Exhibit 10.2

 

[Execution]

 

FOURTH AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT

 

by and among

 

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

 

NEW YORK & COMPANY, INC.,
NEVADA RECEIVABLE FACTORING, INC.,
LERNER NEW YORK HOLDING, INC.,
LERNER NEW YORK GC, LLC and
NEW YORK & COMPANY STORES, INC.,
as Guarantors,

 

WELLS FARGO BANK, NATIONAL ASSOCIATION,
as Administrative Agent for Revolving Loan Lenders and
Collateral Agent,

 

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

 

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

 

and

 

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

 

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

 

Dated:  October 24, 2014

 

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Table of Contents

 

 

 

Page

 

 

 

SECTION 1.

DEFINITIONS

2

 

 

 

SECTION 2.

CREDIT FACILITIES

51

 

 

 

2.1

Revolving Loans

51

2.2

Letter of Credit Accommodations

52

2.3

Revolving Loan Commitments

56

2.4

Bank Products

56

2.5

Revolving Loan Facility Increases

56

2.6

Revolving Loan Facility Decreases

57

2.7

Prepayments

58

2.8

Term Loans

59

2.9

Term Loan Push Down Reserve

60

 

 

 

SECTION 3.

INTEREST AND FEES

60

 

 

 

3.1

Interest

60

3.2

Fees

62

3.3

Inability to Determine Applicable Interest Rate

63

3.4

Illegality

63

3.5

Increased Costs

64

3.6

Capital Requirements

64

3.7

Certificates for Reimbursement

64

3.8

Delay in Requests

65

3.9

Mitigation; Replacement of Lenders

65

3.10

Funding Losses

66

3.11

Maximum Interest

66

3.12

No Requirement of Match Funding

67

 

 

 

SECTION 4.

CONDITIONS PRECEDENT

67

 

 

 

4.1

Conditions Precedent to Effectiveness of Agreement

67

4.2

Conditions Precedent to All Loans and Letter of Credit Accommodations

68

 

 

 

SECTION 5.

GRANT AND PERFECTION OF SECURITY INTEREST

69

 

 

 

5.1

Grant of Security Interest

69

5.2

Perfection of Security Interests

71

 

 

 

SECTION 6.

COLLECTION AND ADMINISTRATION

75

 

 

 

6.1

Borrowers’ Loan Accounts

75

6.2

Statements

76

6.3

Collection of Accounts

76

6.4

Payments

78

6.5

Taxes

82

6.6

Authorization to Make Loans

85

 

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6.7

Use of Proceeds

85

6.8

Pro Rata Treatment

86

6.9

Sharing of Payments, Etc.

86

6.10

Settlement Procedures

87

6.11

Obligations Several; Independent Nature of Lenders’ Rights

91

 

 

 

SECTION 7.

COLLATERAL REPORTING AND COVENANTS

91

 

 

 

7.1

Collateral Reporting

91

7.2

Accounts Covenants

93

7.3

Inventory Covenants

94

7.4

Equipment Covenants

96

7.5

Bills of Lading and Other Documents of Title

96

7.6

Intellectual Property Appraisals

97

7.7

Power of Attorney

97

7.8

Right to Cure

98

7.9

Access to Premises

98

 

 

 

SECTION 8.

REPRESENTATIONS AND WARRANTIES

99

 

 

 

8.1

Corporate Existence, Power and Authority

99

8.2

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

99

8.3

Financial Statements; No Material Adverse Change

100

8.4

Priority of Liens; Title to Properties

100

8.5

Tax Returns

100

8.6

Litigation

101

8.7

Compliance with Other Agreements and Applicable Laws

101

8.8

Environmental Compliance

101

8.9

Employee Benefits

102

8.10

Bank Accounts, etc.

103

8.11

Intellectual Property

103

8.12

Subsidiaries; Affiliates; Capitalization; Solvency

104

8.13

Labor Disputes

104

8.14

Restrictions on Subsidiaries

105

8.15

Material Contracts

105

8.16

Credit Card Agreements

105

8.17

Payable Practices

106

8.18

Accuracy and Completeness of Information

106

8.19

No Defaults

106

8.20

Transition Services

106

8.21

Patriot Act

106

8.22

OFAC

107

8.23

Survival of Warranties; Cumulative

107

 

 

 

SECTION 9.

AFFIRMATIVE AND NEGATIVE COVENANTS

107

 

 

 

9.1

Maintenance of Existence

107

9.2

New Collateral Locations

108

9.3

Compliance with Laws, Regulations, Etc.

108

 

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9.4

Payment of Taxes and Claims

109

9.5

Insurance

109

9.6

Financial Statements and Other Information

110

9.7

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

112

9.8

Encumbrances

114

9.9

Indebtedness

116

9.10

Prepayments and Amendments; Loans, Investments, Etc.

118

9.11

Dividends and Redemptions

120

9.12

Transactions with Affiliates

121

9.13

Compliance with ERISA

121

9.14

End of Fiscal Years; Fiscal Quarters

122

9.15

Change in Business

122

9.16

Limitation of Restrictions Affecting Subsidiaries

122

9.17

Minimum Excess Availability

122

9.18

License Agreements

123

9.19

After Acquired Real Property

124

9.20

Costs and Expenses

124

9.21

Credit Card Agreements

125

9.22

Additional Guaranties and Collateral Security; Further Assurances

126

9.23

Private Label Credit Cards

127

9.24

Termination of Transition Services Agreement

127

9.25

Cash Collateral Account

127

9.26

Foreign Assets Control Regulations, Etc.

128

9.27

ECP Guarantor Keepwell

128

 

 

 

SECTION 10.

EVENTS OF DEFAULT AND REMEDIES

129

 

 

 

10.1

Events of Default

129

10.2

Remedies

131

10.3

Remedies with respect to Priority Collateral

135

 

 

 

SECTION 11.

JURY TRIAL WAIVER; OTHER WAIVERS AND CONSENTS; GOVERNING LAW

137

 

 

 

11.1

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

137

11.2

Waiver of Notices

139

11.3

Amendments and Waivers

139

11.4

Waiver of Counterclaims

142

11.5

Indemnification

142

 

 

 

SECTION 12.

THE AGENT

143

 

 

 

12.1

Appointment, Powers and Immunities

143

12.2

Reliance by Agent

144

12.3

Events of Default

144

12.4

Wells Fargo in its Individual Capacity

145

12.5

Indemnification

145

12.6

Non Reliance on Agent and Other Lenders

145

12.7

Failure to Act

146

 

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12.8

Additional Revolving Loans

146

12.9

Concerning the Collateral and the Related Financing Agreements

147

12.10

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

147

12.11

Collateral Matters

147

12.12

Agency for Perfection

149

12.13

Successor Agent

149

12.14

Term Loan Agent

150

 

 

 

SECTION 13.

JOINT AND SEVERAL LIABILITY; SURETYSHIP WAIVERS

151

 

 

 

13.1

Independent Obligations; Subrogation

151

13.2

Authority to Modify Obligations and Security

152

13.3

Waiver of Defenses

152

13.4

Exercise of Agent’s and Lenders’ Rights

152

13.5

Additional Waivers

153

13.6

Additional Indebtedness

153

13.7

Notices, Demands, Etc.

153

13.8

Revival

154

13.9

Understanding of Waivers

154

 

 

 

SECTION 14.

TERM; MISCELLANEOUS

154

 

 

 

14.1

Term

154

14.2

Interpretative Provisions

155

14.3

Notices

157

14.4

Partial Invalidity

158

14.5

Confidentiality

158

14.6

Successors

159

14.7

Assignments; Participations

159

14.8

Separate Grants

162

14.9

Entire Agreement

163

14.10

Patriot Act

163

14.11

Counterparts, Etc.

163

 

 

 

SECTION 15.

ACKNOWLEDGMENT AND RESTATEMENT

163

 

 

 

15.1

Existing Obligations

163

15.2

Acknowledgment of Security Interests

164

15.3

Existing Financing Agreements

164

15.4

Restatement

164

15.5

Release

165

 

iv

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INDEX OF SCHEDULES AND EXHIBITS

 

Exhibit A

 

Form of Assignment and Acceptance Agreement for Lenders

 

 

 

Exhibit B

 

Form of Borrowing Base Certificate

 

 

 

Exhibit C

 

Form of Compliance Certificate

 

 

 

Exhibit D

 

Information Certificates for Borrowers and Guarantors

 

 

 

Exhibit E

 

Locations of Inventory

 

 

 

Exhibit F

 

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

 

 

 

Schedule 1

 

Commitments

Schedule 1.87

 

Freight Forwarders

Schedule 5.2(b)

 

Chattel Paper and Instruments

Schedule 5.2(e)

 

Investment Property

Schedule 5.2(g)

 

Letter of Credit Accommodations

Schedule 5.2(h)

 

Commercial Tort Claims

Schedule 8.8

 

Environmental Compliance

Schedule 8.9(c)

 

ERISA Affiliates Transactions

Schedule 8.11

 

Certain Intellectual Property

Schedule 8.13

 

Collective Bargaining Agreements

Schedule 8.15

 

Material Contracts

Schedule 8.16

 

Credit Card Agreements

Schedule 9.9(h)

 

Permitted Intercompany Indebtedness

Schedule 9.10

 

Permitted Loans

Schedule 9.11(d)

 

Permitted Uses of Certain Permitted Dividends

 

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FOURTH AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT

 

This Fourth Amended and Restated Loan and Security Agreement (this “Agreement”),
dated as of October 24, 2014, is entered into by and among Lerner New
York, Inc., a Delaware corporation (“Lerner”), Lernco, Inc., a Delaware
corporation (“Lernco”), and Lerner New York Outlet, Inc., a Massachusetts
corporation (“Lerner Outlet” and together with Lerner and Lernco, collectively,
“Borrowers” and individually each a “Borrower”), New York & Company, Inc., a
Delaware corporation (“NY&Co”), Lerner New York Holding, Inc., a Delaware
corporation (“Parent”), Nevada Receivable Factoring, Inc., a Nevada corporation
(“Nevada Factoring”), New York & Company Stores, Inc., a New York corporation,
formerly known as Associated Lerner Shops of America, Inc., a New York
corporation (“NY &Co Stores”), and Lerner New York GC, LLC, an Ohio limited
liability company (“Lerner GC” and together with NY&Co, Parent, Nevada Factoring
and NY &Co Stores, collectively, “Guarantors” and each a “Guarantor”), the
Revolving Loan Lenders (as hereinafter defined), Wells Fargo Bank, National
Association, a national banking association, in its capacity as administrative
agent and collateral agent for Lenders and Bank Product Providers (in such
capacity, “Agent” as hereinafter further defined), Term Loan Lenders (as
hereinafter defined), Wells Fargo Bank, National Association, a national banking
association, in its capacity as administrative agent for Term Loan Lenders (in
such capacity, “Term Loan Agent” as hereinafter further defined), and Wells
Fargo Capital Finance, LLC, as sole lead arranger and sole lead bookrunner.

 

W I T N E S S E T H:

 

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

 

WHEREAS, Borrowers and Guarantors have requested that Agent and Existing Lenders
(a) permit a Term Loan in the principal amount of $15,000,000 (the “Term Loan”
as hereinafter further defined) to be made by Term Loan Lenders to Borrowers,
and (b) amend and extend the Existing Loan Agreement and the other Existing
Financing Agreements by amending and restating the Existing Loan Agreement;

 

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

 

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

 

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

 

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WHEREAS, each Revolving Loan Lender (as hereinafter defined) is willing
(severally and not jointly) to continue to make Revolving Loans (as hereinafter
defined) and other financial accommodations to Borrowers, in each case on a pro
rata basis according to its commitments provided for herein on the terms and
conditions set forth herein, and Agent is willing to continue to act as agent
for the Lenders on the terms and conditions set forth herein;

 

WHEREAS, each Term Loan Lender is willing (severally and not jointly) to make a
Term Loan to Borrowers, in each case on a pro rata basis according to its
commitment provided for herein on the terms and conditions set forth therein,
and Term Loan Agent and Agent are willing to act as agents for Term Loan Lenders
on the terms and conditions set forth herein; and

 

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

 

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

 

SECTION 1.                         DEFINITIONS

 

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

 

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

 

“ACH Transactions” shall mean any cash management or related services, including
the automatic clearing house transfer of funds by Agent or any of its Affiliates
for the account of a Borrower or a Guarantor pursuant to agreement, or
overdrafts.

 

“Adjusted Eurodollar Rate” shall mean, with respect to each Interest Period for
any Eurodollar Rate Loan, the rate per annum (rounded upwards, if necessary, to
the next one-hundredth (1/100) of one percent (1%)) determined by dividing
(a) the Eurodollar Rate for such Interest Period by (b) a percentage equal to:
(i) one (1) minus (ii) the Reserve Percentage. For purposes hereof, “Reserve
Percentage” shall mean the reserve percentage, expressed as a decimal,
prescribed by any United States or foreign banking authority for determining the
reserve requirement which is or would be applicable to deposits of United States
dollars in a non-United States or an international banking office of the
Reference Bank used to fund a Eurodollar Rate Loan or any Eurodollar Rate Loan
made with the proceeds of such deposit, whether or not the Reference Bank
actually holds or has made any such deposits or loans.  The Adjusted

 

2

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Eurodollar Rate shall be adjusted on and as of the effective day of any change
in the Reserve Percentage.

 

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

 

“Agent” shall mean Wells Fargo Bank, National Association, a national banking
association, in its capacity as administrative agent and collateral agent on
behalf of Lenders pursuant to the terms hereof, and any replacement or successor
agent hereunder.

 

“Agent Payment Account” shall mean account no.               of Agent Wells
Fargo Bank, National Association, located in Charlotte, North Carolina, ABA
no.          , or such other account of Agent as Agent may from time to time
designate to Borrowers as the Agent Payment Account for purposes of this
Agreement and the other Financing Agreements.

 

“Applicable LC Margin” shall mean

 

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

 

Tier

 

Quarterly Average Compliance
Excess Availability

 

Applicable LC Margin for
Standby Letter of Credit
Accommodation

 

Applicable LC Margin for
Documentary Letter of
Credit Accommodation

 

1

 

Greater than or equal to $35,000,000

 

1.50

%

0.75

%

2

 

Less than $35,000,000

 

1.75

%

0.875

%

 

(b)                                 Notwithstanding anything to the contrary set
forth above in clause (a) above, (i) the Applicable LC Margin shall be
calculated and established once each fiscal quarter and shall remain in effect
until adjusted thereafter after the end of such fiscal quarter, (ii) each
adjustment of the Applicable LC Margin shall be effective as of the first day of
a fiscal quarter based on the Average Compliance Excess Availability for the
immediately preceding fiscal quarter, (iii) the Applicable LC Margin from the
date hereof through the end of the first full fiscal quarter after the date
hereof shall be the applicable percentages set forth in Tier 1 set forth above,
and (iv) in the event that at any time after the end of a fiscal quarter, the
Average Compliance Excess Availability for such fiscal quarter used in the
calculation of the Applicable

 

3

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LC Margin was greater than or less than the actual amount of the Average
Compliance Excess Availability for such fiscal quarter, the Applicable LC Margin
shall be adjusted for such prior fiscal quarter and any additional fee as a
result of such recalculation shall promptly paid to Agent.

 

“Applicable Margin” shall mean

 

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

 

Tier

 

Quarterly Average Compliance
Excess Availability

 

Applicable
Prime Rate Margin

 

Applicable Eurodollar
Rate Margin

 

1

 

Greater than or equal to $35,000,000

 

0.50

%

1.50

%

2

 

Less than $35,000,000

 

0.75

%

1.75

%

 

(b)                                 Notwithstanding anything to the contrary set
forth above in clause (a) above, (i) the Applicable Margin shall be calculated
and established once each fiscal quarter and shall remain in effect until
adjusted thereafter after the end of such fiscal quarter, (ii) each adjustment
of the Applicable Margin shall be effective as of the first day of a fiscal
quarter based on the Average Compliance Excess Availability for the immediately
preceding fiscal quarter, (iii) the Applicable Margin from the date hereof
through the end of the first full fiscal quarter after the date hereof shall be
the applicable percentages set forth in Tier 1 set forth above, and (iv) in the
event that at any time after the end of a fiscal quarter, the Average Compliance
Excess Availability for such fiscal quarter used in the calculation of the
Applicable Margin was greater than or less than the actual amount of the Average
Compliance Excess Availability for such fiscal quarter, the Applicable Margin
shall be adjusted for such prior fiscal quarter and any additional interest as a
result of such recalculation shall promptly be paid to Agent.

 

“Appointed Agent” shall have the meaning set forth in Section 12.1 hereof.

 

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

 

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

 

“Authorized Officer” shall mean Greg Scott, Sheamus Toal or such other person as
the Board of Directors of each Borrower may designate by written notice to
Agent.

 

4

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

 

“Bank Products” shall mean any one or more of the following types of services or
facilities extended to a Borrower or a Guarantor by a Bank Product Provider:
(a) credit cards, (b) ACH Transactions, (c) Hedging Transactions, and
(d) foreign exchange contracts.

 

“Bank Product Providers” shall mean Wells Fargo and any of its Affiliates that
may, from time to time, provide any Bank Products to any Borrower or Guarantor
or any of their respective Subsidiaries.

 

“Bank Product Reserve” shall mean any and all reserves that Agent may establish
from time to time, in its sole discretion, for the Bank Products then provided
and outstanding, which reserve may be revised by Agent for such Bank Product
from time to time.

 

“Blocked Accounts” shall have the meaning set forth in Section 6.3(a) hereof.

 

“Borrowers” shall mean, collectively, the following (together with their
respective successors and assigns): (a) Lerner, (b) Lernco, and (c) Lerner
Outlet; each sometimes being referred to herein individually as “Borrower”.

 

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

 

(a)                                 the sum of:

 

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

 

(ii)                                  ninety percent (90%) of the Net Amount of
the Eligible Credit Card Receivables of Borrowers other than PayPal Receivables,
plus

 

(iii)                               the lesser of (A) ninety percent (90%) of
the Net Amount of Eligible Credit Card Receivables of Borrowers consisting of
PayPal Receivables and (B) $500,000, plus

 

(iv)                              ninety percent (90%) of the Net Recovery
Percentage multiplied by the Value of the Eligible Landed Inventory of
Borrowers, plus

 

(v)                                 the lesser of (A) the sum of (1) ninety
percent (90%) of the Net Recovery Percentage multiplied by the Landed Value of
Eligible In-Transit Inventory of Borrowers, plus (2) ninety percent (90%) of the
Net Recovery Percentage multiplied by the Landed Value of Eligible In-Transit LC
Inventory of Borrowers, or (B) one of the following amounts as determined by
Agent in its good faith discretion: (1) $25,000,000, if Eligible In-Transit
Inventory satisfies the requirements of clause (c)(i)(A) of the definition of
Eligible In-Transit Inventory and if such Eligible In-Transit LC Inventory
satisfies the requirements of

 

5

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

 

clause (f)(i) of the definition of Eligible In-Transit LC Inventory,
(2) $12,000,000 (which amount shall automatically increase or decrease from time
to time proportionally based upon a Revolving Loan Facility Increase or
Revolving Loan Facility Decrease so that, after giving effect to any such
Revolving Loan Facility Increase or Revolving Loan Facility Decrease, the amount
of such sublimit shall be equal to the amount that is 16% of the revised amount
of the Maximum Credit), if Eligible In-Transit Inventory satisfies the
requirements of clause (c)(i)(B) of the definition of Eligible In-Transit
Inventory and if such Eligible In-Transit LC Inventory satisfies the
requirements of clause (f)(ii) of the definition of Eligible In-Transit LC
Inventory, and (3) $10,000,000 (which amount shall automatically increase or
decrease from time to time proportionally based upon a Revolving Loan Facility
Increase or Revolving Loan Facility Decrease so that, after giving effect to any
such Revolving Loan Facility Increase or Revolving Loan Facility Decrease, the
amount of such sublimit shall be equal to the amount that is 13.33 % of the
revised amount of the Maximum Credit), if Eligible In-Transit Inventory
satisfies the requirements of clause (c)(i)(C) of the definition of Eligible
In-Transit Inventory and if such Eligible In-Transit LC Inventory satisfies the
requirements of clause (f)(iii) of the definition of Eligible In-Transit LC
Inventory, plus

 

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

 

(b)                                 the Reserves and the Bank Product Reserves;
minus,

 

(c)                                  the Term Loan Push Down Reserve.

 

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

 

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

 

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“Business Day” shall mean any day other than a Saturday, Sunday, or other day on
which commercial banks are authorized or required to close under the laws of the
State of New York, or the Commonwealth of Massachusetts, and a day on which
Agent is open for the transaction of business, except that if a determination of
a Business Day shall relate to any Eurodollar Rate Loans, the term Business Day
shall also exclude any day on which banks are closed for dealings in dollar
deposits in the London interbank market or other applicable Eurodollar Rate
market.

 

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

 

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

 

“Capital Stock” shall mean, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated) of such
Person’s capital stock or partnership, limited liability company or other equity
interests at any time outstanding, and any and all rights, warrants or options
exchangeable for or convertible into such capital stock or other interests (but
excluding any debt security that is exchangeable for or convertible into such
capital stock).

 

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

 

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

 

“Cash Dominion Event” shall mean a period either (a) commencing on the date that
a Default or Event of Default shall exist or have occurred and be continuing and
ending on the date such Default or Event of Default has been waived or cured in
accordance with Section 11.3

 

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

 

“Cash Equivalents” shall mean, at any time, (a) any evidence of Indebtedness
with a maturity date of ninety (90) days or less issued or directly and fully
guaranteed or insured by the United States of America or any agency or
instrumentality thereof; provided, that, the full faith and credit of the United
States of America is pledged in support thereof; (b) certificates of deposit or
bankers’ acceptances with a maturity of ninety (90) days or less of any
financial institution that is a member of the Federal Reserve System having
combined capital and surplus and undivided profits of not less than
$250,000,000; (c) commercial paper (including variable rate demand notes) with a
maturity of ninety (90) days or less issued by a corporation (except an
Affiliate of any Borrower) organized under the laws of any State of the United
States of America or the District of Columbia and rated at least A-1 by
Standard & Poor’s Ratings Service, a division of The McGraw-Hill Companies, Inc.
or at least P-1 by Moody’s Investors Service, Inc.; (d) repurchase obligations
with a term of not more than thirty (30) days for underlying securities of the
types described in clause (a) above entered into with any financial institution
having combined capital and surplus and undivided profits of not less than
$250,000,000; (e) repurchase agreements and reverse repurchase agreements
relating to marketable direct obligations issued or unconditionally guaranteed
by the United States of America or issued by any governmental agency thereof and
backed by the full faith and credit of the United States of America, in each
case maturing within ninety (90) days or less from the date of acquisition;
provided, that, the terms of such agreements comply with the guidelines set
forth in the Federal Financial Agreements of Depository Institutions with
Securities Dealers and Others, as adopted by the Comptroller of the Currency on
October 31, 1985; (f) investments in money market funds and mutual funds which
invest substantially all of their assets in securities of the types described in
clauses (a) through (e) above; and (f) other investments as agreed by Agent in
writing.

 

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

 

“Change of Control” shall mean, as of any date of determination, the occurrence
of any of the following: (a) any Person and/or one or more of its Affiliates,
other than IPC and/or one or more of its Affiliates, or group (within the
meaning of the Securities Exchange Act of 1934, as amended) of Persons shall
have acquired beneficial ownership (within the meaning of Rule 13d-3 of the
Securities and Exchange Commission under the Securities Exchange Act of 1934, as
amended) of twenty percent (20%) or more of the issued and outstanding Voting
Stock of

 

8

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NY&Co, unless either (i) IPC and/or one or more of its Affiliates, collectively,
own more of the Voting Stock of NY&Co than such Person and/or its Affiliates or
(ii) IPC and/or one or more of its Affiliates has the right to elect, or cause
to be elected, and has elected, or caused to be elected, a majority of the
members of the Board of Directors of NY&Co, (b) during any period of twelve (12)
consecutive calendar months, individuals who at the beginning of such period
constituted the board of directors of NY&Co (together with any new directors
whose election by the board of directors of NY&Co or whose nomination for
election by the shareholders of NY&Co was approved by a vote of at least
two-thirds of the directors then still in office who either were directors at
the beginning of such period or whose elections or nomination for election was
previously so approved) cease for any reason other than death or disability to
constitute a majority of the directors then in office; or (c) except as
permitted under the terms of Section 9.7 hereof, NY&Co shall cease to own
(directly or indirectly) one hundred percent (100%) of the Capital Stock of each
Borrower and each other Guarantor; or (d) any Borrower or Guarantor other than
NY&Co does not own one hundred percent (100%) of the Capital Stock of any of its
Subsidiaries.

 

“Change in Law” shall mean (a) the adoption of any law, rule, regulation or
treaty (including any rules or regulations issued under or implementing any
existing law) after November 27, 2002, (b) any change in any law, rule,
regulation or treaty or in the interpretation or application thereof by any
Governmental Authority after November 27, 2002 or (c) compliance by any Lender
or Issuing Bank (or any lending office of such Lender or by such Lender’s or
Issuing Bank’s holding company, if any) with any request, guideline or directive
(whether or not having the force of law) of any Governmental Authority made or
issued after November 27, 2002; provided that notwithstanding anything herein to
the contrary, (i) the Dodd-Frank Wall Street Reform and Consumer Protection Act
and all requests, rules, guidelines or directives thereunder, issued in
connection therewith or in implementation thereof, and (ii) all requests, rules,
guidelines and directives promulgated by the Bank for International Settlements,
the Basel Committee on Banking Supervision (or any successor or similar
authority) or by United States or foreign regulatory authorities, in each case
pursuant to Basel III, shall in each case be deemed to be a “Change in Law”,
regardless of the date enacted, adopted, issued or implemented.

 

“Closing Date” shall mean October 24, 2014.

 

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

 

“Collateral” shall have the meaning set forth in Section 5 hereof.

 

“Collateral Access Agreement” shall mean an agreement in writing, in form and
substance reasonably satisfactory to Agent, from any lessor of premises to any
Borrower or Guarantor, or any other person to whom any Collateral is consigned
or who has custody, control or possession of any such Collateral or is otherwise
the owner or operator of any premises on which any of such Collateral is
located, pursuant to which such lessor, consignee or other person, among other
things, acknowledges the first priority security interest of Agent, for itself
and the ratable benefit of the Lenders and the Bank Product Providers, in such
Collateral, agrees to

 

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waive or subordinate any and all claims such lessor, consignee or other person
may, at any time, have against such Collateral, whether for processing, storage
or otherwise, and agrees to permit Agent access to, and the right to remain on,
the premises of such lessor, consignee or other person so as to exercise Agent’s
rights and remedies and otherwise deal with such Collateral and in the case of
any consignee or other person who at any time has custody, control or possession
of any Collateral, acknowledges that it holds and will hold possession of the
Collateral for the benefit of Agent, the Lenders and the Bank Product Providers
and agrees to follow all instructions of Agent with respect thereto.

 

“Commitment” shall mean, as to each Lender, the aggregate of such Lender’s
Revolving Loan Commitment and Term Loan Commitment; sometimes being referred to
herein collectively as “Commitments”.

 

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

 

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

 

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

 

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

 

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

 

10

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without limitation, credit or debit cards issued by or through American Express
Travel Related Services Company, Inc.

 

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

 

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

 

“Credit Facility” shall mean the Revolving Loan Facility (including the Letter
of Credit Accommodations provided hereunder and under the other Financing
Agreements) and the Term Loan Facility.

 

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

“Defaulting Lender” shall have the meaning set forth in Section 6.10(d) hereof.

 

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

 

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

 

“Domestic In-Transit Inventory” shall mean Inventory owned by a Borrower that is
located in the continental United States of America which is in transit to one
of the locations set forth on Exhibit E (as such schedule may be updated from
time to time by Borrowers to exclude locations which have been closed and/or
include additional locations of Inventory which

 

11

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Borrowers are permitted to establish under the terms of this Agreement) being
the premises of such Borrower in the United States of America which are either
owned and controlled by such Borrower or leased by such Borrower.

 

“EBITDA” shall mean, for any period, without duplication, the total of the
following for the Borrowers and Guarantors on a consolidated basis, each
calculated for such period:  Net Income plus (a) preferred dividends, plus
(b) income tax expense, plus (c) Interest Expense (including all charges owed
with respect to letters of credit), plus (d) depreciation expense, plus
(e) amortization expense, plus (f) management fees and expenses, as permitted
hereunder, paid or accrued, plus (g) non-cash losses from any sale or
disposition of assets, and minus (h) non-cash gains from any sale or disposition
of assets, plus (i) one-time expenses incurred in connection with the relocation
of the headquarters of Borrowers and Guarantors to 330 West 34th Street, New
York, New York not to exceed $5,000,000 for the fiscal period of Borrowers and
Guarantors ending April 30, 2015, plus (j) any other non-cash charges, non-cash
expenses (including non-cash straight line rent), non-cash losses or non-cash
restructuring charges, plus (k) one-time expenses incurred in connection with
the closing of this Agreement and the transactions contemplated to occur on the
date hereof, plus (l) non-cash compensation expenses, including, but not limited
to, those arising from or relating to the issuance of stock, restricted stock,
options to purchase stock, stock appreciation rights (i.e., phantom stock) and
deferred compensation to the officers, employees and directors of the Borrowers
and Obligors, plus (m) without duplication, amortization of intangibles, plus
(n) employee compensation incurred prior to the date hereof in connection with
the transactions contemplated hereby, minus (o) the amortization of construction
or landlord tenant allowances of the Borrowers or any Subsidiary of a Borrower
for such period, all of the foregoing determined in accordance with GAAP.  For
purposes of calculating EBITDA for any Measurement Period, (i) acquisitions that
have been made by such Person and its Subsidiaries, including through mergers or
consolidated and including any related financing transactions, during the
Measurement Period shall be deemed to have occurred on the first day of the
Measurement Period; provided, however, that only the actual historical results
of operations of the Persons so acquired, without adjustment for pro forma
expense savings or revenue increases, shall be used for such calculation; and
(ii) the EBITDA of such Person and its Subsidiaries attributable to discontinued
operations, as determined in accordance with GAAP, and operations or businesses
disposed of prior to the end of such Measurement Period, shall be excluded. For
purposes of calculating EBITDA for any Measurement Period with respect to
(i) whether an appraisal of the Intellectual Property may be required in
accordance with Section 7.6 hereof and (ii) whether a Term Loan Push Down
Trigger Event has occurred and is continuing in accordance with Section 2.9
hereof, clause (j) solely as it relates to non-cash straight line rent and
clause (o) of this definition shall be excluded.

 

“Eligible Cash Collateral” shall mean the cash or Cash Equivalents, in each case
denominated in United States Dollars, of a Borrower which are: (a) pledged by
such Borrower to Agent pursuant to the Cash Collateral Control Agreement, in
form and substance reasonably satisfactory to Agent and duly authorized,
executed and delivered by such bank or financial intermediary and such Borrower;
(b) free and clear of any lien, security interest, claim or other encumbrance or
restriction, except for (i) liens in favor of Agent and (ii) liens of the
financial intermediary holding such cash or Cash Equivalents that are expressly
permitted by the Cash Collateral Control Agreement; (c) subject to the first
priority, valid and perfected security interest and pledge in favor of Agent,
except (as to priority) for liens in favor of the financial

 

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intermediary holding such cash or Cash Equivalents to the extent such liens are
expressly permitted to have priority by the Cash Collateral Control Agreement;
and (d) available to such Borrower without condition or restriction except those
arising pursuant to the pledge in favor of Agent; provided, that, no cash or
Cash Equivalents shall constitute Eligible Cash Collateral prior to the date (if
any) on which Agent shall have consented to the request by Borrowers to include
Eligible Cash Collateral in the Borrowing Base.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

(j)                                    there are no facts, events or occurrences
which to the best knowledge of Borrowers would impair in any material respect
the validity, enforceability or collectability of such Credit Card Receivables
or reduce the amount payable or delay payment thereunder (other than for setoffs
for fees and chargebacks consistent with the practices of such Credit Card
Issuer or Credit Card Processor with such Borrower as of the date hereof or as
such practices may hereafter change as a result of changes to the policies of
such Credit Card Issuer or Credit Card Processor applicable to its customers
generally and unrelated to the circumstances of a Borrower);

 

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

 

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

 

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

 

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

 

(o)                                 such Borrower has not received from any
Credit Card Issuer or Credit Card Processor any notice of default and/or notice
of its intention to cease or suspend payments to a Borrower in respect of such
Credit Card Receivables or to establish reserves or collateral for obligations
of a Borrower to such Credit Card Issuer or Credit Card Processor (other than
for

 

14

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

(h)                                 there are no facts, events or occurrences
which would impair the validity,

 

15

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enforceability or collectability of such Accounts or reduce the amount payable
or delay payment thereunder;

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

The criteria for Eligible Damaged Goods Vendors Receivables set forth above may
only be changed and any new criteria for Eligible Damaged Goods Vendors
Receivables may only be established by Agent in good faith based on either: 
(i) an event, condition or other circumstance arising after the date hereof, or
(ii) an event, condition or other circumstance existing on the date hereof to
the extent Agent has no written notice thereof from Borrowers prior to the date
hereof,

 

16

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in either case under clause (i) or (ii) which adversely affects or could
reasonably be expected to adversely affect the Accounts in the good faith
determination of Agent.  Any Accounts which are not Eligible Damaged Goods
Vendors Receivables shall nevertheless be part of the Collateral.

 

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

 

“Eligible Intellectual Property” shall mean Intellectual Property deemed by
Agent and Term Loan Agent in their commercially reasonable discretion to be
eligible for inclusion in the calculation of the Term Loan Push Down Reserve
based on the criteria set forth below.  Intellectual Property shall be Eligible
Intellectual Property if (except as otherwise agreed by Agent and Term Loan
Agent in their commercially reasonable discretion):

 

(a)                                 such Intellectual Property is validly
registered with the U.S. Patent and Trademark Office or the U.S. Copyright
Office, as applicable;

 

(b)                                 a Borrower owns such Intellectual Property
or exclusively licenses such Intellectual Property from a third party;

 

(c)                                  such Borrower is in compliance in all
material respects with the representations, warranties and covenants set forth
in the Agreement relating to such Intellectual Property;

 

(d)                                 such Intellectual Property shall be subject
to a valid first priority security interest of Agent, subject only to any
licenses, liens or junior encumbrances expressly permitted hereunder (including,
without limitation, filings at the U.S. Patent and Trademark Office or the U.S.
Copyright Office, as applicable); and

 

(e)                                  such Intellectual Property shall be
included in an appraisal delivered in accordance with Section 7.6 hereof.

 

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

 

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

 

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

 

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

 

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

 

17

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lender’s loss payee in a manner acceptable to Agent;

 

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

 

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

 

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

 

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

 

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

 

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

 

(i)                                     such Inventory meets the criteria in
subsections (A), (B) or (C) below, subject to the sublimits set forth in the
Borrowing Base:

 

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

 

(B)                               such Inventory either (1) is the subject of a
non-negotiable bill of lading (I) in which Agent is directly named as the
consignee, (II) that was issued by the carrier respecting such Inventory that is
subject to such bill of lading, and (III) that is in the

 

18

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

 

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

 

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

 

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

 

“Eligible In-Transit LC Inventory” shall mean Inventory owned by a Borrower that
otherwise satisfies the criteria for Eligible Landed Inventory but is not
located in the continental United States of America and which is in transit to
one of the locations set forth on Exhibit E hereto (as such schedule may be
updated from time to time by Borrowers to exclude locations which have been
closed and/or include additional locations of Inventory which Borrowers are
permitted to establish under the terms of this Agreement) being either the
premises of a Freight Forwarder in the United States of America or the premises
of such Borrower in the United States of America which are either owned and
controlled by such Borrower or leased by such Borrower (but only if Agent has
received a Collateral Access Agreement duly authorized, executed and delivered
by such Freight Forwarder or the owner and lessor of such leased premises, as
the case may be); provided, that:

 

19

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

 

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

 

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

 

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

 

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

 

(f)                                   such Inventory meets the criteria in
subsections (i), (ii) or (iii) below, subject to the sublimits set forth in the
Borrowing Base:

 

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

 

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

 

20

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

 

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

 

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

 

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

 

(a)           work-in-process;

 

(b)           raw materials;

 

(c)           spare parts for equipment;

 

(d)           packaging and shipping materials;

 

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

 

(f)            Inventory at premises other than those owned or leased and
controlled by a Borrower unless Agent has either (i) received a Collateral
Access Agreement in form and

 

21

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substance satisfactory to Agent with respect to such location or
(ii) established a Reserve in an amount in accordance with the terms hereof with
respect to such location;

 

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

 

(h)           bill and hold goods;

 

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

 

(j)            damaged and/or defective Inventory;

 

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

 

(l)            Inventory consisting of samples or displays;

 

(m)          Inventory held for return to vendors; and

 

(n)           Inventory purchased or sold on consignment.

 

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

 

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

 

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

 

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

 

(c)           such Accounts comply with the terms and conditions contained in
Section

 

22

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7.2(b) of this Agreement;

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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limitation, any bankruptcy, dissolution, liquidation, reorganization or similar
proceeding);

 

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

 

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

 

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

 

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

 

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

 

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

 

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“Enforcement Action” shall mean the exercise by Agent in good faith of any of
its material enforcement rights and remedies as a secured creditor hereunder or
under the other Financing Agreements, applicable law or otherwise at any time
upon the occurrence and during the continuance of an Event of Default
(including, without limitation, the solicitation of bids from third parties to
conduct the liquidation of all or any material portion of the Collateral, the
engagement or retention of sales brokers, marketing agents, investment bankers,
accountants, appraisers, auctioneers or other third parties for the purposes of
valuing, marketing, promoting and selling all or any material portion of the
Collateral, the commencement of any action to foreclose on the security
interests or Liens of Agent in all or any material portion of the Collateral,
notification of account debtors to make payments to Agent, any action to take
possession of all or any material portion of the Collateral or commencement of
any legal proceedings or actions against or with respect to all or any material
portion of the Collateral).

 

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

 

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

 

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

 

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

 

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

 

“Eurodollar Rate” shall mean with respect to the Interest Period for a
Eurodollar Rate Loan, the interest rate per annum equal to the arithmetic
average of the rates of interest per annum (rounded upwards, if necessary, to
the next one-hundredth (1/100) of one percent (1%)) appearing on Reuters Screen
LIBOR01 Page (or any successor or substitute page of such service, or any
successor to or substitute for such service as determined by Agent) as the
London interbank offered rate for deposits in US Dollars at approximately
11:00 a.m. (London time) two (2) Business Days’ prior to the first day of such
Interest Period for a term comparable to such Interest Period; provided, that,
if more than one rate is specified on Reuters Screen LIBOR01 Page for such
comparable period, the applicable rate shall be the arithmetic mean of all such
rates.  If such rate is not available at such time for any reason, then the
“Eurodollar Rate” shall mean, with respect to any Eurodollar Rate Loan for the
Interest Period applicable thereto, the rate of interest per annum at which US
dollar deposits of $5,000,000 and for a term comparable to such Interest Period
are offered by the principal London office of Wells Fargo as specified by Agent,
in immediately available funds in the London interbank market at approximately
11:00 a.m. London time two (2) Business Days prior to the commencement of such
Interest Period.

 

“Eurodollar Rate Loans” shall mean the Loans or portions thereof on which
interest is payable based on the Adjusted Eurodollar Rate in accordance with the
terms hereof.

 

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

 

“Excess Availability” shall mean, the amount, as determined by Agent, calculated
at any date, equal to (a)  the lesser of:  (i) the Borrowing Base and (ii) the
Revolving Loan Limit, minus (b) the sum of: (i) the amount of all then
outstanding and unpaid Obligations in respect of the Revolving Loans and
outstanding Letter of Credit Obligations, plus (ii) the aggregate amount of all
outstanding and unpaid trade payables and other obligations of any Borrower
which, as reported on the most recent Borrowing Base Certificate for the most
recent month end, are outstanding more than forty-five (45) days past due as of
such time (other than trade payables or other obligations being contested or
disputed by such Borrower in good faith), plus (iii) without duplication, the
amount of checks issued by any Borrower to pay trade payables and other
obligations which, as reported on the most recent Borrowing Base Certificate for
the most recent month end, are more than forty-five (45) days past due as of
such time (other than trade payables or other obligations being contested or
disputed by such Borrower in good faith), but not yet sent.

 

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

 

“Excluded Swap Obligation” shall mean, with respect to any Borrower or
Guarantor, any Swap Obligation if, and to the extent that, all or a portion of
the joint and several obligations of such Borrower hereunder or the Guarantee of
such Guarantor, or the grant by such Borrower or Guarantor of a security
interest to secure, such Swap Obligation (or any Guarantee thereof) is or
becomes illegal under the Commodity Exchange Act or any rule, regulation or
order of the Commodity Futures Trading Commission (or the application or
official interpretation of any thereof) by virtue of such Borrower’s or
Guarantor’s failure for any reason to constitute an “eligible contract
participant” as defined in the Commodity Exchange Act and the regulations
thereunder at the time the liability of such Borrower or the Guarantee of such
Guarantor or the grant of such security interest becomes effective with respect
to such Swap Obligation. If a Swap Obligation arises under a master agreement
governing more than one swap, such exclusion shall apply only to the portion of
such Swap Obligation that is attributable to swaps for which such joint and
several obligation or Guarantee or security interest is or becomes illegal.

 

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

 

“Existing Guarantor Security Agreements” shall mean, collectively, the Amended
and Restated Guaranty and Security Agreement, dated March 16, 2004, by NY&Co in
favor of Agent, the Amended and Restated Guaranty and Security Agreement, dated
March 16, 2004, by Parent in favor of Agent, the Amended and Restated Guaranty
and Security Agreement, dated March 16, 2004, by Nevada Factoring in favor of
Agent, the Amended and Restated Guaranty and Security Agreement, dated March 16,
2004, by Associated Lerner in favor of Agent, Associated Lerner, and the Amended
and Restated Guaranty and Security Agreement, dated

 

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March 16, 2004, by Lerner GC in favor of Agent as heretofore amended and as in
effect immediately prior to the date hereof.

