLY STORED INFORMATION OR DATA WHICH RELATES TO THE
OBLIGORS, WHETHER MAINTAINED BY OBLIGORS OR BY ANY SERVICE BUREAU, CONTRACTOR,
ACCOUNTANT, OR OTHER PERSON, AND DIRECTS ANY SUCH SERVICE BUREAU, CONTRACTOR,
ACCOUNTANT, OR OTHER PERSON WHO MAINTAINS SUCH INFORMATION FOR THE OBLIGOR FULLY
TO COOPERATE WITH THE AGENT AND THE AGENT’S REPRESENTATIVES WITH RESPECT
THERETO.

 

(II)           VERIFY AT ANY TIME THE COLLATERAL OR ANY PORTION THEREOF,
INCLUDING UPON AND FOLLOWING THE OCCURRENCE AND DURING THE CONTINUANCE OF ANY
SUSPENSION EVENT: VERIFICATION WITH ACCOUNT DEBTORS, AND/OR WITH THE BORROWERS’
COMPUTER BILLING COMPANIES, COLLECTION AGENCIES, AND ACCOUNTANTS AND TO SIGN THE
NAME OF THE OBLIGORS ON

 

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ANY NOTICE TO THE OBLIGORS’ ACCOUNT DEBTORS OR VERIFICATION OF THE COLLATERAL.

 

5.3  IMMEDIATE NOTICE TO AGENT.

 

(A)  THE LEAD BORROWER SHALL PROVIDE THE ADMINISTRATIVE AGENT AND COLLATERAL
AGENT WITH WRITTEN NOTICE PROMPTLY UPON THE OCCURRENCE OF ANY OF THE FOLLOWING
EVENTS, WHICH WRITTEN NOTICE SHALL BE WITH REASONABLE PARTICULARITY AS TO THE
FACTS AND CIRCUMSTANCES IN RESPECT OF WHICH SUCH NOTICE IS BEING GIVEN:

 

(I)            ANY CHANGE IN THE AUTHORIZED OFFICERS.

 

(II)           THE COMPLETION OF ANY PHYSICAL COUNT OF ALL OR A MATERIAL PORTION
OF THE OBLIGOR’S INVENTORY (TOGETHER WITH A COPY OF THE RESULTS THEREOF
CERTIFIED BY THE LEAD BORROWER).

 

(III)          ANY CESSATION BY THE OBLIGORS OF THEIR MAKING PAYMENT TO ITS
CREDITORS GENERALLY AS THE OBLIGORS’ DEBTS BECOME DUE.

 

(IV)          ANY FAILURE BY THE OBLIGORS TO PAY RENT AT ANY FORTY OR MORE OF
THE BORROWERS’ LOCATIONS, WHICH FAILURE CONTINUES FOR MORE THAN TEN (10) DAYS
FOLLOWING THE LAST DAY ON WHICH SUCH RENT WAS PAYABLE.

 

(V)           ANY MATERIAL ADVERSE CHANGE IN THE BUSINESS, OPERATIONS, OR
FINANCIAL AFFAIRS OF THE OBLIGORS.

 

(VI)          THE EXISTENCE OF ANY SUSPENSION EVENT OR EVENT OF DEFAULT.

 

(VII)         ANY DECISION ON THE PART OF ANY OBLIGOR TO DISCHARGE THE OBLIGORS’
PRESENT INDEPENDENT ACCOUNTANTS OR ANY WITHDRAWAL OR RESIGNATION BY SUCH
INDEPENDENT ACCOUNTANTS FROM THEIR ACTING IN SUCH CAPACITY.

 

(VIII)        ANY LITIGATION WHICH, IF DETERMINED ADVERSELY TO THE OBLIGORS,
COULD BE REASONABLY EXPECTED TO HAVE A MATERIAL ADVERSE EFFECT.

 

(ix)           Any violation of any Environmental Law that the Obligors or any
of their Subsidiaries reports in writing or is reportable by such Person in
writing (or for which any written report supplemental to any oral report is
made) to any Governmental Authority and upon becoming aware thereof, of any
inquiry, proceeding, investigation, or other action, including a notice from any
agency of potential environmental liability, of any Governmental Authority.

 

(B)  THE LEAD BORROWER SHALL:

 

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(I)            PROVIDE THE ADMINISTRATIVE AGENT, WHEN SO DISTRIBUTED, WITH
COPIES OF ANY MATERIALS DISTRIBUTED TO THE SHAREHOLDERS OF ANY OBLIGOR (QUA SUCH
SHAREHOLDERS).

 

(II)           AT THE REASONABLE REQUEST OF THE ADMINISTRATIVE AGENT, FROM TIME
TO TIME, PROVIDE THE AGENT WITH COPIES OF ALL ADVERTISING (INCLUDING COPIES OF
ALL PRINT ADVERTISING AND DUPLICATE TAPES OF ALL VIDEO AND RADIO ADVERTISING).

 

(III)          PROVIDE THE ADMINISTRATIVE AGENT, WHEN RECEIVED BY THE OBLIGORS,
WITH A COPY OF ANY MANAGEMENT LETTER OR SIMILAR COMMUNICATIONS FROM ANY
ACCOUNTANT OF THE OBLIGORS.

 

5.4  BORROWING BASE CERTIFICATE.

 

The Lead Borrower shall provide the Collateral Agent by 11:30 a.m., on the tenth
Business Day of each month, with a “Borrowing Base Certificate” (in the form of
EXHIBIT 5.4 as such form may be revised from time to time by the Collateral
Agent), reflecting the Obligor’s condition on the last Business Day of the
reporting period immediately prior to the date when furnished, provided that,
for any week that Excess Availability is less than $10,000,000, the Lead
Borrower shall provide the Agent by 11:30 a.m., weekly, on the Second (2nd)
Business Day of the following week, with such Borrowing Base Certificate
reflecting the Borrower’s condition on the last Business Day of the prior week.
Such Certificate shall be signed by an Authorized Officer and may be sent to the
Agent by facsimile or email (with electronic signature) transmission.

 

5.5  WEEKLY REPORTS.

 

In the event that a Borrowing Base Certificate is required weekly, then, in
addition, on a weekly basis, on Tuesday of each week (as of the then immediately
preceding Saturday) the Lead Borrower shall provide the Collateral Agent with a
flash inventory and accounts receivable collateral report (each in such form as
may be specified from time to time by the Collateral Agent). Such report may be
sent to the Collateral Agent by facsimile transmission, provided that the
original thereof is forwarded to the Collateral Agent on the date of such
transmission.

 

5.6  MONTHLY REPORTS.

 

(A)  MONTHLY, THE LEAD BORROWER SHALL PROVIDE THE COLLATERAL AGENT WITH ORIGINAL
COUNTERPARTS OF THE FOLLOWING (EACH IN SUCH FORM AS THE COLLATERAL AGENT FROM
TIME TO TIME MAY SPECIFY):

 

(I)            WITHIN FIFTEEN (15) DAYS OF THE END OF THE PREVIOUS MONTH:

 

(A)          A “STOCK LEDGER REPORT”.

 

(B)           A “GENERAL LEDGER INVENTORY REPORT”.

 

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(C)           RECONCILIATION BETWEEN STOCK LEDGER AND GENERAL LEDGER AS OF THE
END OF THE SUBJECT MONTH.

 

(D)          A LEASED DEPARTMENT INVENTORY REPORT (FOR LOCATIONS WITHIN
DEPARTMENT OR SPECIALTY STORES OR OTHER LOCATIONS IN WHICH A BORROWER LEASES OR
LICENSES A PORTION OF THE SPACE IN SUCH STORE).

 

(E)           L/C INVENTORY AND IN-TRANSIT INVENTORY REPORT (IF IN THE BORROWING
BASE).

 

(F)           A “GENERAL LEDGER ACCOUNTS RECEIVABLE REPORT”.

 

(G)           A “GENERAL LEDGER OTHER ACCOUNTS RECEIVABLE REPORT”.

 

(H)          AN AGING OF THE BORROWERS’ ACCOUNTS.

 

(I)            AN AGING OF THE BORROWERS’ ACCOUNTS PAYABLE.

 

(J)            THIRD PARTY STATEMENTS AS TO ELIGIBLE LIQUID COLLATERAL AND
LIQUID COLLATERAL INVESTMENTS.

 

(K)          A GROSS MARGIN RECONCILIATION.

 

(L)           A STORE ACTIVITY REPORT.

 

(II)           WITHIN THIRTY (30) DAYS OF THE END OF THE PREVIOUS MONTH:

 

(A)          THE OFFICER’S COMPLIANCE CERTIFICATE DESCRIBED IN SECTION 5.9.

 

(B)           An internally prepared financial statement of the Borrowers’
financial condition and the results of its operations for, the period ending
with the end of the subject month, which financial statement shall include, at a
minimum, a consolidated balance sheet, income statement, cash flow and
comparison to the Business Plan, which statement shall be certified by the Lead
Borrower’s chief financial officer or chief operating officer as fairly
presenting the financial position of the Borrowers in accordance with GAAP
(subject to year-end audit adjustments).

 

(C)           IN ADDITION, IF ACCOUNTS IN AN AGGREGATE FACE AMOUNT IN EXCESS OF
$500,000 BECOME NEWLY INELIGIBLE BECAUSE THEY FALL WITHIN ONE OF THE SPECIFIED
CATEGORIES OF INELIGIBILITY SET FORTH IN THE DEFINITION OF ELIGIBLE ACCOUNTS OR
OTHERWISE

 

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ESTABLISHED BY ADMINISTRATIVE AGENT, BORROWERS SHALL NOTIFY THE ADMINISTRATIVE
AGENT OF SUCH OCCURRENCE NO LATER THAN THE SIXTH BUSINESS DAY FOLLOWING SUCH
OCCURRENCE AND THE BORROWING BASE SHALL THEREUPON BE ADJUSTED TO REFLECT SUCH
OCCURRENCE.

 

(B)  FOR PURPOSES OF SECTION 5.6(A)(I), ABOVE, THE FIRST “PREVIOUS MONTH” IN
RESPECT OF WHICH THE ITEMS REQUIRED BY THAT SECTION SHALL BE PROVIDED SHALL BE
SEPTEMBER 2004, AND FOR PURPOSES OF SECTION 5.6(A)(II), ABOVE, THE FIRST
“PREVIOUS MONTH” IN RESPECT OF WHICH THE ITEMS REQUIRED BY THAT SECTION SHALL BE
PROVIDED SHALL BE AUGUST 2004.

 

(C)  UNTIL OTHERWISE REQUESTED BY THE ADMINISTRATIVE AGENT, THE ITEMS REQUIRED
BY SECTIONS 5.6(A)(I), AND 5.6(A)(II)(C) MAY BE DELIVERED IN ELECTRONIC FORMAT.

 

5.7  QUARTERLY REPORTS.

 

Quarterly, within Forty Five (45) days following the end of each of the
Borrower’s first three fiscal quarters, the Borrowers shall provide the Agent
with an original counterpart of a management prepared financial statement of the
Borrowers for the period from the beginning of the Borrowers’ then current
fiscal year through the end of the subject quarter, with comparative information
for the same period of the previous fiscal year, which statement shall include,
at a minimum, a consolidated balance sheet, income statement (if requested, on a
company specific and on a “consolidating” basis), statement of changes in
shareholders’ equity, and cash flows and comparisons for the corresponding
quarter of the then immediately previous year, as well as to the Business Plan.

 

5.8  ANNUAL REPORTS.

 

(A)  ANNUALLY, WITHIN 90 DAYS FOLLOWING THE END OF THE BORROWERS’ FISCAL YEAR,
THE LEAD BORROWER SHALL FURNISH THE AGENT WITH THE FOLLOWING:

 

(I)            BORROWERS’ CONSOLIDATED ANNUAL FINANCIAL STATEMENT, WHICH
STATEMENT SHALL HAVE BEEN PREPARED BY, AND BEAR THE UNQUALIFIED OPINION OF, THE
BORROWERS’ INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS (I.E. SAID STATEMENT SHALL
BE “CERTIFIED” BY SUCH ACCOUNTANTS) AND SHALL INCLUDE, AT A MINIMUM (WITH
COMPARATIVE INFORMATION FOR THE THEN PRIOR FISCAL YEAR) A BALANCE SHEET, INCOME
STATEMENT, STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY, AND CASH FLOWS; AND

 

(II)           THE OFFICER’S COMPLIANCE CERTIFICATE DESCRIBED IN SECTION 5.9.

 

(B)  EACH ANNUAL STATEMENT SHALL BE ACCOMPANIED BY SUCH ACCOUNTANT’S CERTIFICATE
INDICATING THAT, IN CONDUCTING THE AUDIT FOR SUCH ANNUAL STATEMENT, NOTHING CAME
TO THE ATTENTION OF SUCH ACCOUNTANTS TO BELIEVE THAT ANY SUSPENSION EVENT
RELATING TO THE FINANCIAL PERFORMANCE COVENANTS IMPOSED PURSUANT TO SECTION 5.12
HAD OCCURRED DURING THE SUBJECT FISCAL YEAR (OR IF ONE OR MORE HAD OCCURRED, THE
FACTS AND CIRCUMSTANCES THEREOF).

 

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5.9  OFFICERS’ CERTIFICATES.

 

(A)  THE LEAD BORROWER SHALL CAUSE ITS AUTHORIZED OFFICER TO CERTIFY, IN THE
FORM ATTACHED HERETO AS EXHIBIT 5.9 (THE “OFFICER’S COMPLIANCE CERTIFICATE”) IN
CONNECTION WITH THOSE MONTHLY AND ANNUAL STATEMENTS TO BE FURNISHED PURSUANT TO
THIS AGREEMENT THAT:

 

(I)            SUCH STATEMENT WAS PREPARED IN ACCORDANCE WITH GAAP CONSISTENTLY
APPLIED AND PRESENTS FAIRLY THE FINANCIAL CONDITION OF THE BORROWERS AT THE
CLOSE OF, AND THE RESULTS OF THE BORROWERS’ OPERATIONS AND CASH FLOWS FOR, THE
PERIOD(S) COVERED, SUBJECT, HOWEVER TO THE FOLLOWING:

 

(A)          USUAL YEAR END ADJUSTMENTS (THIS EXCEPTION SHALL NOT BE INCLUDED IN
THE CERTIFICATE WHICH ACCOMPANIES SUCH ANNUAL STATEMENT).

 

(B)           MATERIAL ACCOUNTING CHANGES (IN WHICH EVENT, SUCH CERTIFICATE
SHALL INCLUDE A SCHEDULE (IN REASONABLE DETAIL) OF THE EFFECT OF EACH SUCH
MATERIAL ACCOUNTING CHANGE) NOT PREVIOUSLY SPECIFICALLY TAKEN INTO ACCOUNT IN
THE DETERMINATION OF THE FINANCIAL PERFORMANCE COVENANT IMPOSED PURSUANT TO
SECTION 5.12.

 

(II)           NO SUSPENSION EVENT OR EVENT OF DEFAULT HAS OCCURRED WHICH IS
CONTINUING, OR IF SUCH EVENT HAS OCCURRED, ITS NATURE (IN REASONABLE DETAIL) AND
THE STEPS (IF ANY) BEING TAKEN OR CONTEMPLATED BY THE BORROWERS TO BE TAKEN ON
ACCOUNT THEREOF.

 

(III)          THE BORROWERS WERE IN COMPLIANCE (OR HAD FAILED TO COMPLY) AS OF
THE DATE OF THE APPLICABLE STATEMENT WITH EACH OF THE FINANCIAL PERFORMANCE
COVENANTS INCLUDED IN SECTION 5.12 HEREOF; SUCH CERTIFICATION TO BE ACCOMPANIED
BY CALCULATIONS DEMONSTRATING SUCH COMPLIANCE OR FAILURE TO COMPLY.

 

5.10                INVENTORIES, APPRAISALS, AND AUDITS.

 

(A)  THE COLLATERAL AGENT MAY, AT THE EXPENSE OF THE BORROWERS, PARTICIPATE IN
AND/OR OBSERVE EACH INVENTORY AND ANY CYCLE COUNT OF THE COLLATERAL WHICH IS
UNDERTAKEN ON BEHALF OF THE BORROWERS (PROVIDED THAT ANY EXPENSES OF COLLATERAL
AGENT FOR WHICH COLLATERAL AGENT SEEKS REIMBURSEMENT SHALL BE REASONABLE
EXPENSES).  NO BORROWER MAY, WITHOUT THE PRIOR WRITTEN CONSENT OF THE COLLATERAL
AGENT, CHANGE THE METHODOLOGY TO BE FOLLOWED IN CONNECTION WITH THE CONDUCT OF
AND REPORTING ON THE RESULTS OF SUCH INVENTORY FROM THE METHODOLOGY EMPLOYED BY
THE BORROWERS AS OF THE DATE OF THIS AGREEMENT.

 

(B)  THE BORROWERS, AT THEIR EXPENSE, SHALL CAUSE EACH STORE LOCATION,
WAREHOUSE, AND DISTRIBUTION CENTER TO HAVE NOT LESS THAN ONE (1) PHYSICAL
INVENTORY OR CYCLE COUNT IN EACH TWELVE (12) MONTH PERIOD TO BE UNDERTAKEN
CONSISTENT WITH CURRENT PRACTICE, WHILE THIS

 

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AGREEMENT IS IN EFFECT (THE SCHEDULING OF WHICH SHALL BE SUBJECT TO THE
COLLATERAL AGENT’S REASONABLE DISCRETION), CONDUCTED BY SUCH INVENTORY TAKERS AS
ARE REASONABLY SATISFACTORY TO THE COLLATERAL AGENT AND FOLLOWING SUCH
METHODOLOGY AS MAY BE REASONABLY SATISFACTORY TO THE AGENT.

 

(I)            THE LEAD BORROWER SHALL PROVIDE THE COLLATERAL AGENT WITH A COPY
OF THE PRELIMINARY RESULTS OF EACH SUCH INVENTORY (AS WELL AS OF ANY OTHER
PHYSICAL INVENTORY UNDERTAKEN BY THE BORROWERS) WITHIN TEN (10) DAYS AFTER ITS
COMPLETION.

 

(II)           THE LEAD BORROWER SHALL PROVIDE THE COLLATERAL AGENT WITH A
RECONCILIATION OF THE RESULTS OF EACH SUCH INVENTORY (AS WELL AS OF ANY OTHER
PHYSICAL INVENTORY UNDERTAKEN BY THE BORROWERS) TO THE BORROWERS’ BOOKS AND
RECORDS WITHIN THIRTY (30) DAYS FOLLOWING THE COMPLETION OF SUCH INVENTORY.

 

(III)          THE COLLATERAL AGENT, IN ITS DISCRETION, FOLLOWING THE OCCURRENCE
OF AND DURING THE CONTINUANCE OF A SUSPENSION EVENT, MAY CAUSE SUCH ADDITIONAL
INVENTORIES TO BE TAKEN AS THE COLLATERAL AGENT DETERMINES (EACH, AT THE EXPENSE
OF THE BORROWERS).

 

(C)  THE COLLATERAL AGENT CONTEMPLATES OBTAINING UP TO ONE (1) APPRAISAL (AT THE
EXPENSE OF THE BORROWER) OF THE BORROWERS’ INVENTORY DURING EACH TWELVE (12)
MONTH PERIOD DURING WHICH THIS AGREEMENT IS IN EFFECT, EACH CONDUCTED BY SUCH
APPRAISERS AS ARE SATISFACTORY TO THE COLLATERAL AGENT,  AND CONTEMPLATES
OBTAINING UP TO ONE (1) ADDITIONAL APPRAISAL (AT THE EXPENSE OF THE BORROWERS)
DURING ANY TWELVE (12) MONTH PERIOD IN WHICH EXCESS AVAILABILITY FALLS BELOW
$20,000,000 AT ANY TIME,  BUT IN ITS DISCRETION, MAY OBTAIN ADDITIONAL
APPRAISALS OF THE BORROWERS’ INVENTORY AND REAL ESTATE IN THE EVENT IT DEEMS IT
REASONABLY NECESSARY IN ITS DISCRETION (SUCH ADDITIONAL APPRAISALS, IF NOT
CONDUCTED AFTER AND DURING THE CONTINUANCE OF AN EVENT OF DEFAULT, SHALL BE AT
COLLATERAL AGENT’S EXPENSE).

 

(D)  THE COLLATERAL AGENT CONTEMPLATES CONDUCTING ONE (1) COMMERCIAL FINANCE
AUDIT (AT THE EXPENSE OF THE BORROWERS) OF THE BORROWERS’ BOOKS AND RECORDS
DURING EACH TWELVE (12) MONTH PERIOD DURING WHICH THIS AGREEMENT IS IN EFFECT
AND CONTEMPLATES CONDUCTING UP TO ONE (1) ADDITIONAL COMMERCIAL FINANCE AUDIT
(AT THE EXPENSE OF THE BORROWERS) DURING ANY TWELVE (12) MONTH PERIOD IN WHICH
EXCESS AVAILABILITY FALLS BELOW $20,000,000 AT ANY TIME, BUT IN ITS DISCRETION,
MAY OBTAIN MORE IN THE EVENT IT DEEMS IT REASONABLY NECESSARY IN ITS DISCRETION
(SUCH ADDITIONAL COMMERCIAL FINANCE AUDITS, IF NOT CONDUCTED AFTER AND DURING
THE CONTINUANCE OF AN EVENT OF DEFAULT, SHALL BE AT COLLATERAL AGENT’S EXPENSE).