 

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

 

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

 

“FATCA” shall mean the Foreign Account Tax Compliance Act (enacted as part of
the Hiring Incentives to Restore Employment Act), Sections 1471 through 1474 of
the Code, together with all rules, regulations and interpretations thereunder or
related thereto.

 

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

 

“Fee Letters” shall mean, collectively, the Revolving Loan Fee Letter and the
Term Loan Fee Letter; sometimes being referred to herein individually as a “Fee
Letter”.

 

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

 

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

 

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

 

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

 

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

 

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“Fixed Charges” shall mean, with respect to any Person and its Subsidiaries for
any period, the sum of, without duplication, (a) all cash Interest Expense paid
during such period (net of interest income of such Person during such Period and
excluding, to the extent taken into account in the calculation of Interest
Expense, upfront fees, costs and expenses in respect of this Agreement and the
transactions contemplated hereby and thereby), plus (b) all regularly scheduled
mandatory principal payments with respect to Indebtedness for borrowed money
(excluding payments in respect of Revolving Loans but including regularly
scheduled amortization payments in respect of the Term Loans) paid or payable
for such period, and Indebtedness with respect to Capital Leases paid during
such period in cash (excluding the interest component with respect to
Indebtedness under Capital Lease), plus (c) all income taxes paid during such
period in cash (net of refunds or tax credits to such Person in respect to
income taxes, and excluding income tax on extraordinary or non-recurring gains
or gains from asset sales outside of the ordinary course of business), plus
(d) all Capital Expenditures paid in cash during such period net of applicable
construction or landlord tenant allowances during such period (other than
(i) Capital Expenditures of such Person made with the proceeds of Indebtedness
permitted for such purpose hereunder and (ii) lease payments in respect of
certain Capital Leases and Capital Expenditures of Borrowers not to exceed
$15,000,000 in the aggregate in respect of the construction of the new
headquarters of Borrowers and Guarantors located at 330 West 34th Street, New
York, New York), all of the foregoing as determined in accordance with GAAP.

 

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

 

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

 

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

 

“Freight Forwarders” shall mean the persons listed on Schedule 1.87 hereto or
such other person or persons as may be selected by Borrower after the date
hereof and after written notice by Borrower to Agent who are reasonably
acceptable to Agent to handle the receipt of Inventory within the United States
of America and/or to clear Inventory through the Bureau of Customs and Border
Protection (formerly the Customs Service) or other domestic or foreign export
control authorities or otherwise perform port of entry services to process
Inventory imported by Borrower from outside the United States of America (such
persons sometimes being referred to herein individually as a “Freight
Forwarder”), provided, that, as to each such person, (a) Agent

 

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shall have received a Collateral Access Agreement by such person in favor of
Agent (in form and substance satisfactory to Agent) duly authorized, executed
and delivered by such person, (b) such agreement shall be in full force and
effect and (c) such person shall be in compliance in all material respects with
the terms thereof.

 

“GAAP” shall mean generally accepted accounting principles in the United States
of America as in effect from time to time as set forth in the opinions and
pronouncements of the Accounting Principles Board and the American Institute of
Certified Public Accountants and the statements and pronouncements of the
Financial Accounting Standards Board which are applicable to the circumstances
as of the date of determination consistently applied, except that, for purposes
of Section 9.17 and for purposes of calculating the Fixed Charge Coverage Ratio
hereof, GAAP shall be determined on the basis of such principles in effect on
the date hereof and consistent with those used in the preparation of the most
recent audited financial statements delivered to Agent prior to the date hereof.

 

“Gift Certificate and Store Credit Reserve” shall mean, as of any date of
determination, a Reserve equal to the amount of fifty-one percent (51%) of all
(a) accrued and outstanding gift certificates which any Borrower is obligated to
honor and (b) the aggregate amount of outstanding store credit to be honored by
any Borrower.

 

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

 

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

 

“Guarantors” shall mean collectively, the following (together with their
respective successors and assigns): (a) NY&Co, (b) Parent, (c) Nevada Factoring,
(d) NY&Co Stores, and (e) Lerner GC; each sometimes being referred to herein
individually as ‘Guarantor’.

 

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

 

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“Hedging Transactions” shall mean (a) any and all rate swap transactions, basis
swaps, forward rate transactions, commodity swaps, commodity options, forward
commodity contracts, equity or equity index swaps or options, bond or bond price
or bond index swaps or options, forward bond or forward bond price or forward
bond index transactions, interest rate options, forward foreign exchange
transactions, cap transactions, floor transactions, collar transactions,
currency swap transactions, cross-currency rate swap transaction, currency
options or any other similar transactions or any combination of any of the
foregoing (including any options to enter into any of the foregoing), whether or
not any such transaction is governed by or subject to any master agreement, or
(b) any and all transactions of any kind, and the related confirmations, that
are subject to the terms or conditions of, or governed by, any form of master
agreement published by the International Swaps and Derivatives Association,
Inc., or any other master agreement, as amended, restated, extended,
supplemented or otherwise modified in writing from time to time, including but
not limited to, any such obligations or liabilities under any such agreement.

 

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

 

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

 

“Indebtedness” shall mean, with respect to any Person and without duplication,
any liability, whether or not contingent, (a) in respect of borrowed money
(whether or not the recourse of the lender is to the whole of the assets of such
Person or only to a portion thereof) or evidenced by bonds, notes, debentures or
similar instruments; (b) representing the balance deferred and unpaid of the
purchase price of any property or services (except any such balance that
constitutes an account payable to a trade creditor (whether or not an Affiliate)
created, incurred, assumed or guaranteed by such Person in the ordinary course
of business of such Person in connection with obtaining goods, materials or
services that is not overdue by more than ninety (90) days, unless the trade
payable is being contested in good faith); (c) all obligations as lessee under
leases which have been, or should be, in accordance with GAAP recorded as
Capital Leases; (d) any contractual obligation, contingent or otherwise, of such
Person to pay or be liable for the payment of any indebtedness described in this
definition of another Person, including, without limitation, any such
indebtedness, directly or indirectly guaranteed, or any agreement to purchase,
repurchase, or otherwise acquire such indebtedness, obligation or liability or
any security therefor, or to provide funds for the payment or discharge thereof,
or to maintain solvency, assets, level of income, or other financial condition
of another Person; (e) all obligations with respect to redeemable stock and
redemption or repurchase obligations under any Capital Stock or other equity
securities issued by such Person; (f) all reimbursement obligations and other
liabilities of such Person with respect to surety bonds (whether bid,
performance or otherwise), letters of credit, banker’s acceptances, drafts or
similar documents or instruments issued for such Person’s account; (g) all
indebtedness of such Person in respect of indebtedness

 

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of another Person for borrowed money or indebtedness of another Person otherwise
described in this definition which is secured by any consensual lien, security
interest, collateral assignment, conditional sale, mortgage, deed of trust, or
other encumbrance on any asset of such Person, whether or not such obligations,
liabilities or indebtedness are assumed by or are a personal liability of such
Person, all as of such time; (h) all obligations, liabilities and indebtedness
of such Person (marked to market) arising under swap agreements, cap agreements
and collar agreements and other agreements or arrangements designed to protect
such person against fluctuations in interest rates or currency or commodity
values; and (i) all obligations owed by such Person under License Agreements
with respect to non-refundable, advance or minimum guarantee royalty payments.

 

“Indemnitee” shall have the meaning set forth in Section 11.5 hereof.

 

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

 

“Insolvency Event” shall mean, the commencement of any of the following with
respect to any Borrower or Guarantor: (a) any case or proceeding with respect to
such person under the Bankruptcy Code, or any other Federal, State or other
bankruptcy, insolvency, reorganization or other law affecting creditors’ rights
or any other or similar proceedings seeking any stay, reorganization,
arrangement, composition or readjustment of all or substantially all of the
obligations and indebtedness of such person or (b) any proceeding seeking the
appointment of any receiver, trustee, administrator, liquidator, custodian or
other insolvency official with similar powers with respect to such person or all
or substantially all of its assets or (c) any proceeding for liquidation,
dissolution or other winding up of the business of such person or (d) any
general assignment for the benefit of creditors or any general marshaling of all
or substantially all of the assets of such person.

 

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

 

“Intellectual Property Reserves” shall mean such reserves as Agent and Term Loan
Agent may from time to time determine in Agent’s and Term Loan Agent’s
commercially reasonable discretion as being appropriate to reflect the
impediments to Agent’s ability to realize upon any

 

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Eligible Intellectual Property or to reflect claims and liabilities that Agent
determines will need to be satisfied in connection with the realization upon any
Eligible Intellectual Property; provided, that, (a) as of the Closing Date, no
Intellectual Property Reserve is in effect and (b) after the Closing Date, Agent
and Term Loan Agent will provide ten Business Days’, or if a Default or Event of
Default exists or has occurred and is continuing, three (3) Business Days’,
telephonic or electronic notice to Borrowers before implementing any such
Intellectual Property Reserve.

 

“Intellectual Property Security Agreements” shall mean, collectively, the Lerner
Trademark Agreement, the Lernco Trademark Agreement and any other security
agreement concerning any Intellectual Property of any Borrower or Guarantor at
any time delivered to Agent in connection with this Agreement, as the same now
exist or may hereafter be amended, modified, supplemented, extended, renewed,
restated or replaced.

 

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

 

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

 

“Interest Period” shall mean for any Eurodollar Rate Loan, a period of
approximately one (1), two (2), three (3) or six (6) months duration as
Borrowers may elect, the exact duration to be determined in accordance with the
customary practice in the applicable Eurodollar Rate market; provided, that,
Borrowers may not elect an Interest Period which will end after the last day of
the then-current term of this Agreement.

 

“Interest Rate” shall mean:

 

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

 

(i)            as to Revolving Loans that are Prime Rate Loans, a rate equal to
the Prime Rate plus the Applicable Margin for Prime Rate Loans,

 

(ii)           as to Revolving Loans that are Eurodollar Rate Loans, a rate
equal to the Adjusted Eurodollar Rate plus the Applicable Margin for Eurodollar
Rate Loans (in each case, based on the Eurodollar Rate applicable for the
Interest Period selected by Borrowers as in effect two (2) Business Days after
the date of receipt by Agent of the request of or on behalf of Borrowers for
such Eurodollar Rate Loans in accordance with the terms hereof, whether such
rate is higher or lower than any rate previously quoted to Borrowers),

 

(iii)          in the event that Eurodollar Rate Loans are not available under
the terms of this Agreement, as to Term Loans that are Prime Rate Loans, a rate
equal to the Prime Rate plus four (4.0%) percent for Prime Rate Loans, and

 

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(iv)          as to Term Loans that are Eurodollar Rate Loans, a rate equal to
the Adjusted Eurodollar Rate for an Interest Period of one (1) month plus four
and one-half (4.5%) percent; provided, that, in no event shall the Adjusted
Eurodollar Rate for such Eurodollar Rate Loans be less than one-half of one
percent (0.50%).

 

(b)           Notwithstanding anything to the contrary contained in clause (a)
of this definition, (i) the Applicable Margin otherwise used to calculate the
Interest Rate for Prime Rate Loans in the immediately preceding clause (a)(i)
and for Eurodollar Rate Loans in the immediately preceding clause (a)(ii) shall
be the percentage set forth in the definition of the term Applicable Margin for
each category of Loans that is then applicable plus two (2%) percent per annum,
at Agent’s option and (ii) the Interest Rate for Prime Rate Loans in the
immediately preceding clause (a)(iii) and for Eurodollar Rate Loans in the
immediately preceding clause (a)(iv) shall be the percentage set forth in each
such clause for such Term Loans plus two (2%) percent per annum, at Term Loan
Agent’s option, either (1) for the period (x) on and after the date of
termination or non-renewal of this Agreement in accordance with the terms hereof
until such time as all Obligations are finally paid and satisfied in full in
immediately available funds, or (y) from and after the date of the occurrence of
any Event of Default, and for so long as such Event of Default is continuing or
(2) on Loans at any time in the aggregate in excess of the Borrowing Base at any
time or any other limitation with respect thereto provided for herein (in each
case whether or not such excess(es) arise or are made with or without any
Agent’s or any Lender’s knowledge or consent and whether made before or after an
Event of Default), it being understood that Agent may elect to increase the
Interest Rate on Revolving Loans and Term Loan Agent on Term Loans under this
clause (b) by no more than two (2%) percent even if the events described in each
of subclauses (1) and (2) above have occurred.

 

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

 

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

 

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

 

“Issuing Bank” shall mean Wells Fargo Bank, National Association, a national
banking association, and it successors and assigns.

 

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

 

“Lenders” shall mean the Revolving Loan Lenders and Term Loan Lenders; each
sometimes being referred to herein individually as a “Lender”.

 

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

 

“Lernco Trademark Agreement” shall mean the Second Amended and Restated
Collateral Assignment of Trademarks (Security Agreement), dated as of August 22,
2007, by Lernco and Lerner Outlet in favor of Agent, for itself and the ratable
benefit of the Lenders and the Bank Product Providers, as the now exists or may
hereafter be amended, modified, supplemented, extended, renewed, restated or
replaced.

 

“Lerner” shall mean Lerner New York, Inc., a Delaware corporation, and its
successors and assigns.

 

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

 

“Lerner Outlet” shall mean Lerner New York Outlet, Inc., a Massachusetts
corporation, formerly known as Jasmine Company, Inc., and its successors and
assigns.

 

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

 

“Lerner Trademark Agreement” shall mean the Amended and Restated Collateral
Assignment of Trademarks (Security Agreement), dated as of August 22, 2007, by
Lerner in favor of Agent, for itself and the ratable benefit of the Lenders and
the Bank Product Providers, as the same now exists or may hereafter be amended,
modified, supplemented, extended, renewed, restated or replaced.

 

“Letter of Credit Accommodations” shall mean, collectively, the letters of
credit, merchandise purchase or other guaranties, or acceptances of drafts
relating to letters of credit, which are from time to time either (a) issued or
opened by Issuing Bank for the account of any Borrower or any Obligor or for
which Issuing Bank is the confirming bank or in respect of which it has
otherwise agreed to make any payment, including all Existing Letters of Credit,
or (b) with respect to which Agent or Lenders have agreed to indemnify the
issuer or guarantee to the issuer

 

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the performance by any Borrower or any Obligor of its obligations to such
issuer; sometimes being referred to herein individually as a “Letter of Credit
Accommodation”.

 

“Letter of Credit Documents” shall mean, with respect to any Letter of Credit
Accommodation, such Letter of Credit Accommodation, any amendments thereto, any
documents delivered in connection therewith, any application therefor, and any
agreements, instruments, guarantees or other documents (whether general in
application or applicable only to such Letter of Credit Accommodation) governing
or providing for (a) the rights and obligations of the parties concerned or at
risk or (b) any collateral security for such obligations.

 

“Letter of Credit Rate” shall have the meaning set forth in Section 2.2(b)
hereof.

 

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

 

“Letter of Credit Obligations” shall mean, at any time, the sum of (a) the
aggregate undrawn amount of all Letter of Credit Accommodations outstanding at
such time, plus (b) the aggregate amount of all drawings under Letter of Credit
Accommodations for which Issuing Bank has not at such time been reimbursed, plus
(c) without duplication, the aggregate amount of all payments made by each
Lender to Issuing Bank with respect to such Lender’s participation in Letter of
Credit Accommodations as provided in Section 2.2 for which Borrowers have not at
such time reimbursed Lenders, whether by way of a Revolving Loan or otherwise.

 

“License Agreements” shall have the meaning set forth in Section 8.11 hereof.

 

“Loan Accounts” shall have the meaning set forth in Section 6.1 hereof.

 

“Loan Parties” shall mean Borrowers and Guarantors.

 

“Loans” shall mean the Revolving Loans and the Term Loans.

 

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

 

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

 

“Maturity Date” shall mean October 24, 2019.

 

“Maximum Credit” shall mean the amount equal to the (a) the Revolving Loan Limit
then in effect plus (b) the outstanding principal amount of the Term Loans less
any payments or prepayments thereon.

 

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

 

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

 

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

 

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

 

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

 

“Net Cash Proceeds” shall mean the aggregate cash proceeds received by any
Borrower or Guarantor (a) in respect of any sale, lease, transfer or other
disposition of any assets or properties, or interest in assets and properties,
in each case outside the ordinary course of business of such Borrower or
Guarantor, or (b) as proceeds of any loans or other financial accommodations
provided to any Borrower or Guarantor (either of clause (i) or (ii) of this
definition, a “Specified Disposition”), in each case net of (i) the reasonable
costs relating to such Specified Disposition (including, without limitation,
legal, accounting and investment banking fees, and sales commissions), (ii) the
portion of such proceeds deposited in an escrow account or otherwise required to
be reserved pursuant to the purchase agreements related to such Specified
Disposition for purchase price adjustments or indemnification payments payable
by such Borrower or Guarantor to the purchaser thereof (but only until such time
as such portion of such proceeds is received by such Borrower or Guarantor),
(iii) taxes paid or estimated to be payable as a result thereof (after taking
into account any available tax credits or deductions and any tax sharing
arrangements), and (iv) amounts applied to the repayment of Indebtedness secured
by a

 

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valid and enforceable lien on the asset or assets that are the subject of such
Specified Disposition required to be repaid in connection with such
transaction.  For purposes of this definition, a Specified Disposition described
in clause (i) above shall exclude (x) sales, leases, transfers and other
dispositions of Inventory permitted under Section 9.7(b)(vii) hereof, and (y)
sales and other dispositions of defective, obsolete, out-of-season or slow
moving Inventory to a third-party off-price wholesaler, including Ben Elias and
Value City, or any other Person engaged in substantially the same business as
Ben Elias or Value City and permitted by Agent.  Net Cash Proceeds shall exclude
any non-cash proceeds received by any Borrower or Guarantor from any Specified
Disposition, but shall include such proceeds when and as converted by any
Borrower or Guarantor to cash or other immediately available funds.

 

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

 

“Net Orderly Liquidation Value” shall mean, as of any date of determination, the
value of the Intellectual Property of Borrowers that is estimated to be
recoverable in an orderly liquidation of such Intellectual Property net of all
costs and expenses of such liquidation, such amount to be determined as to each
category of Intellectual Property and to be as specified in the most recent
appraisal received by Term Loan Agent and Agent in accordance with Section 7.6
hereof.

 

“Net Recovery Percentage” shall mean the fraction, expressed as a percentage,
(a) the numerator of which is the amount equal to the amount of the recovery in
respect of the Inventory at such time a “net orderly liquidation value” basis as
set forth in the most recent acceptable appraisal of Inventory received by Agent
in accordance with Section 7.3 hereof, net of operating expenses, liquidation
expenses and commissions, and (b) the denominator of which is the applicable
Value of the aggregate amount of the Inventory subject to such appraisal.

 

“Nevada Factoring” shall mean Nevada Receivable Factoring, Inc., a Nevada
corporation, and its successors and assigns.

 

“Non-Borrower Receivables” shall mean those receivables owned by WFNNB, Nevada
Factoring or any Person other than a Borrower, with respect to which the
proceeds thereof are, at any time, in the possession of a Borrower or in a
deposit account of a Borrower and such Borrower maintains possession or control
of such proceeds for the benefit of WFNNB, Nevada Factoring or any other such
Person pursuant to the Private Label Credit Card Agreement or any other
agreement.

 

“Non-Consenting Lender” shall have the meaning set forth in Section 11.3(d)
hereof.

 

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“Non-Recourse Agreement” shall mean that certain agreement dated as of November
27, 2002 and entered into by and among Lerner, Nevada Factoring and WFNNB.

 

“Notice of Default or Failure of Condition” shall have the meaning set forth in
Section 12.3(a) hereof.

 

“NY&Co” shall mean New York & Company, Inc., a Delaware corporation, and its
successors and assigns.

 

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

 

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

 

“Obligations” shall mean (a) any and all Loans, Letter of Credit Accommodations
and all other obligations, liabilities and indebtedness of every kind, nature
and description owing by any Borrower or any Guarantor to Agent, any Lender or
any Issuing Bank and/or any of their Affiliates, whether consisting of
principal, interest, charges, fees, costs and expenses, fees relating to Letter
of Credit Accommodations, however evidenced, whether as principal, surety,
endorser, guarantor or otherwise, arising under this Agreement or any of the
other Financing Agreements, whether now existing or hereafter arising, in each
case under this Agreement or the other Financing Agreements, whether arising
before, during or after the initial or any renewal term of this Agreement or
after the commencement of any case with respect to any Borrower or any Guarantor
or Obligor under the United States Bankruptcy Code or any similar statute
(including the payment of interest and other amounts which would accrue and
become due but for the commencement of such case, whether or not such amounts
are allowed or allowable in whole or in part in such case), whether direct or
indirect, absolute or contingent, joint or several, due or not due, primary or
secondary, liquidated or unliquidated, or secured or unsecured and (b) for
purposes only of Section 5.1 hereof and subject to the priority in right of
payment set forth in Section 6.4 hereof, all obligations, liabilities and
indebtedness of every kind, nature and description owing by any or all of
Borrowers or Guarantors to Agent or any Bank Product Provider arising under or
pursuant to any Bank Products, whether now existing or hereafter arising,
provided, that, (i) as to any such obligations, liabilities and indebtedness
arising under or pursuant to a Hedging Transaction, the same shall only be
included within the Obligations if, upon Agent’s request, Agent shall have
entered into an agreement, in form and substance satisfactory to Agent, with the
Bank Product Provider that is a counterparty to such Hedging Transaction, as
acknowledged and agreed to by Borrowers and Guarantors, providing for the
delivery to Agent by such counterparty of information with respect to the amount
of such obligations and providing for the other rights of Agent and such Bank
Product Provider in connection with such arrangements, and notwithstanding
anything contained in the foregoing or in any of the other Financing Agreements
to the contrary, the Obligations of any Borrower or Guarantor shall exclude its
Excluded Swap Obligations, (ii) as to any such obligations, liabilities

 

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and indebtedness arising under or pursuant to a Bank Product (other than a
Hedging Transaction if Agent has requested the agreement referred to in clause
(i) above), the same shall only be included within the Obligations if the Bank
Product Provider with respect thereto shall have delivered written notice to
Agent that (A) such Bank Product Provider has entered into a transaction to
provide Bank Products to a Borrower and Guarantor and (B) the obligations
arising pursuant to such Bank Products provided to Borrowers and Guarantors
constitute Obligations entitled to the benefits of the security interest of
Agent granted hereunder, and Agent shall have accepted such notice in writing
(provided, that, not such notice or acceptance shall be required as to such
obligations, liabilities and indebtedness arising under or pursuant to a Bank
Product provided by or owing to Wells Fargo or any of its Affiliates), and (iii)
in no event shall any Bank Product Provider acting in such capacity to whom such
obligations, liabilities or indebtedness are owing be deemed a Lender for
purposes hereof to the extent of and as to such obligations, liabilities or
indebtedness except that each reference to the term “Lender” in Sections 12.1,
12.2, 12.3(b), 12.5, 12.6,12.7, 12.9, 12.12 and 14.6 hereof shall be deemed to
include such Bank Product Provider and in no event shall the approval of any
such person in its capacity as Bank Product Provider be required in connection
with the release or termination of any security interest or lien of Agent.

 

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

 

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

 

“Other Taxes” shall mean any present or future stamp or documentary taxes or any
other excise or property taxes, charges or similar levies of the United States
or any political subdivision thereof or any applicable foreign jurisdiction, and
all liabilities with respect thereto, in each case arising from any payment made
hereunder or under any of the other Financing Agreements or from the execution,
delivery or registration of, or otherwise with respect to, this Agreement or any
of the other Financing Agreements

 

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

 

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

 

“Participant” shall mean any Person that acquires and holds a participation in
the interest of any Lender in any of the Revolving Loans or Letter of Credit
Accommodations in conformity with the provisions of Section 14.7 of this
Agreement governing participations.

 

“Patriot Act” shall mean the Uniting and Strengthening America by Providing
Appropriate Tools Required to Intercept and Obstruct Terrorism (USA Patriot Act
of 2001), as

 

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the same now exists or may from time to time hereafter be amended, modified,
recodified or supplemented, together with all rules, regulations and
interpretations thereunder or related thereto.

 

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

 

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

 

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

 

“Pension Plan” shall mean a Plan that is subject to Title IV of ERISA.

 

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

 

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

 

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

 

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

 

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

 

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

 

(f)            Agent shall have received not less than ten (10) Business Days’
prior

 

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written notice of the proposed acquisition and such information with respect
thereto as Agent may reasonably request, to the extent available, including (i)
the parties to such acquisition, (ii) the proposed date and amount of the
acquisition, (iii) a description of the assets or shares intended to be
acquired, and (iv) the proposed total purchase price and other consideration for
the assets to be purchased (and the terms of payment of such purchase price);

 

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

 

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

 

(i)            Agent shall have received a certificate of the chief executive
officer or a Financial Officer of Administrative Borrower certifying on behalf
of Borrowers to Agent and Lenders that such transaction complies with this
definition.

 

Notwithstanding anything to the contrary contained herein, (i) Borrowers and
Guarantors shall comply with the terms and conditions of Section 9.22 hereof to
the extent applicable to such Acquired Business and (ii) if Borrowers request
that any assets acquired pursuant to any acquisition be included in the
Borrowing Base, Agent shall have (A) completed a field examination with respect
to the business and assets of the Acquired Business and (B) completed its
customary business and legal due diligence, in each case, in accordance with
Agent’s customary procedures and practices and as otherwise required by the
nature and circumstances of the business of the Acquired Business, the scope and
results of which shall be reasonably satisfactory to Agent before such assets
may be included.  Any Accounts, Intellectual Property or Inventory of the
Acquired Business shall only be Eligible Accounts, Eligible Intellectual
Property or Eligible Inventory to the extent that Agent has so completed such
field examination with respect thereto and the criteria for Eligible Accounts,
Eligible Intellectual Property or Eligible Inventory set forth herein are
satisfied with respect thereto (or such other or additional criteria as Agent
may, at its option, establish with respect thereto, and subject to such Reserves
as Agent may establish in connection with the Acquired Business), and, if
requested by Agent, in the case of Eligible Intellectual Property or Eligible
Inventory acquired pursuant to a Permitted Acquisition to the extent that it has
been subject to an appraisal that satisfies the requirements of Section 7.3 or
Section 7.6 hereof, as the case may be.

 

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

 

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

 

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“Prime Rate” shall mean the highest of (a) the rate from time to time publicly
announced by Reference Bank, or its successors, as its “prime rate”, subject to
each increase or decrease in such prime rate, effective as of the day any such
change occurs, whether or not such announced rate is the best rate available at
such bank, (b) the Federal Funds Rate from time to time plus one-half (.50%)
percent, or (c) the Adjusted Eurodollar Rate (using the one month rate if
applicable), which rate shall be determined on a daily basis, plus one (1%)
percent.

 

“Prime Rate Loans” shall mean the Loans or any portion thereof on which interest
is payable based on the Prime Rate in accordance with the terms thereof.

 

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

 

“Private Label Credit Card Agreement” shall mean the Amended and Restated
Private Label Credit Card Program Agreement, dated as of November 1, 2004,
between NY&Co and WFNNB, as amended, and as may be further amended from time to
time in accordance with the terms hereof, including the amendment thereto to add
Lerner as a party thereto and to be the party submitting credit card slips and
charges to WFNNB in consideration of the remittance of the amounts payable on
such Accounts from WFNNB to Lerner.

 

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

 

“Pro Rata Share” shall mean, in each case as the context requires, (a) with
respect to any Revolving Lender at any time, the percentage of the aggregate
Revolving Loan Commitments represented by such Revolving Lender’s Revolving Loan
Commitment at such time, provided, that, if the Revolving Loan Commitments have
been terminated, the numerator shall be the unpaid amount of such Revolving
Lender’s Revolving Loans and its interest in Special Agent Advances and Letter
of Credit Accommodations and the denominator shall be the aggregate amount of
all unpaid Revolving Loans, Special Agent Advances and outstanding Letter of
Credit Accommodations, (b) with respect to any Term Lender at any time, the
portion of the Term Loan represented by the outstanding principal balance of
such Term Lender’s Term Loan at such time, or (c) with respect to all Lenders at
any time, the percentage of the sum of the Aggregate Revolving Commitments and
the outstanding Term Loans represented by the sum of such Lender’s Revolving
Commitment and the outstanding principal balance of such Lender’s Term Loan at
such time, in each case as the context provides.

 

“Provision for Taxes” shall mean an amount equal to all taxes imposed on or
measured by net income, whether Federal, State, Provincial, county or local, and
whether foreign or

 

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domestic, that are paid or payable by any Person in respect of any period in
accordance with GAAP.

 

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

 

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

 

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

 

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

 

“Records” shall mean all of each Borrower’s or Guarantor’s present and future
books of account of every kind or nature, purchase and sale agreements,
invoices, ledger cards, bills of

 

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lading and other shipping evidence, statements, correspondence, memoranda,
credit files and other data relating to the Collateral or any account debtor,
together with the tapes, disks, diskettes and other data and software storage
media and devices, file cabinets or containers in or on which the foregoing are
stored (including any rights of such Borrower or Guarantor with respect to the
foregoing maintained with or by any other person).

 

“Reference Bank” shall mean Wells Fargo Bank, National Association, or such
other bank as Agent may from time to time designate.

 

“Registered Term Note” shall have the meaning set forth in Section 2.8(d)
hereof.

 

“Report” or “Reports” shall have the meaning set forth in Section 12.10(a)
hereof.

 

“Required Lenders” shall mean the Required Revolving Loan Lenders plus the
Required Term Loan Lenders.

 

“Required Revolving Loan Lenders” shall mean, at any time, those Revolving Loan
Lenders whose Pro Rata Shares aggregate sixty-six and two-thirds percent
(662/3%) or more of the aggregate Revolving Loan Commitments of all Revolving
Loan Lenders, or if the Revolving Loan Commitments have been terminated,
Revolving Loan Lenders to whom sixty-six and two-thirds percent (662/3%) or more
of the then outstanding Obligations arising from or in connection with the
Revolving Loans are owing.

 

“Required Term Loan Lenders” shall mean, as of any date of determination,
Lenders to whom sixty-six and two-thirds percent (662/3%) or more of the then
outstanding Obligations arising from or in connection with the Term Loans are
owing.

 

“Reserves” shall mean as of any date of determination, such amounts as Agent may
from time to time establish and revise in good faith reducing the amount of
Revolving Loans and Letter of Credit Accommodations which would otherwise be
available to Borrowers under the lending formula(s) provided for herein:  (a) to
reflect events, conditions, contingencies or risks which, as determined by Agent
in good faith, adversely affect, or would have a reasonable likelihood of
adversely affecting, either (i) the Collateral or any other property which is
security for the Obligations or its value or (ii) the assets or business of any
Borrower or any Obligor or (iii) the security interests and other rights of
Agent or any Lender in the Collateral (including the enforceability, perfection
and priority thereof) or (b) to reflect Agent’s good faith belief that any
collateral report or financial information furnished by or on behalf of any
Borrower or any Obligor to Agent is or may have been incomplete, inaccurate or
misleading in any material respect.  To the extent Agent may decrease the
lending formulas used to determine the Borrowing Base or establish new criteria
or revise existing criteria for Eligible Sell-Off Vendors Receivables, Eligible
Damaged Goods Vendors Receivables, Eligible Credit Card Receivables or Eligible
Inventory so as to address any circumstances, condition, event or contingency in
a manner satisfactory to Agent, Agent shall not establish a Reserve for the same
purpose.  The amount of any Reserve established by Agent shall have a reasonable
relationship to the event, condition or other matter which is the basis for such
reserve as determined by Agent in good faith.  Without limiting the generality
of the foregoing, Reserves may be established to reflect any of the following:
(i) the Gift Certificate and Store Credit Reserve, (ii) such amounts, as

 

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determined by Agent, for amounts at any time due or to become past due in the
good faith judgment of Agent to the owner, lessor or operator of any facility at
which Eligible Inventory may be located with respect to which Agent has not
received a Collateral Access Agreement, in form and substance satisfactory to
Agent; provided, that, with respect to facilities leased by a Borrower or
Guarantor which are located in a jurisdiction which affords the lessor thereof a
lien, or other such rights, on any of the Collateral for unpaid rent or other
amounts, which lien may have priority over Agent’s liens on or rights to the
Collateral, such amount shall equal three (3) months’ rent for such facility
plus any amounts past due, (iii) such amounts, as determined by Agent, for
sales, excise or similar taxes that are (A) past due and (B) not being contested
in good faith and not subject to liens filed against any Borrower or Guarantor
with respect thereto, (iv) such amounts, as determined by Agent, for payments
owed by any Borrower or Guarantor to bailees, customs brokers or freight
forwarders for the services provided by such bailees, customs brokers or freight
forwarders in an amount not to exceed $1,000,000, plus such freight, customs,
taxes and duty and other amounts which Agent estimates must be paid upon the
arrival and in connection with the delivery to a Borrower’s location for
Eligible Inventory within the United States of America of any Inventory ordered
or purchased by any Borrower under a documentary Letter of Credit Accommodation
or which constitutes any portion of the Borrowing Base, (v) upon an Event of
Default or if Compliance Excess Availability is less than $10,000,000, such
amounts, as determined by Agent, for Service Costs owed to Limited Brands, Inc.
or any of its Affiliates and payable by any Borrower or any of their Affiliates
arising from logistic or information technology services to be provided by
Limited Brands, Inc. for the benefit of any Borrower or its Affiliates pursuant
to the Transition Services Agreement in an amount not to exceed $1,000,000 and
(vi) Intellectual Property Reserves.

 

“Revolving Credit Facility” shall mean the Revolving Loans (including all
Special Agent Advances and additional Revolving Loans pursuant to Section 12.8
hereof) and all Letter of Credit Accommodations provided to or for the benefit
of Borrowers and Guarantors as set forth in this Agreement.

 

“Revolving Loan Commitment” shall mean, at any time, as to any Lender, the
principal amount set forth opposite such Lender’s name on Schedule 1 hereto
designated as such Lender’s Revolving Loan Commitment or on Schedule 1 to the
Assignment and Acceptance Agreement pursuant to which such Lender became a
Lender hereunder in accordance with the provisions of 14.7 hereof, as the same
may be adjusted from time to time in accordance with the terms hereof; sometimes
being collectively (as to all Revolving Loan Lenders) referred to herein as the
“Revolving Loan Commitments”.

 

“Revolving Loan Facility Decrease” shall have the meaning set forth in Section
2.6 hereof.

 

“Revolving Loan Facility Increase” shall have the meaning set forth in Section
2.5 hereof.

 

“Revolving Loan Fee Letter” shall mean the Confidential Revolving Loan Fee
Letter, dated of even the date herewith, among Borrowers, Guarantors and Agent.

 

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“Revolving Loan Lender Register” shall have the meaning given in Section 14.7(b)
hereof.

 

“Revolving Loan Lenders” shall mean the financial institutions who are
signatories hereto as Lenders that hold Revolving Loan Commitments and other
persons made a party to this Agreement as a Revolving Loan Lender in accordance
with Section 14.7 hereof, and their respective successors and assigns; each
sometimes being referred to herein individually as a “Revolving Loan Lender”.

 

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

 

“Revolving Loan Priority Collateral” shall mean the Accounts, Inventory and all
the Collateral other than the Term Loan Priority Collateral.

 

“Revolving Loan Register” shall have the meaning set forth in Section 14.7(b)
hereof.

 

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

 

“Sanctioned Entity” shall mean (a) an agency of the government of, (b) an
organization directly or indirectly controlled by, or (c) a person resident in,
a country that is subject to a sanctions program identified on the list
maintained and published by OFAC and available at
http://www.treas.gov/offices/enforcement/ofac/programs, or as otherwise
published from time to time as such program may be applicable to such agency,
organization or person.

 

“Sanctioned Person” shall mean a person named on the list of Specially
Designated Nationals or Blocked Persons maintained by OFAC available at
http://www.treas.gov/offices/enforcement/ofac/sdn/index.html, or as otherwise
published from time to time.

 

“Secured Parties” shall mean, collectively, (a) Agent, (b) Term Loan Agent, (e)
Issuing Bank, (f) Lenders and (g) Bank Product Providers; provided, that, as to
any Bank Product Provider, only to the extent of the Obligations owing to such
Bank Product Provider.

 

“Service Costs” shall have the meaning set forth in the Transition Services
Agreement.

 

“Settlement Period” shall have the meaning set forth in Section 6.10(b) hereof.

 

“Solvent” shall mean, at any time with respect to any Person, that at such time
such Person (a) is able to pay its debts as they mature and has (and has a
reasonable basis to believe it will continue to have) sufficient capital (and
not unreasonably small capital) to carry on its business consistent with its
practices as of the date hereof, and (b) the assets and properties of such
Person at a fair valuation (and including as assets for this purpose at a fair
valuation all rights of subrogation, contribution or indemnification arising
pursuant to any guarantees given

 

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by such Person) are greater than the Indebtedness of such Person, and including
subordinated and contingent liabilities computed at the amount which, such
person has a reasonable basis to believe, represents an amount which can
reasonably be expected to become an actual or matured liability (and including
as to contingent liabilities arising pursuant to any guarantee the face amount
of such liability as reduced to reflect the probability of it becoming a matured
liability).

 

“Special Agent Advances” shall have the meaning set forth in Section 12.11(a)
hereof.

 

“Specified Amounts” shall have the meaning set forth in Section 6.4(c)(i)
hereof.

 

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

 

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

 

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

 

“Taxes” shall mean any and all present or future taxes, levies, imposts,
deductions, charges or withholdings, and all liabilities with respect thereto,
excluding, in the case of Agent, Issuing Bank or any Lender, (a) such taxes
(including income taxes, franchise taxes, branch profits or capital taxes) as
are imposed on or measured by Agent’s, such Issuing Bank’s, or such Lender’s net
income or capital (or other taxes imposed in lieu thereof) by any jurisdiction
or political subdivision thereof, (b) all interest and penalties imposed on
Agent, such Issuing Bank or such Lender with respect to the taxes described in
clause (a) above, and (c) any United Stated federal withholding taxes imposed
under FATCA.

 

“Term Loan Action Default” shall mean any one or more of the following: (a) an
Event of Default described in Section 10.1(a)(i) or (ii) with respect to the
Term Loans, and (b) an Event of Default described in 10.1(e), 10.1(f), 10.1(g),
or 10.1(h) hereof or an Event of Default under Section 10.1(a)(ii) arising from
a breach of Section 9.17 hereof in each case after giving effect to any
applicable cure period.

 

“Term Loan Action Notice” shall have the meaning set forth in Section 10.3(a)
hereof.

 

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“Term Loan Agent” shall mean Wells Fargo Bank, National Association, a national
banking association, in its capacity as administrative agent on behalf of Term
Loan Lenders pursuant to the terms hereof, and any replacement or successor term
loan agent hereunder.

 

“Term Loan Commitment” shall mean, at any time, as to any Lender, the principal
amount set forth opposite such Lender’s name on Schedule 1 hereto designated as
such Lender’s Term Loan Commitment or on Schedule 1 to the Assignment and
Acceptance Agreement pursuant to which such Lender became a Lender hereunder in
accordance with the provisions of 14.7 hereof, as the same may be adjusted from
time to time in accordance with the terms hereof; sometimes being collectively
(as to all Term Loan Lenders) referred to herein as the “Term Loan Commitments”.

 

“Term Loan Facility” shall mean the Term Loans provided to or for the benefit of
Borrowers and Guarantors as set forth in this Agreement.

 

“Term Loan Fee Letter” shall mean the Confidential Term Loan Fee Letter, dated
of even the date herewith, among Borrowers, Guarantors and Term Loan Agent.

 

“Term Loan Lender Register” shall have the meaning set forth in Section 14.7(c)
hereof.

 

“Term Loan Lenders” shall mean the financial institutions who are signatories
hereto as Lenders that hold Term Loan Commitments and other persons made a party
to this Agreement as a Term Loan Lender in accordance with Section 14.7 hereof,
and their respective successors and assigns; each sometimes being referred to
herein individually as a “Term Loan Lender”.

 

“Term Loan Priority Collateral” shall mean all now owned or hereafter acquired
Collateral that constitutes:

 

(a)           fixtures and Equipment;

 

(b)           Intellectual Property;

 

(c)           Real Property;

 

(d)           general intangibles, chattel paper, instruments and documents
(other than general intangibles, chattel paper, instruments and documents that
are Revolving Loan Priority Collateral);

 

(e)           payment intangibles that relate to fixtures, Equipment,
Intellectual Property or Real Property;

 

(f)            permits and licenses related to any of the foregoing (including
any permits or licenses related to ownership or operation of fixtures,
Equipment, Intellectual Property or Real Property of any Loan Party);

 

(g)           all books and records related to the foregoing and not
constituting Revolving Loan Priority Collateral; and

 

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(h)           all products and proceeds of any and all of the foregoing in
whatever form received, including proceeds of insurance and claims against third
parties.

 

“Term Loan Push Down Reserve” shall mean, at any time of calculation, a positive
amount equal to (a) the outstanding principal amount of the Term Loan minus (b)
the amount equal to fifty (50%) percent of the Net Orderly Liquidation Value of
Eligible Intellectual Property.

 

“Term Loan Push Down Trigger Event” shall have the meaning set forth in Section
2.9 hereof.

 

“Term Loan Register” shall have the meaning set forth in Section 14.7(c) hereof.

 

“Term Loan Standstill Period” shall have the meaning given in Section 10.3(a)
hereof.

 

“Term Loans” shall mean the term loans provided by Lenders with Term Loan
Commitments pursuant to Section 2.8 hereof

 

“Third Party Purchaser” shall have the meaning set forth in Section 10.3 hereof.

 

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

 

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

 

“Unused Line Fee” shall have the meaning set forth in Section 3.2(a) hereof.

 

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

 

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

 

“Voting Stock” shall mean with respect to any Person, (a) one (1) or more
classes of Capital Stock of such Person having general voting powers to elect at
least a majority of the board of directors, managers or trustees of such Person,
irrespective of whether at the time Capital Stock of any other class or classes
have or might have voting power by reason of the happening of any contingency,
and (b) any Capital Stock of such Person convertible or exchangeable without
restriction at the option of the holder thereof into Capital Stock of such
Person described in clause (a) of this definition.

 

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

 

“Wells Fargo” shall mean Wells Fargo Bank, National Association, a national
banking association, successor by merger to Wachovia Bank, National Association,
in its individual capacity, and its successors and assigns.

 

“WFNNB” shall mean World Financial Network National Bank.

 

SECTION 2.        CREDIT FACILITIES

 

2.1          Revolving Loans.

 

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

 

(b)           Agent may, in its discretion, from time to time, (i) if no Default
or Event of Default exists or has occurred and is continuing, upon ten (10)
Business Days’ telephonic or electronic notice to Borrowers and (ii) if a
Default or Event of Default exists or has occurred and is continuing, upon three
(3) Business Days’ telephonic or electronic notice to Borrowers, (A) reduce the
lending formula(s) with respect to Eligible Inventory to the extent that Agent
determines in good faith that:  (1) the number of days of the turnover of the
Inventory for any period has adversely changed or (2) the liquidation value of
the Eligible Inventory, or any category thereof, has decreased, including any
decrease attributable to a material change in the nature, quality or mix of the
Inventory or (B) reduce the lending formula(s) with respect to Eligible Sell-Off
Vendors Receivables, Eligible Damaged Goods Vendors Receivables, Eligible Credit
Card Receivables to the extent that Agent determines in good faith that an event
of

 

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condition or other circumstance exists which could adversely affect the ability
to collect such Receivables.  The amount of any decrease in the lending formulas
shall have a reasonable relationship to the event, condition or circumstance
which is the basis for such decrease as determined by Agent in good faith.  In
determining whether to reduce the lending formula(s), Agent may consider events,
conditions, contingencies or risks which are also considered in determining
Eligible Sell-Off Vendors Receivables, Eligible Damaged Goods Vendors
Receivables, Eligible Credit Card Receivables, Eligible Inventory or in
establishing Reserves.

 

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

 

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

 

2.2          Letter of Credit Accommodations.

 

(a)           Subject to and upon the terms and conditions contained herein and
in the Letter of Credit Documents, at the request of any Borrower, Agent agrees,
for the ratable risk of each Revolving Loan Lender according to its Pro Rata
Share, to cause Issuing Bank, and Issuing Bank agrees to issue, one of more
Letter of Credit Accommodations for the account of Borrowers containing terms
and conditions acceptable to Agent and Issuing Bank.  Any payments made by or on
behalf of Agent or any Revolving Loan Lender to Issuing Bank in connection with
the Letter of Credit Accommodations provided to or for the benefit of any
Borrower shall constitute additional Revolving Loans to Borrowers pursuant to
this Section 2 (or Special Agent Advances as the case may be).

 

(b)           In the case of the issuance of any Letter of Credit
Accommodations, Borrowers shall pay to Agent, for the benefit of Revolving Loan
Lenders on a Pro Rata Basis, monthly a fee at the applicable rate determined as
provided in accordance with the Applicable LC Margin on a per annum basis on the
average daily maximum amount available to be drawn under such Letter of Credit
Accommodations for the immediately preceding month (or part thereof), payable in
arrears as of the first day of each succeeding month, computed for each day from
the date of issuance to the date of expiration (the “Letter of Credit Rate”). 
The Letter of Credit Rate for standby Letter of Credit Accommodations shall be a
rate equal to the Applicable LC Margin for standby Letter of Credit
Accommodations. The Letter of Credit Rate for documentary Letter of Credit
Accommodations shall be a rate equal to the Applicable LC

 

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Margin for documentary Letter of Credit Accommodations. At Agent’s option,
Borrowers shall pay such Letter of Credit Accommodation fee at a Letter of
Credit Rate equal to two (2.00%) percent per annum greater than the otherwise
applicable Letter of Credit Rate on such average daily maximum amount for: (i)
the period from and after the date of termination or non-renewal of this
Agreement in accordance with its terms until Agent and Revolving Loan Lenders
have received full and final payment of all Obligations (notwithstanding entry
of a judgment against any Borrower or Guarantor) and (ii) the period from and
after the date of the occurrence of an Event of Default for so long as such
Event of Default is continuing as determined by Agent.  Such Letter of Credit
Accommodation fees shall be calculated on the basis of a three hundred sixty
(360) day year and actual days elapsed and the obligation of Borrowers to pay
such fee shall survive the termination or non-renewal of this Agreement.  In
addition to the Letter of Credit Accommodation fees provided above, Borrower
shall pay to Issuing Bank for its own account (without sharing with Revolving
Loan Lenders) a letter of credit fronting fee equal to one eighths (0.125%)
percent per annum and the customary charges and arranging fees of Issuing Bank
with respect to the issuance, amendment, transfer, administration, cancellation
and conversion of, and drawings under, such Letter of Credit Accommodations.

 

(c)           A Borrower shall give Agent one (1) Business Day’s prior written
notice of such Borrower’s request for the issuance of a commercial Letter of
Credit Accommodation and two (2) Business Days’ prior written notice of such
Borrower’s request for the issuance of a stand-by Letter of Credit
Accommodation.  Such notice shall be irrevocable and shall specify the original
face amount of the Letter of Credit Accommodation requested, the effective date
(which date shall be a Business Day) of issuance of such requested Letter of
Credit Accommodation, whether such Letter of Credit Accommodations may be drawn
in a single or in partial draws, the date on which such requested Letter of
Credit Accommodation is to expire (which date shall be a Business Day), the
purpose for which such Letter of Credit Accommodation is to be issued, and the
beneficiary of the requested Letter of Credit Accommodation.  Such Borrower
shall attach to such notice the proposed terms of the Letter of Credit
Accommodation.

 

(d)           In addition to being subject to the satisfaction of the applicable
conditions precedent contained in Section 4 hereof and the other terms and
conditions contained herein, no Letter of Credit Accommodations shall be
available unless each of the following conditions precedent have been satisfied
in a manner satisfactory to Agent:  (i) the applicable Borrower shall have
delivered to Issuing Bank at such times and in such manner as Issuing Bank may
require, an application, in form and substance satisfactory to Issuing Bank and
Agent, for the issuance of the Letter of Credit Accommodation and the Letter of
Credit Documents, and the form and terms of the proposed Letter of Credit
Accommodation shall be satisfactory to Agent and Issuing Bank, (ii) as of the
date of issuance, no order of any court, arbitrator or other Governmental
Authority shall purport by its terms to enjoin or restrain money center banks
generally from issuing letters of credit of the type and in the amount of the
proposed Letter of Credit Accommodation, and no law, rule or regulation
applicable to money center banks generally and no request or directive (whether
or not having the force of law) from any Governmental Authority with
jurisdiction over money center banks generally shall prohibit, or request that
Issuing Bank refrain from, the issuance of letters of credit generally or the
issuance of such Letter of Credit Accommodations; and (iii) after giving effect
to the issuance of such Letter of Credit Accommodation, the aggregate amount of
the Obligations then outstanding would not exceed the Borrowing Base.

 

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(e)           Except with the consent of all Revolving Loan Lenders, the
aggregate amount of all Letter of Credit Obligations shall not at any time
exceed the Letter of Credit Limit.

 

(f)            Each Borrower and Guarantor shall indemnify and hold Agent and
Revolving Loan Lenders and Issuing Bank harmless from and against any and all
losses, claims, damages, liabilities, costs and expenses which Agent, any
Revolving Loan Lender or Issuing Bank may suffer or incur in connection with any
Letter of Credit Accommodations and any documents, drafts or acceptances
relating thereto, including any losses, claims, damages, liabilities, costs and
expenses due to any action taken by Issuing Bank or a correspondent bank of such
Issuing Bank with respect to any Letter of Credit Accommodation, except for such
losses, claims, damages, liabilities, costs or expenses that are a direct result
of the gross negligence or willful misconduct of Agent or any Revolving Loan
Lender as determined pursuant to a final non-appealable order of a court of
competent jurisdiction.  Each Borrower assumes all risks with respect to the
acts or omissions of the drawer under or beneficiary of any Letter of Credit
Accommodation and for such purposes the drawer or beneficiary shall be deemed
such Borrower’s agent.  Each Borrower assumes all risks for, and agrees to pay,
all foreign, Federal, State and local taxes, duties and levies relating to any
goods subject to any Letter of Credit Accommodations or any documents, drafts or
acceptances thereunder.  Each Borrower and Guarantor hereby releases and holds
Agent and Revolving Loan Lenders harmless from and against any acts, waivers,
errors, delays or omissions, whether caused by such Borrower or Guarantor, by
Issuing Bank or correspondent bank or otherwise with respect to or relating to
any Letter of Credit Accommodation, except for the gross negligence or willful
misconduct of Agent or any Revolving Loan Lender as determined pursuant to a
final, non-appealable order of a court of competent jurisdiction.  The
provisions of this Section 2.2(f) shall survive the payment of Obligations and
the termination of this Agreement.

 

(g)           At any time a Cash Dominion Event exists or has occurred and is
continuing, in connection with Inventory purchased pursuant to Letter of Credit
Accommodations during the existence and continuance of such Cash Dominion Event,
each Borrower and Guarantor shall, at Agent’s request, instruct all suppliers,
carriers, forwarders, customs brokers, warehouses or others receiving or holding
cash, checks, Inventory, documents or instruments in which Agent holds a
security interest to deliver them to Agent and/or subject to Agent’s order, and
if they shall come into such Borrower’s or Guarantor’s possession, to deliver
them, upon Agent’s request, to Agent in their original form.  Each Borrower and
Guarantor shall also, at Agent’s request, designate Agent as the consignee on
all bills of lading and other negotiable and non-negotiable documents.

 

(h)           Each Borrower hereby irrevocably authorizes and directs Issuing
Bank to name such Borrower as the account party therein and to deliver to Agent
all instruments, documents and other writings and property received by Issuing
Bank pursuant to the Letter of Credit Accommodations and to accept and rely upon
Agent’s instructions and agreements with respect to all matters arising in
connection with the Letter of Credit Accommodations or the applications
therefor.  Nothing contained herein shall be deemed or construed to grant any
Borrower any right or authority to pledge the credit of Agent or any Lender in
any manner.  Borrowers shall be bound by any reasonable interpretation made in
good faith by Agent, or Issuing Bank or correspondent bank thereof under or in
connection with any Letter of Credit Accommodation or any drafts or acceptances
of other Letter of Credit Documents thereunder,

 

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notwithstanding that such interpretation may be inconsistent with any
instructions from any Borrower.

 

(i)            At any time an Event of Default exists or has occurred and is
continuing, Agent shall have the right and authority to, and no Borrower or
Guarantor shall, without the prior written consent of Agent, (i) approve or
resolve any questions of non-compliance of documents, (ii) give any instructions
as to acceptance or rejection of any documents or goods, (iii) execute any and
all applications for steamship or airway guaranties, indemnities or delivery
orders, (iv) grant any extensions of the maturity of, time of payments for, or
time of presentation of, any drafts, acceptances, or other Letter of Credit
Documents, and (v) agree to any amendments, renewals, extensions, modifications,
changes or cancellations of any of the terms or conditions of any of the
applications, Letter of Credit Accommodations, or documents, drafts or
acceptances thereunder or any letters of credit included in the Collateral. 
Agent may take such actions either in its own name or in any Borrower’s or
Guarantor’s name.

 

(j)            At any time, so long as no Event of Default exists or has
occurred and is continuing, any Borrower may, with Agent’s consent, (i) grant
any extensions of the maturity of, time of payment for, or time of presentation
of, any drafts, acceptances or other Letter of Credit Documents, and (ii) agree
to any amendments, renewals, extensions, modifications, changes or cancellations
of any of the terms or conditions of any of the applications, Letter of Credit
Accommodations, or Letter of Credit Documents or any letters of credit included
in the Collateral; provided, that, such Borrower may approve or resolve any
questions of non-compliance of documents following notice to Agent thereof and
without Agent’s consent except as otherwise provided in Section 2.2(i) hereof.

 

(k)           Any rights, remedies, duties or obligations granted or undertaken
by any Borrower to Issuing Bank in any application for any Letter of Credit
Accommodation, or any other agreement in favor of Issuing Bank relating to any
Letter of Credit Accommodation, shall be deemed to have been granted or
undertaken by such Borrower to Agent for the ratable benefit of Revolving Loan
Lenders.  Any duties or obligations undertaken by Agent to Issuing Bank in any
application for any Letter of Credit Accommodation, or any other agreement by
Agent in favor of Issuing Bank to the extent relating to any Letter of Credit
Accommodation, shall be deemed to have been undertaken by such Borrower to Agent
for the ratable benefit of Revolving Loan Lenders and to apply in all respects
to such Borrower.

 

(l)            Immediately upon the issuance or amendment of any Letter of
Credit Accommodation, each Revolving Loan Lender shall be deemed to have
irrevocably and unconditionally purchased and received, without recourse or
warranty, an undivided interest and participation to the extent of such
Revolving Loan Lender’s Pro Rata Share of the liability with respect to such
Letter of Credit Accommodation (including, without limitation, all Obligations
with respect thereto).

 

(m)          Borrowers and Guarantors are irrevocably and unconditionally,
jointly and severally, obligated, without presentment, demand or protest, to pay
to Agent any amounts paid by Issuing Bank with respect to such Letter of Credit
Accommodation (whether through the borrowing of Revolving Loans in accordance
with Section 2.2(a) hereof or otherwise).  In the event that Borrowers and
Guarantors fail to pay Agent on the date of any payment under a Letter

 

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of Credit Accommodation in an amount equal to the amount of such payment, Agent
(to the extent it has actual notice thereof) shall promptly notify each
Revolving Loan Lender of the unreimbursed amount of such payment and each
Revolving Loan Lender agrees, upon one (1) Business Days’ notice, to fund to
Agent the purchase of its participation in such Letter of Credit Accommodation
in an amount equal to its Pro Rata Share of the unpaid amount.  The obligation
of each Revolving Loan Lender to deliver to Agent an amount equal to its
respective participation pursuant to the foregoing sentence is absolute and
unconditional and such remittance shall be made notwithstanding the occurrence
or continuance of any Event of Default, the failure to satisfy any other
condition set forth in Section 4 hereof or any other event or circumstance.  If
such amount is not made available by a Revolving Loan Lender when due, Agent
shall be entitled to recover such amount on demand from such Revolving Loan
Lender with interest thereon, for each day from the date such amount was due
until the date such amount is paid to Agent at the Federal Funds Rate for each
day during such period (as published by the Federal Reserve Bank of New York or
at Agent’s option based on the arithmetic mean determined by Agent of the rates
for the last transaction in overnight Federal funds arranged prior to 9:00 a.m.
(New York City time) on that day by each of the three leading brokers of Federal
funds transactions in New York City selected by Agent) and if such amounts are
not paid within three (3) days of Agent’s demand, at the highest Interest Rate
provided for in Section 3.1 hereof applicable to Prime Rate Loans.

 

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

 

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

 

2.5          Revolving Loan Facility Increases.

 

(a)           Borrowers may, at their option, request an increase in the
Revolving Loan Limit (each a “Revolving Loan Facility Increase”) in an aggregate
amount not to exceed $25,000,000 by delivering a written request to Agent that
specifies the amount of such increase in the Revolving Loan Limit; provided,
that, (i)  the aggregate amount of any such increase shall not cause the
Revolving Loan Limit to exceed $100,000,000, (ii) the amount of any such initial
Revolving Loan Facility Increase shall be for an increase in the amount equal to
not less than $10,000,000 or an integral multiple of $500,000 in excess thereof,
(iii) the amount of any additional Revolving Loan Facility Increase shall be for
an increase in the amount equal to not less than $5,000,000 or an integral
multiple of $500,000 in excess thereof, (iv) any such request

 

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shall be irrevocable (unless such Revolving Loan Facility Increase is being
requested in connection with a Permitted Acquisition and Agent receives written
notice prior to the effective date of such Revolving Loan Facility Increase that
such Permitted Acquisition will not be consummated), (v) after the initial
Revolving Loan Facility Increase, there shall be no more than two (2) additional
Revolving Loan Facility Increases, (vi) Agent shall have received a Revolving
Loan Facility Increase fee in accordance with the terms and conditions of the
Revolving Loan Fee Letter, (vii) Agent shall have received such written request
at least two (2) Business Days’ before the proposed effective date of such
increase, and (viii) at the time Agent receives notice of such request for a
Revolving Loan Facility Increase and on the date of and after giving effect to
such Revolving Loan Facility Increase, no Default or Event of Default shall
exist or have occurred and be continuing. If the conditions set forth in this
Section 2.5(a) are satisfied as determined by Agent, then the requested amount
of the Revolving Loan Facility Increase shall become effective on the proposed
effective date of such increase. Wells Fargo agrees to increase its Commitment
up to the full amount of any such Revolving Loan Facility Increase to the extent
that any other Revolving Loan Lender declines to increase its Revolving Loan
Commitment as provided in this Section 2.5(a) hereof.

 

(b)           Upon the receipt by Agent of any such written request, Agent shall
promptly notify each Revolving Loan Lender of such request and each Revolving
Loan Lender shall have the option (but not the obligation, other than Wells
Fargo) to increase the amount of its Commitment by an amount up to its Pro Rata
Share of the amount of the increase in the Revolving Loan Limit requested by
Borrowers as set forth in the notice from Agent to such Revolving Loan Lender. 
Each Revolving Loan Lender shall notify Agent within ten (10) days after the
receipt of such notice from Agent whether such Revolving Loan Lender will so
increase its Revolving Loan Commitment, and if so, the amount of such increase. 
The minimum increase in the Commitments of each such Revolving Loan Lender
providing the additional Revolving Loan Commitments shall equal such Revolving
Loan Lender’s Pro Rata Share unless otherwise agreed to by Agent.  If the
aggregate amount of the increases in the Revolving Loan Commitments received
from Revolving Loan Lenders does not equal or exceed the amount of the increase
in the Revolving Loan Limit requested by Borrowers, Agent may seek additional
increases from Lenders or Revolving Loan Commitments from such Eligible
Transferees as it may determine, after consultation with Borrowers.  In the
event Revolving Loan Lenders (or Revolving Loan Lenders and any such Eligible
Transferees, as the case may be) have committed in writing to provide increases
in their Revolving Loan Commitments or new Revolving Loan Commitments in an
aggregate amount in excess of the increase in the Revolving Loan Limit requested
by Borrowers or permitted hereunder, Agent shall then have the right to allocate
such commitments, first to Revolving Loan Lenders and then to Eligible
Transferees, in such amounts and manner as Agent may determine, after
consultation with Borrowers.  Any new Revolving Loan Lender that is an Eligible
Transferee shall execute and deliver an Assignment and Acceptance as modified to
provide for the sale by Agent of such Revolving Loan Commitment to such Eligible
Transferee.

 

2.6          Revolving Loan Facility Decreases.

 

(a)           Borrowers may, at their option, request a decrease in the
Revolving Loan Limit (each a “Revolving Loan Facility Decrease”) by delivering a
written request to Agent that specifies the amount of the decrease in the
Revolving Loan Limit and a corresponding decrease

 

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

 

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

 

2.7          Prepayments.

 

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

 

(b)           Borrowers may, at their option, at any time or from time to time,
make a prepayment of all or any portion of the outstanding principal balance of
Term Loan; provided, that:

 

(i)            on the date of and after giving effect to such payment, no
Default or Event of Default shall exist or have occurred and be continuing;

 

(ii)           the amount of such principal prepayment shall be in an amount not
less than $100,000 or an integral multiple of $100,000 in excess thereof;

 

(iii)          unless the Revolving Credit Facility is being or has been
terminated in full in accordance with the terms of this Agreement, on the date
of and after giving effect to such payment, Borrowers have Compliance Excess
Availability in an amount equal to not less than twenty (20%) percent of the
Revolving Loan Limit;

 

(iv)          unless the Revolving Credit Facility is being or has been

 

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terminated in full in accordance with the terms of this Agreement, Agent shall
have received, in form and substance reasonably satisfactory to Agent, monthly
projections showing that, for the twelve (12) months immediately after such
payment is made, Compliance Excess Availability shall be greater than 20% of the
Revolving Loan Limit;

 

(v)           Parent and its Subsidiaries shall have a Fixed Charge Coverage
Ratio of not less than 1.0:1.0 calculated based on the immediately preceding
twelve (12) months for which Agent has received financial statements delivered
in accordance with Section 9.6(a) hereof as set forth in an officer’s
certificate, in form and substance reasonably satisfactory to Agent;

 

(vi)          Agent and Term Loan Agent shall have been given not less than two
(2) Business Days’ prior written notice of the intention of Borrowers to make
such prepayment, which notice shall include the amount of the payment and such
other information as Agent and Term Loan Agent may request in good faith; and

 

(vii)         Borrowers pay the fees required pursuant to Section 3.2(d) hereof
and the fees due for any breakage or similar costs or other amounts payable in
accordance with this Agreement (if any).

 

(c)           Upon the sale, lease, transfer or other disposition of any Term
Loan Priority Collateral other than as permitted pursuant by Section 9.7(b)
hereof, the Net Cash Proceeds therefrom shall be applied to prepay the Term
Loan.  All such amounts shall be applied first to the amount of the Term Loan
due on the Maturity Date and then in inverse order of the payments due pursuant
to Section 2.8(c) hereof, each prepayment in accordance with the Pro Rata Share
each Term Loan Lender.

 

2.8          Term Loans.

 

(a)           Subject to and upon the terms and conditions contained herein,
each Term Loan Lender severally (and not jointly) agrees to make its Term Loan
to Borrowers in an amount equal to its Term Loan Commitment.  All of the Term
Loans have been fully funded on the date hereof by Term Loan Lenders and after
the Closing Date, no further Term Loan Commitment exists on the part of any Term
Loan Lender to make any further Term Loans.

 

(b)           The Term Loans shall be (i) evidenced by this Agreement and, at
the request of Term Loan Agent, a Term Promissory Note issued to each Term Loan
Lender in the original principal amount of the Term Loan Commitment of such Term
Loan Lender, duly executed and delivered by Borrowers to such Term Loan Lender;
(ii) to be repaid, together with interest and other amounts, in accordance with
this Agreement, the Term Promissory Notes (if and when executed and delivered),
and the other Financing Agreements, and (iii) secured by all of the Collateral.

 

(c)           The aggregate principal amount of the Term Loans shall be repaid
in consecutive quarterly installments (or earlier as provided herein) payable on
the first day of each calendar quarter commencing on January 1, 2015, each such
installment shall be in the amount of $250,000 and the entire remaining unpaid
balance of the Term Loans shall be due and payable on the Maturity Date. Any
amounts paid in respect of Term Loans may not be reborrowed.

 

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(d)           Agent, on behalf of Borrowers, agrees upon the request of all Term
Loan Lenders to record the Term Loans on the Register referred to in Section
14.7(c) hereof.  Upon the registration of the Term Loans, any promissory note
evidencing the same shall be null and void and shall be returned to Borrower. 
Borrowers agree, at the request of Agent, to execute and deliver to any Term
Loan Lender a promissory note in registered form to evidence such Registered
Term Loan (i.e., containing registered note language) and registered as provided
in Section 14.7(c) hereof (a “Registered Term Note”), payable to the order of
each Term Loan Lender and otherwise duly completed.  Once recorded on the
Register, the Obligations evidenced by such Registered Term Note may not be
removed from the Register so long as it remains outstanding, and a Registered
Term Note may not be exchanged for a promissory note that is not a Registered
Term Note.

 

(e)           Except for the Term Loans made by Term Loan Lenders as set forth
in this Section 2.8, Borrowers shall have no right to request, and Term Loan
Lenders shall have no obligation to make, any additional loans or advances to
Borrowers under this this Agreement, and any repayments of the Term Loans shall
not be subject to any readvance to or reborrowing by Borrowers.

 

2.9          Term Loan Push Down Reserve.  As of the Closing Date, the Term Loan
Push Down Reserve is $0. No Term Loan Push Down Reserve shall be established,
unless after the Closing Date (a) EBITDA of Borrowers and their Subsidiaries on
a consolidated basis calculated each month on a trailing twelve (12) month basis
is at any time less than $20,000,000 or (b) an Event of Default exists or has
occurred and is continuing (a “Term Loan Push Down Reserve Trigger Event”). Term
Loan Agent shall calculate the Term Loan Push Down Reserve based upon the most
recent appraisal of the Intellectual Property received by Agent and Term Loan
Agent in accordance with Section 7.6 hereof, and Agent shall include the amount
of the Term Loan Push Down Reserve in the Borrowing Base; provided, that, at any
time after a Term Loan Push Down Reserve Trigger Event has occurred, if (i)
EBITDA of Borrowers and their Subsidiaries on a consolidated basis calculated
each month on a trailing twelve (12) month basis is $20,000,000 or greater for a
period of not less than one (1) fiscal quarter and (ii) no Event of Default
shall exist or have occurred and be continuing, then the Term Loan Push Down
Reserve previously established as a result of such Term Loan Push Down Reserve
Trigger Event shall be released as of the end of the fiscal quarter that both of
the conditions set forth in the immediately preceding clauses (i) and (ii) have
been satisfied, unless thereafter another Term Loan Push Down Reserve Trigger
Event occurs or reoccurs.

 

SECTION 3.        INTEREST AND FEES

 

3.1          Interest.

 

(a)           Borrowers shall pay to Agent, for the ratable benefit of the
Lenders, interest on the outstanding principal amount of the Loans at the
applicable Interest Rate.  All interest accruing hereunder on and after the date
of any Event of Default or termination hereof shall be payable on demand.

 

(b)           Any Borrower may from time to time request that Revolving Loans be
made as Eurodollar Rate Loans or may request that Revolving Loans which are
Prime Rate

 

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Loans be converted to Eurodollar Rate Loans or that any existing Revolving Loans
which are Eurodollar Rate Loans continue for an additional Interest Period. 
Such request from a Borrower shall specify the amount of such Eurodollar Rate
Loans or the amount of such Prime Rate Loans to be converted to Eurodollar Rate
Loans or the amount of such Eurodollar Rate Loans to be continued (subject to
the limits set forth below) and the Interest Period to be applicable to such
Eurodollar Rate Loans.  Subject to the terms and conditions contained herein,
two (2) Business Days after receipt by Agent of such a request from such
Borrower, such Eurodollar Rate Loans shall be made or such Prime Rate Loans
shall be converted to Eurodollar Rate Loans or such Eurodollar Rate Loans shall
continue, as the case may be, provided, that, (i) no Default or Event of Default
shall exist or have occurred and be continuing, (ii) no party hereto shall have
sent any notice of termination of this Agreement, (iii) such Borrower shall have
complied with such customary procedures as are established by Agent and
specified by Agent to Borrowers for Eurodollar Rate Loans, (iv) no more than six
(6) Interest Periods may be in effect at any one time, (v) the aggregate amount
of the Eurodollar Rate Loans must be in an amount not less than $3,000,000 or an
integral multiple of $500,000 in excess thereof, and (vi) Agent and each Lender
shall have determined that the Interest Period or Adjusted Eurodollar Rate is
available to Agent and such Lender and can be readily determined as of the date
of the request for such Eurodollar Rate Loan by such Borrower.  Any request by
or on behalf of any Borrower for Revolving Loans that are to be Eurodollar Rate
Loans or to convert Revolving Loans that are Prime Rate Loans to Eurodollar Rate
Loans or to continue any existing Revolving Loans that are Eurodollar Rate Loans
shall be irrevocable.  Notwithstanding anything to the contrary contained
herein, Agent and Lenders shall not be required to purchase United States Dollar
deposits in the London interbank market or other applicable Eurodollar Rate
market to fund any Eurodollar Rate Loans, but the provisions hereof shall be
deemed to apply as if Agent and Lenders had purchased such deposits to fund the
Eurodollar Rate Loans.

 

(c)           Any Revolving Loans that are Eurodollar Rate Loans shall
automatically convert to Prime Rate Loans upon the last day of the applicable
Interest Period, unless Agent has received and approved a request to continue
such Eurodollar Rate Loan at least two (2) Business Days prior to such last day
in accordance with the terms hereof.  Any Revolving Loans that are Eurodollar
Rate Loans shall, at Agent’s option, upon notice by Agent to Borrowers, be
subsequently converted to Prime Rate Loans in the event that this Agreement or
the Revolving Credit Facility shall terminate or not be renewed.  Borrowers
shall pay to Agent, for the benefit of Lenders, upon demand by Agent (or Agent
may, at its option, charge any loan account of Borrowers) any amounts required
to compensate any Lender or Participant for any loss (including loss of
anticipated profits), cost or expense incurred by such person, as a result of
the conversion of Eurodollar Rate Loans to Prime Rate Loans pursuant to any of
the foregoing.

 

(d)           Interest shall be payable by Borrowers to Agent, for the account
of Lenders, monthly in arrears not later than the first day of each calendar
month (provided that Interest with respect to any Eurodollar Rate Loans shall be
payable on the last day of each relevant Interest Period) and shall be
calculated on the basis of a three hundred sixty (360) day year and actual days
elapsed.  The interest rate on non-contingent Obligations (other than Eurodollar
Rate Loans) shall increase or decrease by an amount equal to each increase or
decrease in the Prime Rate effective on the first day of the month after any
change in such Prime Rate is announced based on the Prime Rate in effect on the
last day of the month in which any such change occurs.  In no event shall
charges constituting interest payable by Borrowers to

 

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Agent and Lenders exceed the maximum amount or the rate permitted under any
applicable law or regulation, and if any such part or provision of this
Agreement is in contravention of any such law or regulation, such part or
provision shall be deemed amended to conform thereto.

 

(e)           Subject to the terms and conditions of Section 3.3 hereof, all
Term Loans shall be Eurodollar Rate Loans.

 

3.2          Fees.

 

(a)           Unused Line Fee. Borrowers shall pay to Agent, for the Pro Rata
Share of each Revolving Loan Lender, monthly an unused line fee at a rate equal
to one quarter percent (0.25%) per annum in the aggregate of the difference
between (i) the average daily principal balance of the outstanding Revolving
Loans and Letter of Credit Accommodations during the immediately preceding month
(or part thereof) while this Agreement is in effect and for so long thereafter
as any of the Obligations are outstanding and (ii) the Revolving Loan Limit then
in effect (the “Unused Line Fee”), which fee shall be payable on the first day
of each month in arrears.

 

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

 

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

 

(d)           Term Loan Early Termination Fee.

 

(i)            If the Term Loan Facility is (a) terminated prior to the Maturity
Date (whether voluntarily by Borrowers or by Lenders following an Event of
Default), or (b) in the event that the Borrowers prepay, or are required to
prepay, the Term Loan in whole or in part, in view of the impracticality and
extreme difficulty of ascertaining actual damages and by mutual agreement of the
parties as to a reasonable calculation of lost profits of Term Loan Lenders as a
result thereof, Borrowers agree to pay to Term Loan Lenders, upon the effective
date of such termination (or prepayment), an early termination fee as follows: 
(A) in the amount equal to two percent (2%) of the outstanding principal amount
of the Term Loans immediately prior to the date of such termination (or in the
case of a prepayment, the amount so prepaid), if this Agreement is terminated
(or prepayment made) at any time after the Closing Date to and including the
second anniversary of this Agreement; and (B), in the amount equal to one
percent

 

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(1%) of the outstanding principal amount of the Term Loans immediately prior to
the date of such termination (or in the case of a prepayment, the amount so
prepaid), if this Agreement is terminated (or prepayment made) at any time after
the Closing Date to and including the third anniversary of this Agreement.

 

(ii)           Such early termination fee shall be presumed to be the amount of
damages sustained by Term Loan Lenders as a result of such early termination and
Borrowers agree that it is reasonable under the circumstances currently existing
(including, but not limited to, the interest, fees and other charges that are
reasonably expected to be received by Term Loan Lenders pursuant to the Term
Loans).  Without limiting the foregoing, Term Loan Lenders shall be entitled to
such early termination fee upon the occurrence of any Event of Default described
in 10.1(e), 10.1(f), 10.1(g) and 10.1(h) hereof, even if Term Loan Agent and
Term Loan Lenders do not exercise the right to terminate this Agreement, but
elect, at their option, to provide financing to any Borrower or permit the use
of cash collateral under the United States Bankruptcy Code.  The early
termination fee provided for in this Section 3.2(d) shall be deemed included in
the Obligations.

 

3.3          Inability to Determine Applicable Interest Rate.  If Agent shall
determine in good faith (which determination shall, absent manifest error, be
final and conclusive and binding on all parties hereto) that on any date by
reason of circumstances affecting the London interbank market adequate and fair
means do not exist for ascertaining the interest rate applicable to Eurodollar
Rate Loans, Agent shall on such date give notice to Borrowers and each Lender of
such determination.  Upon such date no Loans may be maintained, made as, or
converted to, Eurodollar Rate Loans until such time as Agent notifies Borrowers
and Lenders that the circumstances giving rise to such notice no longer exist
and any existing Eurodollar Rate Loans shall be converted to Prime Rate Loans
and any request for Eurodollar Rate Loans received by Agent shall be deemed to
be a request, or a continuation or conversion, for or into Prime Rate Loans.

 

3.4          Illegality.  Notwithstanding anything to the contrary contained
herein, if (a) any Change in Law makes it unlawful for a Lender to make or
maintain a Eurodollar Rate Loan or to maintain any Commitment with respect to a
Eurodollar Rate Loan or (b) a Lender determines in good faith (which
determination shall, absent manifest error, be final and conclusive and binding
upon all parties hereto) has become impracticable as a result of a circumstance
that adversely affects the London interbank market or the position of such
Lender in such market, then such Lender shall promptly give notice thereof to
Agent and Borrowers and may (i) declare that Eurodollar Rate Loans will not
thereafter be made by such Lender, such that any request for a Eurodollar Rate
Loans from such Lender shall be deemed to be a request for a Prime Rate Loan
unless such Lender’s declaration has been withdrawn (and it shall be withdrawn
promptly upon the cessation of the circumstances described in clause (a) or (b)
above )and (ii) demand that (A) all outstanding Eurodollar Rate Loans made by
such Lender be prepaid immediately or (B) converted to Prime Rate Loans
immediately, in which event all outstanding Eurodollar Rate Loans of such Lender
shall be so converted; provided, that, Borrowers shall have the option to choose
whether to prepay such Eurodollar Rate Loans or have such Eurodollar Rate Loans
converted to Prime Rate Loans.  Borrowers shall jointly and severally indemnify
Agent, Term Loan Agent and Lenders and hold Agent, Term Loan Agent and Lenders
harmless from any loss or expense which Agent or any Lender may sustain or incur
as a consequence of a default by any

 

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Borrower in making a borrowing of or conversion into Eurodollar Rate Loans after
any Borrower has given a notice requesting the same in accordance with the
provisions of this Agreement.  This covenant shall survive the termination or
non-renewal of this Agreement and the payment of the Obligations.

 

3.5          Increased Costs.  If any Change in Law shall: (a) impose, modify or
deem applicable any reserve, special deposit, compulsory loan, insurance charge
or similar requirement against assets of, deposits with or for the account of,
or credit extended or participated in by, any Lender or the Issuing Bank; (b)
subject any Lender or Issuing Bank to any tax of any kind whatsoever with
respect to this Agreement, any Letter of Credit Accommodation, any participation
in a Letter of Credit Accommodation or any Eurodollar Rate Loan made by it, or
change the basis of taxation of payments to such Lender or the Issuing Bank in
respect thereof (except for Taxes or Other Taxes covered by Section 6.5 and the
imposition of, or any change in the rate of, any taxes payable by such Lender or
the Issuing Bank described in Sections 6.5(a), (b) and (c)); or (c) impose on
any Lender or Issuing Bank or the London interbank market any other condition,
cost or expense affecting this Agreement or Eurodollar Rate Loans made by such
Lender or any Letter of Credit Accommodation or participation therein, and the
result of any of the foregoing shall be to increase the cost to such Lender of
making or maintaining any Eurodollar Rate Loan (or of maintaining its obligation
to make any such Loan), or to increase the cost to such Lender or Issuing Bank
of participating in, issuing or maintaining any Letter of Credit Accommodation
(or of maintaining its obligation to participate in or to issue any Letter of
Credit Accommodation), or to reduce the amount of any sum received or receivable
by such Lender or Issuing Bank hereunder (whether of principal, interest or any
other amount) then, upon request of such Lender or Issuing Bank, Borrowers will
pay to such Lender or Issuing Bank, as the case may be, such additional amount
or amounts as will compensate such Lender or Issuing Bank, as the case may be,
for such additional costs incurred or reduction suffered.

 

3.6          Capital Requirements.  If any Lender or Issuing Bank determines
that any Change in Law affecting such Lender or the Issuing Bank or any lending
office of such Lender or such Lender’s or Issuing Bank’s holding company, if
any, regarding capital requirements has or would have the effect of reducing the
rate of return on such Lender’s or Issuing Bank’s capital or on the capital of
such Lender’s or Issuing Bank’s holding company, if any, as a consequence of
this Agreement, the Commitments of such Lender or the Loans made by, or
participations in Letter of Credit Accommodations held by, such Lender, or the
Letter of Credit Accommodations issued by the applicable Issuing Bank, to a
level below that which such Lender or Issuing Bank or such Lender’s or Issuing
Bank’s holding company could have achieved but for such Change in Law (taking
into consideration such Lender’s or Issuing Bank’s policies and the policies of
such Lender’s or Issuing Bank’s holding company with respect to capital
adequacy), then from time to time Borrowers will pay to such Lender or Issuing
Bank, as the case may be, such additional amount or amounts as will compensate
such Lender or Issuing Bank or such Lender’s or Issuing Bank’s holding company
for any such reduction suffered.

 

3.7          Certificates for Reimbursement.  A certificate of a Lender or
Issuing Bank, together with reasonable supporting documentation or calculations
in accordance with such Lender’s or Issuing Bank’s then existing procedures,
setting forth the amount or amounts necessary to compensate such Lender or
Issuing Bank or its holding company, as the case may be, as specified in Section
3.5 or 3.6 hereof and delivered to Borrowers shall be conclusive

 

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absent manifest error.  Borrowers shall pay such Lender or Issuing Bank, as the
case may be, the amount shown as due on any such certificate within fifteen (15)
days after receipt thereof.

 

3.8          Delay in Requests.  Failure or delay on the part of any Lender or
Issuing Bank to demand compensation pursuant to Section 3.5 or 3.6 hereof shall
not constitute a waiver of such Lender’s or Issuing Bank’s right to demand such
compensation; provided, that, Borrowers shall not be required to compensate a
Lender or Issuing Bank pursuant to this Section for any increased costs incurred
or reductions occurring more than one hundred eighty (180) days prior to the
date that such Lender or Issuing Bank, as the case may be, becomes aware of the
Change in Law giving rise to such Lender’s or Issuing Bank’s claim for
compensation therefor (except that, if the Change in Law giving rise to such
increased costs or reductions is retroactive, then the one hundred eighty (180)
day period referred to above shall be extended to include the period of
retroactive effect thereof).

 

3.9          Mitigation; Replacement of Lenders.

 

(a)           If any Lender requests compensation under Section 3.4, 3.5 or
Section 3.6 hereof, or Borrowers are required to pay any additional amount to
any Lender or any Governmental Authority for the account of any Lender pursuant
to Section 6.5, then such Lender shall, if requested by Borrowers, use
reasonable efforts (subject to overall policy considerations of such Lender) to
designate a different lending office for funding or booking its Loans hereunder,
to assign its rights and obligations hereunder to another of its offices,
branches or affiliates or to take such other actions as such Lender or Agent
determines, if, in the judgment of such Lender, such designation, assignment or
other action (i) would eliminate or reduce amounts payable pursuant to such
Sections in the future and (ii) would not subject Agent or such Lender to any
unreimbursed cost or expense and Agent or such Lender would not suffer any
economic, legal or regulatory disadvantage.  Nothing in this Section 3.9 shall
affect or postpone any of the obligations of Borrowers or the rights of Agent or
such Lender pursuant to this Section 3.9.  Borrowers hereby agree to pay on
demand all reasonable out of pocket costs and expenses incurred by Agent or any
Lender in connection with any such designation or assignment.

 

(b)           If (i) any Lender requests compensation under Section 3.4, 3.5 or
Section 3.6 hereof, (ii) Borrowers are required to pay any additional amount to
any Lender or Governmental Authority pursuant to Section 6.5 hereof, (iii) a
Non-Consenting Lender does not consent to a proposed change, waiver, discharge
or termination with respect to this Agreement or any Financing Agreement that
has been approved by the Required Lenders as provided in Section 11.3 hereof but
requires unanimous consent of all Lenders or all Lenders directly affected
thereby (as applicable) or (iv) any Lender is a Defaulting Lender, then
Borrowers may, at their sole expense and effort, upon notice to such Lender and
Agent, replace such Lender by requiring such Lender to assign and delegate (and
such Lender shall be obligated to assign and delegate), without recourse (in
accordance with and subject to the restrictions contained in Section 14.7
hereof), all of its interests, rights and obligations under this Agreement and
the related Financing Agreements to an Eligible Transferee that shall assume
such obligations; provided, that, (A) Borrowers have received the prior written
consent of Agent, (B) such Lender shall have received payment of an amount equal
to the outstanding principal amount of its Loans and participations in Letter of
Credit Obligations that it has funded, if any, accrued interest thereon, accrued
fees and other amounts payable to it hereunder, from the assignee (to the extent

 

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of such outstanding principal) and Borrowers (in the case of accrued interest,
fees and other amounts, including amounts under Section 3.10 hereof), (C) such
assignment will result in a reduction in such compensation and payments, and (D)
such assignment does not conflict with applicable laws or regulations.  A Lender
shall not be required to make any such assignment and delegation if, prior
thereto, as a result of a waiver by such Lender or otherwise, the circumstances
entitling the Borrowers to require such assignment and delegation cease to
apply.  Nothing in this Section 3.9 shall impair any rights that any Borrower or
Agent may have against any Lender that is a Defaulting Lender.