 

5.11                ADDITIONAL FINANCIAL INFORMATION.

 

(A)  IN ADDITION TO ALL OTHER INFORMATION REQUIRED TO BE PROVIDED PURSUANT TO
THIS ARTICLE V, THE LEAD BORROWER PROMPTLY SHALL PROVIDE THE AGENT (AND ANY
GUARANTOR OF THE LIABILITIES), SUCH OTHER AND ADDITIONAL INFORMATION CONCERNING
THE OBLIGORS, THE COLLATERAL, THE OPERATION OF THE OBLIGORS’ BUSINESS, AND THE
OBLIGORS’ FINANCIAL CONDITION, INCLUDING FINANCIAL

 

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REPORTS AND STATEMENTS (INCLUDING SUPPORTING SCHEDULES), AS THE AGENT MAY FROM
TIME TO TIME REASONABLY REQUEST FROM THE LEAD BORROWER.

 

(B)  THE LEAD BORROWER MAY PROVIDE THE AGENT, FROM TIME TO TIME HEREAFTER, WITH
UPDATED FORECASTS OF THE OBLIGORS’ ANTICIPATED PERFORMANCE AND OPERATING
RESULTS.

 

(C)  THE LEAD BORROWER SHALL, NO LATER THAN THIRTY (30) DAYS PRIOR TO THE END OF
EACH OF THE BORROWERS’ FISCAL YEARS, FURNISH THE ADMINISTRATIVE AGENT WITH A
DRAFT UPDATED AND EXTENDED FORECAST (WHICH FORECAST SHALL BE PROPOSED BY THE
LEAD BORROWER TO BECOME THE BUSINESS PLAN AS PROVIDED IN CLAUSE (5.11(D) BELOW)
WHICH SHALL GO OUT AT LEAST THROUGH THE END OF THE THEN NEXT FISCAL YEAR AND
SHALL INCLUDE A CONSOLIDATED INCOME STATEMENT, BALANCE SHEET, AND STATEMENT OF
CASH FLOW, BY MONTH, AS WELL AS COMPONENTS OF THE BORROWING BASE AND SHALL
INCLUDE ASSUMPTIONS AS ARE REASONABLY SATISFACTORY TO THE AGENT, EACH PREPARED
IN CONFORMITY WITH GAAP AND CONSISTENT WITH THE BORROWERS’ THEN CURRENT
PRACTICES, AND THE LEAD BORROWER SHALL, NO LATER THAN SIXTY (60) DAYS AFTER THE
END OF EACH OF THE BORROWERS’ FISCAL YEARS, FURNISH THE AGENT WITH A FINAL
UPDATED AND EXTENDED FORECAST WHICH SHALL GO OUT AT LEAST THROUGH THE END OF THE
THEN NEXT FISCAL YEAR AND SHALL INCLUDE A CONSOLIDATED INCOME STATEMENT, BALANCE
SHEET, AND STATEMENT OF CASH FLOW, BY MONTH, AS WELL AS COMPONENTS OF THE
BORROWING BASE AND SHALL INCLUDE ASSUMPTIONS AS ARE REASONABLY SATISFACTORY TO
THE AGENT, EACH PREPARED IN CONFORMITY WITH GAAP AND CONSISTENT WITH THE
BORROWERS’ THEN CURRENT PRACTICES,.

 

(D)  THE ADMINISTRATIVE AGENT, FOLLOWING THE RECEIPT OF ANY OF SUCH FORECAST,
MAY, BUT SHALL NOT BE UNDER ANY OBLIGATION TO, ACCEPT IN WRITING SUCH FORECAST
(IN WHICH EVENT, SUCH FORECAST SHALL BECOME THE BUSINESS PLAN).

 

(E)  INTENTIONALLY OMITTED.

 

(F)  PROMPTLY AFTER THE SENDING OR FILING THEREOF, AS THE CASE MAY BE, THE
OBLIGORS SHALL DELIVER TO THE ADMINISTRATIVE AGENT COPIES OF ANY PROXY
STATEMENTS, FINANCIAL STATEMENTS OR REPORTS WHICH OBLIGORS HAVE SENT TO
SHAREHOLDERS QUA SHAREHOLDERS AND COPIES OF ANY REGULAR, PERIODIC AND SPECIAL
REPORTS OR REGISTRATION STATEMENTS WHICH OBLIGORS FILE WITH THE SECURITIES AND
EXCHANGE COMMISSION OF ANY GOVERNMENTAL AUTHORITY WHICH MAY BE SUBSTITUTED
THEREFORE, OR ANY NATIONAL SECURITIES EXCHANGE.

 

(G)  THE OBLIGORS RECOGNIZE THAT ALL APPRAISALS, INVENTORIES, ANALYSIS,
FINANCIAL INFORMATION, AND OTHER MATERIALS WHICH THE AGENT MAY OBTAIN, DEVELOP,
OR RECEIVE WITH RESPECT TO THE OBLIGORS IS CONFIDENTIAL TO THE AGENT AND THAT,
EXCEPT AS OTHERWISE PROVIDED HEREIN, THE OBLIGORS ARE NOT ENTITLED TO RECEIPT OF
ANY OF SUCH APPRAISALS, INVENTORIES, ANALYSIS, FINANCIAL INFORMATION, AND OTHER
MATERIALS, NOR COPIES OR EXTRACTS THEREOF OR THEREFROM.

 

5.12                FINANCIAL PERFORMANCE COVENANTS.

 

The Borrowers shall observe and comply with those financial performance
covenants set forth on EXHIBIT 5.12(a) certain of which covenants are based on
the Business Plan set forth on EXHIBIT 5.12(b).  Compliance with such financial
performance covenants shall be made as if no Material Accounting Changes had
been made (other than any Material Accounting Changes

 

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specifically taken into account in the setting of such covenants).  The
Administrative Agent may determine the Borrowers’ compliance with such covenants
based upon financial reports and statements provided by the Lead Borrower to the
Administrative Agent (whether or not such financial reports and statements are
required to be furnished pursuant to this Agreement) as well as by reference to
interim financial information provided to, or developed by, the Administrative
Agent.

 

ARTICLE VI. - USE AND COLLECTION OF COLLATERAL:

 

6.1  USE OF INVENTORY COLLATERAL.

 

(A)  THE BORROWERS SHALL NOT ENGAGE IN ANY SALE OF THE INVENTORY OTHER THAN FOR
FAIR CONSIDERATION IN THE CONDUCT OF THE BORROWERS’ BUSINESS IN THE ORDINARY
COURSE AND SHALL NOT ENGAGE IN SALES OR OTHER DISPOSITIONS TO CREDITORS, SALES
OR OTHER DISPOSITIONS IN BULK, OR ANY USE OF ANY OF THE INVENTORY IN BREACH OF
ANY PROVISION OF THIS AGREEMENT.

 

(B)  NO SALE OF INVENTORY SHALL BE ON CONSIGNMENT, APPROVAL, OR UNDER ANY OTHER
CIRCUMSTANCES SUCH THAT, WITH THE EXCEPTION OF THE BORROWERS’ CUSTOMARY RETURN
POLICY APPLICABLE TO THE RETURN OF INVENTORY PURCHASED BY THE BORROWERS’ RETAIL
CUSTOMERS IN THE ORDINARY COURSE, SUCH INVENTORY MAY BE RETURNED TO THE
BORROWERS WITHOUT THE CONSENT OF THE AGENT.

 

6.2  INVENTORY QUALITY.

 

All Inventory now owned or hereafter acquired by the Borrowers is and will be of
good and merchantable quality and free from defects (other than defects within
customary trade tolerances or for purchases of “irregular” Inventory in
accordance with current practices).

 

6.3  ADJUSTMENTS AND ALLOWANCES.

 

The Borrowers may grant such allowances or other adjustments to the Borrowers’
Account Debtors (exclusive of extending the time for payment of any Account or
Account Receivable, which shall not be done except in the ordinary course of the
Borrowers’ business) as the Borrowers may reasonably deem to accord with sound
business practice, provided, however, upon the occurrence and during the
continuance of an Event of Default, the authority granted the Borrowers pursuant
to this Section 6.3 may be limited or terminated by the Collateral Agent at any
time in the Collateral Agent’s discretion.

 

6.4  VALIDITY OF ACCOUNTS.

 

(A)  THE AMOUNT OF EACH ACCOUNT SHOWN ON THE BOOKS, RECORDS, AND INVOICES OF THE
BORROWERS REPRESENTED AS OWING BY EACH ACCOUNT DEBTOR IS AND WILL BE THE CORRECT
AMOUNT ACTUALLY OWING BY SUCH ACCOUNT DEBTOR AND SHALL HAVE BEEN FULLY EARNED BY
PERFORMANCE BY THE BORROWERS.

 

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(B)  UPON AND FOLLOWING THE OCCURRENCE AND DURING THE CONTINUANCE OF ANY
SUSPENSION EVENT, THE COLLATERAL AGENT FROM TIME TO TIME MAY VERIFY THE
RECEIVABLES COLLATERAL DIRECTLY WITH THE BORROWERS’ ACCOUNT DEBTORS, SUCH
VERIFICATION TO BE UNDERTAKEN IN KEEPING WITH COMMERCIALLY REASONABLE COMMERCIAL
LENDING STANDARDS.

 

(C)  THE BORROWERS HAVE NO KNOWLEDGE OF ANY IMPAIRMENT OF THE VALIDITY OR
COLLECTIBILITY OF ANY MATERIAL PORTION OF THE ACCOUNTS (AND NO KNOWLEDGE OF ANY
IMPAIRMENT OF THE VALIDITY OR COLLECTIBILITY OF ANY OF THE ELIGIBLE ACCOUNTS OR
ELIGIBLE CREDIT CARD RECEIVABLES) AND THE LEAD BORROWER SHALL NOTIFY THE
COLLATERAL AGENT OF ANY SUCH FACT IMMEDIATELY AFTER ANY BORROWER BECOMES AWARE
OF ANY SUCH IMPAIRMENT.

 

(D)  EXCEPT WITH RESPECT TO PERFORMANCE BONDS IN RESPECT OF CONSTRUCTION
CONTRACTS, UP TO AN AGGREGATE MAXIMUM OF $2,500,000, FOR WHICH THE SOLE
COLLATERAL IS THE BORROWER’S CASH, THE BORROWERS SHALL NOT POST ANY BOND TO
SECURE ANY BORROWERS’ PERFORMANCE UNDER ANY AGREEMENT TO WHICH ANY BORROWER IS A
PARTY NOR CAUSE ANY SURETY, GUARANTOR, OR OTHER THIRD PARTY OBLIGEE TO BECOME
LIABLE TO PERFORM ANY OBLIGATION OF ANY BORROWER (OTHER THAN TO THE AGENT) IN
THE EVENT OF SUCH BORROWER’S FAILURE SO TO PERFORM.

 

6.5  NOTIFICATION TO ACCOUNT DEBTORS.

 

The Collateral Agent shall have the right (upon and following the occurrence and
during the continuance of any Suspension Event) to notify any of the Borrowers’
Account Debtors to make payment directly to the Collateral Agent and to collect
all amounts due on account of the Collateral.

 

ARTICLE VII. -  CASH MANAGEMENT; PAYMENT OF LIABILITIES:

 

7.1  DEPOSITORY ACCOUNTS.

 

(A)  ANNEXED HERETO AS EXHIBIT 7.1 IS A SCHEDULE OF ALL PRESENT DDA’S, WHICH
INCLUDES, WITH RESPECT TO EACH DEPOSITORY (I) THE NAME AND ADDRESS OF THAT
DEPOSITORY; (II) THE ACCOUNT NUMBER(S) OF THE ACCOUNT(S) MAINTAINED WITH SUCH
DEPOSITORY; AND (III) A CONTACT PERSON AT SUCH DEPOSITORY.

 

(B)  THE LEAD BORROWER SHALL DELIVER THE FOLLOWING TO THE COLLATERAL AGENT, AS A
CONDITION TO THE EFFECTIVENESS OF THIS AGREEMENT:

 

(I)            WITH RESPECT TO DDA’S THAT ARE NOT BLOCKED ACCOUNTS, THE
OPERATING ACCOUNT, OR EXEMPT DDA’S, NOTIFICATION, EXECUTED ON BEHALF OF THE
OBLIGORS, TO EACH DEPOSITORY INSTITUTION WITH WHICH ANY DDA IS MAINTAINED, IN
FORM SATISFACTORY TO THE COLLATERAL AGENT OF THE COLLATERAL AGENT’S INTEREST IN
SUCH DDA.

 

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(II)           WITH RESPECT TO DDA’S THAT ARE BLOCKED ACCOUNTS OR THE OPERATING
ACCOUNT, A BLOCKED ACCOUNT AGREEMENT WITH ANY DEPOSITORY INSTITUTION AT WHICH
SUCH ACCOUNTS ARE MAINTAINED.

 

(C)  THE OBLIGORS WILL NOT ESTABLISH ANY DDA HEREAFTER (OTHER THAN AN EXEMPT
DDA) UNLESS, CONTEMPORANEOUS WITH SUCH ESTABLISHMENT, THE LEAD BORROWER DELIVERS
THE FOLLOWING TO THE COLLATERAL AGENT:

 

(I)            WITH RESPECT TO DDA’S THAT ARE NOT BLOCKED ACCOUNTS, THE
OPERATING ACCOUNT, OR EXEMPT DDA’S, NOTIFICATION TO THE DEPOSITORY AT WHICH SUCH
DDA IS ESTABLISHED IF THE SAME WOULD HAVE BEEN REQUIRED PURSUANT TO SECTION
7.1(B)(I) IF THE SUBJECT DDA WERE OPEN AT THE EXECUTION OF THIS AGREEMENT; AND

 

(II)           WITH RESPECT TO DDA’S THAT ARE BLOCKED ACCOUNTS OR THE OPERATING
ACCOUNT, A BLOCKED ACCOUNT AGREEMENT EXECUTED ON BEHALF OF THE DEPOSITORY AT
WHICH SUCH DDA IS ESTABLISHED IF THE SAME WOULD HAVE BEEN REQUIRED PURSUANT TO
SECTION 7.1(B)(II) IF THE DDA WERE OPEN AT THE EXECUTION OF THIS AGREEMENT.

 

7.2  CREDIT CARD RECEIPTS.

 

(A)  ANNEXED HERETO AS EXHIBIT 7.2, IS A SCHEDULE WHICH DESCRIBES ALL
ARRANGEMENTS TO WHICH THE OBLIGORS ARE A PARTY WITH RESPECT TO THE PAYMENT TO
THE OBLIGORS OF THE PROCEEDS OF CREDIT CARD CHARGES FOR SALES BY THE OBLIGORS.

 

(B)  THE OBLIGORS SHALL DELIVER TO THE COLLATERAL AGENT, AS A CONDITION TO THE
EFFECTIVENESS OF THIS AGREEMENT, NOTIFICATION, EXECUTED ON BEHALF OF THE
OBLIGORS, TO EACH OF THE OBLIGORS’ CREDIT CARD CLEARINGHOUSES AND PROCESSORS OF
NOTICE (IN FORM SATISFACTORY TO THE COLLATERAL AGENT), WHICH NOTICE PROVIDES
THAT PAYMENT OF ALL CREDIT CARD CHARGES SUBMITTED BY THE OBLIGORS TO THAT
CLEARINGHOUSE OR OTHER PROCESSOR AND ANY OTHER AMOUNT PAYABLE TO THE OBLIGORS BY
SUCH CLEARINGHOUSE OR OTHER PROCESSOR SHALL BE DIRECTED TO THE OPERATING
ACCOUNT, OR IF A SWEEP PERIOD IS EFFECT, AS OTHERWISE DESIGNATED FROM TIME TO
TIME BY THE COLLATERAL AGENT.  THE OBLIGORS SHALL NOT CHANGE SUCH DIRECTION OR
DESIGNATION EXCEPT UPON AND WITH THE PRIOR WRITTEN CONSENT OF THE COLLATERAL
AGENT.

 

7.3  THE CONCENTRATION, BLOCKED, AND OPERATING ACCOUNTS.

 

(A)  THE FOLLOWING CHECKING ACCOUNTS HAVE BEEN OR WILL BE ESTABLISHED (AND ARE
SO REFERRED TO HEREIN):

 

(I)            THE “CONCENTRATION ACCOUNT”: ESTABLISHED BY THE ADMINISTRATIVE
AGENT WITH FLEET NATIONAL BANK.

 

(II)           THE “BLOCKED ACCOUNT(S)”: ESTABLISHED BY EACH OF THE OBLIGORS
WITH (A) BANK ONE, N.A., WELLS FARGO BANK, N.A., BANK OF AMERICA, N.A., AND FNB,
AND, UPON 60 DAYS’ PRIOR WRITTEN NOTICE

 

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FROM THE COLLATERAL AGENT TO THE LEAD BORROWER, WACHOVIA BANK, N.A. (PROVIDED,
THAT THE ACCOUNTS AT WACHOVIA BANK. N.A. SHALL NOT BE BLOCKED ACCOUNTS,
NOTWITHSTANDING SUCH 60-DAY NOTICE, IF AFTER THE LEAD BORROWER HAS USED BEST
EFFORTS TO CAUSE WACHOVIA BANK, N.A. TO ENTER INTO A BLOCKED ACCOUNT AGREEMENT
ACCEPTABLE TO THE COLLATERAL AGENT, WACHOVIA BANK, N.A. HAS NOT ENTERED INTO
SUCH AN AGREEMENT) OR (B) ANY OTHER BANKS SATISFACTORY TO THE ADMINISTRATIVE
AGENT, INTO WHICH DEPOSITS FROM OTHER DDA’S MUST BE DIRECTED AND FROM WHICH THE
OBLIGORS SHALL NOT MAKE DISBURSEMENTS OTHER THAN TO THE OPERATING ACCOUNT OR THE
CONCENTRATION ACCOUNT.

 

(III)          THE “OPERATING ACCOUNT”:  ESTABLISHED BY EACH OF THE OBLIGORS
WITH FLEET NATIONAL BANK, FROM WHICH ONLY DISBURSEMENTS MAY BE MADE AND INTO
WHICH ADVANCES UNDER THE REVOLVING CREDIT MAY BE DEPOSITED OR DEPOSITS FROM THE
BLOCKED ACCOUNT(S) MAY BE MADE.

 

(B)  THE CONTENTS OF EACH DDA AND OF THE BLOCKED ACCOUNT CONSTITUTES COLLATERAL
AND PROCEEDS OF COLLATERAL. THE CONTENTS OF THE CONCENTRATION ACCOUNT
CONSTITUTES THE ADMINISTRATIVE AGENT’S PROPERTY.

 

(C)  THE OBLIGORS SHALL NOT ESTABLISH ANY BLOCKED ACCOUNT HEREAFTER EXCEPT UPON
NOT LESS THAN THIRTY (30) DAYS WRITTEN NOTICE TO THE COLLATERAL AGENT AND THE
DELIVERY TO THE COLLATERAL AGENT OF A BLOCKED ACCOUNT AGREEMENT WITH RESPECT
THERETO.

 

(D)  THE OBLIGORS SHALL PAY ALL FEES AND CHARGES OF, AND MAINTAIN SUCH IMPRESSED
BALANCES AS MAY BE REQUIRED BY THE DEPOSITORY IN WHICH ANY ACCOUNT IS OPENED AS
REQUIRED HEREBY (EVEN IF SUCH ACCOUNT IS OPENED BY AND/OR IS THE PROPERTY OF THE
AGENT).

 

(E)  NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THIS SECTION 7.3 OR
ELSEWHERE IN THIS AGREEMENT, EACH BLOCKED ACCOUNT AGREEMENT SHALL PROVIDE
(EXCEPT AS THE COLLATERAL AGENT MAY OTHERWISE AGREE IN WRITING) THAT, UNTIL
COLLATERAL AGENT HAS NOTIFIED THE FINANCIAL INSTITUTION MAINTAINING SUCH BLOCKED
ACCOUNT IN WRITING TO FORWARD BY DAILY SWEEP ALL AMOUNTS IN THE APPLICABLE
BLOCKED ACCOUNT TO THE CONCENTRATION ACCOUNT, ALL AMOUNTS IN THE APPLICABLE
BLOCKED ACCOUNT SHALL BE FORWARDED PURSUANT TO THE INSTRUCTIONS OF THE
APPLICABLE OBLIGOR GIVEN TO THE DEPOSITORY INSTITUTION MAINTAINING SUCH BLOCKED
ACCOUNT FROM TIME TO TIME.  COLLATERAL AGENT SHALL BE ENTITLED TO GIVE THE
AFOREMENTIONED NOTIFICATION TO SUCH FINANCIAL INSTITUTION, OR TO REQUEST THAT
THE OBLIGORS DELIVER SUCH A NOTIFICATION TO SUCH FINANCIAL INSTITUTION UNDER
SECTION 7.3(F), AT ANY TIME AFTER EITHER (I) THE OCCURRENCE AND DURING THE
CONTINUANCE OF AN EVENT OF DEFAULT, OR (II) EXCEPT AS SPECIFIED IN SECTION
7.3(G)(1), EXCESS AVAILABILITY ON ANY DAY IS LESS THAN $10,000,000 (THE PERIOD
DURING WHICH THE COLLATERAL AGENT MAY GIVE SUCH A NOTICE, A “SWEEP PERIOD”);
PROVIDED, HOWEVER, THAT, SUBJECT TO THE FOLLOWING SENTENCE, EACH SWEEP PERIOD
WILL BE SUSPENDED WITHIN FIVE (5) BUSINESS DAYS OF:  (Y) AGENT’S AND LENDERS’
WRITTEN WAIVER OF ANY RELEVANT EVENT OF DEFAULT; OR (Z) BORROWERS’ EXCESS
AVAILABILITY EXCEEDING $20,000,000 FOR SIXTY (60) CONSECUTIVE DAYS (A “SWEEP
SUSPENSION”).  A SWEEP SUSPENSION WILL BE PERMITTED TO OCCUR ONLY TWO (2) TIMES
DURING THE EFFECTIVENESS OF THIS AGREEMENT, SUCH THAT IN THE EVENT THAT

 

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EXCESS AVAILABILITY IS LESS THAN $10,000,000 OR AN EVENT OF DEFAULT OCCURS AFTER
A SECOND SWEEP SUSPENSION HAS OCCURRED, NO SWEEP SUSPENSION WILL BE EFFECTIVE
AND THE SWEEP PERIOD SHALL CONTINUE IN EFFECT.

 

(F)  EXCEPT AS SET FORTH IN SECTION 7.3(G)(1), THE OBLIGORS AGREE THAT, AT ANY
TIME OR FROM TIME TO TIME DURING A SWEEP PERIOD THAT THE COLLATERAL AGENT
REQUESTS THAT THE OBLIGORS DELIVER TO SUCH A FINANCIAL INSTITUTION AN
INSTRUCTION TO FORWARD BY DAILY SWEEP ALL AMOUNTS IN THE APPLICABLE BLOCKED
ACCOUNT TO THE CONCENTRATION ACCOUNT, THE OBLIGORS SHALL IMMEDIATELY UPON SUCH A
REQUEST DELIVER SUCH AN INSTRUCTION TO SUCH FINANCIAL INSTITUTION AND DELIVER A
WRITTEN COPY THEREOF TO THE COLLATERAL AGENT.

 

(G)  NOTWITHSTANDING ANYTHING TO THE CONTRARY IN SECTIONS 7.3(E) OR 7.3(F), WITH
RESPECT TO THE LEAD BORROWER’S BLOCKED ACCOUNTS NUMBERED 1417650388 AND
1000008202 AT THE BANK OF AMERICA, N.A., THE COLLATERAL AGENT AGREES THAT:

 

(1) IF A SWEEP PERIOD IS TRIGGERED SOLELY BY AN EVENT UNDER CLAUSE (II) OF
SECTION 7.3(E) ABOVE, THEN THE COLLATERAL AGENT SHALL, PRIOR TO SENDING THE
INSTRUCTION DESCRIBED IN SECTION 7.3(E) TO BANK OF AMERICA, N.A., REQUEST THAT
THE OBLIGORS DELIVER SUCH AN INSTRUCTION, AND THE COLLATERAL AGENT SHALL, IN
SUCH A CIRCUMSTANCE, ITSELF SEND SUCH AN INSTRUCTION TO BANK OF AMERICA, N.A.
ONLY IF THE OBLIGORS HAVE FAILED TO DEMONSTRATE TO COLLATERAL AGENT, PRIOR TO
5:00 P.M. (BOSTON TIME) ON THE BUSINESS DAY FOLLOWING THE DATE OF SUCH REQUEST,
THAT THE OBLIGORS HAVE DELIVERED THE REQUESTED INSTRUCTION; AND

 

(2) IF THE COLLATERAL AGENT ITSELF HAS DELIVERED AN INSTRUCTION TO BANK OF
AMERICA, N.A. TO FORWARD BY DAILY SWEEP ALL AMOUNTS IN THE APPLICABLE BLOCKED
ACCOUNT TO THE CONCENTRATION ACCOUNT, THE COLLATERAL AGENT AGREES THAT IF AND
WHEN EITHER OR BOTH OF THE TWO (2) PERMITTED SWEEP SUSPENSIONS BECOMES
EFFECTIVE, IT SHALL THEREAFTER, AT THE REQUEST OF THE LEAD BORROWER, AND UNTIL
THE COMMENCEMENT OF A SUBSEQUENT SWEEP PERIOD, EITHER: (A) INSTRUCT THE BANK OF
AMERICA TO CAUSE AMOUNTS AT SUCH BLOCKED ACCOUNTS TO BE REDIRECTED TO THE
OPERATING ACCOUNT, INSTEAD OF THE CONCENTRATION ACCOUNT; (B) SUBJECT TO BANK OF
AMERICA, N.A.’S AGREEMENT TO DO SO, ENTER INTO A NEW BLOCKED ACCOUNT AGREEMENT
WITH THE BANK OF AMERICA, N.A. SUBSTANTIALLY IN THE FORM OF THE BLOCKED ACCOUNT
AGREEMENT DATED AS OF OR ABOUT EVEN DATE HEREWITH, WITH SUCH CHANGES THERETO AS
MAY BE REASONABLY REQUESTED BY THE PARTIES, WITH RESPECT TO THE SUCH BLOCKED
ACCOUNTS OR NEW BLOCKED ACCOUNTS AT BANK OF AMERICA, N.A.; OR (C) TAKE SUCH
OTHER STEPS TO REDIRECT AMOUNTS AT SUCH BLOCKED ACCOUNTS TO THE OPERATING
ACCOUNT OR AS THE LEAD BORROWER AND THE COLLATERAL AGENT MAY OTHERWISE AGREE IN
WRITING IN THEIR SOLE DISCRETION.

 

7.4  PROCEEDS AND COLLECTION OF ACCOUNTS.

 

(A)  ALL RECEIPTS CONSTITUTE COLLATERAL AND PROCEEDS OF COLLATERAL AND SHALL BE
HELD IN TRUST BY THE OBLIGORS FOR THE COLLATERAL AGENT, SHALL NOT BE COMMINGLED
WITH ANY OF THE OBLIGORS’ OTHER FUNDS, AND SHALL BE DEPOSITED AND/OR TRANSFERRED
ONLY TO A BLOCKED ACCOUNT, THE OPERATING ACCOUNT, OR THE CONCENTRATION ACCOUNT,
OR ANOTHER DDA PERMITTED HEREUNDER (AND, IN

 

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SUCH CASE, ONLY IF THE FUNDS IN SUCH DDA ARE DEPOSITED AND/OR TRANSFERRED TO A
BLOCKED ACCOUNT, OPERATING ACCOUNT, OR CONCENTRATION ACCOUNT).

 

(B)  THE OBLIGORS SHALL CAUSE THE ACH OR WIRE TRANSFER TO A BLOCKED ACCOUNT OR
THE OPERATING ACCOUNT, AS DESIGNATED BY COLLATERAL AGENT (OR, DURING ANY SWEEP
PERIOD, SHALL PERMIT THE AGENT TO CAUSE SUCH DAILY ACH OR WIRE TRANSFERS TO A
BLOCKED ACCOUNT OR THE OPERATING ACCOUNT), NO LESS FREQUENTLY THAN WEEKLY (AND,
DURING ANY SWEEP PERIOD, NO LESS FREQUENTLY THAN DAILY) (AND WHETHER OR NOT
THERE IS THEN AN OUTSTANDING BALANCE IN THE LOAN ACCOUNT) OF THE FOLLOWING:

 

(I)            THE CONTENTS OF EACH DDA (OTHER THAN ANY EXEMPT DDA, THE BLOCKED
ACCOUNTS, OR THE OPERATING ACCOUNT).  EACH SUCH TRANSFER TO BE NET OF ANY
MINIMUM BALANCE, NOT TO EXCEED $2,500 MULTIPLIED BY THE NUMBER OF STORES FROM
WHICH RECEIPTS ARE DEPOSITED INTO SUCH DDA, AS MAY BE REQUIRED TO BE MAINTAINED
IN THE SUBJECT DDA BY THE BANK AT WHICH SUCH DDA IS MAINTAINED.

 

(II)           THE PROCEEDS OF ALL CREDIT CARD CHARGES NOT OTHERWISE PROVIDED
FOR PURSUANT HERETO.

 

Telephone advice (confirmed by written notice) shall be provided to the
Collateral Agent on each Business Day on which any such transfer is made.

 

(C)  DURING ANY SWEEP PERIOD, WHETHER OR NOT ANY LIABILITIES ARE THEN
OUTSTANDING, THE BORROWERS SHALL CAUSE THE DAILY ACH OR WIRE TRANSFER TO THE
CONCENTRATION ACCOUNT, OR AS OTHERWISE DESIGNATED BY COLLATERAL AGENT (OR SHALL
PERMIT THE COLLATERAL AGENT TO CAUSE SUCH DAILY ACH OR WIRE TRANSFERS TO THE
CONCENTRATION ACCOUNT OR AS OTHERWISE DESIGNATED BY COLLATERAL AGENT),  OF THEN
ENTIRE LEDGER BALANCE OF EACH BLOCKED ACCOUNT OR THE OPERATING ACCOUNT, NET OF
SUCH MINIMUM BALANCE, NOT TO EXCEED $2,500, AS MAY BE REQUIRED TO BE MAINTAINED
IN THE BLOCKED ACCOUNT OR THE OPERATING ACCOUNT BY THE DEPOSITORY WHICH THE
BLOCKED ACCOUNT OR THE OPERATING ACCOUNT IS MAINTAINED.

 

(D)  IN THE EVENT THAT, NOTWITHSTANDING THE PROVISIONS OF THIS SECTION 7.4, THE
OBLIGORS RECEIVE OR OTHERWISE HAVE DOMINION AND CONTROL OF ANY RECEIPTS, OR ANY
PROCEEDS OR COLLECTIONS OF ANY COLLATERAL, SUCH RECEIPTS, PROCEEDS, AND
COLLECTIONS SHALL BE HELD IN TRUST BY THE OBLIGORS FOR THE COLLATERAL AGENT AND
SHALL NOT BE COMMINGLED WITH ANY OF THE OBLIGORS’ OTHER FUNDS OR DEPOSITED IN
ANY ACCOUNT OF THE BORROWERS OTHER THAN AS SET FORTH HEREIN OR AS INSTRUCTED BY
THE COLLATERAL AGENT.

 

7.5  PAYMENT OF LIABILITIES.

 

(A)  ON EACH BUSINESS DAY, THE ADMINISTRATIVE AGENT SHALL APPLY THE THEN
COLLECTED BALANCE, IF ANY, OF THE CONCENTRATION ACCOUNT (NET OF FEES CHARGED,
AND OF SUCH MINIMUM BALANCES AS MAY BE REQUIRED BY THE BANK AT WHICH THE
CONCENTRATION ACCOUNT IS MAINTAINED) FIRST, TOWARDS THE UNPAID BALANCE OF
SWINGLINE LOANS, SECOND, TOWARDS THE UNPAID BALANCE OF THE LOAN ACCOUNT AND
THIRD TOWARDS ALL OTHER LIABILITIES.

 

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(B)  THE FOLLOWING RULES SHALL APPLY TO DEPOSITS AND PAYMENTS UNDER AND PURSUANT
TO THIS AGREEMENT:

 

(I)            FUNDS SHALL BE DEEMED TO HAVE BEEN DEPOSITED TO THE CONCENTRATION
ACCOUNT ON THE BUSINESS DAY ON WHICH DEPOSITED, PROVIDED THAT NOTICE OF SUCH
DEPOSIT IS AVAILABLE TO THE ADMINISTRATIVE AGENT BY 2:00 P.M. ON THAT BUSINESS
DAY.

 

(II)           FUNDS PAID TO THE AGENT, OTHER THAN BY DEPOSIT TO THE
CONCENTRATION ACCOUNT, SHALL BE DEEMED TO HAVE BEEN RECEIVED ON THE BUSINESS DAY
WHEN THEY ARE GOOD AND COLLECTED FUNDS, PROVIDED THAT NOTICE OF SUCH PAYMENT IS
AVAILABLE TO THE AGENT BY 2:00 P.M. ON THAT BUSINESS DAY.

 

(III)          IF NOTICE OF A DEPOSIT TO THE CONCENTRATION ACCOUNT (SECTION
7.5(B)(I)) OR PAYMENT (SECTION 7.5(B)(II)) IS NOT AVAILABLE TO THE AGENT UNTIL
AFTER 2:00 P.M. ON A BUSINESS DAY, SUCH DEPOSIT OR PAYMENT SHALL BE DEEMED TO
HAVE BEEN MADE AT 9:00 A.M. ON THE THEN NEXT BUSINESS DAY.

 

(IV)          ALL DEPOSITS TO THE CONCENTRATION ACCOUNT AND OTHER PAYMENTS TO
THE AGENT ARE SUBJECT TO CLEARANCE AND COLLECTION.

 

(C)  THE ADMINISTRATIVE AGENT SHALL TRANSFER TO THE OPERATING ACCOUNT ANY
SURPLUS IN THE CONCENTRATION ACCOUNT REMAINING AFTER THE APPLICATION TOWARDS THE
LIABILITIES REFERRED TO IN SECTION 7.5(A), ABOVE (LESS THOSE AMOUNT WHICH ARE TO
BE NETTED OUT, AS PROVIDED THEREIN) PROVIDED, HOWEVER, IN THE EVENT THAT A
SUSPENSION EVENT OR EVENT OF DEFAULT EXISTS AND/OR ONE OR MORE L/C’S ARE THEN
OUTSTANDING, THEN THE AGENT MAY ESTABLISH A FUNDED RESERVE OF UP TO 110% OF THE
AGGREGATE STATED AMOUNTS OF SUCH L/C’S.  SUCH FUNDED RESERVE SHALL EITHER BE (I)
RETURNED TO THE BORROWERS PROVIDED THAT, NO SUSPENSION EVENT OR EVENT OF DEFAULT
EXISTS OR (II) APPLIED TOWARDS THE LIABILITIES FOLLOWING ACCELERATION.

 

7.6  THE OPERATING ACCOUNT AND DISBURSEMENT ACCOUNT.

 

Except as otherwise specifically provided in, or permitted by, this Agreement,
all checks shall be drawn by the Borrowers upon, and other disbursements shall
be made by the Borrowers solely from, the Operating Account or Exempt DDAs.

 

ARTICLE VIII. -  GRANT OF SECURITY INTEREST:

 

8.1  GRANT OF SECURITY INTEREST.

 

To secure the Obligors’ prompt, punctual, and faithful performance and payment
of all and each of the Liabilities, each Obligor hereby grants to the Collateral
Agent, for the benefit of the Agents and the Lenders, a continuing security
interest in and to, and assigns to the Collateral

 

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Agent certain assets as set forth below of the Obligors, and each item thereof,
whether now owned or now due, or in which in which that Obligor has an interest,
or hereafter acquired, arising, or to become due, or in which that Obligor
obtains an interest, and all products, Proceeds, substitutions, and accessions
of or to any of the following (all of which, together with any other property in
which the Agent may in the future be granted a security interest, is referred to
herein as the “Collateral”):

 

(A)  ALL ACCOUNTS.

 

(B)  ALL INVENTORY.

 

(C)  ALL GENERAL INTANGIBLES.

 

(D)  ALL CHATTEL PAPER.

 

(E)  ALL LEASEHOLD INTERESTS.

 

(F)  THE HEADQUARTERS FACILITY, TOGETHER WITH ALL FIXTURES IN CONNECTION
THEREWITH OR LOCATED THEREON.

 

(G)  ALL LETTER-OF-CREDIT RIGHTS.

 

(H)  ALL PAYMENT INTANGIBLES.

 

(I)  ALL SUPPORTING OBLIGATIONS.

 

(J)  ALL BOOKS, RECORDS, AND INFORMATION RELATING TO THE COLLATERAL AND/OR TO
THE OPERATION OF THE OBLIGORS’ BUSINESS, AND ALL RIGHTS OF ACCESS TO SUCH BOOKS,
RECORDS, AND INFORMATION, AND ALL PROPERTY IN WHICH SUCH BOOKS, RECORDS, AND
INFORMATION ARE STORED, RECORDED, AND MAINTAINED.

 

(K)  ALL INVESTMENT PROPERTY, INSTRUMENTS, DOCUMENTS, DOCUMENTS OF TITLE,
DEPOSIT ACCOUNTS, POLICIES AND CERTIFICATES OF INSURANCE, DEPOSITS, IMPRESSED
ACCOUNTS, COMPENSATING BALANCES, MONEY, CASH, OR OTHER PROPERTY.

 

(L)  ALL COMMERCIAL TORT CLAIMS.

 

(M)  ALL INSURANCE PROCEEDS, REFUNDS, AND PREMIUM REBATES, INCLUDING, WITHOUT
LIMITATION, PROCEEDS OF FIRE AND CREDIT INSURANCE, WHETHER ANY OF SUCH PROCEEDS,
REFUNDS, AND PREMIUM REBATES ARISE OUT OF ANY OF THE FOREGOING ( 8.1(A) THROUGH
8.1(M) ) OR OTHERWISE.

 

(N)  ALL SUPPORTING OBLIGATIONS AND ALL PRESENT AND FUTURE LIENS, SECURITY
INTERESTS, RIGHTS, REMEDIES, TITLE AND INTEREST IN, TO AND IN RESPECT OF
ACCOUNTS AND OTHER COLLATERAL, INCLUDING (I) RIGHTS AND REMEDIES RELATING TO
GUARANTIES, CONTRACTS OF SURETYSHIP, LETTER OF CREDIT AND CREDIT AND OTHER
INSURANCE RELATED TO THE COLLATERAL, (II) RIGHTS OF STOPPAGE IN TRANSIT,
REPLEVIN, REPOSSESSION, RECLAMATION AND OTHER RIGHTS AND REMEDIES OF AN UNPAID
VENDOR, LIEN OR SECURED PARTY, (III) GOODS DESCRIBED IN INVOICES, DOCUMENTS,
CONTRACTS OR INSTRUMENTS WITH RESPECT THERETO,

 

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OR OTHERWISE REPRESENTING OR EVIDENCING, ACCOUNTS OR OTHER COLLATERAL, INCLUDING
RETURNED, REPOSSESSED AND RECLAIMED GOODS, AND (IV) DEPOSITS BY AND PROPERTY OF
ACCOUNT DEBTORS OR OTHER PERSONS SECURING THE OBLIGATIONS OF ACCOUNT DEBTORS.

 

8.2  EXTENT AND DURATION OF SECURITY INTEREST.

 

The security interest created and granted herein is in addition to, and
supplemental of, any security interest previously granted by the Obligors to the
Agent and shall continue in full force and effect applicable to all Liabilities
until all Liabilities have been paid and/or satisfied in full, the Commitment of
the Lenders to make loans and other financial accommodations has been
terminated, and the security interest granted herein is specifically terminated
in writing by a duly authorized officer of the Collateral Agent.

 

8.3  PERFECTION OF SECURITY INTERESTS.

 

(A)  EACH OF THE OBLIGORS AGREES TO TAKE ALL ACTION THAT THE COLLATERAL AGENT
MAY REQUEST AS A MATTER OF NONBANKRUPTCY LAW TO PERFECT AND PROTECT THE
COLLATERAL AGENT’S COLLATERAL INTEREST IN THE COLLATERAL AND FOR SUCH COLLATERAL
INTEREST TO OBTAIN THE PRIORITY THEREFORE CONTEMPLATED HEREBY, INCLUDING,
WITHOUT LIMITATION, EXECUTING AND DELIVERING SUCH DOCUMENTS AND INSTRUMENTS,
FINANCING STATEMENTS, OBTAINING SUCH NOTICES AND ASSENTS OF THIRD PARTIES,
OBTAINING GOVERNMENTAL APPROVALS AND PROVIDING SUCH OTHER INSTRUMENTS AND
DOCUMENTS IN RECORDABLE FORM AS THE COLLATERAL AGENT MAY REQUEST.  OBLIGORS
IRREVOCABLY AND UNCONDITIONALLY AUTHORIZE THE COLLATERAL AGENT TO FILE AT ANY
TIME AND FROM TIME TO TIME SUCH FINANCING STATEMENTS WITH RESPECT TO THE
COLLATERAL NAMING THE COLLATERAL AGENT OR ITS DESIGNEE AS THE SECURED PARTY AND
OBLIGORS AS DEBTORS, AS COLLATERAL AGENT MAY REQUIRE, TOGETHER WITH ANY
AMENDMENT AND CONTINUATIONS WITH RESPECT THERETO, THAT (A) INDICATE THE
COLLATERAL (I) AS “ALL ASSETS OF SUCH OBLIGOR” OR WORDS OF SIMILAR EFFECT,
REGARDLESS OF WHETHER ANY PARTICULAR ASSET COMPRISED IN THE COLLATERAL FALLS
WITHIN THE SCOPE OF ARTICLE 9 OF THE UNIFORM COMMERCIAL CODE OF THE STATE OF NEW
YORK OR SUCH JURISDICTION, OR (II) AS BEING OF AN EQUAL OR LESSER SCOPE OR WITH
GREATER DETAIL, AND (B) PROVIDE ANY OTHER INFORMATION REQUIRED BY PART 5 OF
ARTICLE 9 OF THE UNIFORM COMMERCIAL CODE OF ANY JURISDICTION FOR THE SUFFICIENCY
OR FILING OFFICE ACCEPTANCE OF ANY FINANCING STATEMENT OR AMENDMENT, INCLUDING
(I) WHETHER SUCH OBLIGOR IS AN ORGANIZATION, THE TYPE OF ORGANIZATION AND ANY
ORGANIZATION IDENTIFICATION NUMBER ISSUED TO SUCH OBLIGOR AND, (II) IN THE CASE
OF A FINANCING STATEMENT FILED AS A FIXTURE FILING, IF ANY, A SUFFICIENT
DESCRIPTION OF REAL PROPERTY TO WHICH THE COLLATERAL RELATES.  SUCH OBLIGOR
AGREES TO FURNISH ANY SUCH INFORMATION TO THE COLLATERAL AGENT PROMPTLY UPON THE
AGENT’S REQUEST.  OBLIGORS HEREBY AUTHORIZE COLLATERAL AGENT TO ADOPT ON BEHALF
OF OBLIGORS ANY SYMBOL REQUIRED FOR AUTHENTICATING ANY ELECTRONIC FILING.  IN NO
EVENT SHALL OBLIGORS 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 COLLATERAL
AGENT OR ITS DESIGNEE AS SECURED PARTY AND OBLIGORS AS DEBTORS.