 

3.10        Funding Losses.  Borrowers shall pay to Agent its customary
administrative charge and to each Lender all losses, expenses and liabilities
(including any interest paid by such Lender to Lenders of funds borrowed by it
to make or carry its Eurodollar Rate Loans and any loss, expense or liability
sustained by such Lender in connection with the liquidation or redeployment of
such) that it sustains (a) if for any reason (other than a default by such
Lender) a borrowing of any Eurodollar Rate Loan does not occur on a date
specified therefor or in the amount in a request for borrowing, or a conversion
to, any Eurodollar Rate Loan does not occur on a date specific therefor or in
the amount in a request for conversion or continuation, (b) if any prepayment or
other principal payment of any of its Eurodollar Rate Loans occurs on a date
prior to the last day of an Interest Period applicable to such Loan, or (c) if
any prepayment of any of its Eurodollar Rate Loans is not made on any date
specified in a notice of prepayment given by a Borrower. This covenant shall
survive the termination or non-renewal of this Agreement and the payment of the
Obligations.

 

3.11        Maximum Interest.  Notwithstanding anything to the contrary
contained in this Agreement or any of the other Financing Agreements, in no
event whatsoever shall the aggregate of all amounts that are contracted for,
charged or received by Agent or any Lender pursuant to the terms of this
Agreement or any of the other Financing Agreements and that are deemed interest
under applicable law exceed the Maximum Interest Rate (including, to the extent
applicable, the provisions of Section 5197 of the Revised Statutes of the United
States of America as amended, 12 U.S.C. Section 85, as amended).  In no event
shall any Borrower or Guarantor be obligated to pay interest or such amounts as
may be deemed interest under applicable law in amounts which exceed the Maximum
Interest Rate.  In the event any Interest is charged or received in excess of
the Maximum Interest Rate (the “Excess”), each Borrower and Guarantor
acknowledges and stipulates that any such charge or receipt shall be the result
of an accident and bona fide error, and that any Excess received by Agent or any
Lender shall be applied, first, to the payment of the then outstanding and
unpaid principal hereunder; second to the payment of the other Obligations then
outstanding and unpaid; and third, returned to such Borrower or Guarantor.  All
monies paid to Agent or any Lender hereunder or under any of the other Financing
Agreements, whether at maturity or by prepayment, shall be subject to any rebate
of unearned interest as and to the extent required by applicable law. For the
purpose of determining whether or not any Excess has been contracted for,
charged or received by Agent or any Lender, all interest at any time contracted
for, charged or received from any Borrower or Guarantor in connection with this
Agreement or any of the other Financing Agreements shall, to the extent
permitted by applicable law, be amortized, prorated, allocated and spread during
the entire term of this Agreement in accordance with the amounts outstanding
from time to time hereunder and the Maximum Interest Rate from time to time in
effect in order to lawfully charge the maximum amount of interest permitted
under applicable laws.  The provisions of this Section

 

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3.11 shall be deemed to be incorporated into each of the other Financing
Agreements (whether or not any provision of this Section is referred to
therein).

 

3.12        No Requirement of Match Funding.  Notwithstanding anything to the
contrary contained herein, Agent and Lenders shall not be required to acquire US
Dollar deposits in the London interbank market or any other offshore US Dollar
market to fund any Eurodollar Rate Loan or to otherwise match fund any
Obligations as to which interest accrues based on the Adjusted Eurodollar Rate. 
All of the provisions of this Section 3 shall be deemed to apply as if Agent,
each Lender or any Participant had acquired such deposits to fund any Eurodollar
Rate Loan or any other Obligation as to which interest is accruing at the
Adjusted Eurodollar Rate by acquiring such US Dollar deposits for each Interest
Period in the amount of the Eurodollar Rate Loans or other applicable
Obligations, whether or not such Eurodollar Rate Loans or other applicable
Obligations were in fact so funded.

 

SECTION 4.        CONDITIONS PRECEDENT

 

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

 

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

 

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

 

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

 

(d)           on the date hereof after giving effect to the transactions
contemplated by

 

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this Agreement, Compliance Excess Availability as determined by Agent, shall be
not less than $35,000,000,

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

(a)           all representations and warranties contained herein and in the
other

 

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

 

(b)           no law, regulation, order, judgment or decree of any Governmental
Authority shall exist, and no action, suit, investigation, litigation or
proceeding shall be pending or threatened in any court or before any arbitrator
or Governmental Authority, which (i) purports to enjoin, prohibit, restrain or
otherwise affect (A) the making of the Loans or providing the Letter of Credit
Accommodations, or (B) the consummation of the transactions contemplated
pursuant to the terms hereof or the other Financing Agreements or (ii) has a
reasonable likelihood of having a Material Adverse Effect; and

 

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

 

SECTION 5.        GRANT AND PERFECTION OF SECURITY INTEREST

 

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

 

(a)           all Accounts;

 

(b)           all general intangibles, including, without limitation, all
Intellectual Property;

 

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

 

(d)           all fixtures;

 

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

 

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

 

(g)           all documents;

 

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(h)           all deposit accounts;

 

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

 

(j)            all supporting obligations and all present and future liens,
security interests, rights, remedies, title and interest in, to and in respect
of Receivables and other Collateral, including (i) rights and remedies under or
relating to guaranties, contracts of suretyship, letters of 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, lienor or secured party, (iii) goods described in invoices, documents,
contracts or instruments with respect to, or otherwise representing or
evidencing, Receivables or other Collateral, including returned, repossessed and
reclaimed goods, and (iv) deposits by and property of account debtors or other
persons securing the obligations of account debtors;

 

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

 

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

 

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

 

(n)           all Records; and

 

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

 

Notwithstanding anything herein to the contrary, in no event shall the
Collateral include, and no Borrower or Guarantor shall be deemed to have granted
a security interest in, (i) any personal and real property, fixtures and
interests of such Borrower or Guarantor which are not assignable or are
incapable of being encumbered as a matter of law, except for the products and
proceeds thereof, (ii) such Borrower’s or Guarantor’s rights or interests in any
license, contract or agreement to which such Borrower or Guarantor is a party or
any of its rights or interests thereunder to the extent, but only to the extent,
that such a grant would, under the terms of such license, contract or agreement,
applicable laws or otherwise, result in a breach of the terms of, or constitute
a default under any license, contract or agreement to which such Borrower or
Guarantor is a party (except for the products and proceeds thereof); provided,
that, upon the ineffectiveness, lapse or termination of any such provision, the
Collateral shall include, and such Borrower or Guarantor shall be deemed to have
granted a security interest in, all such rights and interests as if such
provision had never been in effect, (iii) the Capital Stock of any Foreign
Subsidiary that is a “controlled foreign corporation” (as such term is defined
in Section 957(a) of the Code), to the extent such Foreign Subsidiary is not
treated as a “disregarded entity” by the

 

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Code, or the Capital Stock of any Foreign Holdco Subsidiary in excess of sixty
five (65%) percent of all of the issued and outstanding shares of Capital Stock
of such Subsidiary entitled to vote (within the meaning of Treasury Regulation
Section 1.956-2); provided, that, if the pledge of one hundred (100%) percent of
the Capital Stock of such Foreign Subsidiary or Foreign Holdco Subsidiary would
not have an adverse tax impact on such Borrower or Guarantor for purposes of
Section 956 of the Code as determined by Agent in its good faith discretion in
consultation with such Borrower or Guarantor, Borrower or such Guarantor shall
pledge to Agent one hundred (100%) percent of the Capital Stock of such Foreign
Subsidiary or such Foreign Holdco Subsidiary; and (iv) any rights to any
Intellectual Property, License Agreements or software that would be rendered,
void, invalid or unenforceable under the terms thereof or under applicable laws
by the grant of a security interest in such Intellectual Property, License
Agreements or software created pursuant to the terms of this Agreement, for as
long as such prohibition or reason for invalidity exists, except in each case
under the foregoing clauses (i) through (iv) for the products and proceeds
thereof.

 

5.2                               Perfection of Security Interests.

 

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

 

(b)                                 No Borrower or Guarantor has any chattel
paper (whether tangible or electronic) or instruments as of the date hereof,
except as set forth on Schedule 5.2(b) hereto.  In the event that any Borrower
or Guarantor shall be entitled to or shall receive any chattel paper or

 

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instrument after the date hereof, which together with all other chattel paper
and instruments that Borrowers and Guarantors have become entitled to or have
received after the date hereof has a fair market value in excess of $100,000
individually or in the aggregate, such Borrower or Guarantor shall promptly
notify Agent thereof in writing.  Promptly upon the receipt thereof by or on
behalf of such Borrower or Guarantor (including by any agent or representative),
such Borrower or Guarantor shall deliver, or cause to be delivered to Agent, all
tangible chattel paper and instruments that such Borrower or Guarantor has or
may at any time acquire, accompanied by such instruments of transfer or
assignment duly executed in blank as Agent may from time to time specify, in
each case except as Agent may otherwise agree.  At Agent’s option, such Borrower
or Guarantor shall, or Agent may at any time on behalf of such Borrower or
Guarantor, cause the originals of  any such instruments and chattel paper that
have a fair market value in excess of $100,000 individually or in the aggregate,
to be conspicuously marked in a form and manner acceptable to Agent with the
following legend referring to chattel paper or instruments as applicable: “This
[chattel paper][instrument] is subject to the security interest of Wells Fargo
Bank, National Association, and any sale, transfer, assignment or encumbrance of
this [chattel paper][instrument] violates the rights of such secured party.”

 

(c)                                  In the event that any Borrower or Guarantor
shall at any time hold or acquire an interest in any electronic chattel paper or
any “transferable record” (as such term is defined in Section 201 of the Federal
Electronic Signatures in Global and National Commerce Act or in Section 16 of
the Uniform Electronic Transactions Act as in effect in any relevant
jurisdiction), which together with all other electronic chattel paper or
“transferable record” that Borrowers and Guarantors have become entitled to has
a fair market value in excess of $100,000 individually or in the aggregate, such
Borrower or Guarantor shall promptly notify Agent thereof in writing.  Promptly
upon Agent’s request, such Borrower or Guarantor shall take, or cause to be
taken, such actions as Agent may request to give Agent control of such
electronic chattel paper under Section 9-105 of the UCC and control of such
transferable record under Section 201 of the Federal Electronic Signatures in
Global and National Commerce Act or, as the case may be, Section 16 of the
Uniform Electronic Transactions Act, as in effect in such jurisdiction.

 

(d)                                 No Borrower or Guarantor has any deposit
accounts as of the date hereof, except as set forth in such Borrower’s or
Guarantor’s Information Certificate.  No Borrower or Guarantor shall, directly
or indirectly, after the date hereof open, establish or maintain any Central
Collection Deposit Account unless each of the following conditions is
satisfied:  (i) Agent shall have received not less than five (5) Business Days
prior written notice of the intention of such Borrower or Guarantor to open or
establish such account which notice shall specify in reasonable detail and
specificity acceptable to Agent the name of the Central Collection Deposit
Account, the owner of the Central Collection Deposit Account, the name and
address of the bank at which such Central Collection Deposit Account is to be
opened or established, the individual at such bank with whom such Borrower or
Guarantor is dealing and the purpose of the Central Collection Deposit Account,
(ii) the bank where such Central Collection Deposit Account is opened or
maintained shall be reasonably acceptable to Agent, and (iii) on or before the
opening of such Central Collection Deposit Account, such Borrower or Guarantor
shall as Agent may specify either (A) deliver to Agent a Deposit Account Control
Agreement with respect to such Central Collection Deposit Account duly
authorized, executed and delivered by such Borrower or Guarantor and the bank at
which such deposit account is opened and maintained or (B) arrange for Agent to
become the customer of the bank with respect

 

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to the deposit account on terms and conditions reasonable acceptable to Agent. 
The terms of this subsection (d) shall not apply to (i) deposit accounts
specifically and exclusively used for payroll, payroll taxes and other employee
wage and benefit payments to or for the benefit of such Borrower’s or
Guarantor’s salaried employees or (ii) an account maintained by Borrowers and a
management company engaged by Borrowers for the purpose of paying the real
property taxes of Borrowers and Guarantors so long as (A) Borrowers prefund the
amount of taxes to be paid in such account not earlier than ten (10) Business
Days prior to the date such taxes are required to be paid and (B) at all times
other than the time when such account may be prefunded during such ten (10) day
period with the amount of taxes to be so paid, not more than $5,000 is
maintained in such account.  Agent shall not exercise its right to require
amounts in such accounts to be sent to the Agent Payment Account except as
provided by Section 6.3 hereof.

 

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

 

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

 

(f)                                   No Borrower or Guarantor shall, directly
or indirectly, after the date hereof open, establish or maintain any investment
account, securities account, commodity account or any other similar account
(other than a deposit account) with any securities intermediary or commodity
intermediary unless each of the following conditions is satisfied: (A) Agent
shall have received not less than five (5) Business Days prior written notice of
the intention of such Borrower or Guarantor to open or establish such account
which notice shall specify in reasonable detail and specificity reasonably
acceptable to Agent the name of the account, the owner of the account, the name
and address of the securities intermediary or commodity intermediary at which
such account is to be opened or established, the individual at such intermediary
with whom such Borrower or Guarantor is dealing and the purpose of the account,
(B) the securities intermediary or commodity intermediary (as the case may be)
where such account is opened or maintained shall be reasonably acceptable to
Agent, and (C) on or before the opening of such investment account, securities
account or other similar account with a

 

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securities intermediary or commodity intermediary, such Borrower or Guarantor
shall as Agent may specify either (1) execute and deliver, and cause to be
executed and delivered to Agent, an Investment Property Control Agreement with
respect thereto duly authorized, executed and delivered by such Borrower or
Guarantor and such securities intermediary or commodity intermediary or
(2) arrange for Agent to become the entitlement holder with respect to such
investment property on terms and conditions acceptable to Agent.  Agent shall
not exercise its right to require amounts in such accounts to be sent to the
Agent Payment Account except during the existence of a Cash Dominion Event.

 

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

 

(h)                                 No Borrower or Guarantor has any commercial
tort claims with respect to which the amount claimed exceeds $1,000,000 and
either a written demand therefor has been made or legal action has commenced,
except as set forth on Schedule 5.2(h) hereto.  In the event that any Borrower
or Guarantor shall at any time after the date hereof have any such commercial
tort claims, or if an Event of Default exists, if any Borrower or Guarantor has
any commercial tort claims, such Borrower or Guarantor shall promptly notify
Agent thereof in writing, which notice shall (i) set forth in reasonable detail
the basis for and nature of such commercial tort claim and (ii) include the
express grant by such Borrower or Guarantor to Agent of a security interest in
such commercial tort claim (and the proceeds thereof).  In the event that such
notice does not include such grant of a security interest, the sending thereof
by such Borrower or Guarantor to Agent shall be deemed to constitute such grant
to Agent.  Upon the sending of such notice, any commercial tort claim described
therein shall constitute part of the Collateral and shall be deemed included
therein.  Without limiting the authorization of Agent provided in
Section 5.2(a) hereof or otherwise arising by the execution by such Borrower or
Guarantor of this Agreement or any of the other Financing Agreements, Agent is
hereby irrevocably authorized from time to time and at any time to file such
financing statements naming Agent or its designee as secured party and such
Borrower or Guarantor as debtor, or any amendments to any financing statements,
covering any such commercial tort claim as Collateral.  In addition, such
Borrower or Guarantor shall promptly upon Agent’s request, execute and deliver,
or cause

 

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to be executed and delivered, to Agent such other agreements, documents and
instruments as Agent may require in connection with such commercial tort claim.

 

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

 

(j)                                    Each Borrower and Guarantor shall take
any other actions reasonably requested by Agent from time to time to cause the
attachment, perfection and first priority of, and the ability of Agent to
enforce, the security interest of Agent in any and all of the Collateral,
including, without limitation, (i) executing, delivering and, where appropriate,
filing financing statements and amendments relating thereto under the UCC or
other applicable law, to the extent, if any, that such Borrower’s or Guarantor’s
signature thereon is required therefor, (ii) upon Agent’s request after the
occurrence and during the continuance of an Event of Default, causing Agent’s
name to be noted as secured party on any certificate of title for a titled good
if such notation is a condition to attachment, perfection or priority of, or
ability of Agent to enforce, the security interest of Agent in such Collateral,
(iii) complying with any provision of any statute, regulation or treaty of the
United States as to any Collateral if compliance with such provision is a
condition to attachment, perfection or priority of, or ability of Agent to
enforce, the security interest of Agent in such Collateral, (iv) obtaining the
consents and approvals required by any Governmental Authority or third party,
including, without limitation, any consent of any licensor, lessor or other
Person obligated on Collateral, and taking all actions required by other law, as
applicable in any relevant jurisdiction.  Notwithstanding the foregoing, nothing
in this Agreement shall require any Borrower or Guarantor to make any filings or
take any other actions to record or perfect Agent’s security interest in or lien
on any Intellectual Property outside the United States, unless Agent determines
in its good faith discretion that such recordation or perfection would be
required for Agent and Secured Parties have the Obligations paid in full in
accordance with the terms and conditions of this Agreement.

 

SECTION 6.        COLLECTION AND ADMINISTRATION

 

6.1                               Borrowers’ Loan Accounts.  Agent shall
maintain one or more loan account(s) on its books in the name of Borrowers
(collectively, the “Loan Accounts”) on which shall be recorded (i)  all
Revolving Loans, Letter of Credit Accommodations, Term Loans and other
Obligations attributable or allocable to the Credit Facility, including all
Special Agent Advances, (ii) all payments made by or on behalf of a Borrower in
respect of the Obligations arising under or related to the Revolving Loans,
including all Special Agent Advances,  the Term Loans, and all payments in
respect of any Revolving Loan  Priority Collateral and any Term Loan Priority

 

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Collateral, and (iii) all other appropriate debits and credits as provided in
this Agreement, including, without limitation, fees, charges, costs, expenses
and interest payable hereunder attributable or allocable to the Credit Facility.
All entries in the Loan Account shall be made in accordance with Agent’s
customary practices as in effect from time to time.  All Collateral or other
collateral security held by or granted to Agent or Secured Parties by a Borrower
or any third persons shall be security for the payment and performance of any
and all Obligations attributable to the Credit Facility to Agent and Secured
Parties (including, but not limited to, the Revolving Loans, Letter of Credit
Accommodations and Term Loans), notwithstanding the maintenance of separate
accounts for Borrowers or third persons or the existence of any notes.

 

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

 

6.3                               Collection of Accounts.

 

(a)                                 Borrowers and Guarantors shall establish and
maintain, at their expense, blocked accounts or lockboxes and related blocked
accounts (in either case, “Blocked Accounts”), as Agent may specify, with the
banks set forth on Schedule 31 to the Information Certificates and such other
banks as are reasonably acceptable to Agent; provided, that, not later than
sixty (60) days following the date hereof (or such later date as Agent may agree
in its discretion), each Borrower and Guarantor shall establish and maintain, at
its expense, deposit accounts and cash management services at Wells or one of
its Affiliates (except for certain local deposit accounts agreed to by Agent and
Borrowers which shall be maintained with such other institutions as are
acceptable to Agent) of a type and on terms reasonably satisfactory to Agent. 
The banks set forth on Schedule 31 of the Information Certificate constitute all
of the banks with which all Borrowers and all Guarantors have deposit account
and cash management arrangements as of the date hereof and identifies each of
the deposit accounts at such banks that are used for receiving receipts from
particular locations of a Borrower or otherwise describes the nature of the use
of such deposit account by such Borrower or Guarantor.  Such Blocked Accounts
may be Central Collection Deposit Accounts, and the term Blocked Accounts shall
include the Central Collection Deposit Accounts.  Borrowers and Guarantors shall
retain the use of their cash, including payments and proceeds of Collateral;
provided, that, at any time that a Cash Dominion Event exists or has occurred
and is continuing, Agent may, at its option, instruct the banks at which the
Blocked Accounts are maintained to remit the funds (other than funds in respect
of Non-Borrower Receivables) therein to Agent for application to the Obligations
and to otherwise comply only with the instructions of Agent.  If such Cash
Dominion Event ceases to

 

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

 

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

 

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Business Day.

 

(c)                                  Each Borrower and Obligor and its
shareholders, directors, employees, agents, Subsidiaries or other Affiliates
shall, acting as trustee for Agent, receive, as the property of Agent, any
monies, checks, notes, drafts or any other payment relating to and/or proceeds
of Accounts or other Collateral which come into their possession or under their
control and promptly, upon receipt thereof, shall deposit or cause the same to
be deposited in the Blocked Accounts, or if a Cash Dominion Event exists or has
occurred and is continuing, at Agent’s option, remit the same or cause the same
to be remitted, in kind, to the Agent Payment Account.  In no event shall the
same be commingled with any Borrower’s or Obligor’s funds.  Borrowers and
Guarantors agree to reimburse Agent on demand for any amounts owed or paid to
any bank at which a Blocked Account or any other deposit account is established
or any other bank or Person involved in the transfer of funds to or from the
Blocked Accounts arising out of Agent’s payments to or indemnification of such
bank or Person.  The obligation of Borrowers and Guarantors to reimburse Agent
for such amounts pursuant to this Section 6.3(c) shall survive the termination
or non-renewal of this Agreement.

 

6.4                               Payments.

 

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

 

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

 

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

 

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

 

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

 

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

 

(vi)                              sixth, ratably to pay principal in respect of
the Term Loans in accordance with the regularly scheduled payments set forth in
Section 2.8(c) hereof, to the extent the same are then due and payable;

 

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

 

(viii)                        eighth, to cash collateralize any outstanding
Letter of Credit Accommodations if required under the terms of this Agreement;

 

(ix)                              ninth, to pay any Obligations due in respect
of the Bank Products, if any; and

 

(x)                                 tenth

 

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

 

(b)                                 Notwithstanding anything to the contrary
contained in Section 6.4(a), from and after the commencement of a Priority
Event, unless waived in writing by Agents and Lenders, Agents shall apply
payments received or collected from Borrowers or Obligors or for the account of
Borrowers or Obligors (including the monetary proceeds of collections or of
realization upon any Collateral) as follows:

 

(i)                                     With respect to any and all proceeds of
Collateral, other than the proceeds from Term Loan Priority Collateral:

 

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

 

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

 

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

 

(D)                               fourth, ratably to pay that portion of the
Obligations constituting accrued and unpaid interest on the Revolving Loans and
other Obligations (other than Obligations owing to the Term Loan Lenders), and
fees;

 

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

 

(F)                                 sixth, to cash collateralize any outstanding
Letter of Credit Accommodations;

 

(G)                               seventh, to pay any Obligations due with
respect to the Bank Products up to the sum of (1) the amount of the Bank Product
Reserve then in effect for

 

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such Obligations plus (2) up to $5,000,000 for such Obligations for which no
Bank Product Reserve has been established;

 

(H)                              eighth, ratably to pay that portion of the
Obligations constituting accrued and unpaid interest on the Term Loans and other
Obligations and fees owing to the Term Loan Lenders,

 

(I)                                   ninth, ratably to pay that portion of the
Obligations constituting unpaid principal of the Term Loans;

 

(J)                                   tenth, to pay any remaining Obligations
due in respect of the Bank Products; and

 

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

 

(ii)                                  With respect to any and all proceeds from
Term Loan Priority Collateral:

 

(A)                               first, to payment of Agent for its costs and
expenses incurred in connection with the collection and enforcement of the
Obligations and for the protection, preservation or sale, disposition or other
realization upon the Term Loan Priority Collateral, including all expenses and
liabilities incurred or made by or on behalf of Agent, in connection therewith
(including attorneys’ fees and legal expenses and other expenses of Agent);

 

(B)                               second, ratably to pay that portion of the
Obligations constituting indemnities and other amounts (other than principal,
interest and fees) then due to Term Loan Agent and Term Loan Lenders;

 

(C)                               third, ratably to pay any fees then due to the
Term Loans Lenders until paid in full;

 

(D)                               fourth, ratably to pay interest accrued in
respect of the Term Loans until paid in full;

 

(E)                                fifth, ratably to pay principal due in
respect of Term Loans until paid in full;

 

(F)                                 sixth, to cash collateralize unliquidated
indemnification obligations for which a claim has been asserted against Term
Loan Agent or any Term Loan Lender;

 

(G)                               seventh, to pay the remaining Obligations, in
accordance with the priorities established pursuant to Section 6.04(b)(i) above;
and

 

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

 

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

 

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

 

(ii)                                  should any payment or distribution on
security or instrument or proceeds thereof be received by a Lender other than in
accordance with this Section 6.4, such Lender shall receive and hold the same in
trust, for the benefit of Agent, the other Lenders and the Bank Product
Providers, and shall forthwith deliver the same to Agent (together with any
endorsement or assignment of such Lender where necessary), for application by
Agent to the Obligations in accordance with the terms of this Section 6.4;

 

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

 

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

 

(d)                                 At Agent’s option, all principal, interest,
fees, costs, expenses and other charges provided for in this Agreement or the
other Financing Agreements may be charged directly to the loan accounts of
Borrowers maintained by Agent.  Borrowers shall make all payments to Agent and
Lenders on the Obligations free and clear of, and without deduction or

 

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withholding for or on account of, any setoff, counterclaim, defense,
restrictions or conditions of any kind.  If after receipt of any payment of, or
proceeds of Collateral applied to the payment of, any of the Obligations, Agent
or any Lender is required to surrender or return such payment or proceeds to any
Person for any reason, then the Obligations intended to be satisfied by such
payment or proceeds shall be reinstated and continue and this Agreement shall
continue in full force and effect as if such payment or proceeds had not been
received by Agent or such Lender.  Borrowers shall be liable to pay to Agent and
Lenders, and do hereby indemnify and hold Agent and Lenders harmless for the
amount of any payments or proceeds surrendered or returned.  This
Section 6.4(d) shall remain effective notwithstanding any contrary action which
may be taken by any Agent or any Lender in reliance upon such payment or
proceeds.  This Section 6.4(d) shall survive the payment of the Obligations and
the termination of this Agreement.

 

(e)                                  Borrowers hereby direct Agent to charge the
Loan Account(s) of Borrowers for all principal, interest, fees, costs, expenses
and other amounts and charges provided for in this Agreement or the other
Financing Agreements with respect to the Term Loans which are due and payable to
Term Agent or Term Loan Lenders hereunder.

 

6.5                               Taxes.

 

(a)                                 Any and all payments by Borrowers and
Guarantors to Agent, any Issuing Bank or any Lender under this Agreement and any
of the other Financing Agreements shall be made free and clear of, and without
deduction or withholding for, any Taxes, except to the extent required by
applicable law.  In addition, Borrowers shall pay all Other Taxes (or Agent may,
at its option, pay such Other Taxes and charge the loan account of Borrowers for
such amounts so paid).

 

(b)                                 Borrowers and Guarantors shall indemnify and
hold harmless Agent, Issuing Bank and Lenders for the full amount of Taxes or
Other Taxes paid by Agent, any Issuing Bank or any Lender (including any Taxes
or Other Taxes imposed by any jurisdiction on amounts payable under this
Section, but not including Other Taxes that arise as a result of Agent’s, any
Issuing Bank’s or any Lender’s activities with the applicable taxing
jurisdiction, if any, and not as a result of this Agreement) and any liability
(including penalties, interest and expenses (including reasonable attorney’s
fees and expenses) other than those resulting solely from a failure by Agent,
any Issuing Bank or any Lender to pay any Taxes or Other Taxes which it is
required to pay and for which it received an indemnity payment) arising
therefrom or with respect thereto, whether or not such Taxes or Other Taxes were
correctly or legally asserted by the relevant Governmental Authority; provided,
that, Borrowers and Guarantors shall not be required to indemnify Agent, any
Issuing Bank or any Lender with respect to any Taxes or Other Taxes which are
attributable to such Agent’s, Issuing Bank’s or Lender’s failure to comply with
the provisions of Section 6.5(f), (g), (i) or (j) hereof.  Payment under this
indemnification shall be made within ten (10) days after the date Agent, any
Issuing Bank or any Lender makes written demand therefor on Borrowers.  If
Borrowers reasonably believe that such Taxes or Other Taxes were not correctly
or legally asserted, Agent, such Issuing Bank or such Lender shall, upon
Borrowers’ request and at Borrowers’ expense, provide such documents to
Borrowers in form and substance reasonably satisfactory to Agent, as Borrowers
may reasonably request, to enable Borrowers to contest such Taxes or Other Taxes
pursuant to appropriate proceedings then available to Borrowers (so long as
providing such documents shall not, in the good faith

 

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determination of Agent, have a reasonable likelihood of resulting in any
liability of Agent, any Issuing Bank or any Lender).

 

(c)                                  If any Borrower or Guarantor shall be
required by law to deduct or withhold any Taxes or Other Taxes from or in
respect of any sum payable hereunder or under the other Financing Agreements to
Agent, any Issuing Bank or any Lender, then:

 

(i)                                     the sum payable shall be increased as
necessary so that after making all required deductions and withholdings
(including deductions and withholdings applicable to additional sums payable
under this Section) Agent, such Issuing Bank or such Lender receives an amount
equal to the sum it would have received had no such deductions or withholdings
been made; provided, that, Borrowers and Guarantors shall not be required to
increase any such sum payable to Agent, any Issuing Bank or any Lender which is
attributable to such Agent’s, Issuing Bank’s or Lender’s failure to comply with
the provisions of Section 6.5(f), (g), (i) or (j) hereof;

 

(ii)                                  such Borrower or Guarantor shall make such
deductions and withholdings;

 

(iii)                               such Borrower or Guarantor shall pay the
full amount deducted or withheld to the relevant taxing authority or other
authority in accordance with applicable law; and

 

(iv)                              to the extent not paid to Agent, Issuing Bank
or Lenders pursuant to Section 6.5(c)(i), such Borrower or Guarantor shall also
pay to Agent, any Issuing Bank or any Lender, at the time interest is paid, all
additional amounts which are necessary to preserve the after-tax yield Agent,
such Issuing Bank or such Lender would have received pursuant to the Financing
Agreements if such Taxes or Other Taxes had not been imposed.

 

(d)                                 Within thirty (30) days after the date of
any payment by any Borrower or Guarantor of Taxes or Other Taxes, such Borrower
or Guarantor shall furnish to Agent the original or a certified copy of a
receipt evidencing payment thereof, or other evidence of payment reasonably
satisfactory to Agent.

 

(e)                                  If any Borrower or Guarantor otherwise
would be required to pay additional amounts to Agent, Issuing Bank or a Lender
pursuant to subsection (c) of this Section, then upon Borrowers’ written request
such Lender shall use reasonable efforts at Borrowers’ expense (consistent with
legal and regulatory restrictions) to take such action, including changing the
jurisdiction of its lending office, so as to eliminate or reduce any such
additional payment by such Borrower or Guarantor which may thereafter accrue.

 

(f)                                   In the event a Lender shall assign the
Obligations and its rights hereunder to an assignee which is organized under the
laws of a jurisdiction outside the United States of America on or prior to the
effective date of any such assignment, such assignee of a Lender shall provide
Borrowers with an IRS Form W-8BEN or Form W-8ECI or other applicable form,
certificate or document prescribed by the Internal Revenue Service certifying as
to such assignee’s being entitled to full exemption from United States of
America withholding tax with respect to all payments to be made to such assignee
hereunder and under any of the other

 

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Financing Agreements (unless such assignee of a Lender is unable to do so by
reason of a change in law, including, without limitation, any statute, treaty,
ruling, determination or regulation occurring subsequent to the effective date
of such assignment).

 

(g)                                  Notwithstanding anything to the contrary
contained in this Section 6.5, unless Borrowers have received forms or other
documents indicating that payments to a Lender or Issuing Bank hereunder or
under any of the other Financing Agreements are not subject to United States of
America withholding or backup withholding tax, Borrowers shall, (i) withhold
taxes from such payments at the applicable statutory rate, or at a rate reduced
by an applicable tax treaty and (ii) pay such assignee such payment net of any
taxes so withheld.  Lenders and Issuing Bank will be required to use reasonable
efforts (including reasonable efforts to change its lending office) to avoid or
to minimize any amounts which might otherwise be payable by any Borrower or
Guarantor pursuant to this Section 6.5; provided, that, such efforts shall not
cause the imposition on such assignee of any additional costs or legal or
regulatory burdens deemed by such assignee in good faith to be material.

 

(h)                                 If Agent, Issuing Bank or any Lender
receives a refund or other permanent tax benefit in respect of any Taxes or
Other Taxes for which Agent, such Issuing Bank or such Lender has received an
indemnification payment or additional amounts from any Borrower or Guarantor
hereunder, so long as no Event of Default shall exist or have occurred and be
continuing, Agent, such Issuing Bank or such Lender (as the case may be) shall
credit to the loan account of Borrowers the amount of such refund or other tax
benefit.

 

(i)                                     Each Person that is a Lender or Issuing
Bank as of the date of this Agreement and each Person that becomes a Lender or
Issuing Bank after the date of this Agreement (i) either (A) represents and
warrants to the Borrowers that such Person is incorporated or organized under
the laws of the United States of America or a state thereof or (B) agrees to
furnish (if it is organized under the laws of any jurisdiction other than the
United States of America or any State thereof) to Agent and Borrowers prior to
the time that Agent or such Borrower is required to make any payment of
principal, interest or fees hereunder, duplicate executed originals of either
U.S. Internal Revenue Service Form W-8BEN (wherein such Lender claims
entitlement to the benefits of a tax treaty that provides for a complete
exemption from U.S. federal income withholding tax on all payments hereunder) or
W-8ECI, as applicable and agrees to provide new such forms upon the expiration
of any previously delivered form or comparable statements in accordance with
applicable U.S. law and regulations and amendments thereto, duly executed and
completed by such Lender, and (ii) agrees to comply with all applicable U.S.
laws and regulations with regard to such withholding tax exemption.  If a
payment made to a Lender or Issuing Bank that is organized under the laws of any
jurisdiction other than the United States of America or any State thereof would
be subject to United States federal withholding tax imposed by FATCA and such
Lender fails to comply with the applicable reporting requirements of FATCA
(including those contained in Sections 1471(b) or 1472(b) of the Code, as
applicable), such Lender or Issuing Bank shall deliver to Agent and Borrowers
documentation, at the time or times required by FATCA (including such additional
documentation reasonably requested by the Borrowers as may be necessary to
demonstrate that such Lender or Issuing Bank has complied with applicable
reporting requirements of FATCA) so that payments made to such Lender or Issuing
Bank hereunder would not be subject to United States federal withholding taxes
under FATCA, or, if necessary, to determine the amount to

 

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deduct and withhold from such payment.

 

(j)                                    Each Lender or Issuing Bank (other than
any Lender or Issuing Bank that is entitled to a presumption under applicable
Treasury Regulations that it is a domestic corporation for U.S. federal income
tax purposes) shall deliver to Agent (or, in the case of an assignee of a Lender
which (i) is an Affiliate of such Lender or an Approved Fund of such Lender and
(ii) does not deliver an Assignment and Acceptance Agreement to Agent pursuant
to Section 14.7(a) hereof for recordation pursuant to Section 14.7(b) hereof, to
the assigning Lender only) and Borrowers two properly completed and duly
executed copies of U.S. Internal Revenue Service Form W-9 certifying that such
Lender is exempt from U.S. backup withholding tax.  Such forms shall be
delivered by each such Lender on or before the date it becomes a party to this
Agreement and thereafter within twenty (20) days after receipt of a written
request therefor from Agent.  Notwithstanding any other provision of this
Section 6.5(j), a Lender or Issuing Bank described in this Section 6.5(j) shall
not be required to deliver any form pursuant to this Section 6.5(j) that such
Lender or Issuing Bank is not legally able to deliver.

 

6.6                               Authorization to Make Loans.  Agent and
Lenders are authorized to make the Revolving Loans and provide the Letter of
Credit Accommodations based upon telephonic or other instructions received from
anyone purporting to be an officer of a Borrower or other authorized person or,
at the discretion of Agent, if such Revolving Loans are necessary to satisfy any
Obligations; provided, however, that Agent and Lenders shall direct the
Revolving Loans only into those accounts of a Borrower authorized in writing by
more than one Authorized Officer.  The foregoing sentence notwithstanding, if
Agent or a Lender makes a Revolving Loan into an account of a Borrower
designated by a Person who no longer is an Authorized Officer and Agent did not
receive notice that such Person is no longer an Authorized Officer, such
Revolving Loan will still be considered an Obligation hereunder.  All requests
for Revolving Loans or Letter of Credit Accommodations hereunder shall specify
the date on which the requested advance is to be made or Letter of Credit
Accommodations established (which day shall be a Business Day for any Revolving
Loan or Letter of Credit Accommodation) and the amount of the requested
Revolving Loan.  Requests received after 12:00 p.m. New York time on any day
shall be deemed to have been made as of the opening of business on the
immediately following Business Day.  All Revolving Loans under this Agreement
shall be conclusively presumed to have been made to, and at the request of and
for the benefit of, Borrowers or when deposited to the credit of any Borrower or
otherwise disbursed or established in accordance with the instructions of
Borrowers or in accordance with the terms and conditions of this Agreement.

 

6.7                               Use of Proceeds.  Borrowers shall use the
proceeds of the Loans provided by or on behalf of Lenders to Borrowers hereunder
only for (a) costs, expenses and fees in connection with the preparation,
negotiation, execution and delivery of this Agreement and the other Financing
Agreements and consummation of any other permitted transactions contemplated
hereby which will take place on the date hereof, (b) the repurchase of shares of
Capital Stock to the extent permitted by the terms and condition of this
Agreement, and (c) for general operating, working capital and other proper
corporate purposes of Borrowers not otherwise prohibited by the terms hereof. 
None of the proceeds of any Loans or Letter of Credit Accommodations will be
used, directly or indirectly, for the purpose of purchasing or carrying any
margin security or for the purposes of reducing or retiring any Indebtedness
which was originally incurred to purchase or carry any margin security or for
any other purpose which might cause any of the

 

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Loans or Letter of Credit Accommodations to be considered a “purpose credit”
within the meaning of Regulation U of the Board of Governors of the Federal
Reserve System, as amended.

 

6.8                               Pro Rata Treatment.  Except to the extent
otherwise provided in this Agreement:  (a) the making and conversion of Loans
shall be made among the Lenders based on their respective Pro Rata Shares as to
the Loans and (b) each payment on account of any Obligations to or for the
account of one or more of Lenders in respect of any Obligations due on a
particular day shall be allocated among the Lenders entitled to such payments
based on their respective Pro Rata Shares and shall be distributed accordingly.

 

6.9                               Sharing of Payments, Etc.

 

(a)                                 Each Borrower agrees that, in addition to
(and without limitation of) any right of setoff, banker’s lien or counterclaim
Agent or any Lender may otherwise have, each Lender shall be entitled, at its
option (but subject, as among Agent and Lenders, to the provisions of
Section 12.3(b) hereof), to offset balances held by it for the account of any
Borrower at any of its offices, in dollars or in any other currency, against any
principal of or interest on any Loans owed to such Lender or any other amount
payable to such Lender hereunder, that is not paid when due (regardless of
whether such balances are then due to any Borrower), in which case it shall
promptly notify Borrowers and Agent thereof; provided, that, such Lender’s
failure to give such notice shall not affect the validity thereof.

 

(b)                                 If any Lender (including Agent) shall obtain
from any Borrower payment of any principal of or interest on any Loan owing to
it or payment of any other amount under this Agreement or any of the other
Financing Agreements through the exercise of any right of setoff, banker’s lien
or counterclaim or similar right or otherwise (other than from Agent as provided
herein), and, as a result of such payment, such Lender shall have received more
than its Pro Rata Share of the principal of the Loans or more than its share of
such other amounts then due hereunder or thereunder by Borrowers to such Lender
than the percentage thereof received by any other Lender, it shall promptly pay
to Agent, for the benefit of Lenders, the amount of such excess and
simultaneously purchase from such other Lenders a participation in the Loans or
such other amounts, respectively, owing to such other Lenders (or such interest
due thereon, as the case may be) in such amounts, and make such other
adjustments from time to time as shall be equitable, to the end that all Lenders
shall share the benefit of such excess payment (net of any expenses that may be
incurred by such Lender in obtaining or preserving such excess payment) in
accordance with their respective Pro Rata Shares or as otherwise agreed by
Lenders.  To such end all Lenders shall make appropriate adjustments among
themselves (by the resale of participation sold or otherwise) if such payment is
rescinded or must otherwise be restored.

 

(c)                                  Each Borrower agrees that any Lender
purchasing a participation (or direct interest) as provided in this Section may
exercise, in a manner consistent with this Section, all rights of setoff,
banker’s lien, counterclaim or similar rights with respect to such participation
as fully as if such Lender were a direct holder of Loans or other amounts (as
the case may be) owing to such Lender in the amount of such participation.

 

(d)                                 Nothing contained herein shall require any
Lender to exercise any right of setoff, banker’s lien, counterclaims or similar
rights or shall affect the right of any Lender to

 

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exercise, and retain the benefits of exercising, any such right with respect to
any other Indebtedness or obligation of any Borrower.  If, under any applicable
bankruptcy, insolvency or other similar law, any Lender receives a secured claim
in lieu of a setoff to which this Section applies, such Lender shall, to the
extent practicable, assign such rights to Agent, for itself and the ratable
benefit of the Lenders and the Bank Product Providers, and, in any event,
exercise its rights in respect of such secured claim in a manner consistent with
the rights of Lenders entitled under this Section to share in the benefits of
any recovery on such secured claim.

 

6.10                        Settlement Procedures.

 

(a)                                 In order to administer the Revolving Credit
Facility in an efficient manner and to minimize the transfer of funds between
Agent and Lenders, Agent may, at its option, subject to the terms of this
Section, make available, on behalf of Lenders, the full amount of the Loans
requested or charged to Borrowers’ loan accounts or otherwise to be advanced by
Lenders pursuant to the terms hereof, without requirement of prior notice to
Lenders of the proposed Loans.