 

(B)  NO OBLIGOR HAS ANY CHATTEL PAPER (WHETHER TANGIBLE OR ELECTRONIC) OR
INSTRUMENTS AS OF THE DATE HEREOF.  IN THE EVENT THAT ANY OBLIGOR SHALL BE
ENTITLED TO OR SHALL RECEIVE ANY CHATTEL PAPER OR INSTRUMENT AFTER THE DATE
HEREOF, SUCH OBLIGOR OR THE LEAD OBLIGOR SHALL PROMPTLY NOTIFY COLLATERAL AGENT
THEREOF IN WRITING.  PROMPTLY UPON THE RECEIPT THEREOF BY OR

 

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ON BEHALF OF SUCH OBLIGOR (INCLUDING BY ANY AGENT OR REPRESENTATIVE), SUCH
OBLIGOR OR THE LEAD BORROWER SHALL DELIVER, OR CAUSE TO BE DELIVERED TO
COLLATERAL AGENT, ALL TANGIBLE CHATTEL PAPER AND INSTRUMENTS THAT SUCH OBLIGOR
OR MAY AT ANY TIME ACQUIRE, ACCOMPANIED BY SUCH INSTRUMENTS OF TRANSFER OR
ASSIGNMENT DULY EXECUTED IN BLANK AS COLLATERAL AGENT MAY FROM TIME TO TIME
SPECIFY, IN EACH CASE EXCEPT AS COLLATERAL AGENT MAY OTHERWISE AGREE.  AT
COLLATERAL AGENT’S OPTION, SUCH OBLIGOR OR THE LEAD BORROWER SHALL, OR
COLLATERAL AGENT MAY AT ANY TIME ON BEHALF OF SUCH OBLIGOR, CAUSE THE ORIGINAL
OF ANY SUCH INSTRUMENT OR CHATTEL PAPER TO BE CONSPICUOUSLY MARKED IN A FORM AND
MANNER ACCEPTABLE TO COLLATERAL AGENT WITH THE FOLLOWING LEGEND REFERRING TO
CHATTEL PAPER OR INSTRUMENTS AS APPLICABLE: “THIS [CHATTEL PAPER][INSTRUMENT] IS
SUBJECT TO THE SECURITY INTEREST OF [NAME OF COLLATERAL AGENT] 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 OBLIGOR 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), SUCH OBLIGOR OR THE LEAD
BORROWER SHALL PROMPTLY NOTIFY COLLATERAL AGENT THEREOF IN WRITING.  PROMPTLY
UPON COLLATERAL AGENT’S REQUEST, SUCH OBLIGOR OR THE LEAD BORROWER SHALL TAKE,
OR CAUSE TO BE TAKEN, SUCH ACTIONS AS COLLATERAL AGENT MAY REASONABLY REQUEST TO
GIVE COLLATERAL 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)  EXCEPT AS SET FORTH ON EXHIBIT 8.3(D), NO OBLIGOR 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.

 

(I)            IN THE EVENT THAT ANY OBLIGOR SHALL BE ENTITLED TO OR SHALL AT
ANY TIME AFTER THE DATE HEREOF HOLD OR ACQUIRE ANY CERTIFICATED SECURITIES, SUCH
OBLIGOR OR THE LEAD BORROWER SHALL PROMPTLY ENDORSE, ASSIGN AND DELIVER THE SAME
TO COLLATERAL AGENT, ACCOMPANIED BY SUCH INSTRUMENTS OF TRANSFER OR ASSIGNMENT
DULY EXECUTED IN BLANK AS COLLATERAL AGENT MAY FROM TIME TO TIME SPECIFY.  IF
ANY SECURITIES, NOW OR HEREAFTER ACQUIRED BY ANY OBLIGOR ARE UNCERTIFICATED AND
ARE ISSUED TO ANY OBLIGOR OR ITS NOMINEE DIRECTLY BY THE ISSUER THEREOF, SUCH
OBLIGOR SHALL IMMEDIATELY NOTIFY COLLATERAL AGENT THEREOF AND SHALL AS
COLLATERAL AGENT MAY SPECIFY, EITHER (A) CAUSE THE ISSUER TO AGREE TO COMPLY
WITH INSTRUCTIONS FROM COLLATERAL AGENT AS TO SUCH SECURITIES, WITHOUT FURTHER
CONSENT OF SUCH OBLIGOR OR SUCH NOMINEE, OR (B) ARRANGE FOR COLLATERAL AGENT TO
BECOME THE REGISTERED OWNER OF THE SECURITIES.

 

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(II)           NO OBLIGOR 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)  COLLATERAL AGENT SHALL HAVE RECEIVED
NOT LESS THAN FIVE (5) BUSINESS DAYS PRIOR WRITTEN NOTICE OF THE INTENTION OF A
OBLIGOR TO OPEN OR ESTABLISH SUCH ACCOUNT WHICH NOTICE SHALL SPECIFY IN
REASONABLE DETAIL AND SPECIFICITY ACCEPTABLE TO COLLATERAL 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 OBLIGOR 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 ACCEPTABLE TO COLLATERAL 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 OBLIGOR OR THE
LEAD BORROWER SHALL AS COLLATERAL AGENT MAY SPECIFY EITHER (1) EXECUTE AND
DELIVER, AND CAUSE TO BE EXECUTED AND DELIVERED TO COLLATERAL AGENT, AN
INVESTMENT PROPERTY CONTROL AGREEMENT (IN FORM AND SUBSTANCE ACCEPTABLE TO THE
COLLATERAL AGENT IN ITS REASONABLE DISCRETION)  WITH RESPECT THERETO DULY
AUTHORIZED, EXECUTED AND DELIVERED BY SUCH OBLIGOR OR THE LEAD BORROWER AND SUCH
SECURITIES INTERMEDIARY OR COMMODITY INTERMEDIARY OR (2) ARRANGE FOR COLLATERAL
AGENT TO BECOME THE ENTITLEMENT HOLDER WITH RESPECT TO SUCH INVESTMENT PROPERTY
ON TERMS AND CONDITIONS ACCEPTABLE TO COLLATERAL AGENT.

 

(E)  NO OBLIGOR IS THE BENEFICIARY OR OTHERWISE ENTITLED TO ANY LETTER OF CREDIT
RIGHTS AS OF THE DATE HEREOF.  IN THE EVENT THAT ANY OBLIGOR SHALL BE ENTITLED
TO OR SHALL RECEIVE ANY LETTER OF CREDIT RIGHTS, SUCH OBLIGOR OR THE LEAD
BORROWER SHALL PROMPTLY NOTIFY COLLATERAL AGENT THEREOF IN WRITING.  SUCH
OBLIGOR OR THE LEAD BORROWER SHALL IMMEDIATELY, AS COLLATERAL AGENT MAY SPECIFY,
EITHER (I) DELIVER, OR CAUSE TO BE DELIVERED TO COLLATERAL 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 SATISFACTORY TO COLLATERAL AGENT, CONSENTING TO THE
ASSIGNMENT OF THE PROCEEDS OF THE LETTER OF CREDIT TO COLLATERAL AGENT BY SUCH
OBLIGOR AND AGREEING TO MAKE ALL PAYMENTS THEREON DIRECTLY TO COLLATERAL AGENT
OR AS COLLATERAL AGENT MAY OTHERWISE DIRECT OR (II) CAUSE COLLATERAL AGENT TO
BECOME, AT SUCH OBLIGOR’S EXPENSE, THE TRANSFEREE BENEFICIARY OF THE LETTER OF
CREDIT, BANKER’S ACCEPTANCE OR SIMILAR INSTRUMENT (AS THE CASE MAY BE).

 

(F)  NO OBLIGOR HAS ANY COMMERCIAL TORT CLAIMS AS OF THE DATE HEREOF.  IN THE
EVENT THAT ANY OBLIGOR SHALL AT ANY TIME AFTER THE DATE HEREOF HAVE ANY
COMMERCIAL TORT CLAIMS, SUCH

 

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OBLIGOR OR THE LEAD BORROWER SHALL PROMPTLY NOTIFY COLLATERAL 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
OBLIGOR TO COLLATERAL 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 OBLIGOR TO COLLATERAL
AGENT SHALL BE DEEMED TO CONSTITUTE SUCH GRANT TO COLLATERAL 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 OTHERWISE PROVIDED HEREIN OR OTHERWISE
ARISING BY THE EXECUTION BY OBLIGORS OF THIS AGREEMENT, 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 OBLIGORS AS
DEBTORS, OR ANY AMENDMENTS TO ANY FINANCING STATEMENTS, COVERING ANY SUCH
COMMERCIAL TORT CLAIM AS COLLATERAL. IN ADDITION, OBLIGORS 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.

 

(G)  THE OBLIGORS HEREBY COVENANT AND AGREE THAT EACH LEASEHOLD INTEREST SHALL
AT ALL TIMES BE FREE AND CLEAR OF ALL LIENS, CLAIMS AND ENCUMBRANCES OF ANY
NATURE OR DESCRIPTION (OTHER THAN PERMITTED ENCUMBRANCES) AND NO OTHER CREDITOR
OF THE ESTATE (SECURED OR UNSECURED) SHALL BE ENTITLED TO ENCUMBER ANY LEASEHOLD
INTEREST WITHOUT THE EXPRESS WRITTEN CONSENT OF THE COLLATERAL AGENT.

 

(h)  The due and punctual payment and performance of the Obligations shall also
be secured by the Encumbrance created by the Mortgage upon the Headquarters
Facility of Lead Borrower described therein.

 

(i)            Notwithstanding anything herein to the contrary, the Obligors (I)
may hold assets consisting of Chattel Paper, Letter of Credit Rights, and
commercial tort claims in an aggregate amount not to exceed $50,000 in which the
Collateral Agent’s security interest has not been perfected; and (II) may hold
assets consisting of Investment Property in an aggregate amount not to exceed
$10,000 in which the Collateral Agent’s security interest has not been
perfected.

 

ARTICLE IX. - COLLATERAL AGENT AS BORROWERS’ ATTORNEY-IN-FACT:

 

9.1  APPOINTMENT AS ATTORNEY-IN-FACT.

 

The Obligors hereby irrevocably constitutes and appoints the Collateral Agent as
the Obligor’s true and lawful attorney, with full power of substitution,
following the occurrence and during the continuance of an Event of Default, to
convert the Collateral into cash at the sole risk, cost, and expense of the
Obligors, but for the ratable benefit of the Collateral Agent. The rights and
powers granted the Collateral Agent by this appointment include but are not
limited to the right and power, following the occurrence and during the
continuance of an Event of Default, to:

 

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(A)  PROSECUTE, DEFEND, COMPROMISE, OR RELEASE ANY ACTION RELATING TO THE
COLLATERAL.

 

(B)  SIGN CHANGE OF ADDRESS FORMS TO CHANGE THE ADDRESS TO WHICH THE OBLIGORS’
MAIL IS TO BE SENT TO SUCH ADDRESS AS THE COLLATERAL AGENT SHALL DESIGNATE;
RECEIVE AND OPEN THE OBLIGORS’ MAIL; REMOVE ANY RECEIVABLES COLLATERAL AND
PROCEEDS OF COLLATERAL THEREFROM AND TURN OVER THE BALANCE OF SUCH MAIL EITHER
TO THE OBLIGORS OR TO ANY TRUSTEE IN BANKRUPTCY, RECEIVER, ASSIGNEE FOR THE
BENEFIT OF CREDITORS OF THE OBLIGORS, OR OTHER LEGAL REPRESENTATIVE OF THE
OBLIGORS WHOM THE COLLATERAL AGENT DETERMINES TO BE THE APPROPRIATE PERSON TO
WHOM TO SO TURN OVER SUCH MAIL.

 

(C)  ENDORSE THE NAME OF THE OBLIGORS IN FAVOR OF THE COLLATERAL AGENT UPON ANY
AND ALL CHECKS, DRAFTS, NOTES, ACCEPTANCES, OR OTHER ITEMS OR INSTRUMENTS; SIGN
AND ENDORSE THE NAME OF THE OBLIGORS ON, AND RECEIVE AS SECURED PARTY, ANY OF
THE COLLATERAL, ANY INVOICES, SCHEDULES OF COLLATERAL, FREIGHT OR EXPRESS
RECEIPTS, OR BILLS OF LADING, STORAGE RECEIPTS, WAREHOUSE RECEIPTS, OR OTHER
DOCUMENTS OF TITLE RESPECTIVELY RELATING TO THE COLLATERAL.

 

(D)  SIGN THE NAME OF THE OBLIGORS ON ANY NOTICE TO THE OBLIGORS’ ACCOUNT
DEBTORS OR VERIFICATION OF THE RECEIVABLES COLLATERAL; SIGN THE OBLIGORS’ NAME
ON ANY PROOF OF CLAIM IN BANKRUPTCY AGAINST ACCOUNT DEBTORS, AND ON NOTICES OF
LIEN, CLAIMS OF MECHANIC’S LIENS, OR ASSIGNMENTS OR RELEASES OF MECHANIC’S LIENS
SECURING THE ACCOUNTS.

 

(E)  TAKE ALL SUCH ACTION AS MAY BE NECESSARY TO OBTAIN THE PAYMENT OF ANY
LETTER OF CREDIT AND/OR BANKER’S ACCEPTANCE OF WHICH ANY OBLIGOR IS A
BENEFICIARY.

 

(F)  REPAIR, MANUFACTURE, ASSEMBLE, COMPLETE, PACKAGE, DELIVER, ALTER OR SUPPLY
GOODS, IF ANY, NECESSARY TO FULFILL IN WHOLE OR IN PART THE PURCHASE ORDER OF
ANY CUSTOMER OF THE BORROWERS.

 

(G)  USE, LICENSE OR TRANSFER ANY OR ALL GENERAL INTANGIBLES OF THE OBLIGORS.

 

9.2  NO OBLIGATION TO ACT.

 

The Collateral Agent shall not be obligated to do any of the acts or to exercise
any of the powers authorized by Section 9.1 herein, but if the Collateral Agent
elects to do any such act or to exercise any of such powers, it shall not be
accountable for more than it actually receives as a result of such exercise of
power, and shall not be responsible to the Obligors for any act or omission to
act except for any act or omission to act as to which there is a final
determination made in a judicial proceeding (in which proceeding the Collateral
Agent has had an opportunity to be heard) which determination includes a
specific finding that the subject act or omission to act had been grossly
negligent or in actual bad faith.

 

ARTICLE X. -  EVENTS OF DEFAULT:

 

The occurrence of any event described in this Article X respectively shall
constitute an “Event of Default” herein.  Upon the occurrence of any Event of
Default described in Section 10.11,

 

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any and all Liabilities shall become due and payable without any further act on
the part of the Agent. Upon the occurrence of any other Event of Default, the
Administrative Agent may by written notice to the Lead Borrower declare any and
all Liabilities immediately due and payable and thereupon any and all such
Liabilities shall become immediately due and payable.  The occurrence of any
Event of Default shall also constitute, without notice or demand, a default
under all other agreements between the Agent or Lenders and the Obligors and
instruments and papers heretofore, now or hereafter given the Agent or Lenders.

 

10.1        FAILURE TO PAY REVOLVING CREDIT.

 

The failure by the Obligors to pay any amount when due under the Revolving
Credit.

 

10.2        FAILURE TO MAKE OTHER PAYMENTS.

 

The failure by the Obligors to pay when due (or upon demand, if payable on
demand) any payment Liability other than under the Revolving Credit.

 

10.3        FAILURE TO PERFORM COVENANT OR LIABILITY (NO GRACE PERIOD).

 

The failure by the Obligors to promptly, punctually, faithfully and timely
perform, discharge, or comply with any covenant or Liability not otherwise
described in Section 10.1 or Section 10.2 hereof, and included in any of the
following provisions hereof:

 

 

Section

Relates to:

 

 

 

 

4.3(b)

Notice of Name Change

 

 

 

 

4.6

Location of Collateral

 

 

 

 

4.7

Title to Assets

 

 

 

 

4.8

Indebtedness

 

 

 

 

4.9

Insurance Policies

 

 

 

 

4.15

Pay taxes

 

 

 

 

4.20

Dividends, Investments, Corporate Actions

 

 

 

 

4.24

Affiliate Transactions

 

 

 

 

4.25

Further Assurances

 

 

 

 

6.1

Use of Collateral

 

 

 

 

Article V

Reporting Requirements and

 

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Financial Performance Covenants

 

 

 

 

Article VII

Cash Management

 

 

10.4        FAILURE TO PERFORM COVENANT OR LIABILITY (GRACE PERIOD).

 

The failure by the Obligors, within Thirty (30) days following the earlier of
the  Obligors’ knowledge of a breach of any covenant or Liability not described
in any of Sections 10.1, 10.2, or 10.3 or of the Lead Borrower’s receipt of
written notice from the Administrative Agent of the breach of any of those
Sections.

 

10.5        MISREPRESENTATION.

 

The determination by the Administrative Agent that any representation or
warranty at any time made by the Obligors to the Agent was not true or complete
in all material respects when given.

 

10.6        ACCELERATION OF OTHER DEBT. BREACH OF LEASE.

 

(A)  THE OCCURRENCE OF ANY EVENT SUCH THAT ANY INDEBTEDNESS OF THE OBLIGORS IN
EXCESS OF $1,000,000 TO ANY CREDITOR OTHER THAN THE AGENT COULD BE ACCELERATED
(WHETHER OR NOT THE SUBJECT CREDITOR TAKES ANY ACTION ON ACCOUNT OF SUCH
OCCURRENCE).

 

(B)  THE OCCURRENCE OF ANY OF THE FOLLOWING WITH RESPECT TO LEASES ON WHICH ANY
BORROWER IS THE LESSEE OR IS OBLIGATED:

 

(I)            AN AGGREGATE OF MORE THAN $50,000 IN RENT IS THEN OVERDUE, EXCEPT
TO THE EXTENT BEING CONTESTED IN GOOD FAITH AND FOR WHICH ADEQUATE RESERVES HAVE
BEEN ESTABLISHED BY SUCH OBLIGOR.

 

(II)           DEFAULT AND THE EXPIRY OF ANY APPLICABLE GRACE PERIOD WITH
RESPECT TO MORE THAN TEN (10) LEASES OF RETAIL STORES, EXCEPT IF THE EXISTENCE
OF SUCH DEFAULT IS DISPUTED IN GOOD FAITH BY THE OBLIGORS AND THE APPLICABLE
LANDLORD HAS BEEN STAYED OR AGREED IN WRITING TO FORBEAR FROM INSTITUTING
PROCEEDINGS TO RECOVER POSSESSION OF THE LEASED PREMISES OR OTHERWISE TERMINATE
THE SUBJECT LEASE OR OBLIGORS’ RIGHTS TO PEACEFUL POSSESSION OF THE SUBJECT
PREMISES.

 

(III)          DEFAULT AND THE EXPIRY OF ANY APPLICABLE GRACE PERIOD OF ANY
LEASE OF ANY WAREHOUSE OR DISTRIBUTION CENTER.

 

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10.7        DEFAULT UNDER OTHER AGREEMENTS.

 

The occurrence of any breach or default under any agreement (including any Loan
Document other than this Loan Agreement) between the Agent and the Obligors or
instrument given by the Obligors to the Agent and the expiry, without cure, of
any applicable grace period (notwithstanding that the subject Agent may not have
exercised all or any of its rights on account of such breach or default).

 

10.8        INTENTIONALLY OMITTED.

 

10.9        ATTACHMENT; JUDGMENT; RESTRAINT OF BUSINESS.

 

(A)  THE SERVICE OF PROCESS UPON THE AGENT OR THE LENDERS OR ANY PARTICIPANT
SEEKING TO ATTACH, BY TRUSTEE, MANSE, OR OTHER PROCESS, ANY OF AN  OBLIGOR’S
FUNDS ON DEPOSIT WITH, OR ASSETS OF SUCH OBLIGOR IN THE POSSESSION OF, THE AGENT
OR THE LENDERS OR SUCH PARTICIPANT.

 

(B)  THE ENTRY OF ANY JUDGMENT AGAINST ANY OBLIGOR OR GROUP OF OBLIGORS (WHICH,
IF A MONEY JUDGMENT, IS IN EXCESS OF $1,000,000 SINGLY, OR IN THE AGGREGATE),
WHICH JUDGMENT IS NOT SATISFIED (IF A MONEY JUDGMENT) OR APPEALED FROM (WITH
EXECUTION OR SIMILAR PROCESS STAYED) WITHIN ANY APPLICABLE APPEAL PERIOD.

 

(C)  THE ENTRY OF ANY ORDER OR THE IMPOSITION OF ANY OTHER PROCESS HAVING THE
FORCE OF LAW, THE EFFECT OF WHICH IS TO RESTRAIN IN ANY MATERIAL WAY THE CONDUCT
BY ANY OBLIGOR OF ITS BUSINESS IN THE ORDINARY COURSE.

 

10.10      BUSINESS FAILURE.

 

Any act by, against, or relating to any Obligor, or its property or assets,
which act constitutes the determination, by such Obligor, to initiate a program
of partial or total self-liquidation; application for, consent to, or sufferance
of the appointment of a receiver, trustee, or other person, pursuant to court
action or otherwise, over all, or any part of any  Obligor’s property; the
granting of any trust mortgage or execution of an assignment for the benefit of
the creditors of any Obligor, or the occurrence of any other voluntary or
involuntary liquidation or extension of debt agreement for any Obligor; the
offering by or entering into by any Obligor of any composition, extension, or
any other arrangement seeking relief from or extension of the debts of such
Obligor; or the initiation of any judicial or non-judicial proceeding or
agreement by, against, or including any Obligor which seeks or intends to
accomplish a reorganization or arrangement with creditors; and/or the initiation
by or on behalf of such Obligor of the liquidation or winding up of all or any
part of such  Obligor’s business or operations.

 

10.11      BANKRUPTCY.

 

The failure by any Obligor to generally pay its debts as they mature;
adjudication of bankruptcy or insolvency relative to any Obligor; the entry of
an order for relief or similar order with respect to any Obligor in any
proceeding pursuant to the Bankruptcy Code or any other federal bankruptcy law;
the filing of any complaint, application, or petition by any Obligor initiating
any matter in which such Obligor is or may be granted any relief from the debts
of that Obligor pursuant to the Bankruptcy Code or any other insolvency statute
or procedure; the filing

 

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of any complaint, application, or petition against any Obligor initiating any
matter in which the Obligor is or may be granted any relief from the debts of
that Obligor pursuant to the Bankruptcy Code or any other insolvency statute or
procedure.

 

10.12      DEFAULT BY GUARANTOR OR AFFILIATE.

 

The occurrence of any of the foregoing Events of Default with respect to any
guarantor or endorser, or surety of the Liabilities, or the occurrence of any of
the foregoing Events of Default with respect to any Subsidiary, or Affiliate
(other than an Affiliate that is an Affiliate solely due to ownership of the
Lead Borrower’s publicly-traded stock) of any Obligor, as if such guarantor,
endorser, surety, Subsidiary, or Affiliate were the “ Obligor “ described
therein.

 

10.13      INDICTMENT - FORFEITURE.

 

The indictment of, or institution of any legal process or proceeding against,
any Obligor or any member of any Obligor’s senior management, under any federal,
state, municipal, and other civil or criminal statute, rule, regulation, order,
or other requirement having the force of law where the relief, penalties, or
remedies sought or available include the forfeiture of any property of any
Obligor and/or the imposition of any stay or other order, the effect of which
could be to restrain in any material way the conduct by that Obligor of its
business in the ordinary course.

 

10.14      TERMINATION OF GUARANTY.

 

The termination or attempted termination (other than a mere request for consent
to termination) of any guaranty by any guarantor of the Liabilities.

 

10.15      CHALLENGE TO LOAN DOCUMENTS.

 

(A)  ANY CHALLENGE BY OR ON BEHALF OF ANY BORROWER OR ANY GUARANTOR OF THE
LIABILITIES TO THE VALIDITY OF ANY LOAN DOCUMENT OR THE APPLICABILITY OR
ENFORCEABILITY OF ANY LOAN DOCUMENT STRICTLY IN ACCORDANCE WITH THE SUBJECT LOAN
DOCUMENT’S TERMS OR WHICH SEEKS TO VOID, AVOID, LIMIT, OR OTHERWISE ADVERSELY
AFFECT ANY SECURITY INTEREST CREATED BY OR IN ANY LOAN DOCUMENT OR ANY PAYMENT
MADE PURSUANT THERETO.

 

(B)  ANY DETERMINATION BY ANY COURT OR ANY OTHER JUDICIAL OR GOVERNMENT
AUTHORITY THAT ANY LOAN DOCUMENT IS NOT ENFORCEABLE STRICTLY IN ACCORDANCE WITH
THE SUBJECT LOAN DOCUMENT’S TERMS OR WHICH VOIDS, AVOIDS, LIMITS, OR OTHERWISE
ADVERSELY AFFECTS ANY SECURITY INTEREST CREATED BY ANY LOAN DOCUMENT OR ANY
PAYMENT MADE PURSUANT THERETO.

 

10.16      INTENTIONALLY OMITTED.

 

10.17      CHANGE IN CONTROL.

 

Any Change in Control.

 

10.18      UNINSURED LOSSES.

 

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ANY MATERIAL LOSS, THEFT, DAMAGE OR DESTRUCTION OF ANY OF THE COLLATERAL NOT
FULLY COVERED (SUBJECT TO SUCH DEDUCTIBLES AS ADMINISTRATIVE AGENT AND LENDERS
SHALL HAVE PERMITTED) BY INSURANCE.

 

10.19      ERISA.

 

A REPORTABLE EVENT SHALL OCCUR WHICH AGENT, IN ITS SOLE DISCRETION, SHALL
DETERMINE IN GOOD FAITH CONSTITUTES GROUNDS FOR THE TERMINATION BY THE PENSION
BENEFIT GUARANTY CORPORATION OF ANY PLAN OR FOR THE APPOINTMENT BY THE
APPROPRIATE UNITED STATED DISTRICT COURT OF A TRUSTEE FOR ANY PLAN, OR IF ANY
PLAN SHALL BE TERMINATED IN A “DISTRESS TERMINATION” PURSUANT TO SECTION 4041(C)
OR ANY SUCH TRUSTEE SHALL BE REQUESTED OR APPOINTED, OR IF ANY  OBLIGOR IS IN
“DEFAULT” (AS DEFINED IN SECTION 4219(C)(5) OF ERISA) WITH RESPECT TO PAYMENTS
TO A MULTIEMPLOYER PLAN RESULTING FROM SUCH OBLIGOR’S COMPLETE OR PARTIAL
WITHDRAWAL FROM SUCH PLAN.

 

ARTICLE XI. - RIGHTS AND REMEDIES UPON DEFAULT:

 

Upon the occurrence of any Event of Default described in Section 10.11 and upon
Acceleration, and at all times thereafter, the Agent shall have the following
rights and remedies in addition to all of the rights, remedies, powers,
privileges, and discretions available to Agent prior to the occurrence of an
Event of Default.

 

11.1        RIGHTS OF ENFORCEMENT.

 

The Collateral Agent shall have all of the rights and remedies of a secured
party upon default under the UCC, in addition to which the Collateral Agent
shall have all and each of the following rights and remedies:

 

(A)  TO GIVE NOTICE TO ANY BANK AT WHICH ANY DDA OR BLOCKED ACCOUNT IS
MAINTAINED AND IN WHICH PROCEEDS OF COLLATERAL ARE DEPOSITED, TO TURN OVER SUCH
PROCEEDS DIRECTLY TO THE COLLATERAL AGENT.

 

(B)  TO GIVE NOTICE TO ANY OF THE OBLIGORS’ CUSTOMS BROKERS TO FOLLOW THE
INSTRUCTIONS OF THE COLLATERAL AGENT AS PROVIDED IN ANY CUSTOMS BROKERS
AGREEMENT.

 

(C)  TO COLLECT THE RECEIVABLES COLLATERAL WITH OR WITHOUT THE TAKING OF
POSSESSION OF ANY OF THE COLLATERAL.

 

(D)  TO TAKE POSSESSION OF ALL OR ANY PORTION OF THE COLLATERAL.

 

(E)  TO SELL, LEASE, OR OTHERWISE DISPOSE OF ANY OR ALL OF THE COLLATERAL, IN
ITS THEN CONDITION OR FOLLOWING SUCH PREPARATION OR PROCESSING AS THE COLLATERAL
AGENT DEEMS ADVISABLE AND WITH OR WITHOUT THE TAKING OF POSSESSION OF ANY OF THE
COLLATERAL.

 

(F)  TO CONDUCT ONE OR MORE GOING OUT OF BUSINESS SALES WHICH INCLUDE THE SALE
OR OTHER DISPOSITION OF THE COLLATERAL.

 

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(G)  TO APPLY THE RECEIVABLES COLLATERAL OR THE PROCEEDS OF THE COLLATERAL
TOWARDS (BUT NOT NECESSARILY IN COMPLETE SATISFACTION OF) THE LIABILITIES.

 

(H)  TO EXERCISE ALL OR ANY OF THE RIGHTS, REMEDIES, POWERS, PRIVILEGES, AND
DISCRETIONS UNDER ALL OR ANY OF THE LOAN DOCUMENTS.

 

11.2        SALE OF COLLATERAL.

 

(A)  ANY SALE OR OTHER DISPOSITION OF THE COLLATERAL MAY BE AT PUBLIC OR PRIVATE
SALE UPON SUCH TERMS AND IN SUCH MANNER AS THE COLLATERAL AGENT DEEMS ADVISABLE,
HAVING DUE REGARD TO COMPLIANCE WITH ANY STATUTE OR REGULATION WHICH MIGHT
AFFECT, LIMIT, OR APPLY TO THE COLLATERAL AGENT’S DISPOSITION OF THE COLLATERAL.

 

(B)  THE COLLATERAL AGENT, IN THE EXERCISE OF THE COLLATERAL AGENT’S RIGHTS AND
REMEDIES UPON DEFAULT, MAY CONDUCT ONE OR MORE GOING OUT OF BUSINESS SALES, IN
THE COLLATERAL AGENT’S OWN RIGHT OR BY ONE OR MORE AGENTS AND CONTRACTORS. SUCH
SALE(S) MAY BE CONDUCTED UPON ANY PREMISES OWNED, LEASED, OR OCCUPIED BY ANY
OBLIGOR.  THE COLLATERAL AGENT AND ANY SUCH AGENT OR CONTRACTOR, IN CONJUNCTION
WITH ANY SUCH SALE, MAY AUGMENT THE INVENTORY WITH OTHER GOODS (ALL OF WHICH
OTHER GOODS SHALL REMAIN THE SOLE PROPERTY OF THE COLLATERAL AGENT OR SUCH AGENT
OR CONTRACTOR).  ANY AMOUNTS REALIZED FROM THE SALE OF SUCH GOODS WHICH
CONSTITUTE AUGMENTATIONS TO THE INVENTORY (NET OF AN ALLOCABLE SHARE OF THE
COSTS AND EXPENSES INCURRED IN THEIR DISPOSITION) SHALL BE THE SOLE PROPERTY OF
THE COLLATERAL AGENT OR SUCH AGENT OR CONTRACTOR AND NEITHER THE OBLIGORS NOR
ANY PERSON CLAIMING UNDER OR IN RIGHT OF THE OBLIGORS SHALL HAVE ANY INTEREST
THEREIN.

 

(C)  UNLESS THE COLLATERAL IS PERISHABLE OR THREATENS TO DECLINE SPEEDILY IN
VALUE, OR IS OF A TYPE CUSTOMARILY SOLD ON A RECOGNIZED MARKET (IN WHICH EVENT
THE COLLATERAL AGENT SHALL PROVIDE THE LEAD BORROWER WITH SUCH NOTICE AS MAY BE
PRACTICABLE UNDER THE CIRCUMSTANCES), THE COLLATERAL AGENT SHALL GIVE THE LEAD
BORROWER AT LEAST TEN (10) DAYS PRIOR WRITTEN NOTICE OF THE DATE, TIME, AND
PLACE OF ANY PROPOSED PUBLIC SALE, AND OF THE DATE AFTER WHICH ANY PRIVATE SALE
OR OTHER DISPOSITION OF THE COLLATERAL MAY BE MADE.  THE OBLIGORS AGREE THAT
SUCH WRITTEN NOTICE SHALL SATISFY ALL REQUIREMENTS FOR NOTICE TO THE OBLIGORS
WHICH ARE IMPOSED UNDER THE UCC OR OTHER APPLICABLE LAW WITH RESPECT TO THE
EXERCISE OF THE COLLATERAL AGENT’S RIGHTS AND REMEDIES UPON DEFAULT.

 

(D)  THE COLLATERAL AGENT OR THE LENDERS MAY CREDIT BID AND MAY PURCHASE THE
COLLATERAL, OR ANY PORTION OF IT AT ANY SALE HELD UNDER THIS ARTICLE XI.

 

(E)  IF ANY OF THE COLLATERAL IS SOLD, LEASED, OR OTHERWISE DISPOSED OF BY THE
COLLATERAL AGENT ON CREDIT, THE LIABILITIES SHALL NOT BE DEEMED TO HAVE BEEN
REDUCED AS A RESULT THEREOF UNLESS AND UNTIL PAYMENT IS FINALLY RECEIVED THEREON
BY THE COLLATERAL AGENT.

 

11.3        OCCUPATION OF BUSINESS LOCATION.

 

In connection with the Collateral Agent’s exercise of the Collateral Agent’s
rights under this Article XI, the Collateral Agent may enter upon, occupy, and
use any premises owned or occupied by any Obligor, and may exclude the Obligors
from such premises or portion thereof as

 

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may have been so entered upon, occupied, or used by the Collateral Agent.  The
Collateral Agent shall not be required to remove any of the Collateral from any
such premises upon the Agent’s taking possession thereof, and may render any
Collateral unusable to the Obligors.  In no event shall the Agent be liable to
the Obligors for use or occupancy by the Collateral Agent of any premises
pursuant to this Article XI, nor for any charge (such as wages for the 
Obligors’ employees and utilities) incurred in connection with the Collateral
Agent’s exercise of the Agent’s Rights and Remedies.

 

11.4        GRANT OF NONEXCLUSIVE LICENSE.

 

Each Obligor hereby grants to the Collateral Agent a royalty free nonexclusive
irrevocable license to use, apply, and affix any trademark, trade name, logo, or
the like in which that Obligor now or hereafter has rights, such license being
with respect to the Collateral Agent’s exercise of the rights hereunder
including, without limitation, in connection with any completion of the
manufacture of Inventory or sale or other disposition of Inventory.

 

11.5        ASSEMBLY OF COLLATERAL.

 

The Collateral Agent may require the Obligors to assemble the Collateral and
make it available to the Collateral Agent at the Obligors’ sole risk and expense
at a place or places which are reasonably convenient to both the Collateral
Agent and Obligors.

 

11.6        RIGHTS AND REMEDIES.

 

The rights, remedies, powers, privileges, and discretions of the Agent
hereunder, under any other Loan Document or under applicable law (herein, the
“Agent’s Rights and Remedies”) shall be cumulative and not exclusive of any
rights or remedies which it would otherwise have.  No delay or omission by the
Agent in exercising or enforcing any of the Agent’s Rights and Remedies shall
operate as, or constitute, a waiver thereof.  No waiver by the Agent of any
Event of Default or of any default under any other agreement shall operate as a
waiver of any other default hereunder or under any other agreement.  No single
or partial exercise of any of the Agent’s Rights or Remedies, and no express or
implied agreement or transaction of whatever nature entered into between the
Agent and any person, at any time, shall preclude the other or further exercise
of the Agent’s Rights and Remedies.  No waiver by the Agent of any of the
Agent’s Rights and Remedies on any one occasion shall be deemed a waiver on any
subsequent occasion, nor shall it be deemed a continuing waiver.  The Agent’s
Rights and Remedies  may be exercised at such time or times and in such order of
preference as the Agent may determine. The Agent’s Rights and Remedies may be
exercised without resort or regard to any other source of satisfaction of the
Liabilities.

 

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ARTICLE XII. - NOTICES:

 

12.1        NOTICE ADDRESSES.

 

All notices, demands, and other communications made in respect of this Agreement
(other than a request for a loan or advance or other financial accommodation
under the Revolving Credit) shall be made to the following addresses, each of
which may be changed upon Seven (7) days written notice to all others given by
certified mail, return receipt requested:

 

 

If to the Agent:

 

 

 

 

 

Fleet Retail Group, Inc.

 

 

40 Broad Street

 

 

Boston, MA 02109

 

 

Attention: Sally A. Sheehan, Managing Director

 

 

Fax: (617) 434-4185

 

 

 

 

With a copy to:

 

 

Brown Rudnick Berlack Israels LLP

 

 

One Financial Center

 

 

Boston, MA 02111

 

 

Attention: Andrew P. Strehle, Esquire

 

 

Fax: 617 856-8201

 

 

 

 

If to the Lenders:

 

 

Fleet Retail Group, Inc.

 

 

40 Broad Street

 

 

Boston, MA 02109

 

 

Attention: Sally A. Sheehan, Managing Director

 

 

Fax: (617) 434-4185

 

 

 

 

If to the Obligors:

 

 

c/o Lead Borrower

 

 

Mothers Work, Inc.

 

 

456 North Fifth Street

 

 

Philadelphia, PA 19123

 

 

Attention: Edward M. Krell, Chief Financial Officer

 

 

Fax: (215) 923-0975

 

 

 

 

With a copy to:

 

 

Pepper Hamilton LLP

 

 

3000 Two Logan Square

 

 

Eighteenth and Arch Streets

 

 

Philadelphia, PA 19103-2799

 

 

Attention: David G. Smith, Esquire

 

 

Fax: (215) 981-4750

 

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12.2        NOTICE GIVEN.

 

(A)  EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED HEREIN, NOTICES SHALL BE DEEMED
MADE AND CORRESPONDENCE RECEIVED, AS FOLLOWS (ALL TIMES BEING LOCAL TO THE PLACE
OF DELIVERY OR RECEIPT):

 

(I)            BY MAIL: THE SOONER OF WHEN ACTUALLY RECEIVED OR THREE (3) DAYS
FOLLOWING DEPOSIT IN THE UNITED STATES MAIL, POSTAGE PREPAID.

 

(II)           BY RECOGNIZED OVERNIGHT EXPRESS DELIVERY: THE BUSINESS DAY
FOLLOWING THE DAY WHEN SENT.

 

(III)          BY HAND: IF DELIVERED ON A BUSINESS DAY AFTER 9:00 A.M. AND NO
LATER THAN THREE (3) HOURS PRIOR TO THE CLOSE OF CUSTOMARY BUSINESS HOURS OF THE
RECIPIENT, WHEN DELIVERED.  OTHERWISE, AT THE OPENING OF THE THEN NEXT BUSINESS
DAY.

 

(IV)          BY FACSIMILE TRANSMISSION (WHICH MUST INCLUDE A HEADER ON WHICH
THE PARTY SENDING SUCH TRANSMISSION IS INDICATED): IF SENT ON A BUSINESS DAY
AFTER 9:00 A.M. AND NO LATER THAN THREE (3) HOURS PRIOR TO THE CLOSE OF
CUSTOMARY BUSINESS HOURS OF THE RECIPIENT, ONE (1) HOUR AFTER BEING SENT. 
OTHERWISE, AT THE OPENING OF THE THEN NEXT BUSINESS DAY.

 

(B)  REJECTION OR REFUSAL TO ACCEPT DELIVERY AND INABILITY TO DELIVER BECAUSE OF
A CHANGED ADDRESS OR FACSIMILE NUMBER FOR WHICH NO DUE NOTICE WAS GIVEN SHALL
EACH BE DEEMED RECEIPT OF THE NOTICE SENT.

 

(C)  COLLATERAL AGENT WILL GIVE THE LEAD BORROWER NOTICE OF ITS INTENTION TO
FORECLOSE ON ITS SECURITY INTERESTS BY RECOGNIZED OVERNIGHT EXPRESS DELIVERY.

 

ARTICLE XIII. - TERM:

 

13.1        TERMINATION OF REVOLVING CREDIT.

 

The Revolving Credit shall remain in effect (subject to suspension as provided
in Section 2.5(h) hereof) until the Termination Date.

 

13.2        ACTIONS ON TERMINATION.

 

On the Termination Date, the Borrowers shall pay the Administrative Agent
(whether or not then due), in immediately available funds, all then Liabilities
including, without limitation: the entire balance of the Loan Account (including
the unpaid principal balance of the Revolving Credit Loans); any then remaining
installments of the Revolving Credit Commitment Fee; any payments due on account
of the indemnification obligations included in Section 2.10(e); any accrued and
unpaid Unused Line Fee; and all unreimbursed costs and expenses of Agent for
which the Borrowers are responsible; and shall make such arrangements concerning
any L/C’s then outstanding are reasonably satisfactory to the Administrative
Agent.  Until such payment, all

 

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provisions of this Agreement, other than those contained in Article II which
place an obligation on the Agent to make any loans or advances or to provide
financial accommodations under the Revolving Credit or otherwise, shall remain
in full force and effect until all Liabilities shall have been paid in full. 
The release by the Collateral Agent of the Collateral Interests granted the
Agent by the Obligors hereunder may be upon such conditions and indemnifications
as the Collateral Agent may require.