 

(b)                                 With respect to all Loans made by Agent on
behalf of Lenders as provided in this Section, the amount of each Lender’s Pro
Rata Share of the outstanding Loans shall be computed weekly, and shall be
adjusted upward or downward on the basis of the amount of the outstanding Loans
as of 5:00 p.m. New York time on the Business Day immediately preceding the date
of each settlement computation; provided, that, Agent retains the absolute right
at any time or from time to time to make the above described adjustments at
intervals more frequent than weekly, but in no event more than twice in any
week.  Agent shall deliver to each of the Lenders after the end of each week, or
at such lesser period or periods as Agent shall determine, a summary statement
of the amount of outstanding Loans for such period (such week or lesser period
or periods being hereinafter referred to as a “Settlement Period”).  If the
summary statement is sent by Agent and received by a Lender prior to 12:00 p.m.
New York time, then such Lender shall make the settlement transfer described in
this Section by no later than 2:00 p.m. New York time on the same Business Day
and if received by a Lender after 12:00 p.m. New York time, then such Lender
shall make the settlement transfer by no later than 2:00 p.m. New York time on
the next Business Day following the date of receipt.  If, as of the end of any
Settlement Period, the amount of a Lender’s Pro Rata Share of the outstanding
Loans is more than such Lender’s Pro Rata Share of the outstanding Loans as of
the end of the previous Settlement Period, then such Lender shall forthwith (but
in no event later than the time set forth in the preceding sentence) transfer to
Agent by wire transfer in immediately available funds the amount of the
increase.  Alternatively, if the amount of a Lender’s Pro Rata Share of the
outstanding Loans in any Settlement Period is less than the amount of such
Lender’s Pro Rata Share of the outstanding Loans for the previous Settlement
Period, then, if the summary statement is prepared and delivered to Lenders by
Agent prior to 12:00 p.m. New York time, then Agent shall make the transfer
described in this Section by no later than 3:00 p.m. New York time on the same
Business Day and if prepared and delivered to Lenders by Agent after 12:00 p.m.
New York time, then Agent shall make the transfer by no later than 3:00 p.m. New
York time on the next Business Day following the date of receipt, by wire
transfer in immediately available funds the amount of the decrease.  The
obligation of each of the Lenders and Agent to transfer such funds and effect
such settlement shall be irrevocable.  Agent and each Lender agrees to mark its
books and records at the end of each Settlement Period to show at all times the

 

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dollar amount of its Pro Rata Share of the outstanding Loans and Letter of
Credit Accommodations.  Each Lender shall only be entitled to receive interest
on its Pro Rata Share of the Loans to the extent such Loans have been funded by
such Lender.  Because Agent on behalf of Lenders may be advancing and/or may be
repaid Loans prior to the time when Lenders will actually advance and/or be
repaid such Loans, interest with respect to Loans shall be allocated by Agent in
accordance with the amount of Loans actually advanced by and repaid to each
Lender and Agent and shall accrue from and including the date such Loans are so
advanced to but excluding the date such Loans are either repaid by Borrowers or
actually settled with the applicable Lender as described in this Section.

 

(c)                                  To the extent that Agent has made any such
amounts available and the settlement described above shall not yet have
occurred, upon repayment of any Loans by Borrower, Agent may apply such amounts
repaid directly to any amounts made available by Agent pursuant to this
Section.  In lieu of weekly or more frequent settlements, Agent may, at its
option, at any time require each Lender to provide Agent with immediately
available funds representing its Pro Rata Share of each Loan, prior to Agent’s
disbursement of such Loan to Borrowers.  In such event, all Loans under this
Agreement shall be made by the Lenders simultaneously and proportionately to
their Pro Rata Shares.  No Lender shall be responsible for any default by any
other Lender in the other Lender’s obligation to make a Loan requested hereunder
nor shall the Commitment, as the case may be, of any Lender be increased or
decreased as a result of the default by any other Lender in the other Lender’s
obligation to make a Loan hereunder.

 

(d)                                 If Agent is not funding a particular Loan to
Borrowers pursuant to Section 6.10(a) hereof on any day, Agent may assume that
each Lender will make available to Agent such Lender’s Pro Rata Share of the
Loan requested or otherwise made on such day and Agent may, in its discretion,
but shall not be obligated to, cause a corresponding amount to be made available
to or for the benefit of Borrowers on such day.  If Agent makes such
corresponding amount available to Borrowers and such corresponding amount is not
in fact made available to Agent by such Lender, Agent shall be entitled to
recover such corresponding amount on demand from such Lender together with
interest thereon for each day from the date such payment was due until the date
such amount is paid to Agent at the Federal Funds Rate for each day during such
period (as published by the Federal Reserve Bank of New York or at Agent’s
option based on the arithmetic mean determined by Agent of the rates for the
last transaction in overnight Federal funds arranged prior to 9:00 a.m. (New
York City time) on that day by each of the three leading brokers of Federal
funds transactions in New York City selected by Agent) and if such amounts are
not paid within three (3) days of Agent’s demand, at the highest interest rate
provided for in Section 3.1 hereof applicable to such Loans.  During the period
in which such Lender has not paid such corresponding amount to Agent,
notwithstanding anything to the contrary contained in this Agreement or any of
the other Financing Agreements, the amount so advanced by Agent to or for the
benefit of Borrowers shall, for all purposes hereof, be a Loan made by Agent for
its own account.  Upon any such failure by a Lender to pay Agent, Agent shall
promptly thereafter notify Borrowers of such failure and Borrowers shall pay
such corresponding amount to Agent for its own account within five (5) Business
Days of Borrowers’ receipt of such notice.  The term “Defaulting Lender” shall
mean (i) any Lender that has failed to fund any portion of the Loans or
participations in Letter of Credit Obligations required to be funded by it
hereunder within one (1) Business Day of the date required to be funded by it

 

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hereunder, or has otherwise failed to pay over to Agent or any other Lender any
other amount required to be paid by it hereunder within one (1) Business Day of
the date when due, and such failure has not been cured by the making of such
funding or payment over to Agent or such Lender by such Lender with such one
(1) Business Day period, (ii) any Lender that has notified Agent, any
Lender, Issuing Bank, or any Borrower or Guarantor in writing that it will not
or does not intend to comply with any of its funding obligations under this
Agreement (and such Lender has not retracted such notification in writing) or
has made a public statement in writing to the effect that it will not or does
not intend to comply with its funding obligations under this Agreement (and such
Lender has not retracted such public statement in writing), or (iii) any Lender
that becomes or is insolvent or has a parent company that has become or is
insolvent or becomes the subject of a bankruptcy or insolvency proceeding, or
has a receiver, conservator, trustee or custodian appointed for it, or has taken
any action in furtherance of, or indicating its consent to, approval of or
acquiescence in any such proceeding or appointment and has not obtained all
required orders, approvals or consents of any court or other Governmental
Authority to continue to fulfill its obligations hereunder, in form and
substance satisfactory to Agent.  Agent shall not be obligated to transfer to a
Defaulting Lender any payments received by Agent for the Defaulting Lender’s
benefit, nor shall a Defaulting Lender be entitled to the sharing of any
payments hereunder (including any principal, interest or fees).  Amounts payable
to a Defaulting Lender shall instead be paid to or retained by Agent.  Agent may
hold and, in its discretion, relend to Borrowers the amount of all such payments
received or retained by it for the account of such Defaulting Lender.  For
purposes of voting or consenting to matters with respect to this Agreement and
the other Financing Agreements and determining Pro Rata Shares, such Defaulting
Lender shall be deemed not to be a “Lender” and such Lender’s Commitment shall
be deemed to be zero (0).  This Section shall remain effective with respect to a
Defaulting Lender until such default is cured.  The operation of this
Section shall not be construed to increase or otherwise affect the Commitment of
any Lender, or relieve or excuse the performance by any Borrower or any Obligor
of their duties and obligations hereunder.

 

(e)                                  For purposes of voting or consenting to
matters with respect to this Agreement and the other Financing Agreements and
determining Pro Rata Shares, such Defaulting Lender shall be deemed not to be a
“Lender” and such Lender’s Commitment shall be deemed to be zero (0).  So long
as there is a Defaulting Lender, the maximum amount of the Loans and Letter of
Credit Accommodations shall not exceed the aggregate amount of the Commitments
of the Lenders that are not Defaulting Lenders plus the Pro Rata Share of the
Defaulting Lender (determined immediately prior to its being a Defaulting
Lender) of the Loans and Letter of Credit Accommodations outstanding as of the
date that the Defaulting Lender has become a Defaulting Lender.  At any time
that there is a Defaulting Lender, payments received for application to the
Obligations payable to Lenders in accordance with the terms of this Agreement
shall be distributed to Lenders based on their Pro Rata Shares calculated after
giving effect to the reduction of the Defaulting Lender’s Loan Commitment to
zero (0) as provided herein or at Agent’s option, Agent may instead receive and
retain such amounts that would be otherwise attributable to the Pro Rata Share
of a Defaulting Lender (which for such purpose shall be such Pro Rata Share as
in effect immediately prior to its being a Defaulting Lender).  To the extent
that Agent elects to receive and retain such amounts, Agent may hold such
amounts (which shall not accrue interest) and, in its reasonable discretion,
relend such amounts to a Borrower.  To the extent that Agent exercises its
option to relend such amounts, such amounts shall be treated as Revolving Loans
for the account of Agent in addition to the Revolving Loans

 

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that are made by the Lenders other than a Defaulting Lender based on their
respective Pro Rata Shares as calculated after giving effect to the reduction of
such Defaulting Lender’s Commitment to zero (0) as provided herein but shall be
repaid in the same order of priority as the principal amount of the Loans on a
pro rata basis for purposes of Section 6.7 hereof.  Agent shall determine
whether any Revolving Loans requested shall be made from relending such amounts
or from Revolving Loans from the Lenders (other than a Defaulting Lender) and
any allocation of requested Revolving Loans between them. The rights of a
Defaulting Lender shall be limited as provided herein until such time as the
Defaulting Lender has made all payments to Agent of the amounts that it had
failed to pay causing it to become a Defaulting Lender and such Lender is
otherwise in compliance with the terms of this Agreement (including making any
payments as it would have been required to make as a Lender during the period
that it was a Defaulting Lender other than in respect of the principal amount of
Revolving Loans, which payments as to the principal amount of Revolving Loans
shall be made based on the outstanding balance thereof on the date of the cure
by Defaulting Lender or at such other time thereafter as Agent may specify) or
has otherwise provided evidence in form and substance satisfactory to Agent that
such Defaulting Lender will be able to fund its Pro Rata Share (as in effect
immediately prior to its being a Defaulting Lender) in accordance with the terms
hereof.  Upon the cure by Defaulting Lender of the event that is the basis for
it to be a Defaulting Lender by making such payment or payments and such Lender
otherwise being in compliance with the terms hereof, such Lender shall cease to
be a Defaulting Lender and shall only be entitled to payment of interest accrued
during the period that such Lender was a Defaulting Lender to the extent
previously received and retained by Agent from or for the account of Borrowers
on the funds constituting Loans funded by such Lender prior to the date of it
being a Defaulting Lender (and not previously paid to such Lender) and shall
otherwise, on and after such cure, make Loans and settle in respect of the Loans
and other Obligations in accordance with the terms hereof. The existence of a
Defaulting Lender and the operation of this Section shall not be construed to
increase or otherwise affect the Commitment of any Lender, or relieve or excuse
the performance by any Borrower or Guarantor of its duties and obligations
hereunder (including, but not limited to, the obligation of such Borrower or
Guarantor to make any payments hereunder, whether in respect of Loans by a
Defaulting Lender or otherwise).

 

(f)                                   Notwithstanding anything to the contrary
contained in this Agreement, in the event that there is a Defaulting Lender, if
there are any Letter of Credit Accommodations outstanding, within one
(1) Business Day after the written request of an Issuing Bank, Borrowers shall
pay to Agent an amount equal to the Pro Rata Share of the Defaulting Lender
(calculated as in effect immediately prior to such Lender becoming a Defaulting
Lender) of the Letter of Credit Obligations then outstanding to be held by Agent
on terms and conditions satisfactory to Agent and such Issuing Bank as cash
collateral for the Obligations and for so long as there is a Defaulting Lender,
such Issuing Bank shall not be required to issue any Letter of Credit
Accommodations, or increase or extend or otherwise amend any Letter of Credit
Accommodations, unless upon the request of such Issuing Bank, Agent has cash
collateral from Borrowers in an amount equal to the Pro Rata Share of the
Defaulting Lender (calculated as in effect immediately prior to such Lender
becoming a Defaulting Lender) of the Letter of Credit Obligations outstanding
after giving effect to any such requested Letter of Credit (or increase,
extension or other amendment) to be held by Agent on its behalf on terms and
conditions satisfactory to Agent and such Issuing Bank or there are other
arrangements reasonably satisfactory to such Issuing Bank with respect to the
participation in Letter of Credit

 

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Accommodations by such Defaulting Lender.  Such cash collateral shall be applied
first to the Letter of Credit Obligations before application to any other
Obligations, notwithstanding anything to the contrary contained in Section 6.7
hereof

 

(g)                                  Nothing in this Section or elsewhere in
this Agreement or the other Financing Agreements shall be deemed to require
Agent to advance funds on behalf of any Lender or to relieve any Lender from its
obligation to fulfill its Commitment hereunder or to prejudice any rights that
Borrowers may have against any Lender as a result of any default by any Lender
hereunder in fulfilling its Commitment.

 

6.11                        Obligations Several; Independent Nature of Lenders’
Rights.  The obligation of each Lender hereunder is several, and no Lender shall
be responsible for the obligation or commitment of any other Lender hereunder. 
Nothing contained in this Agreement or any of the other Financing Agreements and
no action taken by the Lenders pursuant hereto or thereto shall be deemed to
constitute the Lenders to be a partnership, an association, a joint venture or
any other kind of entity.  The amounts payable at any time hereunder to each
Lender shall be a separate and independent debt, and subject to Section 12.3
hereof, each Lender shall be entitled to protect and enforce its rights arising
out of this Agreement and it shall not be necessary for any other Lender to be
joined as an additional party in any proceeding for such purpose.

 

SECTION 7.        COLLATERAL REPORTING AND COVENANTS

 

7.1                               Collateral Reporting.

 

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

 

(i)                                     as soon as possible after the end of
each month (but in any event within fifteen (15) Business Days after the end
thereof), on a monthly basis, and at any time an Increased Collateral Reporting
Event exists or has occurred and is continuing, more frequently as Agent may
request: (A) Inventory reports by category, (B) a Collateral mix report, in form
and substance satisfactory to Agent; (C) a statement confirming the payment of
rent and other amounts due to owners and lessors of real property used by any
Borrower or Guarantor during the immediately preceding month, subject to
year-end or periodic adjustments; provided, that, if such Increased Collateral
Reporting Event ceases to exist as determined by Agent, Borrowers shall
thereafter deliver such collateral reports described in this
Section 7.1(a)(i) on a monthly basis as provided herein;

 

(ii)                                  as soon as possible after the end of each
month (but in any event within fifteen (15) Business Days after the end
thereof), on a monthly basis, (A) a Borrowing Base Certificate, certified by the
principal accounting officer or principal financial officer of each Borrower as
true and correct, which shall include the calculation of the Compliance Excess
Availability and the calculation of Net Amount of Eligible Credit Card
Receivables, Net Amount of Eligible Damaged Goods Vendors Receivables and Net
Amount of Eligible Sell-Off Vendors Receivables after giving effect to the
assertion of any claims, offsets, defenses or counterclaims by any account
debtor, or any disputes with account debtors, or any settlement, adjustment or
compromise thereof; provided, that, at any time an Increased Collateral
Reporting Event exists or

 

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has occurred and is continuing, as soon as possible after the end of each week
(but in any event within three (3) Business Days after the end thereof), a
Borrowing Base Certificate duly executed and together with all schedules
required pursuant to the terms of each such Borrowing Base Certificate duly
completed, and if such Increased Collateral Reporting Event ceases to exist as
determined by Agent, Borrowers shall thereafter deliver a Borrowing Base
Certificate on a monthly basis as provided herein;

 

(iii)                               as soon as possible after the end of each
fiscal month (but in any event within fifteen (15) Business Days after the end
thereof), on a monthly basis, and at any time an Increased Collateral Reporting
Event exists or has occurred and is continuing, more frequently as Agent may
request, (A) perpetual Inventory reports by location and category (and including
the amounts of Inventory and the value thereof at any leased locations and at
premises of warehouses, bailees or other third parties in possession of the
Collateral); (B) the addresses of all new retail store locations of any Borrower
or Guarantor opened, and existing retail store locations closed or sold, in each
case during the immediately preceding fiscal month, and (C) a report of all
deposit accounts (including without limitation local retail store deposit
accounts) opened by any Borrower or Guarantor with any bank during the
immediately preceding fiscal month, which report shall include the Borrower or
Guarantor in whose name the account is maintained, the account number of such
account, the name and address of the bank at which such account is maintained,
the purpose of such account and the amount held in such account if any, on or
about the date of such report; provided, that, if such Increased Collateral
Reporting Event ceases to exist as determined by Agent, Borrowers shall
thereafter deliver such collateral reports described in this
Section 7.1(a)(iii) on a monthly basis as provided herein;

 

(iv)                              as soon as possible after the end of each
fiscal quarter (but in any event within fifteen (15) Business Days after the end
thereof), on a quarterly basis, and at any time an Increased Collateral
Reporting Event exists or has occurred and is continuing, more frequently as
Agent may request, a report detailing Inventory turnover; provided, that, if
such Increased Collateral Reporting Event ceases to exist as determined by
Agent, Borrowers shall thereafter deliver such collateral reports described in
this Section 7.1(a)(iv) on a quarterly basis as provided herein;

 

(v)                                 upon the occurrence and during the
continuance of an Event of Default or during such time as Agent performs an
audit or examination of the Borrowers and Guarantors, upon Agent’s reasonable
request, (A) amounts owing to owners and lessors of retail store locations,
(B) copies of all bank statements, (C) copies of shipping and delivery
documents, and (D) copies of purchase orders, invoices and delivery documents
for Inventory and Equipment acquired by any Borrower or Guarantor;

 

(vi)                              upon Agent’s reasonable request, (A) reports
of sales for each category of Inventory, (B) reports of aggregate Inventory
purchases (including all costs related thereto, such as freight, duty and taxes)
and identifying items of Inventory in transit to each Borrower related to the
applicable documentary Letter of Credit Accommodation and/or bill of lading
number, (C) copies of remittance advices and reports, (D) copies of bank
statements relating to the Blocked Accounts, (E) reports by retail store
location of sales and operating profits for each such retail store location, and
(F) agings of accounts payable (and including information indicating the amounts
owing to owners and lessors of leased premises (except for

 

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the retail store locations), warehouses, fulfillment centers, bailees and other
third parties from time to time in possession of any Collateral);

 

(vii)                           upon the occurrence and during the continuance
of an Event of Default, as frequently as Agent may request, (A) the monthly
statements received by any Borrower or Guarantor or any of its Affiliates from
any Credit Card Issuers or Credit Card Processors, together with such additional
information with respect thereto as shall be sufficient to enable Agent to
monitor the transactions pursuant to the Credit Card Agreements, (B) a report of
credit card sales during the preceding month, including the amount of the
chargebacks, fees, factored receivables, and credits with respect thereto and
providing an aging of such sales identifying those outstanding more than five
(5) days since the sale date giving rise thereto, (C) reports on sales and use
tax collections, deposits and payments, including monthly sales and use tax
accruals, and (D) a report reconciling the amount of Non-Borrower Receivables
received by or into the account of any Borrower and remitted by such Borrower or
another Person at the direction of such Borrower to or for the account of WFNNB
(and Nevada Factoring as applicable) or any other Person; and

 

(viii)                        such other reports as to the Collateral as Agent
shall reasonably request from time to time.

 

(b)                                 If any Borrower’s or Guarantor’s records or
reports of the Collateral are prepared or maintained by an accounting service,
contractor, shipper or other agent, such Borrower or Guarantor hereby
irrevocably authorizes such service, contractor, shipper or agent to deliver
such records, reports, and related documents to Agent and to follow Agent’s
instructions with respect to further services at any time that an Event of
Default exists or has occurred and is continuing.

 

7.2                               Accounts Covenants.

 

(a)                                 Each Borrower and Guarantor shall notify
Agent promptly of the assertion of any material claims, offsets, defenses or
counterclaims by any account debtor, Credit Card Issuer or Credit Card Processor
or any material disputes with any of such persons or any settlement, adjustment
or compromise thereof and all material adverse information relating to the
financial condition of any account debtor, Credit Card Issuer or Credit Card
Processor.  No credit, discount, allowance or extension or agreement for any of
the foregoing shall be granted to any account debtor, Credit Card Issuer or
Credit Card Processor except in the ordinary course of such Borrower’s or
Guarantor’s business in accordance with the current practices of such Borrower
or Guarantor as in effect on the date hereof.  So long as an Event of Default
exists or has occurred and is continuing, no Borrower or Guarantor shall,
without the prior consent of Agent, settle, adjust or compromise any material
claim, offset, counterclaim or dispute with any account debtor, Credit Card
Issuer, Credit Card Processor.  At any time that an Event of Default exists or
has occurred and is continuing, Agent shall, at its option, have the exclusive
right to settle, adjust or compromise any claim, offset, counterclaim or dispute
with account debtors, Credit Card Issuers or Credit Card Processors or grant any
credits, discounts or allowances.

 

(b)                                 With respect to each Account: no payments
shall be made thereon except payments delivered to Agent pursuant to the terms
of this Agreement, there shall be no material

 

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setoffs, deductions, contras, defenses, counterclaims or disputes existing or
asserted with respect thereto except as reported to Agent in accordance with the
terms of this Agreement and none of the transactions giving rise thereto will
violate any applicable State or Federal Laws or regulations, all documentation
relating thereto will be legally sufficient under such laws and regulations and
all such documentation will be legally enforceable in accordance with its terms.

 

(c)                                  Each Borrower and Guarantor shall notify
Agent promptly of: any notice of a material default by such Borrower or
Guarantor under any of the Credit Card Agreements or of any default which has a
reasonable likelihood of resulting in the Credit Card Issuer or Credit Card
Processor ceasing to make payments or suspending payments to such Borrower or
Guarantor, any notice from any Credit Card Issuer or Credit Card Processor that
such person is ceasing or suspending, or will cease or suspend, any present or
future payments due or to become due to such Borrower or Guarantor from such
person, or that such person is terminating or will terminate any of the Credit
Card Agreements, and the failure of such Borrower or Guarantor to comply with
any material terms of the Credit Card Agreements or any terms thereof which has
a reasonable likelihood of resulting in the Credit Card Issuer or Credit Card
Processor ceasing or suspending payments to such Borrower or Guarantor.

 

(d)                                 Upon an Event of Default, Agent shall have
the right at any time or times, in Agent’s name or in the name of a nominee of
Agent, to verify the validity, amount or any other matter relating to any
Receivables or other Collateral, by mail, telephone, facsimile transmission or
otherwise.

 

7.3                               Inventory Covenants.  With respect to the
Inventory:  (a) each Borrower and Guarantor shall at all times maintain
inventory records reasonably satisfactory to Agent, keeping correct and accurate
records itemizing and describing the kind, type, quality and quantity of such
Borrower’s or Guarantor’s Inventory, such Borrower’s or Guarantor’s cost
therefor and daily withdrawals therefrom and additions thereto; (b) each
Borrower and Guarantor shall conduct a physical count of its Inventory either
through periodic cycle counts or wall to wall counts, so that all Inventory is
subject to such counts at least once each year, but at any time or times as
Agent may request on or after an Event of Default, and promptly following such
physical inventory (whether through periodic cycle counts or wall to wall
counts) shall supply Agent with a report in the form and with such specificity
as may be reasonably satisfactory to Agent concerning such physical count;
(c) no Borrower or Guarantor shall remove any Inventory from the locations set
forth or permitted herein, without the prior written consent of Agent, except
for sales of Inventory in the ordinary course of such Borrower’s or Guarantor’s
business and except to move Inventory directly from one location set forth or
permitted herein to another such location and except for Inventory shipped from
the manufacturer thereof to such Borrower or Guarantor which is in transit to
the locations set forth or permitted herein; (d) upon Agent’s request, Borrowers
and Guarantors shall, at their expense, deliver or cause to be delivered to
Agent written appraisals as to the Inventory in form, scope and methodology
acceptable to Agent and by an appraiser acceptable to Agent, addressed to Agent
and upon which Agent and Lenders are expressly permitted to rely as follows:
(i) so long as Compliance Excess Availability is greater twenty (20%) percent of
the Revolving Loan Limit, no more than one (1) such written appraisal in any
twelve (12) month period, (ii) if Compliance Excess Availability is at any time
less than or equal to twenty (20%) percent of the Revolving Loan Limit, no more
than two (2) such written appraisals in any twelve (12) month period, and
(iii) if a Default or an Event of Default

 

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exists or has occurred and is continuing, such number of written appraisals as
Agent may request; provided, that, at any time or times as Agent may request, at
Agent’s expense,  Agent may arrange to have appraisals conducted as to the
Inventory; (e) upon Agent’s request, Borrowers and Guarantors shall, at their
expense, deliver or cause to be delivered to Agent field examinations as to the
Inventory in form, scope and methodology acceptable to Agent and by a field
examiner acceptable to Agent, addressed to Agent and upon which Agent and
Lenders are expressly permitted to rely as follows: (i) so long as Compliance
Excess Availability is greater twenty (20%) percent of the Revolving Loan Limit,
no more than one (1) such field examination in any twelve (12) month period,
(ii) if Compliance Excess Availability is at any time less than or equal to
twenty (20%) percent of the Revolving Loan Limit, no more than two (2) such
field examinations in any twelve (12) month period, and (iii) if a Default or an
Event of Default exists or has occurred and is continuing, such number of field
examinations as Agent may request; provided, that, at any time or times as Agent
may request, at Agent’s expense,  Agent may arrange to have field examinations
conducted as to the Inventory; (f) upon Agent’s request, Borrowers and
Guarantors shall, at their expense, conduct through Washington Inventory Service
or another inventory counting service acceptable to Agent, a physical count of
the Inventory in form, scope and methodology acceptable to Agent, the results of
which shall be reported directly by such inventory counting service to Agent and
Borrowers and Guarantors shall promptly deliver confirmation in a form
reasonably satisfactory to Agent that appropriate adjustments have been made to
the inventory records of Borrowers and Guarantors to reconcile the inventory
count to Borrowers’ and Guarantors’ inventory records, as follows: (i) so long
as Compliance Excess Availability is greater twenty (20%) percent of the
Revolving Loan Limit, no more than one (1) such physical count in any twelve
(12) month period, and at a time to coincide with Borrowers’ and or Guarantors’
physical count of the Inventory, (ii) if Compliance Excess Availability is at
any time less than or equal to twenty (20%) percent of the Revolving Loan Limit,
no more than two (2) such physical counts in any twelve (12) month period, and
at a time to coincide with Borrowers’ and or Guarantors’ physical count of the
Inventory, and (iii) if a Default or an Event of Default exists or has occurred
and is continuing, such number of physical counts as Agent may request;
provided, that, at any time or times as Agent may request, at Agent’s expense, 
Agent may arrange to have written reports or appraisals conducted as to the
Inventory;  (g) each Borrower and Guarantor shall produce, use, store and
maintain the Inventory, with all reasonable care and caution and in accordance
with applicable standards of any insurance and in conformity with applicable
laws (including the requirements of the Federal Fair Labor Standards Act of
1938, as amended and all rules, regulations and orders related thereto);
(h) none of the Inventory or other Collateral constitutes farm products or the
proceeds thereof; (i) each Borrower and Guarantor assumes all responsibility and
liability arising from or relating to the production, use, sale or other
disposition of the Inventory; (j) no Borrower or Guarantor shall sell Inventory
to any customer on approval, or any other basis which entitles the customer to
return or may obligate such Borrower or Guarantor to repurchase such Inventory
except for the right of return given to retail customers of any Borrower or
Guarantor in the ordinary course of the business of such Borrower or Guarantor
in accordance with the then current return policy of such Borrower; (k) each
Borrower and Guarantor shall keep the Inventory in good and marketable
condition; and (l) no Borrower or Guarantor shall, without prior written notice
to Agent or the specific identification of such Inventory in a report with
respect thereto provided by such Borrower or Guarantor to Agent pursuant to
Section 7.1(a) hereof, acquire or accept any Inventory on consignment or
approval.

 

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7.4                               Equipment Covenants.  With respect to the
Equipment:  (a) upon Agent’s request, Borrowers and Guarantors shall, at their
expense, at any time or times as Agent may request after the occurrence and
during the continuance of an Event of Default, deliver or cause to be delivered
to Agent written appraisals as to the Equipment in form, scope and methodology
acceptable to Agent and by an appraiser acceptable to Agent, addressed to Agent
and upon which Agent is expressly permitted to rely; (b) Borrowers and
Guarantors shall use commercially reasonable efforts to keep the Equipment in
good order, repair and running (ordinary wear and tear excepted); (c) Borrowers
and Guarantors shall use the Equipment with all reasonable care and caution and
in accordance with applicable standards of any insurance and in conformity with
all applicable laws; (d) the Equipment is and shall be used in the business of
Borrowers and Guarantors and not for personal, family, household or farming use;
(e) Borrowers and Guarantors shall not remove any Equipment from the locations
set forth or permitted herein, except to the extent necessary to have any
Equipment repaired or maintained in the ordinary course of its business or to
move Equipment directly from one location set forth or permitted herein to
another such location and except for the movement of motor vehicles used by or
for the benefit of Borrowers and Guarantors in the ordinary course of business;
(f) the Equipment is now and shall remain personal property and Borrowers and
Guarantors shall not permit any of the Equipment to be or become a part of or
affixed to real property; and (g) Borrowers and Guarantors assume all
responsibility and liability arising from the use of the Equipment.

 

7.5                               Bills of Lading and Other Documents of Title.

 

(a)                                 On and after the date hereof, with respect
to goods purchased by a Borrower which are outside the United States of America
and in transit to the premises of such Borrower or the premises of a Freight
Forwarder in the United States of America (i) if Borrowers have elected to
comply with the eligibility criteria in clause (c)(i)(A) of the definition of
Eligible In-Transit Inventory and the eligibility criteria of clause (f)(i) of
the definition of Eligible In-Transit LC Inventory, each Borrower shall cause
all bills of lading or other documents of title relating to such goods to be
issued in a form so as to constitute negotiable documents as such term is
defined in the Uniform Commercial Code, (ii) if Borrowers have elected to comply
with the eligibility criteria in clause (c)(i)(B) or (C) of the definition of
Eligible In-Transit Inventory and the eligibility criteria of clause (f)(ii) or
(iii) of the definition of Eligible In-Transit LC Inventory, each Borrower shall
cause all bills of lading or other documents of title relating to such goods to
be issued in a form so as to constitute non-negotiable documents as such term is
defined in the Uniform Commercial Code  and (iii) other than those relating to
goods being purchased pursuant to a Letter of Credit Accommodation, to be issued
either to the order of Agent or such other person as Agent may from time to time
designate for such purpose as consignee or such Borrower as consignee, as Agent
may specify.

 

(b)                                 There shall be no more than three
(3) originals of any bills of lading and other documents of title relating to
goods being purchased by a Borrower which are outside the United States of
America and in transit to the premises of such Borrower or the premises of a
Freight Forwarder in the United States of America.  As to any such bills of
lading or other documents of title, unless and until Agent shall direct
otherwise, three (3) originals of each of such bill of lading or other document
of title shall be delivered to such Freight Forwarder as such Borrower may
specify and that is party to a Collateral Access Agreement. Upon the request of
Agent, one (1) original of each such bill of lading or other document of title
shall be delivered to

 

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Agent.  To the extent that the terms of this Section have not been satisfied as
to any Inventory, such Inventory shall not constitute Eligible Inventory, except
as Agent may otherwise agree.

 

7.6                               Intellectual Property Appraisals.  Upon Term
Loan Agent’s request, Borrowers and Guarantors shall, at their expense to the
extent provided by Section 9.20(f) hereof, deliver or cause to be delivered to
Term Loan Agent and Agent written appraisals as to the Intellectual Property, in
form, scope and methodology reasonably acceptable to Term Loan Agent and by an
appraiser reasonably acceptable to Term Loan Agent, addressed to Term Loan Agent
and upon which Term Loan Agent, Agent and Lenders are expressly permitted to
rely as follows: (a) so long as EBITDA of Borrowers and their Subsidiaries on a
consolidated basis calculated each month on a trailing twelve (12) month basis
is equal to or less than $22,500,000, no more than one (1) such written
appraisal in any twelve (12) month period, and (b) if a Default or an Event of
Default exists or has occurred and is continuing, such number of written
appraisals as Term Loan Agent may request; provided, that, at any time or times
as Term Loan Agent may request, at Term Loan Agent’s expense, Term Loan Agent
may arrange to have appraisals conducted as to the Intellectual Property.

 

7.7                               Power of Attorney.  Each Borrower and
Guarantor hereby irrevocably designates and appoints Agent (and all persons
designated by Agent) as such Borrower’s or Guarantor’s true and lawful
attorney-in-fact, and authorizes Agent, in such Borrower’s or Guarantor’s, or
Agent’s name, to, at any time an Event of Default exists or has occurred and is
continuing (i) demand payment on Receivables or other Collateral, (ii) enforce
payment of Receivables by legal proceedings or otherwise, (iii) exercise all of
such Borrower’s or Guarantor’s rights and remedies to collect any Receivable or
other Collateral, (iv) sell or assign any Receivable upon such terms, for such
amount and at such time or times as Agent deems advisable, (v) settle, adjust,
compromise, extend or renew an Account, (vi) discharge and release any
Receivable, (vii) prepare, file and sign such Borrower’s or Guarantor’s name on
any proof of claim in bankruptcy or other similar document against an account
debtor or other obligor in respect of any Receivables or other Collateral,
(viii) notify the post office authorities to change the address for delivery of
remittances from account debtors or other obligors in respect of Receivables or
other proceeds of Collateral to an address designated by Agent, and open and
dispose of all mail addressed to such Borrower or Guarantor and handle and store
all mail relating to the Collateral, (ix) do all acts and things which are
necessary, in Agent’s determination, to fulfill such Borrower’s or Guarantor’s
obligations under this Agreement and the other Financing Agreements, (x) take
control in any manner of any item of payment in respect of Receivables or
constituting Collateral or otherwise received in or for deposit in the Blocked
Accounts or otherwise received by Agent or any Lender, (xi) have access to any
lockbox or postal box into which remittances from account debtors or other
obligors in respect of Receivables or other proceeds of Collateral are sent or
received, (xii) endorse such Borrower’s or Guarantor’s name upon any items of
payment in respect of Receivables or constituting Collateral or otherwise
received by Agent and any Lender and deposit the same in Agent’s account for
application to the Obligations, (xiii) endorse such Borrower’s or Guarantor’s
name upon any chattel paper, document, instrument, invoice, or similar document
or agreement relating to any Receivable or any goods pertaining thereto or any
other Collateral, including any warehouse or other receipts, or bills of lading
and other negotiable or non-negotiable documents, (xiv) clear Inventory the
purchase of which was financed with Letter of Credit Accommodations through U.S.
Customs or foreign export control authorities in such Borrower’s or Guarantor’s
name, Agent’s name or the

 

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name of Agent’s designee, and to sign and deliver to customs officials powers of
attorney in such Borrower’s or Guarantor’s own name for such purpose, and to
complete in such Borrower’s or Guarantor’s or Agent’s name, any order, sale or
transaction, obtain the necessary documents in connection therewith and collect
the proceeds thereof, and (xv) sign such Borrower’s or Guarantor’s name on any
verification of Receivables and notices thereof to account debtors or any
secondary obligors or other obligors in respect thereof.  Each Borrower and
Guarantor hereby releases Agent and Lenders and their respective officers,
employees and designees from any liabilities arising from any act or acts under
this power of attorney and in furtherance thereof, whether of omission or
commission, except as a result of Agent’s or any Lender’s own gross negligence
or willful misconduct as determined pursuant to a final non-appealable order of
a court of competent jurisdiction.

 

7.8                               Right to Cure.  Agent may, at its option, upon
notice to Borrowers, (a) cure any default by any Borrower or Obligor under any
material agreement with a third party that affects the Collateral, its value or
the ability of Agent to collect, sell or otherwise dispose of the Collateral or
the rights and remedies of Agent or any Lender therein or the ability of any
Borrower or any Obligor to perform its obligations hereunder or under any of the
other Financing Agreements, (b) pay or bond on appeal any judgment entered
against any Borrower or Obligor, (c) discharge taxes, liens, security interests
or other encumbrances at any time levied on or existing with respect to the
Collateral and (d) pay any amount, incur any expense or perform any act which,
in Agent’s judgment, is necessary or appropriate to preserve, protect, insure or
maintain the Collateral and the rights of Agent and Lenders with respect
thereto.  Agent may add any amounts so expended to the Obligations and charge
Borrowers’ loan accounts therefor, such amounts to be repayable by Borrowers on
demand.  Agent and Lenders shall be under no obligation to effect such cure,
payment or bonding and shall not, by doing so, be deemed to have assumed any
obligation or liability of any Borrower or any Obligor.  Any payment made or
other action taken by Agent or any Lender under this Section shall be (a) made
by Agent or such Lender after Agent or such Lender makes reasonable efforts to
consult with Borrowers with respect thereto, and (b) without prejudice to any
right to assert an Event of Default hereunder and to proceed accordingly.

 

7.9                               Access to Premises.  From time to time as
requested by Agent, at the cost and expense of Borrowers, (a) Agent and its
designees shall contemporaneously have complete access to all of each Borrower’s
and Guarantor’s personnel and premises during normal business hours and after
notice to, or at any time and without notice to Borrowers or Guarantors if an
Event of Default exists or has occurred and is continuing, for the purposes of
inspecting, verifying and auditing the Collateral and all of each Borrower’s and
Guarantor’s books and records, including the Records, (b) Borrowers and
Guarantors shall promptly furnish to Agent such copies of such books and records
or extracts therefrom as Agent may request, and (c) Agent or any Lender or
Agent’s designee may use during normal business hours such of any Borrower’s or
Guarantor’s equipment, supplies and premises as may be reasonably necessary for
the foregoing and if an Event of Default exists or has occurred and is
continuing for the collection of Receivables and realization of other
Collateral.

 

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SECTION 8.        REPRESENTATIONS AND WARRANTIES

 

Each Borrower and Guarantor hereby represents and warrants to Agent and Lenders
the following (which shall survive the execution and delivery of this
Agreement), the truth and accuracy of which are a continuing condition of the
making of Loans and providing Letter of Credit Accommodations to Borrowers:

 

8.1                               Corporate Existence, Power and Authority. 
Each Borrower and Guarantor is a corporation or limited liability company duly
organized and in good standing under the laws of its state of incorporation or
formation identified in its Information Certificate and is duly qualified as a
foreign corporation or limited liability company and in good standing in all
states or other jurisdictions where the nature and extent of the business
transacted by it or the ownership of assets makes such qualification necessary,
except for those jurisdictions in which the failure to so qualify would not have
a material adverse effect on such Borrower’s or Guarantor’s financial condition,
results of operation or business or the rights of Agent in or to any of the
Collateral.  The execution, delivery and performance of this Agreement, the
other Financing Agreements and the transactions contemplated hereunder and
thereunder by each Borrower and Guarantor (a) are all within such Borrower’s or
Guarantor’s corporate or limited liability company powers, (b) have been duly
authorized, (c) are not in contravention of law or the terms of such Borrower’s
or Guarantor’s certificate of incorporation, certificate of formation, by-laws,
operating agreement or other organizational documentation, or any indenture,
agreement or undertaking to which such Borrower or Guarantor is a party or by
which such Borrower or Guarantor or its property are bound, except for those
lease agreements of Lerner for which Lerner did not obtain consents from the
parties thereto with respect to this Agreement, and (d) will not result in the
creation or imposition of, or require or give rise to any obligation to grant,
any lien, security interest, charge or other encumbrance upon any property of
such Borrower or Guarantor other than liens in favor of Agent or any Lender as
contemplated hereby.  This Agreement and the other Financing Agreements to which
each Borrower and Guarantor is a party constitute legal, valid and binding
obligations of such Borrower or Guarantor enforceable in accordance with their
respective terms.

 

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

 

(a)                                 The exact legal name of each Borrower and
Guarantor is as set forth on the signature pages of this Agreement and in each
Borrower’s and Guarantor’s Information Certificate, subject to the rights of
Borrowers and Guarantors to change names in accordance with
Section 9.1(b) hereof.  No Borrower or Guarantor has, during the five years
immediately prior to the date hereof, been known by or used any other corporate
or fictitious name or been a party to any merger or consolidation, or acquired
all or substantially all of the assets of any Person, or acquired any of its
property or assets out of the ordinary course of business, except as set forth
in such Borrower’s or Guarantor’s Information Certificate.

 

(b)                                 Each Borrower and Guarantor is an
organization of the type and organized in the jurisdiction set forth in such
Borrower’s and Guarantor’s Information Certificate.  Each Borrower’s and
Guarantor’s Information Certificate accurately sets forth the organizational
identification number of such Borrower or Guarantor or accurately states that
such Borrower or Guarantor has none and accurately sets forth the federal
employer identification number of such

 

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Borrower and Guarantor, subject to the right of each Guarantor or Borrower to
change names in accordance with Section 9.1(c) hereof.

 

(c)                                  The chief executive office and mailing
address of each Borrower and Guarantor and each Borrower’s and Guarantor’s
Records concerning Accounts are located only at the address(es) identified as
such in such Borrower’s and Guarantor’s Information Certificate, subject to the
rights of each Borrower and Guarantor to change its chief executive office or
its mailing address in accordance with Section 9.1(c) hereof, and its only other
places of business and the only other locations of Collateral, if any, are the
addresses set forth in such Borrower’s or Guarantor’s Information Certificate,
subject to the rights of Borrowers and Guarantors to establish new locations in
accordance with Section 9.2 hereof.  Each Borrower’s and Guarantor’s Information
Certificate correctly identifies any of such locations which are not owned by
such Borrower or Guarantor and sets forth the owners and/or operators thereof.

 

8.3                               Financial Statements; No Material Adverse
Change.  All financial statements relating to Borrowers and Guarantors (or any
of them) which have been or may hereafter be delivered by Borrowers and
Guarantors (or any of them) to Agent and Lenders have been prepared in
accordance with GAAP (except as to any interim financial statements, to the
extent such statements are subject to normal year-end adjustments and do not
include any notes) and fairly present in all material respects the financial
condition and the results of operation of Borrowers and Guarantors as at the
dates and for the periods set forth therein.  Except as disclosed in any interim
financial statements furnished by Borrowers or Guarantors to Agent prior to the
date of this Agreement or otherwise fully and accurately disclosed to Agent in
writing, there has been no act, condition, circumstance or event which has had
or is reasonably likely to have a Material Adverse Effect since the date of the
most recent audited financial statements of Borrowers and Guarantors furnished
by Borrowers and Guarantors to Agent prior to the date of this Agreement.