 

ARTICLE XIV. - GENERAL:

 

14.1        PROTECTION OF COLLATERAL.

 

The Agent has no duty as to the collection or protection of the Collateral
beyond the safe custody of such of the Collateral as may come into the
possession of the Agent.

 

14.2        PUBLICITY.

 

The Administrative Agent, at its expense, may issue a “tombstone” notice of the
establishment of the credit facility contemplated by this Agreement and may make
reference to the Obligors (and may utilize any logo or other distinctive symbol
associated with the Borrowers) in connection with any advertising, promotion, or
marketing undertaken by the Administrative Agent.

 

14.3        SUCCESSORS AND ASSIGNS.

 

This Agreement shall be binding upon the Obligors and the Obligors’
representatives, successors, and assigns and shall inure to the benefit of the
Agent and the Lenders and their respective successors and assigns, provided,
however, no trustee or other fiduciary appointed with respect to the Obligors
shall have any rights hereunder.  In the event that the Agent or Lenders assigns
or transfers its rights under this Agreement, the assignee shall thereupon
succeed to and become vested with all rights, powers, privileges, and duties of
such assignor hereunder and such assignor shall thereupon be discharged and
relieved from its duties and obligations hereunder.

 

14.4        SEVERABILITY.

 

Any determination that any provision of this Agreement or any application
thereof is invalid, illegal, or unenforceable in any respect in any instance
shall not affect the validity, legality, or enforceability of such provision in
any other instance, or the validity, legality, or enforceability of any other
provision of this Agreement.

 

14.5        AMENDMENTS; COURSE OF DEALING.

 

(A)  THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS INCORPORATE ALL DISCUSSIONS AND
NEGOTIATIONS BETWEEN THE OBLIGORS, THE AGENT AND THE LENDERS, EITHER EXPRESS OR
IMPLIED, CONCERNING THE MATTERS INCLUDED HEREIN AND IN SUCH OTHER INSTRUMENTS,
ANY CUSTOM, USAGE, OR COURSE OF DEALINGS TO THE CONTRARY NOTWITHSTANDING.  NO
SUCH DISCUSSIONS, NEGOTIATIONS, CUSTOM, USAGE, OR

 

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COURSE OF DEALINGS SHALL LIMIT, MODIFY, OR OTHERWISE AFFECT THE PROVISIONS
THEREOF.  NO FAILURE BY THE AGENT OR LENDERS TO GIVE NOTICE TO THE LEAD BORROWER
OF THE OBLIGORS’ HAVING FAILED TO OBSERVE AND COMPLY WITH ANY WARRANTY OR
COVENANT INCLUDED IN ANY LOAN DOCUMENT SHALL CONSTITUTE A WAIVER OF SUCH
WARRANTY OR COVENANT OR THE AMENDMENT OF THE SUBJECT LOAN DOCUMENT.  NO CHANGE
MADE BY THE AGENT TO THE MANNER BY WHICH AVAILABILITY IS DETERMINED SHALL
OBLIGATE THE AGENT TO CONTINUE TO DETERMINE AVAILABILITY IN THAT MANNER.

 

(B)  THE OBLIGORS MAY UNDERTAKE ANY ACTION OTHERWISE PROHIBITED HEREBY, AND MAY
OMIT TO TAKE ANY ACTION OTHERWISE REQUIRED HEREBY, UPON AND WITH THE EXPRESS
PRIOR WRITTEN CONSENT OF THE AGENT. NO CONSENT, MODIFICATION, AMENDMENT, OR
WAIVER OF ANY PROVISION OF ANY LOAN DOCUMENT SHALL BE EFFECTIVE UNLESS EXECUTED
IN WRITING BY OR ON BEHALF OF THE PARTY TO BE CHARGED WITH SUCH MODIFICATION,
AMENDMENT, OR WAIVER (AND IF SUCH PARTY IS THE AGENT THEN BY A DULY AUTHORIZED
OFFICER THEREOF).  NOTWITHSTANDING THE FOREGOING SENTENCE, ANY INCREASE IN THE
REVOLVING CREDIT LOAN CEILING, UP TO A MAXIMUM OF $75,000,000, SHALL BE DEEMED
EFFECTIVE UPON AND WITH EXPRESS WRITTEN CONSENT OF THE BORROWERS AND THE
ADMINISTRATIVE AGENT AND THOSE LENDERS THAT AGREE IN WRITING TO INCREASE THEIR
REVOLVING CREDIT COMMITMENTS IN CONNECTION WITH SUCH INCREASE. ANY MODIFICATION,
AMENDMENT, OR WAIVER PROVIDED BY THE ADMINISTRATIVE AGENT SHALL BE IN RELIANCE
UPON ALL REPRESENTATIONS AND WARRANTIES THERETOFORE MADE TO THE ADMINISTRATIVE
AGENT BY OR ON BEHALF OF THE BORROWERS (AND ANY GUARANTOR, ENDORSER, OR SURETY
OF THE LIABILITIES) AND CONSEQUENTLY MAY BE RESCINDED IN THE EVENT THAT ANY OF
SUCH REPRESENTATIONS OR WARRANTIES WAS NOT TRUE AND COMPLETE IN ALL MATERIAL
RESPECTS WHEN GIVEN.

 

14.6        POWER OF ATTORNEY.

 

In connection with all powers of attorney included in this Agreement, the
Obligors hereby grant unto the Agent full power to do any and all things
necessary or appropriate in connection with the exercise of such powers as fully
and effectually as the Obligors might or could do, hereby ratifying all that
said attorney shall do or cause to be done by virtue of this Agreement.  No
power of attorney set forth in this Agreement shall be affected by any
disability or incapacity suffered by the Obligors and each shall survive the
same. All powers conferred upon the Agent by this Agreement, being coupled with
an interest, shall be irrevocable until this Agreement is terminated by a
written instrument executed by a duly authorized officer of the Agent.

 

14.7        APPLICATION OF PROCEEDS.

 

The proceeds of any collection, sale, or disposition of the Collateral, or of
any other payments received hereunder, shall be applied towards the Liabilities
in such order and manner as the Administrative Agent determines in its sole
discretion, consistent, however, with the provisions of this Agreement and the
Agency Agreement.  The Obligors shall remain liable for any deficiency remaining
following such application.

 

14.8        INCREASED COSTS.

 

If the Administrative Agent or Lenders shall have determined that the adoption
of any law, rule or regulation regarding capital adequacy, or any change therein
or in the interpretation

 

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or application thereof, or compliance by the Agent or Lenders with any request
or directive regarding capital adequacy (whether or not having the force of law)
from any central bank or governmental authority enacted after the date hereof,
does or shall have the effect of reducing the rate of return on such party’s
capital as a consequence of its obligations hereunder to a level below that
which the Agent or Lenders could have achieved but for such adoption, change or
compliance (taking into consideration the Agent’s or Lenders’ policies with
respect to capital adequacy) by a material amount, then from time to time, after
submission by the Administrative Agent or Lenders to the Lead Borrower of a
written demand therefor (“Capital Adequacy Demand”) together with the
certificate described below, the Borrowers shall pay to the Agent or Lenders, as
applicable, such additional amount or amounts (“Capital Adequacy Charge”) as
will compensate the Agent or Lenders for such reduction, such Capital Adequacy
Demand to be made with reasonable promptness following such determination.  A
certificate of the Administrative Agent or Lenders claiming entitlement to
payment as set forth above shall be conclusive.  Such certificate shall set
forth the nature of the occurrence giving rise to such reduction, the amount of
the Capital Adequacy Charge to be paid to the Agent or Lenders, and the method
by which such amount was determined.  In determining such amount, the
Administrative Agent or Lenders may use any reasonable averaging and attribution
method, applied on a non-discriminatory basis.

 

14.9        COSTS AND EXPENSES OF THE AGENT AND LENDERS.

 

The Borrowers shall pay from time to time on demand all Costs of Collection and
all reasonable costs, expenses, and disbursements of (including attorneys’
reasonable fees and expenses) which are incurred by the Agent and Lenders in
connection with the preparation, negotiation, execution, and delivery of this
Agreement and of any other Loan Documents, and all other reasonable costs,
expenses, and disbursements which may be incurred connection with or in respect
to the credit facility contemplated hereby or which otherwise are incurred with
respect to the Liabilities.

 

(A)  THE BORROWERS SHALL PAY ON FROM TIME TO TIME ON DEMAND ALL REASONABLE COSTS
AND EXPENSES (INCLUDING REASONABLE ATTORNEYS’ FEES AND EXPENSES) INCURRED BY THE
AGENT AND ALL REASONABLE COSTS AND EXPENSES (INCLUDING REASONABLE ATTORNEY’S
FEES AND EXPENSES) INCURRED BY THE LENDERS TO THE LENDERS’ SPECIAL COUNSEL,
FOLLOWING THE OCCURRENCE OF ANY EVENT OF DEFAULT.

 

(B)  THE BORROWERS AUTHORIZE THE ADMINISTRATIVE AGENT TO PAY ALL SUCH FEES AND
EXPENSES AND IN THE ADMINISTRATIVE AGENT’S DISCRETION, TO ADD SUCH FEES AND
EXPENSES TO THE LOAN ACCOUNT.

 

(C)  THE UNDERTAKING ON THE PART OF THE BORROWERS IN THIS SECTION 14.9 SHALL
SURVIVE PAYMENT OF THE LIABILITIES AND/OR ANY TERMINATION, RELEASE, OR DISCHARGE
EXECUTED BY THE AGENT IN FAVOR OF THE BORROWERS, OTHER THAN A TERMINATION,
RELEASE, OR DISCHARGE WHICH MAKES SPECIFIC REFERENCE TO THIS SECTION 14.9.

 

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14.10      COPIES AND FACSIMILES.

 

This Agreement and all documents which relate thereto, which have been or may be
hereinafter furnished the Agent or the Lenders may be reproduced by the Agent or
Lenders by any photographic, microfilm, xerographic, digital imaging, or  other
process, and such Person making such reproduction may destroy any document so
reproduced.  Any such reproduction shall be admissible in evidence as the
original itself in any judicial or administrative proceeding (whether or not the
original is in existence and whether or not such reproduction was made in the
regular course of business). Any facsimile which bears proof of transmission
shall be binding on the party which or on whose behalf such transmission was
initiated and likewise shall be so admissible in evidence as if the original of
such facsimile had been delivered to the party which or on whose behalf such
transmission was received.

 

14.11      NEW YORK LAW.

 

This Agreement and all rights and obligations hereunder, including matters of
construction, validity, and performance, shall be governed by the law of the
State of New York.

 

14.12      CONSENT TO JURISDICTION.

 

(A)  EACH OBLIGOR AGREES THAT ANY LEGAL ACTION, PROCEEDING, CASE, OR CONTROVERSY
AGAINST THE OBLIGORS WITH RESPECT TO ANY LOAN DOCUMENT MAY BE BROUGHT IN THE
SUPREME COURT FOR NEW YORK COUNTY OR IN THE UNITED STATES DISTRICT COURT,
SOUTHERN DISTRICT OF NEW YORK, SITTING IN NEW YORK CITY, NEW YORK, OR THE
SUPERIOR COURT OF SUFFOLK COUNTY, MASSACHUSETTS OR IN THE UNITED STATES DISTRICT
COURT, DISTRICT OF MASSACHUSETTS, SITTING IN BOSTON, MASSACHUSETTS, AS THE AGENT
MAY ELECT IN THE AGENT’S SOLE DISCRETION.  BY EXECUTION AND DELIVERY OF THIS
AGREEMENT, EACH BORROWER, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, ACCEPTS,
SUBMITS, AND CONSENTS GENERALLY AND UNCONDITIONALLY, TO THE JURISDICTION OF THE
AFORESAID COURTS.

 

(B)  EACH OBLIGOR WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT, AND
IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED
COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY
CERTIFIED MAIL, POSTAGE PREPAID, TO LEAD BORROWER AT LEAD BORROWER’S ADDRESS FOR
NOTICES AS SPECIFIED HEREIN, SUCH SERVICE TO BECOME EFFECTIVE FIVE (5) BUSINESS
DAYS AFTER SUCH MAILING.

 

(C)  EACH OBLIGOR WAIVES ANY OBJECTION BASED ON FORUM NON CONVENIENS AND ANY
OBJECTION TO VENUE OF ANY ACTION OR PROCEEDING INSTITUTED UNDER ANY OF THE LOAN
DOCUMENTS AND CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE REMEDY AS IS
DEEMED APPROPRIATE BY THE COURT.

 

(D)  NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE AGENT TO BRING LEGAL ACTIONS
OR PROCEEDINGS IN ANY OTHER COMPETENT JURISDICTION.

 

(E)  EACH OBLIGOR AGREES THAT ANY ACTION COMMENCED BY ANY BORROWER ASSERTING ANY
CLAIM ARISING UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT SHALL BE BROUGHT SOLELY IN THE SUPERIOR COURT OF SUFFOLK COUNTY,
MASSACHUSETTS OR IN THE UNITED STATES DISTRICT COURT, DISTRICT OF MASSACHUSETTS,
SITTING IN BOSTON, MASSACHUSETTS, AND THAT SUCH COURTS SHALL HAVE EXCLUSIVE
JURISDICTION WITH RESPECT TO ANY SUCH ACTION.

 

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14.13      INDEMNIFICATION.

 

The Obligors shall indemnify, defend, and hold the Agent and Lenders and any
Participant and any of their respective employees, officers, or agents (each, an
“Indemnified Person”) harmless of and from any claim brought or threatened
against any Indemnified Person by the Borrowers, any guarantor or endorser of
the Liabilities, or any other Person (as well as from attorneys’ reasonable
fees, expenses, and disbursements in connection therewith) on account of the
relationship of any Obligor or of any other guarantor or endorser of the
Liabilities (each of claims which may be defended, compromised, settled, or
pursued by the Indemnified Person with counsel of the Agent’s or Lenders’ or
Participant’s (as the case may be) selection, but at the expense of the
Obligors) other than any claim as to which a final determination is made in a
judicial proceeding (in which the Agent, Lenders and any other Indemnified
Person has had an opportunity to be heard), which determination includes a
specific finding that the Indemnified Person seeking indemnification had acted
in a grossly negligent manner or in actual bad faith.  This indemnification
shall survive payment of the Liabilities and/or any termination, release, or
discharge executed by the Agent or Lenders in favor of the Obligors, other than
a termination, release, or discharge duly executed on behalf of the Agent or
Lenders which makes specific reference to this Section 14.13.

 

14.14      RULES OF CONSTRUCTION.

 

The following rules of construction shall be applied in the interpretation,
construction, and enforcement of this Agreement and of the other Loan Documents:

 

(A)  UNLESS OTHERWISE SPECIFICALLY PROVIDED FOR HEREIN, INTEREST AND ANY FEE OR
CHARGE WHICH IS STATED AS A PER ANNUM PERCENTAGE SHALL BE CALCULATED BASED ON A
365/366 DAY YEAR AND ACTUAL DAYS ELAPSED.

 

(B)  WORDS IN THE SINGULAR INCLUDE THE PLURAL AND WORDS IN THE PLURAL INCLUDE
THE SINGULAR.

 

(C)  ANY REFERENCE, HEREIN, TO A CIRCUMSTANCE OR EVENT’S HAVING “MORE THAN A DE
MINIMIS ADVERSE EFFECT” AND ANY SIMILAR REFERENCE IS TO A CIRCUMSTANCE OR EVENT
WHICH (X) IN A WELL-MANAGED ENTERPRISE, WOULD RECEIVE THE ACTIVE ATTENTION OF
SENIOR MANAGEMENT WITH A VIEW TOWARDS IT BEING REVERSED OR REMEDIED; OR (Y) IF
NOT REVERSED OR REMEDIED, COULD REASONABLY BE EXPECTED TO LEAD TO ITS BECOMING A
MATERIAL ADVERSE EFFECT.

 

(D)  CROSS REFERENCES TO SECTIONS IN THIS AGREEMENT BEGIN WITH THE ARTICLE IN
WHICH THAT SECTION APPEARS AND THEN THE SECTION TO WHICH REFERENCE IS MADE. (FOR
EXAMPLE, A REFERENCE TO “SECTION 5.6” IS TO SUBSECTION 6, WHICH APPEARS IN
ARTICLE V OF THIS AGREEMENT).

 

(E)  TITLES, HEADINGS (INDICATED BY BEING UNDERLINED OR SHOWN IN SMALL CAPITALS)
AND ANY TABLE OF CONTENTS ARE SOLELY FOR CONVENIENCE OF REFERENCE; DO NOT
CONSTITUTE A PART OF THE INSTRUMENT IN WHICH INCLUDED; AND DO NOT AFFECT SUCH
INSTRUMENT’S MEANING, CONSTRUCTION, OR EFFECT.

 

(F)  THE WORDS “INCLUDES” AND “INCLUDING” ARE NOT LIMITING.

 

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(G)  TEXT WHICH FOLLOWS THE WORDS “INCLUDING, WITHOUT LIMITATION” (OR SIMILAR
WORDS) IS ILLUSTRATIVE AND NOT LIMITING.

 

(H)  EXCEPT WHERE THE CONTEXT OTHERWISE REQUIRES OR WHERE THE RELEVANT
SUBSECTIONS ARE JOINED BY “OR”, COMPLIANCE WITH ANY SECTION OR PROVISION OF ANY
LOAN DOCUMENT WHICH CONSTITUTES A WARRANTY OR COVENANT REQUIRES COMPLIANCE WITH
ALL SUBSECTIONS (IF ANY) OF THAT SECTION OR PROVISION.  EXCEPT WHERE THE CONTEXT
OTHERWISE REQUIRES, COMPLIANCE WITH ANY WARRANTY OR COVENANT OF ANY LOAN
DOCUMENT WHICH INCLUDES SUBSECTIONS WHICH ARE JOINED BY “OR” MAY BE ACCOMPLISHED
BY COMPLIANCE WITH ANY OF SUCH SUBSECTIONS.

 

(I)  TEXT WHICH IS SHOWN IN ITALICS, SHOWN IN BOLD, SHOWN IN ALL CAPITAL
LETTERS, OR IN ANY COMBINATION OF THE FOREGOING, SHALL BE DEEMED TO BE
CONSPICUOUS.

 

(J)  THE WORDS “MAY NOT” ARE PROHIBITIVE AND NOT PERMISSIVE.

 

(K)  THE WORD “OR” IS NOT EXCLUSIVE.

 

(L)  ANY REFERENCE TO A PERSON’S “KNOWLEDGE” (OR WORDS OF SIMILAR IMPORT) ARE TO
SUCH PERSON’S KNOWLEDGE ASSUMING THAT SUCH PERSON HAS UNDERTAKEN REASONABLE AND
DILIGENT INVESTIGATION WITH RESPECT TO THE SUBJECT OF SUCH “KNOWLEDGE” (WHETHER
OR NOT SUCH INVESTIGATION HAS ACTUALLY BEEN UNDERTAKEN).

 

(M)  TERMS WHICH ARE DEFINED IN ONE SECTION OF ANY LOAN DOCUMENT ARE USED WITH
SUCH DEFINITION THROUGHOUT THE INSTRUMENT IN WHICH SO DEFINED.

 

(N)  THE SYMBOL “$” REFERS TO UNITED STATES DOLLARS.

 

(O)  UNLESS LIMITED BY REFERENCE TO A PARTICULAR SECTION OR PROVISION, ANY
REFERENCE TO “HEREIN”, “HEREOF”, OR “WITHIN” IS TO THE ENTIRE LOAN DOCUMENT IN
WHICH SUCH REFERENCE IS MADE.

 

(P)  REFERENCES TO “THIS AGREEMENT” OR TO ANY OTHER LOAN DOCUMENT IS TO THE
SUBJECT INSTRUMENT AS AMENDED TO THE DATE ON WHICH APPLICATION OF SUCH REFERENCE
IS BEING MADE.

 

(Q)  EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED, ALL REFERENCES TO TIME ARE TO
BOSTON TIME.

 

(R)  IN THE DETERMINATION OF ANY NOTICE, GRACE, OR OTHER PERIOD OF TIME
PRESCRIBED OR ALLOWED HEREUNDER:

 

(I)            UNLESS OTHERWISE PROVIDED (I) THE DAY OF THE ACT, EVENT, OR
DEFAULT FROM WHICH THE DESIGNATED PERIOD OF TIME BEGINS TO RUN SHALL NOT BE
INCLUDED AND THE LAST DAY OF THE PERIOD SO COMPUTED SHALL BE INCLUDED UNLESS
SUCH LAST DAY IS NOT A BUSINESS DAY, IN WHICH EVENT THE LAST DAY OF THE RELEVANT
PERIOD SHALL BE THE THEN NEXT BUSINESS DAY AND (II) THE PERIOD SO COMPUTED SHALL
END AT 5:00 P.M. ON THE RELEVANT BUSINESS DAY.

 

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(II)           THE WORD “FROM” MEANS “FROM AND INCLUDING”.

 

(III)          THE WORDS “TO” AND “UNTIL” EACH MEAN “TO, BUT EXCLUDING”.