 

8.4                               Priority of Liens; Title to Properties.  The
security interests and liens granted to Agent under this Agreement and the other
Financing Agreements upon filing the appropriate documents (including UCC
financing statements and filings with the U.S. Patent and Trademark Office and
the U.S. Copyright Office), but only if and to the extent that a security
interest may be so perfected under applicable laws, constitute or deemed
necessary by Agent to maintain valid and perfected first priority liens and
security interests in and upon the Collateral subject only to the liens
indicated on the Information Certificates and the other liens permitted under
Section 9.8; provided, that, additional recordations or filings may be required
with the United States Copyright Office or the United States Patent and
Trademark Office to perfect, and/or to preserve and protect, the lien and
security interest in and upon certain of the Intellectual Property acquired by
any Borrower or Guarantor after the date hereof or otherwise in accordance with
the terms of this Agreement.

 

8.5                               Tax Returns.  Each Borrower and Guarantor has
filed, or caused to be filed, in a timely manner (including any extensions) all
federal income tax returns and all other material tax returns, reports and
declarations that are required to be filed by it.  All information in such tax
returns, reports and declarations is complete and accurate in all material
respects.  Each Borrower and Guarantor has paid or caused to be paid all taxes
due and payable or claimed due and payable in any assessment received by it,
except taxes (i) the validity of which are being

 

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contested in good faith by appropriate proceedings diligently pursued and
available to such Borrower or Guarantor and with respect to which adequate
reserves have been set aside on its books or (ii) the nonpayment of which could
not reasonably be expected to have a Material Adverse Effect.  Adequate
provision has been made for the payment of all accrued and unpaid material
Federal, State, county, local, foreign and other taxes whether or not yet due
and payable and whether or not disputed.

 

8.6                               Litigation.  Except as set forth in the
Information Certificates, (a) there are no investigations by any Governmental
Authority pending, or to the best of each Borrower’s Guarantor’s knowledge
threatened, against or affecting any Borrower or Guarantor, its assets or
business and (b) there is no action, suit, proceeding or claim by any Person
pending, or to the best of each Borrower’s and Guarantor’s knowledge threatened,
against any Borrower or Guarantor or its assets or goodwill, or against or
affecting any transactions contemplated by this Agreement, in each case, which
if adversely determined against such Borrower or Guarantor has or could
reasonably be expected to have a Material Adverse Effect.

 

8.7                               Compliance with Other Agreements and
Applicable Laws.  Except for those lease agreements of Lerner for which Lerner
did not obtain consents from the parties thereto with respect to this Agreement,
no Borrower or Guarantor is in default in any respect under, or in violation in
any material respect of any of the terms of, any agreement, contract,
instrument, lease or other commitment to which it is a party or by which it or
any of its assets are bound which could reasonably be expected to have a
Material Adverse Effect.  Except as could not reasonably be expected to have a
Material Adverse Effect, each Borrower and Guarantor is in compliance in all
respects with the requirements of all applicable laws, rules, regulations and
orders of any Governmental Authority relating to its business, including,
without limitation, those set forth in or promulgated pursuant to the
Occupational Safety and Health Act of 1970, as amended, the Fair Labor Standards
Act of 1938, as amended, ERISA, the Code, as amended, and the rules and
regulations thereunder, all Federal, State and local statutes, regulations,
rules and orders relating to consumer credit (including, without limitation, as
each has been amended, the Truth-in-Lending Act, the Fair Credit Billing Act,
the Equal Credit Opportunity Act and the Fair Credit Reporting Act, and
regulations, rules and orders promulgated thereunder), all Federal, State and
local states, regulations, rules and orders pertaining to sales of consumer
goods (including, without limitation, the Consumer Products Safety Act of 1972,
as amended, and the Federal Trade Commission Act of 1914, as amended, and all
regulations, rules and orders promulgated thereunder).

 

8.8                               Environmental Compliance.

 

(a)                                 Except as set forth on Schedule 8.8 hereto
or as would not reasonably be expected to have a Material Adverse Effect, no
Borrower or Guarantor has generated, used, stored, treated, transported,
manufactured, handled, produced or disposed of any Hazardous Materials, on or
off its premises (whether or not owned by it) in any manner which at any time
violates in any material respect any applicable Environmental Law or any permit
issued to any Borrower or Guarantor under Environmental Law, and the operations
of Borrowers and Guarantors and their respective Subsidiaries comply in all
material respects with all Environmental Laws and all permits issued to any
Borrower or Guarantor under Environmental Law.

 

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(b)                                 Except as set forth on Schedule 8.8 hereto
or as would not reasonably be expected to have a Material Adverse Effect, there
has been no investigation by any Governmental Authority or any proceeding,
complaint, order, directive, claim, citation or notice by any Governmental
Authority or any other person nor is any pending or to the best of each
Borrower’s and Guarantor’s knowledge threatened, with respect to any
non-compliance with or violation of the requirements of any Environmental Law by
such Borrower or Guarantor or the release, spill or discharge, threatened or
actual, of any Hazardous Material or the generation, use, storage, treatment,
transportation, manufacture, handling, production or disposal of any Hazardous
Materials by such Borrower or Guarantor or any other environmental, health or
safety matter involving such Borrower or Guarantor, which adversely affects or
would reasonably be expected to adversely affect in any material respect such
Borrower or Guarantor or its business, operations or assets or any properties at
which such Borrower or Guarantor has transported, stored or disposed of any
Hazardous Materials.

 

(c)                                  Except as set forth on Schedule 8.8 hereto
or as would not reasonably be expected to have a Material Adverse Effect, no
Borrower or Guarantor has any material liability (contingent or otherwise) in
connection with a release, spill or discharge, threatened or actual, of any
Hazardous Materials or the generation, use, storage, treatment, transportation,
manufacture, handling, production or disposal of any Hazardous Materials.

 

(d)                                 Except as set forth on Schedule 8.8 hereto
or as would not reasonably be expected to have a Material Adverse Effect, each
Borrower and Guarantor has all permits required to be obtained or filed in
connection with the operations of such Borrower and Guarantor under any
Environmental Law and all of such licenses, certificates, approvals or similar
authorizations and other permits are valid and in full force and effect.

 

8.9                               Employee Benefits.

 

(a)                                 Except as could not reasonably be expected
to have a Material Adverse Effect, each Plan is in compliance in all material
respects with the applicable provisions of ERISA, the Code and other Federal or
State law and each Plan which is intended to qualify under Section 401(a) of the
Code has received a favorable determination letter from the Internal Revenue
Service or is still within the remedial amendment period (as defined in
Section 401(b) of the Code) to obtain a favorable determination letter.  Each
Borrower and Guarantor and its ERISA Affiliates have made all required
contributions to any Pension Plan subject to Section 412 of the Code, and no
application for a funding waiver or an extension of any amortization period
pursuant to Section 412 of the Code has been made with respect to any such
Pension Plan.

 

(b)                                 Except as could not reasonably be expected
to have a Material Adverse Effect, there are no pending, or to the best of each
Borrower’s and Guarantor’s knowledge, threatened claims, actions or lawsuits, or
action by any Governmental Authority, with respect to any Plan, and there has
been no non-exempt prohibited transaction or violation of the fiduciary
responsibility rules with respect to any Plan.

 

(c)                                  (i)                                    
Except as could not reasonably be expected to have a Material Adverse Effect, no
ERISA Event has occurred or is reasonably expected to occur; (ii) the current
value of the assets of each Pension Plan (determined in accordance with the
assumptions used for

 

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funding such Pension Plan pursuant to Section 412 of the Code) are not exceeded
by such Pension Plan’s liabilities under Section 4001(a)(16) of ERISA in an
amount that could reasonably be expected to have a Material Adverse Effect;
(iii) no Borrower or Guarantor or any of its ERISA Affiliates have incurred nor
do any of them reasonably expect to incur any liability under Title IV of ERISA
with respect to any Pension Plan (other than premiums due and not delinquent
under Section 4007 of ERISA) in an amount which could reasonably be expected to
have a Material Adverse Effect; (iv) except as could not reasonably be expected
to have a Material Adverse Effect, no Borrower or Guarantor or any of its ERISA
Affiliates have incurred nor do any of them reasonably expect to incur any
liability (and no event has occurred which, with the giving of notice under
Section 4219 of ERISA, would result in such liability) under Section 4201 or
4243 of ERISA with respect to a Multiemployer Plan; and (v) except as set forth
on Schedule 8.9(c) hereto, no Borrower or Guarantor or any of its ERISA
Affiliates has engaged in a transaction that would be subject to Section 4069 or
4212(c) of ERISA.

 

8.10                        Bank Accounts, etc.  All of the deposit accounts,
investment accounts or other accounts in the name of or used by any Borrower or
Guarantor maintained at any bank or other financial institution are set forth on
such Borrower’s or Guarantor’s Information Certificate, subject to the right of
Borrowers and Guarantors to establish new accounts in accordance with
Section 5.2(d) hereof.

 

8.11                        Intellectual Property.

 

(a)                                 Each Borrower and Guarantor owns or licenses
or otherwise has the right to use all Intellectual Property necessary for the
operation of its business as presently conducted or proposed to be conducted. 
As of the date hereof, no Borrower or Guarantor owns any Intellectual Property
registered, or subject to pending applications, in the United States Patent and
Trademark Office or any similar office or agency in the United States, any State
thereof, any political subdivision thereof or in any other country, other than
those described in such Borrower’s or Guarantor’s Information Certificate and
has not granted any licenses with respect thereto other than as set forth in
such Borrower’s or Guarantor’s Information Certificate.  To the best of each
Borrower’s and Guarantor’s knowledge, no event has occurred which permits or
would permit after notice or passage of time or both, the revocation, suspension
or termination of any Borrower’s or Guarantor’s Intellectual Property rights the
loss of which could reasonably be expected to have a Material Adverse Effect.
 To the best of each Borrower’s and Guarantor’s knowledge, except as could not
reasonably be expected to have a Material Adverse Effect: (i) no slogan or other
advertising device, product, process, method, substance or other Intellectual
Property or goods bearing or using any Intellectual Property presently
contemplated to be sold by or employed by any Borrower or Guarantor infringes
any patent, trademark, servicemark, tradename, copyright, license or other
Intellectual Property owned by any other Person presently, and (ii) and no claim
or litigation is pending or threatened against or affecting any Borrower or
Guarantor contesting its right to sell or use any such Intellectual Property. 
Each Borrower’s and Guarantor’s Information Certificate sets forth all of the
agreements of such Borrower or Guarantor pursuant to which such Borrower or
Guarantor has a license or other right to use any material trademarks, logos,
designs or other material Intellectual Property owned by another person as in
effect on the date hereof and the dates of the expiration of such agreements
(collectively, together with such agreements or other arrangements as may be
entered into by any Borrower or Guarantor after the date hereof, collectively,
the “License Agreements” and

 

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individually, a “License Agreement”).

 

(b)                                 No trademark, servicemark, copyright or
other Intellectual Property at any time used by any Borrower or Guarantor which
is owned by another person, or owned by such Borrower or Guarantor subject to
any security interest, lien, collateral assignment, pledge or other encumbrance
in favor of any person other than Agent, is affixed to any Eligible Inventory,
except (i)  as set forth on such Borrower’s or Guarantor’s Information
Certificate, (ii) to the extent permitted under the term of the License
Agreements listed on such Borrower’s or Guarantor’s  Information Certificate,
and (iii)  to the extent the sale of Inventory to which such Intellectual
Property is affixed is permitted to be sold by such Borrower or Guarantor under
applicable law (including the United States Copyright Act of 1976).  The
Intellectual Property consisting of the patents and the copyright set forth on
Schedule 8.11 hereof (i) are not material and are no longer used or useful in
the business of any Borrower or Guarantor, (ii) are not otherwise used in the
production, distribution or sale of any Inventory or the collection of Accounts
and (iii) do not have any material value.

 

8.12                        Subsidiaries; Affiliates; Capitalization; Solvency.

 

(a)                                 No Borrower or Guarantor has any direct or
indirect Subsidiaries or Affiliates and is not engaged in any joint venture or
partnership except as set forth in such Borrower’s or Guarantor’s Information
Certificate.

 

(b)                                 Each Borrower and Guarantor is the record
and beneficial owner of all of the issued and outstanding shares of Capital
Stock of each of the Subsidiaries listed on such Borrower’s or Guarantor’s
Information Certificate as being owned by such Borrower or Guarantor and there
are no proxies, irrevocable or otherwise, with respect to such shares and no
equity securities of any of Subsidiary of a Borrower or Guarantor are or may
become required to be issued by reason of any options, warrants, rights to
subscribe to, calls or commitments of any kind or nature and there are no
contracts, commitments, understandings or arrangements by which any Subsidiary
of a Borrower or Guarantor is or may become bound to issue additional shares of
its Capital Stock or securities convertible into or exchangeable for such
shares.

 

(c)                                  The issued and outstanding shares of
Capital Stock of each Borrower and Guarantor are directly and beneficially owned
and held by the persons indicated in such Borrower’s or Guarantor’s Information
Certificate, and in each case all of such shares have been duly authorized and
are fully paid and non-assessable, free and clear of all claims, liens, pledges
and encumbrances of any kind, except as may be permitted under the terms of the
Financing Agreements.

 

(d)                                 Each Borrower and Guarantor is Solvent and
will continue to be Solvent after the creation of the Obligations, the security
interests of Agent and the other transaction contemplated hereunder.

 

8.13                        Labor Disputes.

 

(a)                                 Set forth on Schedule 8.13 hereto is a list
(including dates of termination) of all collective bargaining or similar
agreements between or applicable to any Borrower or Guarantor and any union,
labor organization or other bargaining agent in respect of the

 

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employees of such Borrower or Guarantor on the date hereof.

 

(b)                                 Except as could not reasonably be expected
to have a Material Adverse Effect, there is (i) no unfair labor practice
complaint pending against any Borrower or Guarantor or, to the best of such
Borrower’s or Guarantor’s knowledge, threatened against it, before the National
Labor Relations Board, and no grievance or arbitration proceeding arising out of
or under any collective bargaining agreement is pending on the date hereof
against such Borrower or Guarantor or, to best of such Borrower’s or Guarantor’s
knowledge, threatened against it, and (ii) no strike, labor dispute, slowdown or
stoppage is pending against any Borrower or Guarantor or, to the best of such
Borrower’s or Guarantor’s knowledge, threatened against such Borrower or
Guarantor.

 

8.14                        Restrictions on Subsidiaries.  Except for
restrictions contained in this Agreement, the Transition Services Agreement, or
any other agreement with respect to Indebtedness of any Borrower or Guarantor
permitted hereunder as in effect on the date hereof (or hereafter in effect
pursuant to any refinancing thereof permitted under the terms of this
Agreement), there are no contractual or consensual restrictions on any Borrower
or Guarantor or any of its Subsidiaries which prohibit or otherwise restrict
(a) the transfer of cash or other assets (i) between Borrowers, (ii) between any
Borrower or Guarantor and any Subsidiary of a Borrower or Guarantor, or
(iii) between any Subsidiaries of any Borrower or Guarantor or (b) the ability
of any Borrower or Guarantor or any of its Subsidiaries to incur Indebtedness or
grant security interests to Agent or any Lender in the Collateral.

 

8.15                        Material Contracts. Schedule 8.15 hereto sets forth
a list of all Material Contracts to which any Borrower or Guarantor is a party
or is bound as of the date hereof.  Each Borrower and Guarantor has delivered
true, correct and complete copies of such Material Contracts to Agent on or
before the date hereof.  No Borrower or Guarantor is in breach or in default in
any material respect of or under any Material Contract and have not received any
notice of the intention of any other party thereto to terminate any Material
Contract.

 

8.16                        Credit Card Agreements.

 

(a)                                 Set forth in Schedule 8.16 hereto is a
correct and complete list of all of the Credit Card Agreements as of the date
hereof and all other agreements, documents and instruments existing as of the
date hereof between or among any Borrower or Guarantor, any of their Affiliates,
the Credit Card Issuers, the Credit Card Processors and any of their
Affiliates.  The Credit Card Agreements constitute all of such agreements
necessary for Borrowers and Guarantors to operate their business as presently
conducted with respect to credit cards and debit cards and no Receivables of any
Borrower or Guarantor arise from purchases by customers of Inventory with credit
cards or debit cards, other than those which are issued by Credit Card Issuers
with whom such Borrower or Guarantor has entered into one of the Credit Card
Agreements set forth on Schedule 8.16 hereto or with whom such Borrower or
Guarantor has entered into a Credit Card Agreement in accordance with
Section 9.21 hereof.  Each of the Credit Card Agreements constitutes the legal,
valid and binding obligations of the Borrower or Guarantor that is party thereto
and to the best of each Borrower and Guarantor’s knowledge, the other parties
thereto, enforceable in accordance with their respective terms and is in full
force and effect.  Except as could not reasonably (i) be expected to have a
Material Adverse Effect or

 

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(ii) result in the cessation of the transfer of payments under any Credit Card
Agreement to the Blocked Accounts as required under this Agreement, no default
or event of default, or act, condition or event which after notice or passage of
time or both, would constitute a default or an event of default under any of the
Credit Card Agreements exists or has occurred.  The applicable Borrower and
Guarantors and the other parties thereto have complied with all of the terms and
conditions of the Credit Card Agreements to the extent necessary for such
Borrower or Guarantor to be entitled to receive all payments thereunder which
constitute proceeds of Eligible Credit Card Receivables.  Borrowers and
Guarantors have delivered, or caused to be delivered to Agent, true, correct and
complete copies of all of the Credit Card Agreements.

 

(b)                                 Lerner may sell to Nevada Factoring Private
Label Credit Card Receivables in accordance with the terms and conditions of the
Private Label Credit Agreement so long as the following conditions shall have
been satisfied as determined by Agent: (i) the Private Label Credit Card
Agreement and a Credit Card Acknowledgement with respect to the Private Label
Credit Receivables shall be in full force and effect in accordance with the
terms and conditions of this Agreement; (ii) Lerner shall be permitted to act as
agent on behalf of Nevada Factoring to submit the charge slips and transactions
documents with respect to such Private Credit Card Receivables to WFNNB pursuant
to the Private Label Credit Agreement; and (iii) WFNNB shall have been directed
by Nevada Receivables and Lerner, and WFNNB shall have agreed in writing, to
wire transfer in immediately available funds all proceeds and other amounts
payable in respect of Private Label Credit Card Receivables to a Blocked
Account.

 

8.17                        Payable Practices.  Borrowers and Guarantors have
not made any material changes in their historical accounts payable practices
from those in effect immediately prior to the date hereof.

 

8.18                        Accuracy and Completeness of Information.  All
information furnished by or on behalf of any Borrower or Guarantor in writing to
Agent or any Lender in connection with this Agreement or any of the other
Financing Agreements or any transaction contemplated hereby or thereby,
including all information on the Information Certificates is true and correct in
all material respects on the date as of which such information is dated or
certified and does not omit any material fact necessary in order to make such
information not misleading.  No event or circumstance has occurred which has had
or could reasonably be expected to have a Material Adverse Effect, which has not
been fully and accurately disclosed to Agent in writing prior to the date
hereof.

 

8.19                        No Defaults.  As of the date hereof, no event has
occurred and is continuing that constitutes (a) an Event of Default or Default
hereunder, or (b) except as could not reasonably be expected to have a Material
Adverse Effect, a default or event of default under the Transition Services
Agreement.

 

8.20                        Transition Services.  As of the date hereof, the
only material services being provided to Borrowers and Guarantors under the
Transition Services Agreement are logistics or other such Inventory processing
and handling services.

 

8.21                        Patriot Act.  Each Borrower and Guarantor is in
compliance, in all material respects, with the (a) Trading with the Enemy Act,
as amended, and each of the foreign assets

 

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control regulations of the United States Treasury Department (31 CFR, Subtitle
B, Chapter V, as amended) and any other enabling legislation or executive order
relating thereto, and (b) the Patriot Act.  No part of the proceeds of the loans
made hereunder will be used by any Borrower or Guarantor or any of their
Affiliates, directly or indirectly, for any payments to any governmental
official or employee, political party, official of a political party, candidate
for political office, or anyone else acting in an official capacity, in order to
obtain, retain or direct business or obtain any improper advantage, in violation
of the United States Foreign Corrupt Practices Act of 1977, as amended.

 

8.22                        OFAC.  No Borrower or Guarantor nor any of its
Subsidiaries is in violation of any of the country or list based economic and
trade sanctions administered and enforced by OFAC.  No Borrower or Guarantor nor
any of its Subsidiaries (a) is a Sanctioned Person or a Sanctioned Entity,
(b) has its assets located in Sanctioned Entities, or (c) derives revenues from
investments in, or transactions with Sanctioned Persons or Sanctioned Entities. 
No proceeds of any loan made hereunder will be used to fund any operations in,
finance any investments or activities in, or make any payments to, a Sanctioned
Person or a Sanctioned Entity.

 

8.23                        Survival of Warranties; Cumulative.  All
representations and warranties contained in this Agreement or any of the other
Financing Agreements shall survive the execution and delivery of this Agreement
and shall be deemed to have been made again to Agent and Lenders on the date of
each additional borrowing or other credit accommodation hereunder and shall be
conclusively presumed to have been relied on by Agent and Lenders regardless of
any investigation made or information possessed by Agent or any Lender.  The
representations and warranties set forth herein shall be cumulative and in
addition to any other representations or warranties which any Borrower or
Guarantor shall now or hereafter give, or cause to be given, to Agent or any
Lender.

 

SECTION 9.        AFFIRMATIVE AND NEGATIVE COVENANTS

 

9.1                               Maintenance of Existence.

 

(a)                                 Except as permitted under Section 9.7
hereof, each Borrower and Guarantor shall at all times preserve, renew and keep
in full force and effect its corporate existence and material rights and
franchises with respect thereto and maintain in full force and effect all
material licenses, trademarks, tradenames, approvals, authorizations, leases,
contracts and Permits necessary to carry on the business as presently or
proposed to be conducted.

 

(b)                                 No Borrower or Guarantor shall change its
name unless each of the following conditions is satisfied: (i) Agent shall have
received not less than thirty (30) days prior written notice from such Borrower
or Guarantor of such proposed change in its corporate name, which notice shall
accurately set forth the new name (other than in the case of Lerner New
York, Inc. in connection with certain tax planning transaction of Borrowers and
Guarantors, in which case Agent shall have received not less than ten (1) days’
prior written notice of such change; and (ii) Agent shall have received a copy
of the amendment to the Certificate of Incorporation of such Borrower or
Guarantor providing for the name change certified by the Secretary of State of
the jurisdiction of incorporation or organization of such Borrower or Guarantor
as soon as it is available.

 

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(c)                                  No Borrower or Guarantor shall change its
chief executive office or its mailing address or organizational identification
number (or if it does not have one, shall not acquire one) unless Agent shall
have received not less than thirty (30) days’ prior written notice from such
Borrower or Guarantor of such proposed change, which notice shall set forth such
information with respect thereto as Agent may require and Agent shall have
received such agreements as Agent may reasonably require in connection
therewith.  Without the prior written consent of Agent, such consent not to be
unreasonably withheld, no Borrower or Guarantor shall change its type of
organization, jurisdiction of organization or other legal structure.

 

9.2                               New Collateral Locations.  Any Borrower or
Guarantor may open any new location within the continental United States
provided such Borrower or Guarantor (a) gives Agent written notice of the
opening of any such new location on or before the date such Borrower or
Guarantor decides to open such new location and (b) executes and delivers, or
causes to be executed and delivered, to Agent such agreements, documents, and
instruments as Agent may deem reasonably necessary or desirable to protect its
interests in the Collateral at such location.

 

9.3                               Compliance with Laws, Regulations, Etc.

 

(a)                                 Except as could not reasonably be expected
to cause a Material Adverse Effect, each Borrower and Guarantor shall, and shall
cause its respective Subsidiaries to, at all times, comply in all material
respects with all laws, rules, regulations, licenses, approvals, orders and
other Permits applicable to it and duly observe all requirements of any foreign,
Federal, State or local Governmental Authority, the Code, the Occupational
Safety and Health Act of 1970, as amended, the Fair Labor Standards Act of 1938,
as amended, all Federal, State and local statutes, regulations, rules and orders
relating to consumer credit (including, without limitation, as each has been
amended, the Truth-in-Lending Act, the Fair Credit Billing Act, the Equal Credit
Opportunity Act and the Fair Credit Reporting Act, and regulations, rules and
orders promulgated thereunder), all Federal, State and local statutes,
regulations, rules and orders pertaining to sales of consumer goods (including,
without limitation, the Consumer Products Safety Act of 1972, as amended, and
the Federal Trade Commission Act of 1914, as amended, and all regulations,
rules and orders promulgated thereunder) and all statutes, rules, regulations,
orders, permits and stipulations relating to environmental pollution and
employee health and safety, including all of the Environmental Laws.

 

(b)                                 Each Borrower and Guarantor shall give
written notice to Agent promptly upon such Borrower’s or Guarantor’s receipt of
any notice of, or such Borrower’s or Guarantor’s otherwise obtaining knowledge
of any of the following, except if it could not reasonably be expected to have a
Material Adverse Effect, (i) the occurrence of any event involving the
unpermitted release, spill or discharge, threatened or actual, of any Hazardous
Material by any Borrower or Guarantor or (ii) any investigation, proceeding,
complaint, order, directive, claims, citation or notice with respect to: (A) any
non-compliance with or violation of any Environmental Law by any Borrower or
Guarantor or (B) the release, spill or discharge, threatened or actual, of any
Hazardous Material by any Borrower or Guarantor other than in the ordinary
course of business and other than as permitted under any applicable
Environmental Law.  Copies of all environmental surveys, audits, assessments,
feasibility studies and results of remedial investigations shall be promptly
furnished, or caused to be furnished, by Borrowers and

 

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Guarantors to Agent.  Borrowers and Guarantors shall take prompt action to
respond to any material non-compliance with any of the Environmental Laws and
shall regularly report to Agent on such response.

 

(c)                                  Without limiting the generality of the
foregoing, whenever Agent reasonably determines that there is non-compliance, or
any condition which requires any action by or on behalf of any Borrower or
Guarantor in order to avoid any non-compliance, with any Environmental Law
except with respect to such non-compliance that could not reasonably be expected
to have a Material Adverse Effect, Borrowers and Guarantors shall, at Agent’s
request and Borrowers’ expense: (i) cause an independent environmental
consultant reasonably acceptable to Agent to assess such non-compliance or
alleged non-compliance with such Environmental Laws (including sampling and
analysis, if necessary) and prepare and deliver to Agent a report as to such
non-compliance setting forth the results of any sampling or analysis, a proposed
plan for responding to any environmental problems described therein, and an
estimate of the costs thereof and (ii) provide to Agent a supplemental report of
such consultant whenever the scope of such non-compliance, or any Borrower’s or
Guarantor’s response thereto or the estimated costs thereof, shall change in any
material respect.

 

(d)                                 Each Borrower and Guarantor shall indemnify
and hold harmless Agent and Lenders and their respective directors, officers,
employees, agents, invitees, representatives, successors and assigns, from and
against any and all losses, claims, damages, liabilities, costs, and expenses
(including reasonable attorneys’ fees and expenses) directly or indirectly
arising out of or attributable to the use, generation, manufacture,
reproduction, storage, release, threatened release, spill, discharge, disposal
or presence of a Hazardous Material, including the costs of any required or
necessary repair, cleanup or other remedial work with respect to any property of
any Borrower or Guarantor and the preparation and implementation of any closure,
remedial or other required plans except to the extent such losses, claims,
damages, liabilities, costs, and expenses arise out of or are attributable to
the negligence or willful misconduct of Agent or any Lender.  All
representations, warranties and indemnifications in this Section 9.3 shall
survive the payment of the Obligations and the termination of this Agreement.

 

9.4                               Payment of Taxes and Claims.  Each Borrower
and Guarantor shall, and shall cause its Subsidiaries to, duly pay and discharge
all taxes, assessments, contributions and governmental charges upon or against
it or its properties or assets, except for taxes (i) the validity of which are
being contested in good faith by appropriate proceedings diligently pursued and
available to such Borrower or Guarantor or its Subsidiaries, as the case may be,
and with respect to which adequate reserves have been set aside on its books or
(ii) the non-payment of which could not reasonably be expected to have a
Material Adverse Effect.

 

9.5                               Insurance.  Each Borrower and Guarantor shall,
and shall cause its Subsidiaries to, at all times, maintain with financially
sound and reputable insurers insurance with respect to the Collateral against
loss or damage and all other insurance of the kinds and in the amounts
customarily insured against or carried by corporations of established reputation
engaged in the same or similar businesses and similarly situated.  Said policies
of insurance shall be reasonably satisfactory to Agent as to form, amount and
insurer.  Each Borrower and Guarantor shall furnish certificates, policies or
endorsements to Agent as Agent shall reasonably require as proof of such
insurance, and, if such Borrower or Guarantor fails to do so, Agent is
authorized, but not

 

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required, to obtain such insurance at the expense of Borrowers.  All policies
with regard to such insurance shall provide for at least thirty (30) days prior
written notice to Agent of any cancellation or reduction of coverage and that
Agent may act as attorney for such Borrower or Guarantor in obtaining, and at
any time an Event of Default exists or has occurred and is continuing,
adjusting, settling, amending and canceling such insurance.  Within ten days
after the date hereof, Borrowers and Guarantors shall cause Agent to be named as
a loss payee and an additional insured, as its interests may appear (but without
any liability for any premiums), under such insurance policies and Borrowers and
Guarantors shall obtain non-contributory lender’s loss payable endorsements to
all such insurance policies in form and substance satisfactory to Agent.  Such
lender’s loss payable endorsements shall specify that the proceeds of such
insurance shall be payable to Agent, for itself and the ratable benefit of the
Lenders and the Bank Product Providers, as its interests may appear and further
specify that Agent and Lenders shall be paid regardless of any act or omission
by any Borrower or Guarantor or any of its Affiliates.  Without limiting any
other rights of Agent or Lenders, any insurance proceeds received by Agent at
any time may be applied to payment of the Obligations, whether or not then due,
in accordance with Section 6.4(a) hereof.  Upon application of such proceeds to
the Revolving Loans, Revolving Loans may be available subject and pursuant to
the terms hereof to be used for the costs of repair or replacement of the
Collateral lost or damages resulting in the payment of such insurance proceeds.

 

9.6                               Financial Statements and Other Information.

 

(a)                                 Each Borrower and Guarantor shall, and shall
cause its Subsidiaries to, keep proper books and records in which true and
complete entries shall be made of all dealings or transactions of or in relation
to the Collateral and the business of such Borrower or Guarantor and its
Subsidiaries in accordance with GAAP.  Borrowers and Guarantors shall promptly
furnish to Agent and Lenders all such financial and other information as Agent
shall reasonably request relating to the Collateral and the assets, business and
operations of Borrowers and Guarantors, and Borrowers and Guarantors shall
notify their auditors and accountants that Agent is authorized to obtain such
information directly from them.  Without limiting the foregoing, Borrowers and
Guarantors shall furnish or cause to be furnished to Agent, the following:
(i) within thirty (30) days after the end of each fiscal month, monthly
unaudited consolidated financial statements, and unaudited consolidating
financial statements (including in each case balance sheets, statements of
income and loss, statements of cash flow, and statements of shareholders’
equity), all in reasonable detail, fairly presenting the financial position and
the results of the operations of NY&Co and its Subsidiaries as of the end of and
through such fiscal month, certified to be correct by either the “chief
accounting officer or the  chief financial officer of each Borrower, subject to
normal year-end adjustments and accompanied by a compliance certificate
substantially in the form of Exhibit C hereto, along with a schedule in a form
reasonably satisfactory to Agent of the calculations used in determining, as of
the end of such month, whether Borrowers and Guarantors are in compliance with
the covenants set forth in Section 9.17 of this Agreement for such month,
(ii) during any Cash Dominion Event or Increased Collateral Reporting Event or
on the last Business Day of any month therein, Borrowers will deliver to Agent a
compliance report, in form and substance reasonably satisfactory to Agent, along
with a schedule of the calculations used in determining, as of the end of such
month and such other date determined by Borrowers in their sole discretion,
whether either or both any Cash Dominion Event or Increased Collateral Reporting
Event has ceased to

 

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exist, and (iii) without duplication within ninety (90) days after each Fiscal
Year-End, audited consolidated financial statements and unaudited consolidating
financial statements of NY&Co and its Subsidiaries (including in each case
balance sheets, statements of income and loss, statements of cash flow, and
statements of shareholders’ equity), and the accompanying notes thereto, all in
reasonable detail, fairly presenting the financial position and the results of
the operations of NY&Co and its Subsidiaries as of the Fiscal Year-End of and
for such fiscal year, together with the unqualified opinion of independent
certified public accountants with respect to the audited consolidated financial
statements, which accountants shall be an independent accounting firm selected
by NY&Co and reasonably acceptable to Agent, that such audited consolidated
financial statements have been prepared in accordance with GAAP, and present
fairly the results of operations and financial condition of NY&Co and its
Subsidiaries as of the Fiscal Year-End then ended.

 

(b)                                 Borrowers and Guarantors shall promptly
notify Agent in writing of the details of (i) any loss, damage, investigation,
action, suit, proceeding or claim relating to Collateral having a value of more
than $1,000,000 or which if adversely determined would result in any material
adverse change in any Borrower’s or Guarantor’s business, properties, assets,
goodwill or condition, financial or otherwise, (ii) any Material Contract being
terminated or amended or any new Material Contract entered into (in which event
the applicable Borrower or Guarantor shall provide Agent with a copy of such
Material Contract), (iii) any order, judgment or decree in excess of $1,000,000
shall have been entered against any Borrower or Guarantor or any of its
properties or assets, (iv) any notification of a material violation of laws or
regulations received by any Borrower or Guarantor, (v) any ERISA Event, and
(vi) the occurrence of any Event of Default.

 

(c)                                  Borrowers shall promptly after the sending
or filing thereof furnish or cause to be furnished to Agent copies of all
reports and registration statements which any Borrower or Guarantor files with
the Securities and Exchange Commission, any national securities exchange or the
National Association of Securities Dealers, Inc.  Borrowers shall, in addition
to the foregoing, promptly after the sending of all material business reports
which any Borrower or Guarantor sends to its stockholders generally furnish or
cause to be furnished to Agent copies thereof.

 

(d)                                 As soon as available but in any event by no
later than the thirtieth (30th) day after each Fiscal Year-End, Borrowers and
Guarantors shall furnish or cause to be furnished to Agent such monthly budgets,
forecasts, projections, borrowing availability forecasts and other information
respecting the Collateral and the business of Borrowers and Guarantors, as Agent
may reasonably request.  Agent is hereby authorized to deliver a copy of any
financial statement or any other information relating to the business of
Borrowers and Guarantors to any court or other Governmental Authority, or to any
Lender or Participant or prospective Lender or Participant, or any financial
institution engaged in the same business as Agent.  Each Borrower and Guarantor
hereby irrevocably authorizes and directs all accountants or auditors to deliver
to Agent, at Borrowers’ expense and without duplication, copies of the financial
statements of Borrowers and Guarantors (or any of them) and any reports or
management letters prepared by such accountants or auditors on behalf of
Borrowers and Guarantors (or any of them) and to disclose to Agent and Lenders
such information as they may have regarding the business of any Borrower or
Guarantor.  Any documents, schedules, invoices or other papers delivered to
Agent

 

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or any Lender may be destroyed or otherwise disposed of by Agent or such Lender
one (1) year after the same are delivered to Agent or such Lender, except as
otherwise designated by party to Agent or such Lender in writing.

 

9.7                               Sale of Assets, Consolidation, Merger,
Dissolution, Etc..  No Borrower or Guarantor shall, nor shall it permit any of
its Subsidiaries to, directly or indirectly:

 

(a)                                 merge into or with or consolidate with any
other Person or permit any other Person to merge into or with or consolidate
with it; provided, however, upon prior written notice to Agent:

 

(i)                                     a Borrower may merge into or with or
consolidate with another Borrower so long as, other than with respect to a
merger of Lerner New York, Inc. with and into Lerner New York Outlet, Inc. in
connection with certain tax planning transactions of Borrowers and Guarantors,
both before and after giving effect thereto no Default, Event of Default or
Material Adverse Effect exists or would occur; provided, that, in each of the
foregoing cases, the surviving Borrower entity of such merger or consolidation
assumes and continues to be responsible for all of the Obligations of the
constituent corporations to such merger or consolidation;

 

(ii)                                  a Guarantor may merge into or with or
consolidate with another Guarantor; and

 

(iii)                               a Guarantor may merge into or with or
consolidate with a Borrower so long as (A) such Borrower is the surviving entity
with respect thereto and continues to be an organization of the type, domiciled
in the state and bearing the same corporate name as existed prior to such merger
or consolidation, (B) no Default or Event of Default then exists or would occur,
(C) no liens, other than those permitted under the terms of this Agreement with
regard to a Borrower, on the assets of such Guarantor then exist, and (D) such
Borrower would not, as a result of such transaction, be liable for any
Indebtedness or other obligations of such Guarantor, other than Indebtedness or
other obligations which are permitted under the terms of this Agreement with
regard to a Borrower;

 

(b)                                 sell, issue, assign, lease, license,
transfer, abandon or otherwise dispose of any Capital Stock to any other Person
or any of its assets to any other Person, except for

 

(i)                                     sales of Inventory in the ordinary
course of business;

 

(ii)                                  subleases of real property in the ordinary
course of business, as disclosed to Agent pursuant to quarterly reports of such
activity,

 

(iii)                               the abandonment or other disposition of
Intellectual Property so long as (A) such Intellectual Property (1) is not
material and is no longer used or useful in any material respect in the business
of any Borrower or Guarantor, (2) does not appear on is or otherwise not affixed
to or incorporated in any Inventory or necessary in connection with the Records
and (3) does not have any material value, (B) no Event of Default shall exist or
have occurred and be continuing, and (C) Borrowers furnish to Agent a list of
such Intellectual Property so abandoned at the end of each fiscal year of
Borrowers with the delivery of the

 

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Compliance Certificate required to be delivered immediately following such
Fiscal Year-End of Borrowers;

 

(iv)                              exclusive of sales or dispositions
contemplated by clause (vii) hereof, the sale or other disposition of Equipment
(including worn-out or obsolete Equipment or Equipment no longer used or useful
in the business of Borrowers) in the ordinary course of business of Borrowers
and Guarantors so long as the value of such Equipment sold in any fiscal year is
equal to or less than the value of all Equipment acquired in such year, and

 

(v)                                 the issuance and sale by any Borrower or
Guarantor of Capital Stock of such Borrower or Guarantor after the date hereof;
provided, that, (A) Agent shall have received not less than ten (10) Business
Days’ prior written notice of such issuance and sale by such Borrower or
Guarantor, which notice shall specify the parties to whom such shares are to be
sold, the terms of such sale, the total amount which it is anticipated will be
realized from the issuance and sale of such stock and the net cash proceeds
which it is anticipated will be received by such Borrower or Guarantor from such
sale, (B) such Borrower or Guarantor shall not be required to pay any cash
dividends or repurchase or redeem such Capital Stock or make any other payments
in respect thereof, except as otherwise permitted in Section 9.11 hereof,
(C) the terms of such Capital Stock, and the terms and conditions of the
purchase and sale thereof, shall not include any terms that include any
limitation on the right of any Borrower to request or receive Loans or Letter of
Credit Accommodations or the right of any Borrower or Guarantor to amend or
modify any of the terms and conditions of this Agreement or any of the other
Financing Agreements or otherwise in any way relate to or affect the
arrangements of Borrowers and Guarantors with Agent and Lenders or are more
restrictive or burdensome to Borrowers and Guarantors than the terms of any
Capital Stock in effect on the date hereof and (D) if an Event of Default then
exists, all of the proceeds of the sale and issuance of such Capital Stock shall
be paid to Agent for application to the Obligations in accordance with
Section 6.4(a) hereof or at Agent’s option, to be held as cash collateral for
the Obligations,

 

(vi)                              the issuance of Capital Stock of a Borrower or
Guarantor consisting of common stock pursuant to an employee stock option or
grant or similar equity plan or 401(k) plans of such Borrower or Guarantor for
the benefit of its employees, directors and consultants, provided, that, in no
event shall such Borrower or Guarantor be required to issue, or shall such
Borrower or Guarantor issue, Capital Stock pursuant to such stock plans or
401(k) plans which would result in a Change of Control or other Event of
Default,

 

(vii)                           sales or other dispositions by any Borrower of
assets in connection with the closing or sale of a retail store location of such
Borrower in the ordinary course of such Borrower’s business which consist of
leasehold interests in the premises of such store, the Equipment and fixtures
located at such premises and the books and records relating exclusively and
directly to the operations of such store; provided, that, as to each and all
such sales and closings, on the date of, and after giving effect to, any such
closing or sale, (A) the number of retail store locations closed or sold by such
Borrower in any fiscal year minus the number of retail stores opened by such
Borrower in such fiscal year, shall not exceed the amount equal to fifteen
percent (15%) of the number of retail store locations of such Borrower as of the
end of the immediately preceding fiscal year, (B) Agent shall have received not
less than ten (10) Business Days prior written notice of such sale or closing,
which notice shall set forth in reasonable detail

 

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satisfactory to Agent, the parties to such sale or other disposition, the assets
to be sold or otherwise disposed of, the purchase price and the manner of
payment thereof and such other information with respect thereto as Agent may
request, (C) as of the date of such sale or other disposition and after giving
effect thereto, no Default or Event of Default shall exist or have occurred and
be continuing, (D) such sale shall be on commercially reasonable prices and
terms in a bona fide arm’s length transaction, and (E) any and all proceeds
payable or delivered to such Borrower or any Guarantor in respect of such sale
or other disposition shall be paid or delivered, or caused to be paid or
delivered, to Agent in accordance with the terms of this Agreement (except to
the extent such proceeds reflect payment in respect of Indebtedness secured by a
properly perfected first priority security interest in the assets sold, in which
case, such proceeds shall be applied to such Indebtedness secured thereby),

 

(viii)                        sales or transfers of assets between Borrowers,

 

(ix)                              sales or transfers of assets from a Guarantor
to a Borrower so long as no Default or Event of Default would occur as a result
thereof,

 

(x)                                 sales or transfers of assets among
Guarantors;

 

(xi)                              the non-exclusive license of any material
Intellectual Property by a Borrower or Guarantor to another Person in the
ordinary course of business so long as (A) Agent and Term Loan Agent shall have
received not less than five (5) Business Days’ prior written notice of the
intention of to license such Intellectual Property, (B) such license is
nonexclusive and on and pursuant to the reasonable requirements of such
Borrower’s or Guarantor’s business (as the case may be) and upon fair market
terms, (C) the terms of such license shall provide that such license may be
terminated upon sixty (60) days’ prior written notice by Agent and Term Loan
Agent at any time on and after a Default or Event of Default exists or has
occurred and is continuing, and (D) as of the date of and after giving effect to
such license, no Default or Event of Default shall exist or have occurred;

 

(xii)                           the non-exclusive license of any non-material
Intellectual Property by a Borrower or Guarantor to another Person in the
ordinary course of business so long as (A) the terms of such license shall
provide that such license may be terminated upon sixty (60) days’ prior written
notice by Agent at any time on and after a Default or Event of Default exists or
has occurred and is continuing, and (B) as of the date of and after giving
effect to such license, no Default or Event of Default shall exist or have
occurred; and

 

(xiii)                        the sale by Lerner to Nevada Factoring of the
charge slips and credit card transaction documents giving rise to a Private
Label Credit Card Receivable in accordance with the terms and conditions of
Section 8.16(b) hereof;

 

(c)                                  except as permitted in clause (a) above,
wind up, liquidate or dissolve; or

 

(d)                                 agree to do any of the foregoing.

 

9.8                               Encumbrances.  No Borrower or Guarantor shall,
nor shall it permit any of its Subsidiaries to, create, incur, assume or suffer
to exist any security interest, mortgage, pledge, lien, charge or other
encumbrance of any nature whatsoever on any of its assets or properties,

 

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including the Collateral, or file or permit the filing of, or permit to remain
in effect, any financing statement or other similar notice of any security
interest or lien with respect to any such assets or properties, except the
security interests and liens of Agent, for itself and the ratable benefit of the
Lenders and the Bank Product Providers;

 

(b)                                 liens securing the payment of taxes,
assessments or other governmental charges or levies either not yet overdue or
the validity of which are being contested in good faith by appropriate
proceedings diligently pursued and available to such Borrower or Guarantor or
its Subsidiary, as the case may be, and with respect to which adequate reserves
have been set aside on its books;

 

(c)                                  non-consensual statutory liens (other than
liens securing the payment of taxes) arising in the ordinary course of such
Borrower’s, such Guarantor’s, or such Subsidiary’s, business to the extent:
(i) such liens secure Indebtedness which is not overdue or (ii) such liens
secure Indebtedness relating to claims or liabilities which are fully insured
and being defended at the sole cost and expense and at the sole risk of the
insurer or being contested in good faith by appropriate proceedings diligently
pursued and available to such Borrower, such Guarantor or such Subsidiary, in
each case prior to the commencement of foreclosure or other similar proceedings
and with respect to which adequate reserves have been set aside on its books;

 

(d)                                 zoning restrictions, easements, licenses,
covenants and other restrictions affecting the use of Real Property which do not
interfere in any material respect with the use of such Real Property or ordinary
conduct of the business of such Borrower, such Guarantor or such Subsidiary, as
presently conducted thereon or materially impair the value of the Real Property
which may be subject thereto;

 

(e)                                  purchase money security interests in
Equipment (including Capital Leases) to secure Indebtedness permitted under
Section 9.9(b) hereof;

 

(f)                                   pledges and deposits of cash by such
Borrower or Guarantor after the date hereof in the ordinary course of business
in connection with workers’ compensation, unemployment insurance and other types
of social security benefits consistent with the practices of such Borrower or
Guarantor as of the date hereof;

 

(g)                                  pledges and deposits of cash by such
Borrower or Guarantor after the date hereof to secure the performance of
tenders, bids, leases, trade contracts (other than for the repayment of
Indebtedness), statutory obligations and other similar obligations in each case
in the ordinary course of business consistent with the practices of such
Borrower or Guarantor as of the date hereof; provided, that, in connection with
any performance bonds issued by a surety or other person, the issuer of such
bond shall have waived in writing any rights in or to, or other interest in, any
of the Collateral in an agreement, in form and substance satisfactory to Agent;

 

(h)                                 liens arising from (i) operating leases and
the precautionary UCC financing statement filings in respect thereof and
(ii) equipment or other materials which are not owned by a Borrower or Guarantor
located on the premises of such Borrower or Guarantor (but not in connection
with, or as part of, the financing thereof) from time to time in the ordinary
course of business and consistent with current practices of such Borrower or
Guarantor and the

 

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precautionary UCC financing statement filings in respect thereof;

 

(i)                                     liens or rights of setoff or credit
balances of such Borrower or Guarantor with Credit Card Issuers, but not liens
on or rights of setoff against any other property or assets of such Borrower or
Guarantor pursuant to the Credit Card Agreements (as in effect on the date
hereof) to secure the obligations of such Borrower or Guarantor to the Credit
Card Issuers as a result of fees and chargebacks;

 

(j)                                    deposits of cash with the owner or lessor
of premises leased and operated by such Borrower or Guarantor in the ordinary
course of the business of such Borrower or Guarantor to secure the performance
by such Borrower or Guarantor of its obligations under the terms of the lease
for such premises;

 

(k)                                 judgments and other similar liens arising in
connection with court proceedings that do not constitute an Event of Default,
provided, that, (i) such liens are being contested in good faith and by
appropriate proceedings diligently pursued, (ii) adequate reserves or other
appropriate provision, if any, as are required by GAAP have been made therefor,
(iii) a stay of enforcement of any such liens is in effect and (iv) Agent may
establish a Reserve with respect thereto; and

 

(l)                                     licenses of Intellectual Property to the
extent permitted by Sections 9.7(b)(xi) and (xii) hereof; and

 

(m)                             the security interests and liens set forth on
the Information Certificates.

 

9.9                               Indebtedness.  No Borrower or Guarantor shall,
nor shall it permit any of its respective Subsidiaries to, incur, create,
assume, become or be liable in any manner with respect to, or permit to exist,
any Indebtedness, or guarantee, assume, endorse, or otherwise become responsible
for (directly or indirectly), the Indebtedness of any other Person, except: the
Obligations;

 

(a)                                 purchase money Indebtedness (including
Capital Leases) arising after the date hereof to the extent secured by purchase
money security interests in Equipment (including Capital Leases) so long as such
security interests do not apply to any property of any Borrower or Guarantor, or
any Subsidiary of a Borrower or Guarantor other than the Equipment so acquired,
and the Indebtedness secured thereby does not exceed the cost of the Equipment
so acquired, as the case may be;

 

(b)                                 unsecured Indebtedness of a Borrower or
Guarantor arising after the date hereof to any third person; provided, that, on
and after giving effect to the incurrence of such Indebtedness, (i)  no Default
or Event of Default exists or has occurred and is continuing,  (ii) Borrowers
have Excess Availability in an amount equal to not less than twenty (20%)
percent of the Revolving Loan Limit on and after giving effect to such
Indebtedness, and (iii) if such Indebtedness is incurred while an Event of
Default has occurred and is continuing, each of the following additional
conditions is satisfied as determined by Agent, (A) such Indebtedness shall be
on terms and conditions acceptable to Agent and shall be subject and subordinate
in right of payment to the right of Agent and Lenders to receive the prior
indefeasible payment and satisfaction in full payment of all of the Obligations
pursuant to the terms of an intercreditor

 

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agreement between Agent and such third party, in form and substance satisfactory
to Agent, (iv)Agent shall have received not less than ten (10) days prior
written notice of the intention of such Borrower or Guarantor to incur such
Indebtedness, which notice shall set forth in reasonable detail satisfactory to
Agent the amount of such Indebtedness, the person or persons to whom such
Indebtedness will be owed, the interest rate, the schedule of repayments and
maturity date with respect thereto and such other information as Agent may
request with respect thereto,(v) Agent shall have received true, correct and
complete copies of all agreements, documents and instruments evidencing or
otherwise related to such Indebtedness, (vi) all of the proceeds of the loans or
other accommodations giving rise to such Indebtedness shall be paid to Agent for
application to the Obligations in such order and manner consistent with
Section 6.4(a) hereof, or at Agent’s option, to be held as cash collateral for
the Obligations, (vii) such Borrower or Guarantor shall not, directly or
indirectly, (A) amend, modify, alter or change the terms of such Indebtedness or
any agreement, document or instrument related thereto, except, that, such
Borrower or Guarantor may, after prior written notice to Agent, amend, modify,
alter or change the terms thereof so as to extend the maturity thereof, or defer
the timing of any payments in respect thereof, or to forgive or cancel any
portion of such Indebtedness (other than pursuant to payments thereof), or to
reduce the interest rate or any fees in connection therewith, or (B)redeem,
retire, defease, purchase or otherwise acquire such Indebtedness (except
pursuant to regularly scheduled payments permitted herein), or set aside or
otherwise deposit or invest any sums for such purpose, and (viii) such Borrower
or Guarantor shall furnish to Agent all notices or demands in connection with
such Indebtedness either received by such Borrower or Guarantor or on its behalf
promptly after the receipt thereof, or sent by such Borrower or Guarantor or on
its behalf concurrently with the sending thereof, as the case may be;

 

(c)                                  [Reserved];

 

(d)                                 refinancing of the Indebtedness referenced
in the subsections (a), (b) or (c) above so long as such Indebtedness continues
to comply with all provisions of such subsections (a), (b), or (c) as
applicable, and the incurrence of such Indebtedness would not otherwise cause a
Default or Event of Default to occur;

 

(e)                                  unsecured Indebtedness arising under or
pursuant to any agreements entered into by a Borrower or Guarantor or a
Subsidiary of a Borrower or Guarantor, for non-speculative purposes, that
provides for an interest rate, credit, commodity or equity swap, cap, floor,
collar, forward foreign exchange transaction, currency swap, cross currency rate
swap, currency option, or any combination of, or option with respect to, these
or similar transactions, for the purpose of hedging such Person’s exposure to
fluctuations in interest or exchange rates, loan, credit exchange, security or
currency valuations or commodity prices;

 

(f)                                   Indebtedness arising in connection with
any reasonable deferred compensation plan to officers, employees and directors
for services rendered to Borrowers and Guarantors in the ordinary course of
business; and

 

(g)                                  the Indebtedness set forth on Schedule
9.9(h) hereto or other Indebtedness of any Borrower to another Borrower or
Guarantor or of any Guarantor to a Borrower or another Guarantor, in each case,
so long as (i) such Guarantors are parties to the Intercompany Subordination
Agreement, (ii) such Indebtedness is unsecured and (iii) payments made by a

 

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Borrower with respect to such Indebtedness are made on a non-cash basis by way
of a balance sheet adjustment.

 

9.10                        Prepayments and Amendments; Loans, Investments, Etc.

 

(a)                                 No Borrower or Guarantor shall, nor shall
any Borrower or Guarantor permit any of its respective Subsidiaries to, directly
or indirectly, prepay, redeem, defease, purchase or otherwise acquire:  (i) the
Obligations except in accordance with this Agreement;  or (ii) any Indebtedness
except in accordance with the terms of such Indebtedness; provided, that, each
of the following conditions have been satisfied: (A) such Indebtedness is
permitted to be incurred to the extent provided by Section 9.9 hereof, (B) on
the date of and after giving effect to the payment of such payment, no Default
or Event of Default shall exist or have occurred and be continuing, (C) on the
date of and after giving effect to the such payment, Borrowers have Compliance
Excess Availability in an amount equal to not less than twenty (20%) percent of
the Revolving Loan Limit, (D) Agent shall have received, in form and substance
satisfactory to Agent, monthly projections showing that, for the twelve (12)
months immediately after such payment is made, Compliance Excess Availability
shall be greater than 20% of the Revolving Loan Limit, and (E) Parent and its
Subsidiaries shall have a Fixed Charge Coverage Ratio of 1.0:1.0  calculated
based on the immediately preceding twelve (12) months for which Agent has
received financial statements delivered in accordance with
Section 9.6(a) hereof.

 

(b)                                 No Borrower or Guarantor shall, nor shall
any Borrower or Guarantor permit any of its respective Subsidiaries to, directly
or indirectly, make any loans or advance money or property to any person, or
invest in (by capital contribution, dividend or otherwise) or purchase or
repurchase the Capital Stock or Indebtedness or all or a substantial part of the
assets or property of any person, or form or acquire any Subsidiaries, or agree
to do any of the foregoing, except:

 

(i)                                     the endorsement of instruments for
collection or deposit in the ordinary course of business;

 

(ii)                                  investments in cash or Cash Equivalents,
provided, that, (i) no Revolving Loans are then outstanding and (ii) the terms
and conditions of Section 5.2 hereof shall have been satisfied with respect to
the deposit account, investment account or other account in which such cash or
Cash Equivalents are held;

 

(iii)                               the equity investments of such Borrower or
Guarantor in its Subsidiaries existing as of the date hereof or otherwise
permitted to be made hereunder, provided, that, such Borrower or Guarantor shall
not have any further obligations or liabilities to make any capital
contributions or other additional investments in or for the benefit of any of
such Subsidiaries;

 

(iv)                              loans and advances by such Borrower or
Guarantor to employees of such Borrower or Guarantor not to exceed the principal
amount of $2,000,000 in the aggregate for all Borrowers and Guarantors at any
time outstanding for:  (i) reasonably and necessary work-related travel or other
ordinary business expenses to be incurred by such employee in connection with
their work for such Borrower or Guarantor and (ii) reasonable and necessary

 

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relocation expenses of such employees (including home mortgage financing for
relocated employees);

 

(v)                                 stock or obligations issued to such Borrower
or Guarantor by any Person (or the representative of such Person) in respect of
Indebtedness of such Person owing to such Borrower or Guarantor in connection
with the insolvency, bankruptcy, receivership or reorganization of such Person
or a composition or readjustment of the debts of such Person; provided, that,
the original of any such stock or instrument evidencing such obligations shall
be promptly delivered to Agent, upon Agent’s request, together with such stock
power, assignment or endorsement by such Borrower or Guarantor as Agent may
request;

 

(vi)                              obligations of account debtors to such
Borrower or Guarantor arising from Accounts which are past due evidenced by a
promissory note made by such account debtor payable to such Borrower or
Guarantor; provided, that, promptly upon the receipt of the original of any such
promissory note by such Borrower or Guarantor, such promissory note shall be
endorsed to the order of Agent by such Borrower or Guarantor and promptly
delivered to Agent as so endorsed;

 

(vii)                           the loans and advances set forth on Schedule
9.10 hereto; provided, that, as to such loans and advances, (i) such Borrower or
Guarantor shall not, directly or indirectly, amend, modify, alter or change the
terms of such loans and advances or any agreement, document or instrument
related thereto and (ii) such Borrower or Guarantor shall furnish to Agent all
notices or demands in connection with such loans and advances either received by
such Borrower or Guarantor or on its behalf, promptly after the receipt thereof,
or sent by such Borrower or Guarantor or on its behalf, concurrently with the
sending thereof, as the case may be;

 

(viii)                        investments in the form of a joint venture made by
such Borrower or Guarantor in connection with the purchase of assets or Capital
Stock of a Person engaged in substantially the same or a related business as
such Borrower or Guarantor so long as (A) Agent shall have received not less
than ten (10) Business Days’ prior written notice of the intention of such
Borrower or Guarantor to enter into such investment, (B) on and after giving
effect to such investment, no Event of Default has occurred and is continuing,
(C) on and after giving effect to such investment, Borrowers shall have Excess
Availability in an amount equal to not less than twenty (20%) percent of the
Revolving Loan Limit after giving effect to such investment, (D) such Person
shall have executed and delivered a Guarantee to Agent, for itself and the
ratable benefit of the Lenders and the Bank Product Providers, and (E) the
assets of such Person shall not be included in the calculation of the Borrowing
Base, unless otherwise agreed to by Agent pursuant to Section 9.22 hereof;

 

(ix)                              loans or advances from (A) one Borrower to
another Borrower, from a Guarantor to a Borrower or another Guarantor so long as
such Borrower or Guarantor are parties to the Intercompany Subordination
Agreement, or (B) from any Borrower to any Guarantor so long as (A) such loans
or advances are made on a non-cash basis as balance sheet entries and (B) such
Guarantor is a party to the Intercompany Subordination Agreement;

 

(x)                                 Permitted Acquisitions; and

 

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(xi)                              NY&Co may repurchase shares of Capital Stock
from its shareholders; provided, that  (A) for each of the thirty (30) days
immediately prior to the date of such repurchase, Compliance Excess Availability
in an amount equal to not less than twenty (20%) percent of the Revolving Loan
Limit, and as of the date of any such repurchase and after giving effect
thereto, Compliance Excess Availability in an amount equal to not less than
twenty (20%) percent of the Revolving Loan Limit, (B) any such repurchase by
NY&CO shall not contravene its Certificate of Incorporation and By-Laws and
shall comply with all applicable provisions of State and Federal law and (C) as
of the date of any such repurchase and after giving effect thereto, no Event of
Default shall exist or shall have occurred and be continuing.

 

9.11                        Dividends and Redemptions.  No Borrower or Guarantor
shall, directly or indirectly, declare or pay any dividends on account of any
shares of class of any Capital Stock of such Borrower or Guarantor now or
hereafter outstanding, or set aside or otherwise deposit or invest any sums for
such purpose, or redeem, retire, defease, purchase or otherwise acquire any
shares of any class of Capital Stock (or set aside or otherwise deposit or
invest any sums for such purpose) for any consideration or apply or set apart
any sum, or make any other distribution (by reduction of capital or otherwise)
in respect of any such shares or agree to do any of the foregoing, except that:

 

(a)                                 any Borrower or Guarantor may declare and
pay such dividends or redeem, retire, defease, purchase or otherwise acquire any
shares of any class of Capital Stock for consideration in the form of shares of
common stock (so long as after giving effect thereto no Change of Control or
other Default or Event of Default shall exist or occur); any Borrower may pay
dividends to any other Borrower and any Guarantor may pay dividends to any
Borrower;

 

(c)                                  Borrowers and Guarantors may pay (directly
or indirectly) dividends to NY&Co to the extent required to permit NY&Co to
repurchase Capital Stock consisting of common or preferred stock held by
employees pursuant to any employee stock ownership plan thereof upon the
termination, retirement or death of any such employee in accordance with the
provisions of such plan; provided, that, as to any such repurchase, each of the
following conditions is satisfied: (A) as of the date of the payment for such
repurchase and after giving effect thereto, no Default or Event of Default shall
exist or have occurred and be continuing, (B) such repurchase shall be paid with
funds legally available therefor, and (C) such repurchase shall not violate any
law or regulation or the terms of any indenture, agreement or undertaking to
which Lerner is a party or by which Lerner or its properties are bound, and
(D) Borrowers have Compliance Excess Availability in an amount equal to not less
than twenty (20%) percent of the Revolving Loan Limit after giving effect to
such payments;

 

(d)                                 Borrowers and Guarantors may pay dividends
(directly or indirectly) to NY&Co, or any other corporation that is the parent
of any affiliated, consolidated, combined or unitary group of corporations of
which Borrowers and Guarantors are members, in an amount equal to the sum of
(i) the federal, state and local income tax liability of such group that is
attributable to Borrowers and Guarantors and their respective Subsidiaries and
(ii) amounts owed by NY&Co to the independent trade creditors, service
providers, employees and independent directors of NY&Co for the services or
goods (of the types set forth on Schedule 9.11(d)) hereto supplied by such
independent trade creditors, service providers, employees and independent
directors which have conferred a direct benefit to Borrowers, Guarantors and/or
their respective

 

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Subsidiaries, plus an arms-length cost plus fees (not to exceed one and
three-quarters of one percent (1.75%) of the amounts payable thereof) to NY&Co
for its services rendered in arranging and processing payments for those goods
and services; and

 

(e)                                  Borrowers and Guarantors may pay dividends
in cash to NY&Co so that NY&Co may pay cash dividends to its equity holders so
long as each of the following conditions have been satisfied (i) on and after
giving effect to the payment of such dividend, no Default or Event of Default
shall exist or have occurred and be continuing, (ii) such dividend shall be paid
with funds legally available therefor, (iii) the declaration or payment of such
dividend shall not violate any law or regulation or the terms of any indenture,
agreement or undertaking to which such Borrower or Guarantor is a party or by
which such Borrower or Guarantor or its properties are bound, (iv) on and after
giving effect to the payment of such dividend, Borrowers have Compliance Excess
Availability in an amount equal to not less than twenty (20%) percent of the
Revolving Loan Limit, (v) Agent shall have received, in form and substance
satisfactory to Agent, monthly projections showing that, for the twelve (12)
months immediately after such payment is made, Compliance Excess Availability
shall be greater than 20% of the Revolving Loan Limit, and (vi) Parent and its
Subsidiaries shall have a Fixed Charge Coverage Ratio of 1.0:1.0  calculated
based on the immediately preceding twelve (12) months for which Agent has
received financial statements delivered in accordance with
Section 9.6(a) hereof.

 

9.12                        Transactions with Affiliates.  No Borrower or
Guarantor shall, directly or indirectly:

 

(a)                                 except as provided in subsection (b) below,
purchase, acquire or lease any property from, or sell, transfer or lease any
property to, any officer, director or other Affiliate of a Borrower or Guarantor
(other than another Borrower or Guarantor), except in the ordinary course of and
pursuant to the reasonable requirements of such Borrower’s or Guarantor’s
business (as the case may be) and upon fair and reasonable terms no less
favorable to such Borrower or Guarantor than such Borrower or Guarantor would
obtain in a comparable arm’s length transaction with an unaffiliated person; or
make any payments (whether by dividend, loan or otherwise) of management,
consulting or other fees for management or similar services, or of any
Indebtedness owing to any officer, employee, shareholder, director or any other
Affiliate of any Borrower or Guarantor, except

 

(i)                                     reasonable current or deferred
compensation to officers, employees and directors for services rendered to
Borrowers and Guarantors in the ordinary course of business, and

 

(ii)                                  as permitted under Section 9.11 hereof.

 

9.13                        Compliance with ERISA.  Except as could not
reasonably be expected to have a Material Adverse Effect, each Borrower and
Guarantor shall, and shall with respect to any Pension Plan cause each of its
ERISA Affiliates, to:  (a) maintain each Plan in compliance in all material
respects with the applicable provisions of ERISA, the Code and other Federal and
State law; (b) cause each Plan which is qualified under Section 401(a) of the
Code to maintain such qualification; (c) not terminate any Pension Plan so as to
incur any material liability to the Pension Benefit Guaranty Corporation;
(d) not allow or suffer to exist any non-exempt

 

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prohibited transaction which would be reasonably likely to subject any Borrower
or Guarantor or any ERISA Affiliate to a material tax or penalty or other
liability on prohibited transactions imposed under Section 4975 of the Code or
ERISA; (e) make all required contributions to any Pension Plan under Section 302
of ERISA, Section 412 of the Code or the terms of such Pension Plan; (f) not
allow or suffer to exist any accumulated funding deficiency, whether or not
waived, with respect to any Pension Plan; or (g) allow or suffer to exist any
occurrence of a reportable event or any other event or condition which presents
a material risk of termination by the Pension Benefit Guaranty Corporation of
any Pension Plan that is a single employer plan, which termination could result
in any material liability to any Borrower or Guarantor.

 

9.14                        End of Fiscal Years; Fiscal Quarters.  NY&Co shall,
for financial reporting purposes, cause its and its Subsidiaries’ (a) fiscal
years to end on the Fiscal Year-End of each year set forth on Exhibit F hereto,
(b) fiscal quarters to end on the Fiscal Quarter -End of each fiscal year set
forth on Exhibit F hereto and (c) fiscal months to end on the Fiscal Month-End
of each fiscal year set forth on Exhibit F hereto.

 

9.15                        Change in Business.  No Borrower or Guarantor shall,
nor shall it permit its Subsidiaries to, engage in any business other than the
business of Borrowers and Guarantors on the date hereof and any business
reasonably related, ancillary or complimentary to the business in which Lerner
was engaged as of the date hereof.

 

9.16                        Limitation of Restrictions Affecting Subsidiaries. 
No Borrower or Guarantor shall, directly or indirectly, create or otherwise
cause or suffer to exist any encumbrance or restriction which prohibits or
limits the ability of any Subsidiary of any Borrower or Guarantor to (a) pay
dividends or make other distributions or pay any Indebtedness owed to such
Borrower or Guarantor or any of its Subsidiaries; (b) make loans or advances to
such Borrower or Guarantor or any of its Subsidiaries, (c) transfer any of its
properties or assets to such Borrower or Guarantor or any of its Subsidiaries;
or ((d) create, incur, assume or suffer to exist any lien upon any of its
property, assets or revenues, whether now owned or hereafter acquired, other
than encumbrances and restrictions arising under (i) applicable law, (ii) this
Agreement, (iii) customary provisions restricting subletting or assignment of
any lease governing a leasehold interest of such Borrower or Guarantor or any of
its Subsidiaries, (iv) customary restrictions on dispositions of real property
interests found in reciprocal easement agreements of such Borrower or Guarantor
or any of its Subsidiaries, (v) any agreement relating to Indebtedness incurred
by a Subsidiary of such Borrower or Guarantor prior to the date on which such
Subsidiary was acquired by such Borrower or Guarantor and outstanding on such
acquisition date that is permitted under the terms of this Agreement, (vi) the
extension or continuation of contractual obligations in existence on the date
hereof, or (vii) any agreement relating to a refinancing of Indebtedness
permitted under the terms of this Agreement; provided, that, any such
encumbrances or restrictions contained in such extension or continuation are no
less favorable to Agent and Lenders than those encumbrances and restrictions
under or pursuant to the contractual obligations so extended or continued.

 

9.17                        Minimum Excess Availability.  Borrowers shall at all
times maintain Excess Availability equal to the greater of (a) ten percent (10%)
of the Revolving Loan Limit and (b) $7,500,000.

 

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9.18                        License Agreements.

 

(a)                                 Except as could not reasonably be expected
to have a Material Adverse Effect, each Borrower and Guarantor shall
(i) promptly and faithfully observe and perform all of the material terms,
covenants, conditions and provisions of the material License Agreements to which
it is a party to be observed and performed by it, at the times set forth
therein, if any, (ii) not do, permit, suffer or refrain from doing anything that
could reasonably be expected to result in a default under or breach of any of
the terms of any material License Agreement, (iii) not cancel, surrender,
modify, amend, waive or release any material License Agreement in any material
respect or any term, provision or right of the licensee thereunder in any
material respect, or consent to any of the foregoing; except, subject to
Section 9.18(b) below, a Borrower or Guarantor may cancel, surrender or release
any material License Agreement in the ordinary course of the business of such
Borrower or Guarantor; provided, that, such Borrower or Guarantor shall give
Agent not less than thirty (30) days prior written notice of its intention to so
cancel, surrender and release any such material License Agreement, (iv) give
Agent prompt written notice of any material License Agreement entered into by
such Borrower or Guarantor after the date hereof, together with a true, correct
and complete copy thereof and such other information with respect thereto as
Agent may request (subject to any obligation of confidentiality contained
therein), (v) give Agent prompt written notice of any notice of default sent to
another party to a material License Agreement by such Borrower or Guarantor of
any material breach of any obligation, or any default, by such party under any
material License Agreement, and deliver to Agent (promptly upon the receipt
thereof by such Borrower or Guarantor in the case of a notice to such Borrower
or Guarantor and concurrently with the sending thereof in the case of a notice
from such Borrower or Guarantor) a copy of each notice of default and every
other notice and other communication received or delivered by such Borrower or
Guarantor in connection with any material License Agreement which relates to the
right of such Borrower or Guarantor to continue to use the property subject to
such License Agreement, and (vi) furnish to Agent, promptly upon the request of
Agent, such information and evidence as Agent may reasonably require from time
to time concerning the observance, performance and compliance by such Borrower
or Guarantor or the other party or parties thereto with the material terms,
covenants or provisions of any material License Agreement.

 

(b)                                 Each Borrower or Guarantor will either
exercise any option to renew or extend the term of each material License
Agreement to which it is a party in such manner as will cause the term of such
material License Agreement to be effectively renewed or extended for the period
provided by such option and give prompt written notice thereof to Agent or give
Agent prior written notice that such Borrower or Guarantor does not intend to
renew or extend the term of any such material License Agreement, not less than
sixty (60) days prior to the date of any such non-renewal or expiration.  In the
event of the failure of any Borrower or Guarantor to extend or renew any
material License Agreement to which it is a party for reasons which are
commercially unreasonable, Agent shall have, and is hereby granted, the
irrevocable right and authority, at its option upon notice to such Borrower or
Guarantor, as applicable to renew or extend the term of such material License
Agreement, whether in its own name and behalf, or in the name and behalf of a
designee or nominee of Agent or in the name and behalf of such Borrower or
Guarantor, as Agent shall determine at any time that an Event of Default shall
exist or have occurred and be continuing.  Agent may, but shall not be required
to, perform any or all of such obligations of such Borrower or Guarantor under
any of the License Agreements,

 

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including, but not limited to, the payment of any or all sums due from such
Borrower or Guarantor thereunder, except for amount due to another Borrower or
Guarantor.  Any sums so paid by Agent shall constitute part of the Obligations.

 

9.19                        After Acquired Real Property.  If any Borrower or
Guarantor hereafter acquires any Real Property, fixtures or any other property
related thereto, then if such Real Property, fixtures or other property at any
location (or series of adjacent, contiguous or related locations, and regardless
of the number of parcels) has a fair market value in an amount equal to or
greater than $3,000,000 (or if a Default or Event of Default exists, then
regardless of the fair market value of such assets), without limiting any other
rights of Agent or any Lender, or duties or obligations of any Borrower or
Guarantor, promptly upon Agent’s request, such Borrower or Guarantor shall
execute and deliver to Agent a mortgage, deed of trust or deed to secure debt,
as Agent may determine, in form and substance satisfactory to Agent and as to
any provisions relating to specific state laws satisfactory to Agent and in form
appropriate for recording in the real estate records of the jurisdiction in
which such Real Property or other property is located granting to Agent a first
and only lien and mortgage on and security interest in such Real Property,
fixtures or other property (except as such Borrower or Guarantor would otherwise
be permitted to incur hereunder or under its Guaranty, as applicable, or as
otherwise consented to in writing by Agent ) and such other agreements,
documents and instruments as Agent may reasonable require in connection
therewith.  Notwithstanding any provisions to the contrary herein, no Borrower
or Guarantor shall be required to deliver to Agent a mortgage, deed of trust or
deed to secure debt if the Real Property to be secured thereby is a leasehold
interest, and the granting of such security interest is prohibited under the
lease and the landlord has withheld its consent to such security interest. 
Except as provided in Section 9.8 hereof or if Agent’s prior written consent
shall have been obtained, no Borrower shall grant to any Person other than Agent
a lien on or security interest in the Real Property located on 466-472 53rd
Street, Brooklyn, New York.

 

9.20                        Costs and Expenses.  Borrowers shall pay to Agent on
demand all costs, expenses, filing fees and taxes paid or payable in connection
with the preparation, negotiation, execution, delivery, recording,
administration, collection, liquidation, enforcement and defense of the
Obligations, Agent’s rights in the Collateral, this Agreement, the other
Financing Agreements and all other documents related hereto or thereto,
including any amendments, supplements or consents which may hereafter be
contemplated (whether or not executed) or entered into in respect hereof and
thereof, including:  (a) all costs and expenses of filing or recording
(including Uniform Commercial Code financing statement filing taxes and fees,
documentary taxes, intangibles taxes and mortgage recording taxes and fees, if
applicable); (b) costs and expenses and fees for insurance premiums, appraisal
fees and search fees, costs and expenses of remitting Loan proceeds, collecting
checks and other items of payment, and establishing and maintaining the Blocked
Accounts, together with Agent’s customary charges and fees with respect thereto;
(c) charges, fees or expenses charged by Issuing Bank in connection with the
Letter of Credit Accommodations; (d) costs and expenses of preserving and
protecting the Collateral; (e) costs and expenses paid or incurred in connection
with obtaining payment of the Obligations, enforcing the security interests and
liens of Agent, selling or otherwise realizing upon the Collateral, and
otherwise enforcing the provisions of this Agreement and the other Financing
Agreements or defending any claims made or threatened against Agent or any
Lender arising out of the transactions contemplated hereby and thereby
(including preparations for and

 

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consultations concerning any such matters); (f) all reasonable out-of-pocket
expenses and costs incurred by Agent during the course of periodic field
examinations of the Collateral and Borrowers’ operations or for conducting any
appraisals of the Collateral; provided, that, (i) so long as no Default or Event
of Default exists or has occurred and is continuing and Compliance Excess
Availability is greater than twenty (20%) percent of the Revolving Loan Limit,
Borrowers shall not be obligated to reimburse Agent for more than one (1) field
examination and one (1) appraisal of the Inventory  in any twelve (12)
consecutive month period, (ii) so long as no Default or Event of Default exists
or has occurred and is continuing and Compliance Excess Availability is less
than or equal to twenty (20%) percent of the Revolving Loan Limit, Borrowers
shall not be obligated to reimburse Agent for more than two (2) field
examinations and two (2) appraisals of the Inventory in any twelve (12)
consecutive month period, (iii) so long as no Default or Event of Default exists
or has occurred and is continuing and the EBITDA of Borrowers and their
Subsidiaries on a consolidated basis calculated each month on a trailing twelve
(12) month basis is equal to or less than $22,500,000, Borrowers shall be
obligated to reimburse Term Loan Agent for one (1) appraisal of the Intellectual
Property in any twelve (12) consecutive month period, and (iv) if a Default or
an Event of Default exists or has occurred and is continuing, Borrowers shall be
obligated to reimburse Agent for such other field examination and appraisals of
the Collateral (including Inventory and Intellectual Property) as Agent may
request; and (g) the fees and disbursements of expenses of one external counsel
(including legal assistants) to Agent (and, in the case of an actual or
perceived conflict of interest where a Lender affected by such conflict has
informed Agent of such conflict,  of another firm of counsel for such affected
Lender) and, to the extent required, one firm of special counsel (including
legal assistants) to Agent and one firm of local counsel (including legal
assistants) to Agent in any relevant jurisdiction in connection with any of the
foregoing.

 

9.21                        Credit Card Agreements.  Each Borrower and Guarantor
shall (a) observe and perform all material terms, covenants, conditions and
provisions of the Credit Card Agreements to be observed and performed by it at
the times set forth therein; (b) not do, permit, suffer or refrain from doing
anything, as a result of which there could be a default under or breach of any
of the terms of any of the Credit Card Agreements and at all times maintain in
full force and effect the Credit Card Agreements and not terminate, cancel,
surrender, modify, amend, waive or release any of the Credit Card Agreements, or
consent to or permit to occur any of the foregoing; except, that, any Borrower
or Guarantor may terminate or cancel any of the Credit Card Agreements in the
ordinary course of the business of such Borrower or Guarantor; provided, that,
such Borrower or Guarantor shall give Agent not less than ten (10) Business Days
prior written notice of its intention to so terminate or cancel any of the
Credit Card Agreements; (c) not enter into any new Credit Card Agreements with
any new Credit Card Issuer unless Agent shall have received not less than ten
(10) Business Days prior written notice of the intention of such Borrower or
Guarantor to enter into such agreement (together with such other information
with respect thereto as Agent may request) and such Borrower or Guarantor
delivers, or causes to be delivered to Agent, a Credit Card Acknowledgment in
favor of Agent; (d) give Agent immediate written notice of any Credit Card
Agreement entered into by such Borrower or Guarantor after the date hereof,
together with a true, correct and complete copy thereof and such other
information with respect thereto as Agent may reasonably request; (e) furnish to
Agent, promptly upon the request of Agent, such information and evidence as
Agent may require from time to time concerning the observance, performance and
compliance by such Borrower or Guarantor or the other party or parties thereto
with the terms, covenants or provisions of the Credit Card

 

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Agreements; and (f) not modify any instructions given by Agent to any Credit
Card Issuer or Credit Card Processor provided for in any Credit Card
Acknowledgement or otherwise direct the remittance of payments under any Credit
Card Agreement to any account other than the Blocked Account.

 

9.22                        Additional Guaranties and Collateral Security;
Further Assurances.

 

(a)                                 In the event that a Subsidiary is acquired
pursuant to a Permitted Acquisition, the Borrower or Guarantor acquiring such
Subsidiary shall cause such Subsidiary to execute and deliver to Agent, in form
and substance satisfactory to Agent, (i) a joinder agreement to the Financing
Agreements in order to make such Subsidiary a party to this Agreement as a
“Borrower” if it owns accounts or inventory that would constitute Eligible
Accounts and Eligible Inventory to the extent provided by the definition of
Permitted Acquisitions or otherwise as a “Guarantor”, and (ii) a guarantee as a
“Guarantor” or pledge agreement as a “Pledgor”, and including, but not limited
to, supplements and amendments hereto and to any of the other Financing
Agreements, authorization to file UCC financing statements, Collateral Access
Agreements, other agreements, documents or instruments contemplated hereunder
and other consents, waivers, acknowledgments and other agreements from third
persons which Agent may deem reasonably necessary or desirable in order to
permit, protect and perfect its security interests in and liens upon the assets
of such Subsidiary and the Capital Stock of any Borrower or Guarantor in such
Subsidiary, corporate resolutions and other organization and authorizing
documents of such Person, and favorable opinions of counsel to such person;
provided, that, if such Subsidiary is a Foreign Subsidiary that is acquired
pursuant to a Permitted Acquisition, then such Borrower or Guarantor shall not
be required to cause such Foreign Subsidiary to grant a security interest in its
assets located outside the United States or execute and deliver a Guarantee and
become a Loan Party to the extent that granting a security interest in any such
assets by such Foreign Subsidiary or the execution and delivery of a Guarantee
by such Foreign Subsidiary would have an adverse tax impact on such Borrower or
Guarantor for purposes of Section 956 of the Code as determined by Agent in its
good faith discretion in consultation with such Borrower or Guarantor.

 

(b)                                 In the case of an acquisition of assets
whether pursuant to a Permitted Acquisition or otherwise in accordance with the
terms and conditions hereof by a Borrower or Guarantor after the date hereof,
Agent shall have received, in form and substance satisfactory to Agent,
(i) evidence that Agent has valid and perfected security interests in and liens
upon all purchased assets to the extent such assets constitute Collateral
hereunder (except in the case of deposit accounts, within thirty (30) days after
the acquisition thereof); provided, that, in no event shall any such assets
consisting of Accounts or Inventory so purchased be deemed to be Eligible
Accounts or Eligible Inventory until Agent is perfected in such deposit accounts
and Agent has agreed to include such Accounts or Inventory in the Borrowing Base
in the case of a Permitted Acquisition, pursuant to the requirements of  the
definition of Permitted Acquisition, and in all other cases in the discretion of
Agent), (ii) all Collateral Access Agreements and other consents, waivers,
acknowledgments and other agreements from third persons which Agent may deem
necessary or desirable in order to permit, protect and perfect its security
interests in and liens upon the assets purchased, and (iii) such other
agreements, documents and instruments as Agent may require in connection with
the documents referred to above, including, but not limited to, supplements and
amendments hereto, corporate resolutions and other organization and

 

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authorizing documents and favorable opinions of counsel to such person.

 

(c)                                  Borrowers and Guarantors shall provide
Agent with written notice no later than ten (10) Business Days following the
occurrence of any event in which any of the patents or the copyright set forth
on Schedule 8.11 hereto at any time hereafter (i) becomes material to or is used
in or becomes useful in the business of any Borrower or Guarantor, (ii) is
otherwise used in the production, distribution or sale of any Inventory or the
collection of Accounts and (iii) does have any material value.  In such event,
Borrowers and Guarantors shall execute and deliver to Agent, in form and
substance acceptable to Agent (a) such patent and copyright security agreements
as the case may be with respect to such copyright or patents, (b) evidence that
the security interest of Agent in such copyright has been properly filed with
the US Copyright Office and in such patents has been properly filed with the US
Patent and Trademark Office, and (c) such other agreements, documents and
instruments as Agent may require in connection with the documents referred to
above, including, but not limited to, supplements and amendments hereto,
corporate resolutions and other organization and authorizing documents and
favorable opinions of counsel to such person.

 

(d)                                 At the request of Agent at any time and from
time to time, Borrowers and Guarantors shall, at their expense, duly execute and
deliver, or cause to be duly executed and delivered, such further agreements,
documents and instruments, and do or cause to be done such further acts as may
be necessary or proper to evidence, perfect, maintain and enforce the security
interests and the priority thereof in the Collateral and to otherwise effectuate
the provisions or purposes of this Agreement or any of the other Financing
Agreements.  Upon any Borrower’s request for a Loan or a Letter of Credit
Accommodation in accordance with the provisions of Section 6.6 hereof, Agent may
request a certificate from an officer of each Borrower representing that all
conditions precedent to the making of Loans and providing Letter of Credit
Accommodations contained herein are satisfied.  In the event of such request by
Agent, Agent and Lenders may, at Agent’s option, cease to make any further Loans
or provide any further Letter of Credit Accommodations until Agent has received
such certificate and, in addition, Agent has determined that such conditions are
satisfied.

 

9.23                        Private Label Credit Cards.  In the event an Event
of Default has occurred and is continuing and upon Agent’s written notice to
Borrowers, Borrowers and Guarantors will cease to receive any In-Store
Payments.  Upon an acceleration of the Obligations following an Event of
Default, Borrowers and Guarantors will cease to accept any customer payments
made through any Borrower’s or Guarantor’s private label credit cards.