 

(IV)          THE WORD “THROUGH” MEANS “TO AND INCLUDING”.

 

(S)  THE LOAN DOCUMENTS SHALL BE CONSTRUED AND INTERPRETED IN A HARMONIOUS
MANNER AND IN KEEPING WITH THE INTENTIONS SET FORTH IN SECTION 19.15 HEREOF,
PROVIDED, HOWEVER, IN THE EVENT OF ANY INCONSISTENCY BETWEEN THE PROVISIONS OF
THIS AGREEMENT AND ANY OTHER LOAN DOCUMENT, THE PROVISIONS OF THIS AGREEMENT
SHALL GOVERN AND CONTROL.

 

14.15      INTENT.

 

It is intended that:

 

(A)  THIS AGREEMENT TAKE EFFECT AS A SEALED INSTRUMENT.

 

(B)  THE SCOPE OF THE COLLATERAL INTERESTS CREATED BY ANY OBLIGOR TO SECURE THE
LIABILITIES BE BROADLY CONSTRUED IN FAVOR OF THE AGENT AND THAT THEY COVER ALL
ASSETS OF EACH BORROWER.

 

(C)  ALL COLLATERAL INTERESTS CREATED IN FAVOR OF THE AGENT AT ANY TIME AND FROM
TIME TO TIME BY ANY OBLIGOR SECURE ALL LIABILITIES, WHETHER NOW EXISTING OR
CONTEMPLATED OR HEREAFTER ARISING.

 

(D)  EXCEPT AS SPECIFICALLY LIMITED HEREIN, ALL REASONABLE COSTS, EXPENSES, AND
DISBURSEMENTS INCURRED BY THE AGENT AND, TO THE EXTENT PROVIDE HEREIN, THE
LENDERS, IN CONNECTION WITH SUCH PERSON’S RELATIONSHIP(S) WITH THE OBLIGORS
SHALL BE BORNE BY THE OBLIGORS.

 

14.16      PARTICIPATIONS.

 

The Agent or Lenders may sell participations to one or more financial
institutions  (a “Participant”) all or a portion of the Agent’s or Lenders’
rights and obligations under this Agreement, provided, however, that except with
the consent of the Borrowers (which may not be unreasonably withheld or
delayed), the only rights granted to the participant pursuant to such
participation arrangements with respect to waivers, amendments or modifications
of the Loan Documents shall be the rights to approve waivers, amendments or
modifications that would reduce the principal of or the interest rate on any
Loans, extend the term or increase the amount of the Commitment of such Lender
as it relates to such participant, increase the availability of Loans or L/C’s
to the Borrowers, reduce the amount of any fees to which such participant is
entitled, or extend any regularly scheduled payment date for principal or
interest.  No such sale of a participation shall relieve the Agent or Lenders
from the Agent’s or Lenders’ obligations hereunder.

 

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14.17      RIGHT OF SET-OFF.

 

Any and all deposits or other sums at any time credited by or due to the
Obligors from the Agent, Lenders or any Participant or from any Affiliate of any
of the foregoing, and any cash, securities, instruments or other property of the
Obligors in the possession of any of the foregoing, whether for safekeeping or
otherwise (regardless of the reason such Person had received the same), to the
extent permitted by law, shall at all times constitute security for all
Liabilities and for any and all obligations of the Obligors to the Agent,
Lenders or any Participant or such Affiliate and may be applied or set off
against the Liabilities and against such obligations at any time, whether or not
such are then due and whether or not other collateral is then available to the
Agent.

 

14.18      PLEDGES TO FEDERAL RESERVE BANKS.

 

Nothing included in this Agreement shall prevent or limit the Agent or Lenders,
to the extent that the Agent or Lenders is subject to any of the twelve Federal
Reserve Banks organized under §4 of the Federal Reserve Act (12 U.S.C. §341)
from pledging all or any portion of that Agent’s or Lenders’ interest and rights
under this Agreement, provided, however, neither such pledge nor the enforcement
thereof shall release the Agent or Lenders from their respective obligations
hereunder or under any of the Loan Documents.

 

14.19      MAXIMUM INTEREST RATE.

 

Regardless of any provision of any Loan Document, the Agent and Lenders shall
not be entitled to contract for, charge, receive, collect, or apply as interest
on any Liability, any amount in excess of the maximum rate imposed by applicable
law.  Any payment which is made which, if treated as interest on a Liability
would result in such interest’s exceeding such maximum rate shall be held, to
the extent of such excess, as additional collateral for the Liabilities as if
such excess were “Collateral.”

 

14.20      WAIVERS.

 

(A)  EACH BORROWER (AND ALL GUARANTORS, ENDORSERS, AND SURETIES OF THE
LIABILITIES) MAKE EACH OF THE WAIVERS INCLUDED IN SECTION 14.20(B), BELOW,
KNOWINGLY, VOLUNTARILY, AND INTENTIONALLY, AND UNDERSTANDS THAT AGENT AND
LENDERS, IN ESTABLISHING THE FACILITIES CONTEMPLATED HEREBY AND IN PROVIDING
LOANS AND OTHER FINANCIAL ACCOMMODATIONS TO OR FOR THE ACCOUNT OF THE BORROWERS
AS PROVIDED HEREIN, WHETHER NOT OR IN THE FUTURE, IS RELYING ON SUCH WAIVERS.

 

(B)  EACH BORROWER, AND EACH SUCH GUARANTOR, ENDORSER, AND SURETY RESPECTIVELY
WAIVES THE FOLLOWING:

 

(I)            EXCEPT AS OTHERWISE SPECIFICALLY REQUIRED HEREBY, NOTICE OF
NON-PAYMENT, DEMAND, PRESENTMENT, PROTEST AND ALL FORMS OF DEMAND AND NOTICE,
BOTH WITH RESPECT TO THE LIABILITIES AND THE COLLATERAL.

 

(II)           EXCEPT AS OTHERWISE SPECIFICALLY REQUIRED HEREBY, THE RIGHT TO
NOTICE AND/OR HEARING PRIOR TO THE AGENT’S  EXERCISING OF THE AGENT’S RIGHTS
UPON DEFAULT.

 

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(III)          THE RIGHT TO A JURY IN ANY TRIAL OF ANY CASE OR CONTROVERSY IN
WHICH THE  AGENT OR LENDER IS OR BECOMES A PARTY (WHETHER SUCH CASE OR
CONTROVERSY IS INITIATED BY OR AGAINST THE AGENT OR LENDER OR IN WHICH THE AGENT
OR LENDER IS JOINED AS A PARTY LITIGANT), WHICH CASE OR CONTROVERSY ARISES OUT
OF OR IS IN RESPECT OF, ANY RELATIONSHIP AMONGST OR BETWEEN ANY BORROWER OR ANY
OTHER PERSON AND THE AGENT OR LENDER LIKEWISE WAIVES THE RIGHT TO A JURY IN ANY
TRIAL OF ANY SUCH CASE OR CONTROVERSY).

 

(IV)          ANY DEFENSE, COUNTERCLAIM, SET-OFF, RECOUPMENT, OR OTHER BASIS ON
WHICH THE AMOUNT OF ANY LIABILITY, AS STATED ON THE BOOKS AND RECORDS OF THE
AGENT OR LENDERS, COULD BE REDUCED OR CLAIMED TO BE PAID OTHERWISE THAN IN
ACCORDANCE WITH THE TENOR OF AND WRITTEN TERMS OF SUCH LIABILITY.

 

(V)           ANY CLAIM TO CONSEQUENTIAL, SPECIAL, OR PUNITIVE DAMAGES.

 

14.21      COUNTERPARTS.

 

This Agreement, any of the Loan Documents, and any amendments, waivers, consents
or supplements may be executed in any number of counterparts and by different
parties hereto in separate counterparts, each of which, when so executed and
delivered, shall be deemed an original, but all of which counterparts together
shall constitute but one agreement.

 

14.22      ELECTRONIC SUBMISSIONS.

 

Upon not less than Thirty (30) days’ prior written notice (the “Approved
Electronic Form Notice”), the Agent may permit or require that any of the
documents, certificates, forms, deliveries or other communications, authorized,
required or contemplated by this Agreement or the Loan Documents, be submitted
to the Agent in “Approved Electronic Form” (as hereafter defined), subject to
any reasonable terms, conditions and requirements in the applicable Approved
Electronic Forms Notice.  For purposes hereof “Electronic Form” means e-mail,
e-mail attachments, data submitted on web-based forms or any other communication
method that delivers machine readable data or information to the Agent, and
“Approved Electronic Form” means an Electronic Form that has been approved in
writing by the Agent (which approval has not been revoked or modified by the
Agent) and sent to the Borrowers in an Approved Electronic Form Notice.  Except
as otherwise specifically provided in the applicable Approved Electronic Form
Notice, any submissions made in an applicable Approved Electronic Form shall
have the same force and effect that the same submissions would have had if they
had been submitted in any other applicable form authorized, required or
contemplated by this Agreement or the Loan Documents.

 

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14.23      FLEET RETAIL GROUP, INC. AS AGENT.

 

The Lenders have appointed the Agent as their agent to act on their behalf under
the credit facility pursuant to the terms of the “Agency Agreement”, so referred
to herein, between the Lenders and the Agent.  If at any time the Lenders or the
Agent elects to terminate the agency relationship, the Lenders or the Agent
shall give Thirty (30) days written notice of such event to the Lead Borrower. 
Thereafter, all rights and obligations of the Agent contained in this Agreement
and the other Loan Documents shall revert to the Lenders or another Agent, if
appointed by the Lenders.

 

14.24      JOINT BORROWER PROVISIONS.

 

(A)  EACH BORROWER REPRESENTS TO THE AGENT AND LENDERS THAT IT IS AN INTEGRAL
PART OF A CONSOLIDATED ENTERPRISE, AND THAT EACH BORROWER WILL RECEIVE DIRECT
AND INDIRECT BENEFITS FROM THE AVAILABILITY OF THE JOINT CREDIT FACILITY
PROVIDED FOR HEREIN, AND FROM THE ABILITY TO ACCESS THE COLLECTIVE CREDIT
RESOURCES OF THE CONSOLIDATED ENTERPRISE THAT ARE BORROWERS.

 

(B)  EACH BORROWER IS, AND AT ALL TIMES SHALL BE, JOINTLY AND SEVERALLY LIABLE
FOR EACH AND EVERY ONE OF THE LIABILITIES HEREUNDER, REGARDLESS OF WHICH
BORROWER REQUESTED, RECEIVED, USED, OR DIRECTLY ENJOYED THE BENEFIT OF THE
EXTENSIONS OF CREDIT HEREUNDER.  ALL OF THE COLLATERAL SHALL SECURE ALL OF THE
LIABILITIES.  EACH BORROWER’S LIABILITIES ARE INDEPENDENT OBLIGATIONS AND ARE
ABSOLUTE AND UNCONDITIONAL.  EACH BORROWER, TO THE EXTENT PERMITTED BY LAW,
HEREBY WAIVES ANY DEFENSE TO SUCH LIABILITIES THAT MAY ARISE BY REASON OF THE
DISABILITY OR OTHER DEFENSE OR CESSATION OF LIABILITY OF ANY OTHER BORROWER FOR
ANY REASON OTHER THAN PAYMENT IN FULL.  EACH BORROWER ALSO WAIVES ANY DEFENSE TO
SUCH LIABILITIES THAT IT MAY HAVE AS A RESULT OF THE AGENT’S ELECTION OF OR
FAILURE TO EXERCISE ANY RIGHT, POWER, OR REMEDY, INCLUDING, WITHOUT LIMITATION,
THE FAILURE TO PROCEED FIRST AGAINST SUCH OTHER BORROWER OR ANY SECURITY IT
HOLDS FOR SUCH OTHER BORROWER’S LIABILITIES UNDER ANY LOAN DOCUMENT, IF ANY. 
WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, EACH BORROWER EXPRESSLY WAIVES
ALL DEMANDS AND NOTICES WHATSOEVER (EXCEPT FOR ANY DEMANDS OR NOTICES, IF ANY,
THAT SUCH BORROWER EXPRESSLY IS ENTITLED TO RECEIVE PURSUANT TO THE TERMS OF ANY
LOAN DOCUMENT), AND AGREES THAT THE AGENT MAY, WITHOUT NOTICE (EXCEPT FOR SUCH
NOTICE, IF ANY, AS SUCH BORROWER EXPRESSLY IS ENTITLED TO RECEIVE PURSUANT TO
THE TERMS OF ANY LOAN DOCUMENT) AND WITHOUT RELEASING THE LIABILITY OF SUCH
BORROWER, EXTEND FOR THE BENEFIT OF ANY OTHER BORROWER THE TIME FOR MAKING ANY
PAYMENT, WAIVE OR EXTEND THE PERFORMANCE OF ANY AGREEMENT OR MAKE ANY SETTLEMENT
OF ANY AGREEMENT FOR THE BENEFIT OF ANY OTHER BORROWER, AND MAY PROCEED AGAINST
EACH BORROWER, DIRECTLY AND INDEPENDENTLY OF ANY OTHER BORROWER, AS SUCH OBLIGEE
MAY ELECT IN ACCORDANCE WITH THIS AGREEMENT.

 

(C)  EACH BORROWER ACKNOWLEDGES THAT THE LIABILITIES OF SUCH BORROWER UNDERTAKEN
HEREIN OR IN THE OTHER LOAN DOCUMENTS, AND THE GRANTS OF SECURITY INTERESTS AND
LIENS BY SUCH BORROWER TO SECURE LIABILITIES OF THE OTHER BORROWER COULD BE
CONSTRUED TO CONSIST, AT LEAST IN PART, OF THE GUARANTY OF LIABILITIES OF THE
OTHER BORROWER AND, IN FULL RECOGNITION OF THAT FACT, EACH BORROWER CONSENTS AND
AGREES AS HEREINAFTER SET FORTH IN THE BALANCE OF THIS SECTION 14.24.  THE
CONSENTS, WAIVERS, AND AGREEMENTS OF THE BORROWERS THAT ARE CONTAINED IN THE
BALANCE OF THIS SECTION 14.24 ARE INTENDED TO DEAL WITH THE SURETYSHIP ASPECTS
OF THE TRANSACTIONS EVIDENCED BY

 

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THE LOAN DOCUMENTS (TO THE EXTENT THAT A BORROWER MAY BE DEEMED A GUARANTOR OR
SURETY FOR THE LIABILITIES OF ANOTHER BORROWER) AND THUS ARE INTENDED TO BE
EFFECTIVE AND APPLICABLE ONLY TO THE EXTENT THAT ANY BORROWER HAS AGREED TO
ANSWER FOR THE LIABILITIES OF ANOTHER BORROWER OR HAS GRANTED A LIEN OR SECURITY
INTEREST IN COLLATERAL TO SECURE THE LIABILITIES OF ANOTHER BORROWER. 
CONVERSELY, THE CONSENTS, WAIVERS, AND AGREEMENTS OF THE BORROWERS THAT ARE
CONTAINED IN THE BALANCE OF THIS SECTION 14.24 SHALL NOT BE APPLICABLE TO THE
DIRECT LIABILITIES OF A BORROWER WITH RESPECT TO CREDIT EXTENDED DIRECTLY TO
SUCH BORROWER, AND SHALL NOT BE APPLICABLE TO SECURITY INTERESTS OR LIENS ON
COLLATERAL OF A BORROWER GIVEN TO DIRECTLY SECURE DIRECT LIABILITIES OF SUCH
BORROWER WHERE NO ASPECT OF GUARANTY OR SURETYSHIP IS INVOLVED.  EACH BORROWER
CONSENTS AND AGREES THAT THE LENDERS MAY, AT ANY TIME AND FROM TIME TO TIME,
WITHOUT NOTICE OR DEMAND, WHETHER BEFORE OR AFTER ANY ACTUAL OR PURPORTED
TERMINATION, REPUDIATION OR REVOCATION OF THIS AGREEMENT BY ANY ONE OR MORE
BORROWERS, AND WITHOUT AFFECTING THE ENFORCEABILITY OR CONTINUING EFFECTIVENESS
HEREOF AS TO SUCH BORROWER, IN ACCORDANCE WITH THE TERMS OF THE LOAN DOCUMENTS: 
(A) SUPPLEMENT, RESTATE, MODIFY, AMEND, INCREASE, DECREASE, EXTEND, RENEW,
ACCELERATE OR OTHERWISE CHANGE THE TIME FOR PAYMENT OR THE TERMS OF THE
LIABILITIES OR ANY PART THEREOF, INCLUDING ANY INCREASE OR DECREASE OF THE
RATE(S) OF INTEREST THEREON; (B) SUPPLEMENT, RESTATE, MODIFY, AMEND, INCREASE,
DECREASE OR WAIVE, OR ENTER INTO OR GIVE ANY AGREEMENT, APPROVAL OR CONSENT WITH
RESPECT TO, THE LIABILITIES OR ANY PART THEREOF, OR ANY OF THE LOAN DOCUMENTS OR
ANY SECURITY OR GUARANTEES GRANTED OR ENTERED INTO BY ANY PERSON(S) OTHER THAN
SUCH BORROWER, OR ANY CONDITION, COVENANT, DEFAULT, REMEDY, RIGHT,
REPRESENTATION OR TERM THEREOF OR THEREUNDER; (C) ACCEPT NEW OR ADDITIONAL
INSTRUMENTS, DOCUMENTS OR AGREEMENTS IN EXCHANGE FOR OR RELATIVE TO ANY OF THE
LOAN DOCUMENTS OR THE LIABILITIES OR ANY PART THEREOF, (D) ACCEPT PARTIAL
PAYMENTS ON THE LIABILITIES; (E) RECEIVE AND HOLD ADDITIONAL SECURITY OR
GUARANTEES FOR THE LIABILITIES OR ANY PART THEREOF, (F) RELEASE, RECONVEY,
TERMINATE, WAIVE, ABANDON, FAIL TO PERFECT, SUBORDINATE, EXCHANGE, SUBSTITUTE,
TRANSFER OR ENFORCE ANY SECURITY OR GUARANTEES, AND APPLY ANY SECURITY AND
DIRECT THE ORDER OR MANNER OF SALE THEREOF AS THE LENDERS IN THEIR SOLE AND
ABSOLUTE DISCRETION MAY DETERMINE; (G) RELEASE ANY OTHER PERSON (INCLUDING,
WITHOUT LIMITATION, ANY OTHER BORROWER) FROM ANY PERSONAL LIABILITY WITH RESPECT
TO THE LIABILITIES OR ANY PART THEREOF, (H) WITH RESPECT TO ANY PERSON OTHER
THAN SUCH BORROWER (INCLUDING, WITHOUT LIMITATION, ANY OTHER BORROWER), SETTLE,
RELEASE ON TERMS SATISFACTORY TO THE LENDERS OR BY OPERATION OF APPLICABLE LAWS
OR OTHERWISE LIQUIDATE OR ENFORCE ANY LIABILITIES AND ANY SECURITY THEREFOR OR
GUARANTY THEREOF IN ANY MANNER, CONSENT TO THE TRANSFER OF ANY SECURITY AND BID
AND PURCHASE AT ANY SALE; OR (I) CONSENT TO THE MERGER, CHANGE OR ANY OTHER
RESTRUCTURING OR TERMINATION OF THE CORPORATE OR PARTNERSHIP EXISTENCE OF ANY
OTHER BORROWER OR ANY OTHER PERSON, AND CORRESPONDINGLY AGREE, IN ACCORDANCE
WITH ALL APPLICABLE PROVISIONS OF THE LOAN DOCUMENTS, TO THE RESTRUCTURE OF THE
LIABILITIES, AND ANY SUCH MERGER, CHANGE, RESTRUCTURING OR TERMINATION SHALL NOT
AFFECT THE LIABILITY OF ANY BORROWER OR THE CONTINUING EFFECTIVENESS HEREOF, OR
THE ENFORCEABILITY HEREOF WITH RESPECT TO ALL OR ANY PART OF THE LIABILITIES.

 

(D)  UPON THE OCCURRENCE AND DURING THE CONTINUANCE OF ANY EVENT OF DEFAULT, THE
AGENT MAY ENFORCE THE LOAN DOCUMENTS INDEPENDENTLY AS TO EACH BORROWER AND
INDEPENDENTLY OF ANY OTHER REMEDY THE AGENT AT ANY TIME MAY HAVE OR HOLD IN
CONNECTION WITH THE LIABILITIES, AND IT SHALL NOT BE NECESSARY FOR THE AGENT TO
MARSHAL ASSETS IN FAVOR OF ANY BORROWER OR ANY OTHER PERSON OR TO PROCEED UPON
OR AGAINST OR EXHAUST ANY SECURITY OR REMEDY BEFORE PROCEEDING TO ENFORCE THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENTS.  EACH BORROWER EXPRESSLY WAIVES ANY

 

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RIGHT TO REQUIRE THE AGENT TO MARSHAL ASSETS IN FAVOR OF ANY BORROWER OR ANY
OTHER PERSON OR TO PROCEED AGAINST ANY OTHER BORROWER OR ANY COLLATERAL PROVIDED
BY ANY PERSON, AND AGREES THAT THE AGENT MAY PROCEED AGAINST BORROWERS OR ANY
COLLATERAL IN SUCH ORDER AS THEY SHALL DETERMINE IN THEIR SOLE AND ABSOLUTE
DISCRETION, SUBJECT TO THE TERMS HEREOF.

 

(E)  THE AGENT MAY FILE A SEPARATE ACTION OR ACTIONS AGAINST ANY BORROWER,
WHETHER ACTION IS BROUGHT OR PROSECUTED WITH RESPECT TO ANY SECURITY OR AGAINST
ANY OTHER PERSON, OR WHETHER ANY OTHER PERSON IS JOINED IN ANY SUCH ACTION OR
ACTIONS.  EACH BORROWER AGREES, FOR ITSELF, THAT THE AGENT AND ANY OTHER
BORROWER, OR ANY AFFILIATE OF ANY OTHER BORROWER (OTHER THAN SUCH BORROWER
ITSELF), MAY DEAL WITH EACH OTHER IN CONNECTION WITH THE LIABILITIES OR
OTHERWISE, OR ALTER ANY CONTRACTS OR AGREEMENTS NOW OR HEREAFTER EXISTING
BETWEEN ANY OF THEM, IN ANY MANNER WHATSOEVER, ALL WITHOUT IN ANY WAY ALTERING
OR AFFECTING THE CONTINUING EFFICACY AS TO SUCH BORROWER OF THE LOAN DOCUMENTS.

 

(F)  THE AGENT’S RIGHTS HEREUNDER SHALL BE REINSTATED AND REVIVED, AND THE
ENFORCEABILITY OF THIS AGREEMENT SHALL CONTINUE, WITH RESPECT TO ANY AMOUNT AT
ANY TIME PAID ON ACCOUNT OF THE LIABILITIES WHICH THEREAFTER SHALL BE REQUIRED
TO BE RESTORED OR RETURNED BY THE AGENT (INCLUDING, WITHOUT LIMITATION, THE
RESTORATION OR RETURN OF ANY AMOUNT PURSUANT TO A COURT ORDER OR JUDGMENT
(WHETHER OR NOT FINAL OR NON-APPEALABLE), OR PURSUANT TO A GOOD FAITH SETTLEMENT
OF A PENDING OR THREATENED AVOIDANCE OR RECOVERY ACTION, OR PURSUANT TO GOOD
FAITH COMPLIANCE WITH A DEMAND MADE BY A PERSON BELIEVED TO BE ENTITLED TO
PURSUE AN AVOIDANCE OR RECOVERY ACTION (SUCH AS A BANKRUPTCY TRUSTEE OR A PERSON
HAVING THE AVOIDING POWERS OF A BANKRUPTCY TRUSTEE, OR SIMILAR AVOIDING POWERS),
AND WITHOUT REQUIRING THE AGENT TO OPPOSE OR LITIGATE AVOIDANCE OR RECOVERY
DEMANDS OR ACTIONS THAT IT BELIEVES IN GOOD FAITH TO BE MERITORIOUS OR WORTHY OF
SETTLEMENT OR COMPLIANCE, OR PURSUE OR EXHAUST APPEALS), ALL AS THOUGH SUCH
AMOUNT HAD NOT BEEN PAID.  THE RIGHTS AND PRIORITIES OF THE AGENT CREATED OR
GRANTED HEREIN AND THE ENFORCEABILITY OF THE LOAN DOCUMENTS AT ALL TIMES SHALL
REMAIN EFFECTIVE TO COVER THE FULL AMOUNT OF ALL THE LIABILITIES EVEN THOUGH THE
LIABILITIES, INCLUDING ANY PART THEREOF OR ANY OTHER SECURITY OR GUARANTY
THEREFOR, MAY BE OR HEREAFTER MAY BECOME INVALID OR OTHERWISE UNENFORCEABLE AS
AGAINST ANY BORROWER AND WHETHER OR NOT ANY OTHER BORROWER SHALL HAVE ANY
PERSONAL LIABILITY WITH RESPECT THERETO.

 

(G)  TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, EACH BORROWER, FOR
ITSELF, EXPRESSLY WAIVES ANY AND ALL DEFENSES NOW OR HEREAFTER ARISING OR THAT
OTHERWISE MIGHT BE ASSERTED BY REASON OF (A) ANY DISABILITY OR OTHER DEFENSE OF
ANY OTHER BORROWER WITH RESPECT TO THE LIABILITIES OR WITH RESPECT TO THE
ENFORCEABILITY OF THE AGENT’S SECURITY INTEREST IN OR ENCUMBRANCE ON ANY
COLLATERAL SECURING ANY OF THE LIABILITIES (INCLUDING, WITHOUT LIMITATION, THE
COLLATERAL), (B) THE UNENFORCEABILITY OR INVALIDITY OF ANY SECURITY OR GUARANTY
FOR THE LIABILITIES OR THE LACK OF PERFECTION OR CONTINUING PERFECTION OR
FAILURE OF PRIORITY OF ANY SECURITY FOR THE LIABILITIES, (C) THE CESSATION FOR
ANY CAUSE WHATSOEVER OF THE LIABILITY OF ANY OTHER BORROWER (OTHER THAN BY
REASON OF THE FULL PAYMENT AND PERFORMANCE OF ALL LIABILITIES), (D) ANY FAILURE
OF THE AGENT TO GIVE NOTICE OF SALE OR OTHER DISPOSITION OF COLLATERAL TO ANY
OTHER BORROWER OR ANY OTHER PERSON OTHER THAN SUCH WAIVING BORROWER, OR ANY
DEFECT IN ANY NOTICE THAT MAY BE GIVEN TO ANY OTHER BORROWER FOR ANY OTHER
PERSON OTHER THAN SUCH WAIVING BORROWER, IN CONNECTION WITH ANY SALE OR
DISPOSITION OF ANY COLLATERAL SECURING THE LIABILITIES OR ANY OF THEM
(INCLUDING, WITHOUT LIMITATION, THE COLLATERAL), (E) ANY FAILURE OF THE AGENT TO
COMPLY WITH APPLICABLE LAW IN CONNECTION WITH THE SALE OR OTHER

 

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DISPOSITION OF ANY COLLATERAL OR OTHER SECURITY FOR ANY LIABILITIES THAT IS
OWNED BY ANOTHER BORROWER OR BY ANY OTHER PERSON OTHER THAN SUCH WAIVING
BORROWER, INCLUDING ANY FAILURE OF THE AGENT TO CONDUCT A COMMERCIALLY
REASONABLE SALE OR OTHER DISPOSITION OF ANY SUCH COLLATERAL OR OTHER SECURITY
FOR ANY LIABILITIES, (F) ANY ACT OR OMISSION OF THE AGENT OR OTHERS THAT
DIRECTLY OR INDIRECTLY RESULTS IN OR AIDS THE DISCHARGE OR RELEASE OF ANY OTHER
BORROWER, OR THE LIABILITIES OF ANY OTHER BORROWER, OR ANY SECURITY OR GUARANTY
THEREFOR, BY OPERATION OF LAW OR OTHERWISE, OR (G) ANY LAW WHICH PROVIDES THAT
THE OBLIGATION OF A SURETY OR GUARANTOR MUST NEITHER BE LARGER IN AMOUNT NOR IN
OTHER RESPECTS MORE BURDENSOME THAN THAT OF THE PRINCIPAL OR WHICH REDUCES A
SURETY’S OR GUARANTOR’S OBLIGATION IN PROPORTION TO THE PRINCIPAL OBLIGATION. 
UNTIL SUCH TIME, IF ANY, AS ALL OF THE LIABILITIES (OTHER THAN CONTINGENT
LIABILITIES AND INDEMNITIES WHICH SURVIVE REPAYMENT OF THE LOANS) HAVE BEEN PAID
AND PERFORMED IN FULL AND NO PORTION OF ANY COMMITMENT OF THE LENDERS TO ANY
BORROWER UNDER ANY LOAN DOCUMENT REMAINS IN EFFECT, NO BORROWER SHALL HAVE ANY
RIGHT OF SUBROGATION, CONTRIBUTION, REIMBURSEMENT OR INDEMNITY, AND EACH
BORROWER EXPRESSLY WAIVES ANY RIGHT TO ENFORCE ANY REMEDY THAT THE AGENT NOW
HAVE OR HEREAFTER MAY HAVE AGAINST ANY OTHER PERSON AND WAIVES THE BENEFIT OF,
OR ANY RIGHT TO PARTICIPATE IN, ANY COLLATERAL NOW OR HEREAFTER HELD BY THE
AGENT.  EXCEPT TO THE EXTENT EXPRESSLY PROVIDED FOR IN ANY LOAN DOCUMENT, EACH
BORROWER EXPRESSLY WAIVES, TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW,
ALL RIGHTS OR ENTITLEMENTS TO PRESENTMENTS, DEMANDS FOR PAYMENT OR PERFORMANCE,
NOTICES OF NONPAYMENT OR NONPERFORMANCE, PROTESTS, NOTICES OF PROTEST, NOTICES
OF DISHONOR AND ALL OTHER NOTICES OR DEMANDS OF ANY KIND OR NATURE WHATSOEVER
WITH RESPECT TO THE LIABILITIES, AND ALL NOTICES OF ACCEPTANCE OF THE LOAN
DOCUMENTS OR OF THE EXISTENCE, CREATION OR INCURRING OF NEW OR ADDITIONAL
LIABILITIES.

 

(H)  EACH BORROWER HEREBY AGREES TO KEEP EACH OTHER BORROWER FULLY APPRISED AT
ALL TIMES AS TO THE STATUS OF ITS BUSINESS, AFFAIRS, FINANCES, AND FINANCIAL
CONDITION, AND ITS ABILITY TO PERFORM ITS LIABILITIES UNDER THE LOAN DOCUMENTS,
AND IN PARTICULAR AS TO ANY ADVERSE DEVELOPMENTS WITH RESPECT THERETO.  EACH
BORROWER HEREBY AGREES TO UNDERTAKE TO KEEP ITSELF APPRISED AT ALL TIMES AS TO
THE STATUS OF THE BUSINESS, AFFAIRS, FINANCES, AND FINANCIAL CONDITION OF EACH
OTHER BORROWER, AND OF THE ABILITY OF EACH OTHER BORROWER TO PERFORM ITS
LIABILITIES UNDER THE LOAN DOCUMENTS, AND IN PARTICULAR AS TO ANY ADVERSE
DEVELOPMENTS WITH RESPECT TO ANY THEREOF.  EACH BORROWER HEREBY AGREES, IN LIGHT
OF THE FOREGOING MUTUAL COVENANTS TO INFORM EACH OTHER, AND TO KEEP THEMSELVES
AND EACH OTHER INFORMED AS TO SUCH MATTERS, THAT THE AGENT SHALL HAVE NO DUTY TO
INFORM ANY BORROWER OF ANY INFORMATION PERTAINING TO THE BUSINESS, AFFAIRS,
FINANCES, OR FINANCIAL CONDITION OF ANY OTHER BORROWER, OR PERTAINING TO THE
ABILITY OF ANY OTHER BORROWER TO PERFORM ITS LIABILITIES UNDER THE LOAN
DOCUMENTS, EVEN IF SUCH INFORMATION IS ADVERSE, AND EVEN IF SUCH INFORMATION
MIGHT INFLUENCE THE DECISION OF ONE OR MORE OF THE BORROWERS TO CONTINUE TO BE
JOINTLY AND SEVERALLY LIABLE FOR, OR TO PROVIDE COLLATERAL FOR, LIABILITIES OF
ONE OR MORE OF THE OTHER BORROWERS.  TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, EACH BORROWER HEREBY EXPRESSLY WAIVES ANY DUTY OF THE AGENT TO
INFORM ANY BORROWER OF ANY SUCH INFORMATION.

 

(I)  BORROWERS AND EACH OF THEM WARRANT AND AGREE THAT EACH OF THE WAIVERS AND
CONSENTS SET FORTH HEREIN ARE MADE AFTER CONSULTATION WITH LEGAL COUNSEL AND
WITH FULL KNOWLEDGE OF THEIR SIGNIFICANCE AND CONSEQUENCES, WITH THE
UNDERSTANDING THAT EVENTS GIVING RISE TO ANY DEFENSE OR RIGHT WAIVED MAY
DIMINISH, OR OTHERWISE ADVERSELY AFFECT RIGHTS THAT BORROWERS OTHERWISE MAY HAVE
AGAINST OTHER BORROWERS, THE AGENT OR OTHERS, OR AGAINST COLLATERAL, AND THAT,
UNDER THE CIRCUMSTANCES, THE WAIVERS AND CONSENTS HEREIN GIVEN ARE REASONABLE. 
IF ANY OF THE

 

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WAIVERS OR CONSENTS HEREIN IS DETERMINED TO BE CONTRARY TO ANY APPLICABLE LAW OR
PUBLIC POLICY, SUCH WAIVERS AND CONSENTS SHALL BE EFFECTIVE TO THE MAXIMUM
EXTENT PERMITTED BY LAW.

 

14.25      TRANSITIONAL ARRANGEMENTS.

 

This Agreement shall, on and as of the Closing Date, supersede that certain Loan
and Security Agreement dated as of April 24, 1998 among Mothers Work, Inc., Cave
Springs, Inc., and certain other entities from time to time party thereto as
borrowers, and Fleet Retail Group, Inc., as assignee of Fleet Capital
Corporation, as lender (the “First Agreement”), in its entirety, except as
provided in this Section 14.25.  On the Closing Date, the rights and obligations
of the parties under the First Agreement shall be subsumed within and governed
by this Agreement , provided, however,

 

(a)    that each of the “ Loans” (as defined in the First Agreement) outstanding
under the First Agreement on the Closing Date shall continue to bear interest up
to the Closing Date at the rate at which they bear interest under the First
Agreement and, on and after the Closing Date, all of such Loans under the First
Agreement shall be converted to Revolving Credit Loans hereunder and shall bear
interest at the rates set forth hereunder;

 

(b)    that any Letter of Credit outstanding under the First Agreement on the
Closing Date shall for the purposes of this Agreement, together with the Special
Purpose Credit, be a L/C hereunder;

 

(c)    that each and every other Loan Document under the First Agreement  shall,
unless explicitly restated, substituted or replaced in connection herewith,
continue in full force and effect and that any and all references therein to the
First Agreement shall be deemed to constitute references to this Agreement; and

 

(d)   all fees, letter of credit fees and other fees and expenses owing or
accruing under or in respect of the First Agreement shall be calculated as of
the Closing Date (prorated in the case of any fractional periods), and shall be
paid in accordance with the method and on the dates, specified in the First
Agreement, as if the Restated Agreement were still in effect.

 

14.26      CONFIDENTIALITY.

 

(A)  OBLIGORS AND EACH LENDER WILL MAINTAIN, AS CONFIDENTIAL (OTHER THAN TO
THEIR RESPECTIVE ATTORNEYS, AGENTS, ACCOUNTANTS, PARTICIPANTS AND PROSPECTIVE
PARTICIPANTS) ALL OF THE FOLLOWING:

 

(I)            PROPRIETARY APPROACHES, TECHNIQUES, AND METHODS OF ANALYSIS WHICH
ARE APPLIED BY ANY AGENT IN THE ADMINISTRATION OF THE CREDIT FACILITY 
CONTEMPLATED BY THIS AGREEMENT.

 

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(II)           PROPRIETARY FORMS AND FORMATS UTILIZED BY ANY AGENT IN PROVIDING
REPORTS TO THE LENDERS PURSUANT HERETO, WHICH FORMS OR FORMATS ARE NOT OF
GENERAL CURRENCY.

 

(b)           Agent and each Lender will maintain, as confidential (other than
to their respective attorneys, agents, accountants, participants and prospective
participants) all confidential information provided by the Obligors pursuant to
the Loan Documents, other than any information which becomes known to the
general public through services or sources other than that Agent or Lender.

 

(C)           NOTHING INCLUDED HEREIN SHALL PROHIBIT THE DISCLOSURE OF ANY SUCH
INFORMATION AS MAY BE REQUIRED TO BE PROVIDED BY JUDICIAL PROCESS OR BY
REGULATORY AUTHORITIES HAVING JURISDICTION OVER ANY PARTY TO THIS AGREEMENT.

 

[REMAINDER OF PAGE INTENTIONALLY BLANK]

 

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SIGNATURE PAGE TO LOAN AND SECURITY AGREEMENT

 

 

 

 

 

MOTHERS WORK, INC.

 

 

(“Lead Borrower”)

 

 

 

 

 

 

 

 

By:

/s/ Edward M. Krell

 

 

 

Print Name: Edward M. Krell

 

 

Title: Chief Financial Officer

 

 

 

 

 

 

 

 

CAVE SPRINGS, INC.

 

 

(a “Borrower”)

 

 

 

 

 

 

 

 

By:

/s/ Edward M. Krell

 

 

 

Print Name: Edward M. Krell

 

 

Title: Chief Financial Officer

 

 

 

 

 

 

 

 

MOTHERS WORK CANADA, INC.

 

 

(a “Guarantor”)

 

 

 

 

 

 

 

 

By:

/s/ Edward M. Krell

 

 

 

Print Name: Edward M. Krell

 

 

Title: Treasurer

 

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Signature Page to Loan and Security Agreement

 

 

 

 

 

 

 

 

FLEET RETAIL GROUP, INC.

 

 

(“Lender”)

 

 

 

 

 

 

 

 

By:

/s/ Sally A. Sheehan

 

 

 

Print Name: Sally A. Sheehan

 

 

Title: Managing Director

 

 

 

 

 

 

 

 

FLEET RETAIL GROUP, INC.

 

 

(“Administrative Agent”)

 

 

 

 

 

 

 

 

By:

/s/ Sally A. Sheehan

 

 

 

Print Name: Sally A. Sheehan

 

 

Title: Managing Director

 

 

 

 

 

FLEET RETAIL GROUP, INC.

 

 

(“Collateral Agent”)

 

 

 

 

 

 

 

 

By:

/s/ Sally A. Sheehan

 

 

 

Print Name: Sally A. Sheehan

 

 

Title: Managing Director

 

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EXHIBIT 5.12(a)

 

Financial Covenants

 

This Exhibit is attached to and made part of that certain  Loan and Security
Agreement between Fleet Retail Group,  Inc., as Administrative Agent, Collateral
Agent, and Lender, the other Lenders party thereto, and Mothers Work, Inc., as
Lead Borrower, and the other Borrowers and Guarantors party thereto, dated as of
October 15, 2004.  Capitalized terms used in this Exhibit and not separately
defined herein shall have the meanings ascribed under the Loan and Security
Agreement.

 

1)  Fixed Charge Coverage Ratio

 

At any time or from time to time that either: (a) Excess Availability is less
than $10,000,000 on any day; or (b) average Financial Covenant Adjusted
Availability for any calendar month is less than $15,000,000, then the 
Borrowers shall have maintained, for the period of twelve consecutive months,
taken as a whole, ending on the last day of the then most recently ended month,
a Fixed Charge Coverage Ratio of not less than the following during the periods
set forth below:

 

Period

 

Minimum Fixed Charge Coverage Ratio

For each period of twelve consecutive months ending on each month from and after
the period of twelve consecutive months ending on August 31, 2004 through and
including the period of twelve consecutive months ending on September 30, 2006

 

1.000 to 1.000

 

 

 

For each period of twelve consecutive months ending on each month from and after
the period of twelve consecutive months ending on October 31, 2006 through and
including the period of twelve consecutive months ending on September 30, 2007

 

1.025 to 1.000

 

 

 

For each period of twelve consecutive months ending on each month from and after
the period of twelve consecutive months ending on October 31, 2007 through and
including the period of twelve consecutive months ending on September 30, 2008

 

1.050 to 1.000

 

 

 

For each period of twelve consecutive months ending on each month from and after
the period of twelve consecutive months ending on October 31, 2008

 

1.100 to 1.000

 

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2)  Capital Expenditures

 

Borrowers may incur Capital Expenditures in their discretion, provided that:

 

(A) for any fiscal year as to which the Borrowers’ projected pro forma Excess
Availability, as provided under Section 5.11(c), is at least $10,000,000 at all
times and for which average Financial Covenant Adjusted Availability, on
calendar-month basis, is at least $15,000,000 at all times, this Section (2)
shall not limit the Borrowers’ incurrence of  Capital Expenditures in their
discretion, unless actual Excess Availability falls below $10,000,000 at any
time or actual average Financial Covenant Adjusted Availability for any calendar
month during such fiscal year falls below $15,000,000 during such fiscal year
(in which case clause (B) shall apply); and

 

(B) during any fiscal year in which Excess Availability actually falls below
$10,000,000 on any day or average Financial Covenant Adjusted Availability for
any calendar month actually falls below $15,000,000 or is projected, pursuant to
the projections provided under Section 5.11(c), to fall below $10,000,000 on any
day or average Financial Covenant Adjusted Availability for any calendar month
is projected, pursuant to the projections provided under Section 5.11(c) to fall
below $15,000,000, Borrowers shall not permit Capital Expenditures to exceed
$35,000,000.

 

If, for any fiscal year in which clause (B) applies, the Borrowers actually
incur less than $35,000,000 in Capital Expenditures, the Borrowers may, in
addition to the $35,000,000 that Borrowers may incur in the following year,
incur additional Capital Expenditures in an amount equal to the lesser of (i)
Fifty Percent (50%) of the unused amount of Capital Expenditures (below the
$35,000,000 maximum) from the previous fiscal year, or (ii) $10,000,000.

 

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