 

9.24                        Termination of Transition Services Agreement. 
Borrowers shall give Agent written notice of the termination of the Transition
Services Agreement thirty (30) days prior to the date of such termination.

 

9.25                        Cash Collateral Account.  Borrowers shall:

 

(a)                                 continue to maintain the Cash Collateral
Account at their sole expense;

 

(b)                                 ensure that at all times the Cash Collateral
Account Control Agreement is in effect with respect to the Cash Collateral
Account;

 

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(c)                                  not, without the prior written consent of
Agent, close or transfer the Cash Collateral Account or take any other action
with respect to the Cash Collateral Account that is not expressly authorized by
this Agreement;

 

(d)                                 provide to Agent, as and when received by
Borrowers, copies of all statements received by Borrowers with respect to the
Cash Collateral Account to the extent that the financial institution or other
person with whom such account is maintained has not provided such statements
directly to Agent;

 

(e)                                  in the event the available balance of the
Cash Collateral Account is at any time less than an amount sufficient to support
the advances then outstanding pursuant to clause (a)(v) of the definition of
Borrowing Base, immediately report such event to Agent and immediately, but in
any event within two (2) Business Days after receipt of written notice from
Agent of such event, deposit readily available funds into the Cash Collateral
Account sufficient to cause such balance to support the full amount of all
advances then outstanding pursuant to clause (a)(v) of the definition of
Borrowing Base; and

 

(f)                                   not make any withdrawals or transfers from
the Cash Collateral Account without the prior written consent of Agent, which
consent shall not be unreasonably withheld to the extent that both before and
after giving effect to such withdrawal or transfer, (i) no Default or Event of
Default then exists and (ii) the then outstanding balance of the Revolving Loans
made against the available balance of the Cash Collateral Account is greater
than or equal to one hundred percent (100%) of the available balance of the Cash
Collateral Account.

 

9.26                        Foreign Assets Control Regulations, Etc.  None of
the requesting or borrowing of the Loans or the requesting or issuance,
extension or renewal of Letter of Credit Accommodation or the use of the
proceeds of any thereof will violate the Trading With the Enemy Act (50 U.S.C.
§1 et seq., as amended) (the “Trading With the Enemy Act”) or any of the foreign
assets control regulations of the United States Treasury Department (31 C.F.R.,
Subtitle B, Chapter V, as amended) (the “Foreign Assets Control Regulations”) or
any enabling legislation or executive order relating thereto (including, but not
limited to (a) Executive order 13224 of September 21, 2001 Blocking Property and
Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support
Terrorism (66 Fed. Reg. 49079 (2001)) (the “Executive Order”) and (b) the
Uniting and Strengthening America by Providing Appropriate Tools Required to
Intercept and Obstruct Terrorism Act of 2001 (Public Law 107-56).  None of
Borrowers or any of their Subsidiaries or other Affiliates is or will become a
“blocked person” as described in the Executive Order, the Trading with the Enemy
Act or the Foreign Assets Control Regulations or engages or will engage in any
dealings or transactions, or be otherwise associated, with any such “blocked
person”.

 

9.27                        ECP Guarantor Keepwell.  Each Qualified ECP
Guarantor hereby jointly and severally absolutely, unconditionally and
irrevocably undertakes to provide such funds or other support as may be needed
from time to time by each Borrower and Guarantor to guarantee and otherwise
honor all Obligations in respect of Swap Obligations; provided, that, each
Qualified ECP Guarantor shall only be liable under this Section 9.27 for the
maximum amount of such liability that can be hereby incurred without rendering
its obligations under this Section 9.27, or otherwise under this Agreement,
voidable under applicable law relating to fraudulent conveyance

 

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or fraudulent transfer, and not for any greater amount). The obligations of each
Qualified ECP Guarantor under this Section 9.27 shall remain in full force and
effect until payment in full of the Obligations. Each Qualified ECP Guarantor
intends that this Section 9.27 constitute, and this Section 9.27 shall be deemed
to constitute, a “keepwell, support, or other agreement” for the benefit of each
Borrower and Guarantor for all purposes of Section 1a(18)(A)(v)(II) of the
Commodity Exchange Act.

 

SECTION 10.                  EVENTS OF DEFAULT AND REMEDIES

 

10.1                        Events of Default.  The occurrence or existence of
any one or more of the following events are referred to herein individually as
an “Event of Default”, and collectively as “Events of Default”:

 

(a)                                 (i) any Borrower fails to make any principal
payment after the same becomes due and payable, or any Borrower fails to pay any
of the other Obligations (other than with respect to principal payments) within
two (2) Business Days after the same becomes due and payable or (ii) any
Borrower or Guarantor fails to perform any of the covenants contained in
Sections 9.1(a), 9.2, 9.3, 9.4, 9.5, 9.7, 9.11, 9.13, 9.15, 9.16, 9.17, 9.20,
9.24, 9.25 and 9.26 of this Agreement and such failure shall continue for
fifteen (15) Business Days; provided, that, such fifteen (15) Business Day
period shall not apply in the case of: (i) any failure to observe any such
covenant which is not capable of being cured at all or within such fifteen (15)
Business Day period or which has been the subject of a prior failure within a
six (6) month period or (ii) an intentional breach by Borrower or any Guarantor
of any such covenant or (iii) any Borrower or Guarantor fails to perform any of
the terms, covenants, conditions or provisions contained in this Agreement or
any of the other Financing Agreements other than those described in Sections
10.1(a)(i) and 10.1(a)(ii) above and such failure shall continue for thirty (30)
Business Days; provided, that, such thirty (30) Business Day period shall not
apply in the case of: (A) any failure to observe any such covenant which is not
capable of being cured at all or within such thirty (30) Business Day period or
which has been the subject of a prior failure within a six (6) month period or
(B) an intentional breach by any Borrower or such Guarantor of any such
covenant;

 

(b)                                 any representation, warranty or statement of
fact made by any Borrower or Guarantor in this Agreement, the other Financing
Agreements or any other written agreement, schedule, confirmatory assignment or
otherwise shall when made or deemed made be false or misleading in any material
respect;

 

(c)                                  any Guarantor revokes or terminates, or
fails to perform any of the terms, covenants, conditions or provisions of any
Guarantee in favor of Agent or any Lender;

 

(d)                                 any (i) judgment for the payment of money is
rendered against any Borrower or any Obligor in excess of $4,000,000 in any one
case or in excess of $8,000,000 in the aggregate for Borrowers and Obligors (to
the extent not covered by insurance where the insurer has assumed responsibility
in writing for such judgment) and shall remain undischarged or unvacated for a
period in excess of thirty (30) days or execution shall at any time not be
effectively stayed, or any judgment other than for the payment of money, or
injunction, attachment, garnishment or execution is rendered against any
Borrower or any Obligor or any of the Collateral having a value in excess of
$4,000,000 or (ii) unless consented to by Agent, any

 

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settlement of a legal action or litigated claim or controversy is made by any
Borrower or any Obligor in an amount in excess of $8,000,000 (to the extent not
covered by insurance where the insurer has assumed responsibility in writing for
such settlement);

 

(e)                                  except as permitted by Section 9.7 hereof,
any Borrower or Guarantor dissolves or any Borrower suspends or discontinues
doing business;

 

(f)                                   any Borrower or any Obligor makes an
assignment for the benefit of creditors or a general assignment for the benefit
of creditors, makes or sends notice of a bulk transfer or calls a meeting of its
creditors or principal creditors in connection with a moratorium or adjustment
of the Indebtedness due to them;

 

(g)                                  a case or proceeding under the bankruptcy
laws of the United States of America now or hereafter in effect or under any
insolvency, reorganization, receivership, readjustment of debt, dissolution or
liquidation law or statute of any jurisdiction now or hereafter in effect
(whether at law or in equity) is filed against any Borrower, any Obligor or all
or any part of any such Person’s properties and such petition or application is
not dismissed within thirty (30) days after the date of its filing or any
Borrower or any Obligor shall file any answer admitting or not contesting such
petition or application or indicates its consent to, acquiescence in or approval
of, any such action or proceeding or the relief requested is granted sooner;

 

(h)                                 a case or proceeding under the bankruptcy
laws of the United States of America now or hereafter in effect or under any
insolvency, reorganization, receivership, readjustment of debt, dissolution or
liquidation law or statute of any jurisdiction now or hereafter in effect
(whether at a law or equity) is filed by any Borrower or any Obligor or for all
or any part of its property;

 

(i)                                     any default in respect of any
Indebtedness of any Borrower or Obligor (other than Indebtedness owing to Agent
and Lenders hereunder), in any case in an amount in excess of $25,000,000, which
default continues beyond any cure period applicable thereto, if any, with
respect to such Indebtedness, or any default by any Borrower or Obligor under
any Material Contract (other than a Credit Card Agreement), which default
continues beyond any cure period applicable thereto, if any, and/or is not
waived in writing by the other parties thereto;

 

(j)                                    any Credit Card Issuer or Credit Card
Processor: (i) shall send notice to any Borrower or Guarantor that it is ceasing
to make or suspending payments to such Borrower or Guarantor of amounts due or
to become due to such Borrower or Guarantor or shall cease or suspend such
payments, (ii) shall send notice to any Borrower or Guarantor that it is
terminating its arrangements with such Borrower or Guarantor or such
arrangements shall terminate as a result of any event of default under such
arrangements, except where (A) the loss of services by a Credit Card Issuer or
Credit Card Processor would not result in non-payment of amounts due to any
Borrower or Guarantor or could not reasonably be expected to cause a Material
Adverse Effect or (B) such Borrower or Guarantor shall have entered into
arrangements with another Credit Card Issuer or Credit Card Processor, as the
case may be, within forty-five (45) days after the date of any such notice,
(iii) withholds payment of amounts otherwise payable to any Borrower or
Guarantor to fund a reserve account or otherwise hold as collateral, or shall
require any Borrower or Guarantor to pay funds into a reserve account or for
such Credit Card Issuer or

 

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Credit Card Processor to otherwise hold as collateral, or any Borrower or
Guarantor shall provide a letter of credit, guarantee, indemnity or similar
instrument to or in favor of such Credit Card Issuer or Credit Card Processor
such that in the aggregate all of such funds in the reserve account, other
amounts held as collateral and the amount of such letters of credit, guarantees,
indemnities or similar instruments shall exceed an aggregate for Borrowers and
Guarantors of $5,000,000 at any one time or (iv) debits or deducts any amounts
from any deposit account of any Borrower or Guarantor;

 

(k)                                 any material provision hereof or of any of
the other Financing Agreements shall for any reason cease to be valid, binding
and enforceable with respect to any party hereto or thereto (other than Agent)
in accordance with its terms, or any such party shall challenge the
enforceability hereof or thereof, or shall assert in writing, or take any action
or fail to take any action based on the assertion that any provision hereof or
of any of the other Financing Agreements has ceased to be or is otherwise not
valid, binding or enforceable in accordance with its terms, or any security
interest provided for herein or in any of the other Financing Agreements shall
cease to be a valid and perfected first priority security interest in any of the
Collateral purported to be subject thereto (except as otherwise permitted herein
or therein);

 

(l)                                     an ERISA Event shall occur which results
in or could reasonably be expected to result in liability of any Borrower or
Guarantor in an amount which could reasonably be expected to have a Material
Adverse Effect;

 

(m)                             any Change of Control;

 

(n)                                 the indictment by any Governmental
Authority, or as Agent may reasonably and in good faith determine, the
threatened indictment by any Governmental Authority of any Borrower or any
Obligor of which such Borrower, such Obligor or Agent receives notice, in either
case, as to which there is a reasonable possibility of an adverse determination,
in the good faith determination of Agent, under any criminal statute, or
commencement or threatened commencement of criminal or civil proceedings against
any Borrower or any Obligor, pursuant to which statute or proceedings the
penalties or remedies sought or available include forfeiture of (i) any of the
Collateral having a value in excess of $2,500,000 or (ii) any other property of
any Borrower or Guarantor which is necessary or material to the conduct of its
business, and which indictment or proceeding, in Agent’s reasonable judgment,
has had, or could reasonably be expected to have, a Material Adverse Effect; or

 

(o)                                 any event occurs that gives rise to an
actual termination of the logistics and other Inventory handling services being
provided pursuant to the Transition Services Agreement as of the date hereof and
such services have not been adequately replaced by another service provider or
assumed by a Borrower or an Obligor.

 

10.2                        Remedies.

 

(a)                                 At any time an Event of Default exists or
has occurred and is continuing, Agent and Lenders shall have all rights and
remedies provided in this Agreement, the other Financing Agreements, the UCC and
other applicable law, all of which rights and remedies may

 

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be exercised without notice to or consent by any Borrower or any Obligor, except
as such notice or consent is expressly provided for hereunder or required by
applicable law.  All rights, remedies and powers granted to Agent and Lenders
hereunder, under any of the other Financing Agreements, the UCC or other
applicable law, are cumulative, not exclusive and enforceable, in Agent’s
discretion, alternatively, successively, or concurrently on any one or more
occasions, and shall include, without limitation, the right to apply to a court
of equity for an injunction to restrain a breach or threatened breach by any
Borrower or any Obligor of this Agreement or any of the other Financing
Agreements.  Subject to Section 12 hereof, Agent may, and at the direction of
the Required Lenders shall, at any time or times, proceed directly against any
Borrower or any Obligor to collect the Obligations without prior recourse to the
Collateral.

 

(b)                                 Without limiting the foregoing, at any time
an Event of Default exists or has occurred and is continuing, Agent may, in its
discretion, and upon the direction of the Required Lenders, shall (i) accelerate
the payment of all Obligations and demand immediate payment thereof to Agent,
for itself and the ratable benefit of the Lenders and the Bank Product Providers
(provided, that, upon the occurrence of any Event of Default described in
Sections 10.1(g) and 10.1(h), all Obligations shall automatically become
immediately due and payable), (ii) make Reserves for all sales, excise or
similar taxes that are past due, (iii) with or without judicial process or the
aid or assistance of others, enter upon any premises on or in which any of the
Collateral may be located and take possession of the Collateral or complete
processing, manufacturing and repair of all or any portion of the Collateral,
(iv) require Borrowers or any Obligor, at Borrowers’ expense, to assemble and
make available to Agent any part or all of the Collateral at any place and time
designated by Agent, (v) collect, foreclose, receive, appropriate, setoff and
realize upon any and all Collateral, (vi) remove any or all of the Collateral
from any premises on or in which the same may be located for the purpose of
effecting the sale, foreclosure or other disposition thereof or for any other
purpose, (vii) sell, lease, transfer, assign, deliver or otherwise dispose of
any and all Collateral (including entering into contracts with respect thereto,
public or private sales at any exchange, broker’s board, at any office of Agent
or elsewhere) at such prices or terms as Agent may deem reasonable, for cash,
upon credit or for future delivery, with Agent having the right to purchase the
whole or any part of the Collateral at any such public sale, all of the
foregoing being free from any right or equity of redemption of any Borrower or
any Obligor, which right or equity of redemption is hereby expressly waived and
released by each Borrower and Obligors and/or (viii) terminate this Agreement. 
If any of the Collateral is sold or leased by Agent upon credit terms or for
future delivery, the Obligations shall not be reduced as a result thereof until
payment therefor is finally collected by Agent.  If notice of disposition of
Collateral is required by law, ten (10) days prior notice by Agent to Borrowers
designating the time and place of any public sale or the time after which any
private sale or other intended disposition of Collateral is to be made, shall be
deemed to be reasonable notice thereof and Borrowers waive any other notice.  In
the event Agent institutes an action to recover any Collateral or seeks recovery
of any Collateral by way of prejudgment remedy, Borrowers waive the posting of
any bond which might otherwise be required.  At any time an Event of Default
exists or has occurred and is continuing, upon Agent’s request, Borrowers will
either, as Agent shall specify, furnish cash collateral to Issuing Bank to be
used to secure and fund Agent’s reimbursement obligations to Issuing Bank in
connection with any Letter of Credit Accommodations or furnish cash collateral
to Agent for the Letter of Credit Accommodations.  Such cash collateral shall be
in the amount equal to one hundred five percent (105%) of the amount of the
Letter of Credit Accommodations plus the amount of any fees and expenses

 

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payable in connection therewith through the end of the latest expiration date of
such Letter of Credit Accommodations.

 

(c)                                  At any time or times that an Event of
Default exists or has occurred and is continuing, Agent may, in its discretion,
and upon the direction of the Required Lenders, Agent shall, enforce the rights
of any Borrower or any Obligor against any account debtor, secondary obligor or
other obligor in respect of any of the Accounts or other Receivables.  Without
limiting the generality of the foregoing, Agent may, in its discretion, and upon
the direction of the Required Lenders, Agent shall, at such time or times
(i) notify any or all account debtors (including Credit Card Issuers and Credit
Card Processors), secondary obligors or other obligors in respect thereof that
the Receivables have been assigned to Agent and that Agent has a security
interest therein and Agent may direct any or all accounts debtors (including
Credit Card Issuers and Credit Card Processors), secondary obligors and other
obligors to make payment of Receivables directly to Agent, (ii) extend the time
of payment of, compromise, settle or adjust for cash, credit, return of
merchandise or otherwise, and upon any terms or conditions, any and all
Receivables or other obligations included in the Collateral and thereby
discharge or release the account debtor or any secondary obligors or other
obligors in respect thereof without affecting any of the Obligations,
(iii) demand, collect or enforce payment of any Receivables or such other
obligations, but without any duty to do so, and Agent and Lenders shall not be
liable for any failure to collect or enforce the payment thereof nor for the
negligence of its agents or attorneys with respect thereto, and (iv) take
whatever other action Agent may deem necessary or desirable for the protection
of its interests and the interests of Lenders.  At any time that an Event of
Default exists or has occurred and is continuing, at Agent’s request, all
invoices and statements sent to any account debtor shall state that the Accounts
and such other obligations have been assigned to Agent and are payable directly
and only to Agent and Borrowers and Obligors shall deliver to Agent such
originals of documents evidencing the sale and delivery of goods or the
performance of services giving rise to any Accounts as Agent may require.  In
the event any account debtor returns Inventory when an Event of Default exists
or has occurred and is continuing, Borrowers shall, upon Agent’s request, hold
the returned Inventory in trust for Agent, segregate all returned Inventory from
all of its other property, dispose of the returned Inventory solely according to
Agent’s instructions, and not issue any credits, discounts or allowances with
respect thereto without Agent’s prior written consent.

 

(d)                                 If Agent determines at any time that any
amount received by Agent must be returned to any Borrower or any Obligor or paid
to any other person pursuant to any insolvency law or otherwise, then,
notwithstanding any other term or condition of this Agreement or any other
Financing Agreement, Agent will not be required to distribute any portion
thereof to any Lender.  In addition, each Lender will repay to Agent on demand
any portion of such amount that Agent has distributed to such Lender, together
with interest at such rate, if any, that Agent is required to pay to any
Borrower or any Obligor or such other person (without setoff, counterclaim or
deduction of any kind).

 

(e)                                  Anything in this Agreement, any Financing
Agreement or any other agreements or document related hereto to the contrary
notwithstanding, each Lender hereby agrees with each other Lender that no Lender
shall take any action (other than actions against Agent for violating its
obligations under this Agreement) to protect or enforce its rights arising out
of this Agreement or one or more Financing Agreements without first obtaining
the prior

 

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written consent of Agent, it being the intent of Lenders that any such action to
protect or enforce rights under this Agreement or one or more Financing
Agreements shall be taken in concert and at the direction or with the consent of
Agent.  Each Lender agrees and acknowledges that Agent may exercise all rights
and remedies provided to Agent under, and in accordance with, the terms of the
Financing Agreements and applicable law (including, without limitation, with
respect to the liens granted to Agent).

 

(f)                                   To the extent that applicable law imposes
duties on Agent or any Lender to exercise remedies in a commercially reasonable
manner (which duties cannot be waived under such law), each Borrower and
Guarantor acknowledges and agrees that it is not commercially unreasonable for
Agent or any Lender (i) to fail to incur expenses reasonably deemed significant
by Agent or any Lender to prepare Collateral for disposition or otherwise to
complete raw material or work in process into finished goods or other finished
products for disposition, (ii) to fail to obtain third party consents for access
to Collateral to be disposed of, or to obtain or, if not required by other law,
to fail to obtain consents of any Governmental Authority or other third party
for the collection or disposition of Collateral to be collected or disposed of,
(iii) to fail to exercise collection remedies against account debtors, secondary
obligors or other persons obligated on Collateral or to remove liens or
encumbrances on or any adverse claims against Collateral, (iv) to exercise
collection remedies against account debtors and other persons obligated on
Collateral directly or through the use of collection agencies and other
collection specialists, (v) to advertise dispositions of Collateral through
publications or media of general circulation, whether or not the Collateral is
of a specialized nature, (vi) to contact other persons, whether or not in the
same business as Borrowers and Guarantors, for expressions of interest in
acquiring all or any portion of the Collateral, (vii) to hire one or more
professional auctioneers to assist in the disposition of Collateral, whether or
not the collateral is of a specialized nature, (viii) to dispose of Collateral
by utilizing Internet sites that provide for the auction of assets of the types
included in the Collateral or that have the reasonable capability of doing so,
or that match buyers and sellers of assets, (ix) to dispose of assets in
wholesale rather than retail markets, (x) to disclaim disposition warranties,
(xi) to purchase insurance or credit enhancements to insure Agent or Lenders
against risks of loss, collection or disposition of Collateral or to provide to
Agent or Lenders a guaranteed return from the collection or disposition of
Collateral, or (xii) to the extent deemed appropriate by Agent, to obtain the
services of other brokers, investment bankers, consultants and other
professionals to assist Agent in the collection or disposition of any of the
Collateral.  Each Borrower and Guarantor acknowledges that the purpose of this
Section is to provide non-exhaustive indications of what actions or omissions by
Agent or any Lender would not be commercially unreasonable in the exercise by
Agent or any Lender of remedies against the Collateral and that other actions or
omissions by Agent or any Lender shall not be deemed commercially unreasonable
solely on account of not being indicated in this Section.  Without limitation of
the foregoing, nothing contained in this Section shall be construed to grant any
rights to any Borrower or Guarantor or to impose any duties on Agent or Lenders
that would not have been granted or imposed by this Agreement or by applicable
law in the absence of this Section.

 

(g)                                  For the purpose of enabling Agent to
exercise the rights and remedies hereunder, each Borrower and Guarantor hereby
grants to Agent, to the extent assignable and to the extent that the same would
not conflict with or, under applicable law and the terms of such agreement,
result in the invalidity or breach of any agreements (other than any agreement

 

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between any Borrower or Guarantor and any other Borrower or Guarantor) or
otherwise result in the revocation, infringement, unenforceability,
misappropriation or dilution of any rights in any Intellectual Property forming
the subject thereof, an irrevocable, non-exclusive license (exercisable upon the
occurrence of and during the continuation of an Event of Default) without
payment of royalty or other compensation to any Borrower or Guarantor, to use,
assign, license or sublicense any of the trademarks, service-marks, trade names,
business names, trade styles, designs, logos and other source of business
identifiers and other Intellectual Property and general intangibles now owned or
hereafter acquired by such Borrower, wherever the same maybe located, including
in such license reasonable access to all media in which any of the licensed
items may be recorded or stored and to all computer programs used for the
compilation or printout thereof.

 

(h)                                 Agent may apply the cash proceeds of
Collateral actually received by Agent from any sale, lease, foreclosure or other
disposition of the Collateral to payment of the Obligations, in whole or in part
and in such order as Agent may elect, whether or not then due.  Borrowers and
Guarantors shall remain liable to Agent and Lenders for the payment of any
deficiency with interest at the highest rate provided for herein and all costs
and expenses of collection or enforcement, including attorneys’ fees and
expenses.

 

(i)                                     Without limiting the foregoing, upon the
occurrence of a Default or an Event of Default, (i) Agent and Lenders may, at
Agent’s option, and upon the occurrence of an Event of Default, at the direction
of the Required Lenders, Agent and Lenders shall, without notice, (A) cease
making Loans or arranging for Letter of Credit Accommodations or reduce the
lending formulas or amounts of Loans and Letter of Credit Accommodations
available to Borrowers and/or (B) terminate any provision of this Agreement
providing for any future Loans or Letter of Credit Accommodations to be made by
Agent and Lenders to Borrowers, and (ii) Agent may, at its option, establish
such Reserves as Agent determines without limitation or restriction,
notwithstanding anything to the contrary provided herein.

 

10.3                        Remedies with respect to Priority Collateral.

 

(a)                                                         Notwithstanding
anything to the contrary contained herein, except as the Required Term Loan
Lenders shall otherwise agree, Term Loan Agent may demand payment of the Term
Loans and Term Loan Agent may direct Agent to commence and pursue such other
Enforcement Actions with respect to the Term Loan Priority Collateral as Agent
and Term Loan Agent in good faith deem are appropriate within (i) five (5) days
of the occurrence and continuance of any payment Event of Default under
Section 10.1(a) hereof, (ii) forty-five (45) days of the occurrence and
continuance of any Term Loan Action Default, and (iii) ninety (90) days of the
occurrence and continuance of any other Event of Default (“Term Loan Standstill
Period”) after the date of the receipt by Agent of written notice executed and
delivered by the Required Term Loan Lenders or by Term Loan Agent on behalf of
Required Term Loan Lenders of a Term Loan Action Default, and requesting that
Agent to commence Enforcement Actions (the “Term Loan Action Notice”); provided,
that, (i) such Term Loan Action Default has not been waived by Required Term
Loan Lenders or cured, (ii) in the good faith determination of Agent, taking an
Enforcement Action is permitted under the terms of the Financing Agreements and
applicable law, (iii) taking an Enforcement Action shall not result in any
liability of Agent, Term Loan Agent or Lenders to any Borrower, Guarantor or any
other person, and (iv) Agent

 

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and Term Loan Agent shall be entitled to all of the benefits of Sections 12.2,
12.3 and 12.5 hereof. Agent and Term Loan Agent shall not be required to take an
Enforcement Action so long as, during the Term Loan Standstill Period, Agent
shall, at its option, either (A) appoint Term Loan Agent, as an agent of Agent
or Collateral Agent for purposes of exercising the rights of Agent to take an
Enforcement Action, subject to the terms hereof or (B) resign as Agent and Term
Loan Agent shall automatically be deemed to be the successor Agent hereunder for
purposes hereof or thereof, except with respect to the provisions of Section 2
hereof and in connection with all matters relating to the determination of the
Borrowing Base and each of its components (including Eligible Credit Card
Receivables, Eligible Accounts, Eligible Inventory,  Reserves and receiving
reports in respect of Collateral and conducting field examinations with respect
to the Collateral and similar matters).  In the event of any insolvency
proceeding against any Borrower or Guarantor, the Term Loan Standstill Period
shall be tolled.

 

(b)                                 Secured Parties hereby agree that in
connection with any sale or other disposition of all or substantially all of the
Collateral by reason of the exercise of remedies under the Financing Agreements
or applicable law, it is the intention of the parties that, in no event shall
(a) Agent and the Revolving Loan Lenders and Bank Product Provider receive less
than the net book value of the Revolving Loan Priority Collateral subject to
such disposition or (2) Term Loan Agent  and Term Loan Lenders receive less than
the Net Orderly Liquidation Value of the Term Loan Priority Collateral subject
to such disposition.

 

(c)                                  In the event that Term Loan Agent or any
Term Loan Lender shall acquire control or possession of any of the Term Loan
Priority Collateral or shall, through the exercise of remedies under the
Financing Agreements or otherwise, sell or otherwise dispose of any of the Term
Loan Priority Collateral to any third party (a “Third Party Purchaser”), Term
Loan Agent shall permit Agent (or require as a condition of such sale to the
Third Party Purchaser that the Third Party Purchaser agree to permit Agent), at
Agent’s option and in accordance with applicable law: (i) to enter and use any
or all of the Term Loan Priority Collateral under such control or possession (or
sold to a Third Party Purchaser) consisting of real property and the
improvements, structures, buildings thereon and all related rights during normal
business hours in order to inspect, remove or take any action with respect to
the Revolving Loan Priority Collateral or to enforce Agent’s rights with respect
thereto, including, but not limited to, the examination and removal of Revolving
Loan Priority Collateral and the examination and duplication of the books and
records of any Borrower or Guarantor related to the Revolving Loan Priority
Collateral, or to otherwise handle, deliver, ship, transport, deal with or
dispose of any Revolving Loan Priority Collateral, such right to include,
without limiting the generality of the foregoing, the right to conduct one or
more public or private sales or auctions thereon and (ii) use any of the Term
Loan Priority Collateral under such control or possession (or sold to a Third
Party Purchaser) consisting of equipment (including computers or other data
processing equipment related to the storage or processing of records, documents
or files pertaining to the Revolving Loan Priority Collateral) to handle, deal
with or dispose of any Revolving Loan Priority Collateral pursuant to the rights
of Agent and the Revolving Loan Lenders and Bank Product Providers as set forth
in herein and in the other Financing Agreements, the UCC of any applicable
jurisdiction and other applicable law.

 

(d)                                 The rights of Agent set forth in this
Section 10.3 as to the Term Loan Priority Collateral shall be irrevocable and
without charge and shall continue at Agent’s option

 

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for a period of one hundred twenty (120) days as to any such Term Loan Priority
Collateral from the earlier of (i) the date on which Term Loan Agent has
notified Agent that Term Loan Agent has acquired possession or control of such
Term Loan Priority Collateral and (ii) the date of commencement by Agent of
enforcement actions against the Revolving Loan Priority Collateral using such
Term Loan Priority Collateral.  The time periods set forth herein shall be
tolled during the pendency of any proceeding of a Grantor under the United
States Bankruptcy Code or any other insolvency law or other proceedings if and
for so long as Agent is effectively stayed from enforcing its rights against the
Revolving Loan Priority Collateral.  In no event shall Term Loan Agent or any of
the Term Loan Lenders take any action to interfere, limit or restrict the rights
of Agent set forth above or the exercise of such rights by Agent pursuant to
this Section 10.3 prior to the expiration of such periods.

 

(e)                                  Agent shall repair at its expense any
physical damage to any Term Loan Priority Collateral used by Agent as a direct
result of the actions of Agent (or its representatives) in exercising its access
and use rights as provided in this Section 10.3 (but shall not be responsible
for any diminution in value of the Term Loan Priority Collateral resulting from
Agent so dealing with any Revolving Loan Priority Collateral so long as Agent
and Revolving Loan Lenders leave the Term Loan Priority Collateral in the same
condition as it was prior to their actions with respect to the Revolving Loan
Priority Collateral, except for ordinary wear and tear resulting from the
actions of Agent and Revolving Loan Lenders contemplated by, and for the time
periods specified under, this Section 10.3).  Without limiting the rights
granted in this Section 10.3, Agent and Revolving Loan Lenders shall reasonably
cooperate with Term Loan Agent and Term Loan Lenders in connection with any
efforts made by Term Loan Agent and Term Loan Lenders to sell the Term Loan
Priority Collateral.  Agent and Revolving Loan Lenders shall indemnify and hold
harmless Term Loan Agent and the Term Loan Lenders from any claim, loss, damage,
cost or liability arising from any claim by a third party against Term Loan
Agent and the Term Loan Lenders as a direct result of any action by Agent (or
its representatives) in connection with the exercise of its rights to use and/or
occupancy of any Term Loan Priority Collateral under this Section 10.3.  Term
Loan Agent shall not have any responsibility or liability for the acts or
omissions of Agent or any Revolving Loan Lenders, and Agent and Revolving Loan
Lenders shall not have any responsibility or liability for the acts or omissions
of Term Loan Agent or any other Term Loan Lender, in each case arising in
connection with such other Person’s use and/or occupancy of any of the Term Loan
Priority Collateral.

 

SECTION 11.                  JURY TRIAL WAIVER; OTHER WAIVERS AND CONSENTS;
GOVERNING LAW.

 

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

 

(a)                                 The validity, interpretation and enforcement
of this Agreement and the other Financing Agreements and any dispute arising out
of the relationship between the parties hereto, whether in contract, tort,
equity or otherwise, shall be governed by the internal laws of the State of New
York but excluding any principles of conflicts of law or other rule of law that
would cause the application of the law of any jurisdiction other than the laws
of the State of New York.

 

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(b)                                 Borrowers, Guarantors, Agent and Lenders
irrevocably consent and submit to the non-exclusive jurisdiction of the Supreme
Court of the State of New York for New York County and the United States
District Court for the Southern District of New York, whichever Agent may elect,
and waive any objection based on venue or forum non conveniens with respect to
any action instituted therein arising under this Agreement or any of the other
Financing Agreements or in any way connected with or related or incidental to
the dealings of the parties hereto in respect of this Agreement or any of the
other Financing Agreements or the transactions related hereto or thereto, in
each case whether now existing or hereafter arising, and whether in contract,
tort, equity or otherwise, and agree that any dispute with respect to any such
matters shall be heard only in the courts described above (except that Agent and
Lenders shall have the right to bring any action or proceeding against any
Borrower or Guarantor or its or their property in the courts of any other
jurisdiction which Agent deems necessary or appropriate in order to realize on
the Collateral or to otherwise enforce its rights against any Borrower or
Guarantor or its or their property).

 

(c)                                  Each Borrower and Guarantor hereby waives
personal service of any and all process upon it and consents that all such
service of process may be made by certified mail (return receipt requested)
directed to its address set forth herein and service so made shall be deemed to
be completed five (5) days after the same shall have been so deposited in the
U.S. mails, or, at Agent’s option, by service upon such Borrower or Guarantor in
any other manner provided under the rules of any such courts.  Within thirty
(30) days after such service, such Borrower or Guarantor shall appear in answer
to such process, failing which such Borrower or Guarantor shall be deemed in
default and judgment may be entered by Agent against such Borrower or Guarantor
for the amount of the claim and other relief requested.

 

(d)                                 BORROWERS, GUARANTORS, AGENT AND LENDERS
EACH HEREBY WAIVE ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR
CAUSE OF ACTION (i) ARISING UNDER THIS AGREEMENT OR ANY OF THE OTHER FINANCING
AGREEMENTS OR (ii) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE
DEALINGS OF THE PARTIES HERETO IN RESPECT OF THIS AGREEMENT OR ANY OF THE OTHER
FINANCING AGREEMENTS OR THE TRANSACTIONS RELATED HERETO OR THERETO IN EACH CASE
WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY
OR OTHERWISE.  BORROWERS, GUARANTORS, AGENT AND LENDERS EACH HEREBY AGREE AND
CONSENT THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED
BY COURT TRIAL WITHOUT A JURY AND THAT ANY BORROWER, ANY GUARANTOR, AGENT OR ANY
LENDER MAY FILE AN ORIGINAL COUNTERPART OF A COPY OF THIS AGREEMENT WITH ANY
COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF
THEIR RIGHT TO TRIAL BY JURY.

 

(e)                                  Agent and Lenders shall not have any
liability to any Borrower or any Guarantor (whether in tort, contract, equity or
otherwise) for losses suffered by such Borrower or Guarantor in connection with,
arising out of, or in any way related to the transactions or relationships
contemplated by this Agreement, or any act, omission or event occurring in
connection herewith, unless it is determined by a final and non-appealable
judgment or court order binding on Agent and such Lender, that the losses were
the result of acts or omissions

 

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constituting gross negligence or willful misconduct of Agent and/or such
Lenders.  In any such litigation, Agent and Lenders shall be entitled to the
benefit of the rebuttable presumption that it acted in good faith and with the
exercise of ordinary care in the performance by it of the terms of this
Agreement.  Each Borrower and Guarantor: (i) certifies that neither Agent, any
Lender nor any representative, agent or attorney acting for or on behalf of
Agent or any Lender has represented, expressly or otherwise, that Agent and
Lenders would not, in the event of litigation, seek to enforce any of the
waivers provided for in this Agreement or any of the other Financing Agreements
and (ii) acknowledges that in entering into this Agreement and the other
Financing Agreements, Agent and Lenders are relying upon, among other things,
the waivers and certifications set forth in this Section 11.1 and elsewhere
herein and therein.

 

11.2                        Waiver of Notices.  Each Borrower and Guarantor
hereby expressly waives demand, presentment, protest and notice of protest and
notice of dishonor with respect to any and all instruments and chattel paper,
included in or evidencing any of the Obligations or the Collateral, and any and
all other demands and notices of any kind or nature whatsoever with respect to
the Obligations, the Collateral and this Agreement, except such as are expressly
provided for herein.  No notice to or demand on any Borrower or Guarantor which
Agent or any Lender may elect to give shall entitle any Borrower or Guarantor to
any other or further notice or demand in the same, similar or other
circumstances.

 

11.3                        Amendments and Waivers.

 

(a)                                 Neither this Agreement nor any other
Financing Agreement nor any terms hereof or thereof may be amended, waived,
discharged or terminated unless such amendment, waiver, discharge or termination
is in writing signed by Agent and the Required Lenders or at Agent’s option, by
Agent with the authorization of the Required Lenders, and as to amendments to
any of the Financing Agreements (other than with respect to any provision of
Section 12 hereof), by Borrowers; except, that:

 

(i)                                     without the prior written consent of
each Agent and each Lender affected thereby, no such amendment, waiver,
discharge or termination shall:

 

(A)                               amend, modify or waive any of the provisions
of the introductory paragraph of this Section 11.3(a) or any of the provisions
of this Section 11.3(a)(i);

 

(B)                               amend, modify or waive any of the provisions
of Section 6.4 hereof;

 

(C)                               reduce any percentage specified in the
definition of Required Revolving Loan Lenders, Required Term Loan Lenders or
Required Lenders or amend, modify or waive any provision of the definitions
thereof or the definition of Pro Rata Share;

 

(D)                               release or limit the liability of any Loan
Party or release any Collateral (except as expressly required hereunder or under
any of the other Financing Agreements or applicable law and except as permitted
under Section 12.11(b) hereof);

 

(E)                                consent to the assignment or transfer by any
Borrower or any Guarantor of any of their rights and obligations under this
Agreement;

 

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(F)                                 increase (1) the advance rates set forth in
the definition of Borrowing Base, or (2) the Maximum Credit;

 

(G)                               except pursuant to a Revolving Loan Facility
Increase,  increase (1) the Revolving Loan Limit, or (2) the amount of Revolving
Loans or Letter of Credit Accommodations available to Borrowers at any time;

 

(H)                              increase the amount of Special Agent Advances
or amend, modify or waive any of the provisions of the Section 12.11(a) hereof;

 

(I)                                   amend, modify or waive any of the
provisions of the definition of Borrowing Base or Term Loan Push Down Reserve or
any of the components of, or defined terms referred to in, the definition of
Borrowing Base or Term Loan Push Down Reserve if the effect thereof increases
the amount of the Borrowing Base;

 

(J)                                   reduce the amount of Compliance Excess
Availability required in Section 4.1(d) or the amount of Excess Availability in
Section 9.17 hereof;

 

(K)                              amend, modify, or waive the provisions of
Section 9.17 hereof, or any definition of any term relating to the financial
terms used in such Section, if such amendment, modification or waiver makes the
covenants contained therein less restrictive; or

 

(L)                                amend, modify or waive any provision of the
definitions of Cash Dominion Event, Compliance Excess Availability, Excess
Availability or Increased Collateral Reporting Event (or any of the components
of, or defined terms used in, such definitions) or of Section 7.3(d) or
(e) hereof;

 

(ii)                                  without the prior written consent of Agent
and each Revolving Loan Lender directly affected thereby, no such amendment,
waiver, discharge or termination shall:

 

(A)                               amend, modify or waive any of the provisions
of this Section 11.3(a)(ii);

 

(B)                               reduce any percentage specified in the
definition of Required Revolving Loan Lenders;

 

(C)                               reduce the Interest Rate or any fees or
indemnities related to the Revolving Loans or Letter of Credit Accommodations,
amend, modify or waive the provisions of Section 14.1(b) hereof or otherwise
extend the time of payment of principal of the Revolving Loans, extend the time
of payment of interest or any fees related to the Revolving Loans or reduce the
principal amount of any Revolving Loans or Letter of Credit Accommodations; or

 

(D)                               increase the total amount of Revolving Loan
Commitments or the Commitment of any Revolving Loan Lender over the amount
thereof then in effect or provided hereunder.

 

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(iii)                               without the prior written consent of Term
Loan Agent and each Term Loan Lender directly affected thereby, no such
amendment, waiver, discharge or termination shall:

 

(A)                               amend, modify or waive any of the provisions
of this Section 11.3(a)(iii);

 

(B)                               reduce any percentage specified in the
definition of Required Term Loan Lenders;

 

(C)                               reduce the Interest Rate or any fees or
indemnities related to the Term Loans, amend, modify or waive the provisions of
Section 14.1(b) hereof or otherwise extend the time of payment of principal of
the Term Loans, extend the time of payment of interest or any fees related to
the Term Loans or reduce the principal amount of any Term Loans; or

 

(D)                               increase the Commitment of such Term Loan
Lender over the amount thereof then in effect or provided hereunder.

 

(iv)                              without the consent of the Required Revolving
Loan Lenders and the Required Term Loan Lenders:

 

(A)                               amend, modify or waive any of the provisions
of Sections 9.1, 9.5 through and including 9.12, 9.15, 9.17, 9.18, 9.20 and
Section 10 hereof;

 

(B)                               amend, modify or waive any provision of the
definitions of Borrowing Base, Eligible Intellectual Property, Enforcement
Action, Net Orderly Liquidation Value, Revolving Loan Priority Collateral,
Special Agent Advances, Term Loan Action Default, Term Loan Priority Collateral,
Term Loan Push Down Reserve, Intellectual Property Reserves or Term Loan
Standstill Period (or any of the components of, or defined terms used in, such
definitions).

 

(b)                                 Notwithstanding anything to the contrary
contained in Section 11.3(a) hereof, Agent may, in its discretion and without
the consent of the Lenders, amend or otherwise modify the Borrowing Base, the
Reserves or any of their respective components which amendments or modifications
have the effect of increasing the Borrowing Base, decreasing the Reserves or
otherwise increasing the amounts available for borrowing hereunder to the extent
that such amendment or modification is made to restore the Borrowing Base,
Reserves or other components thereof if the reason for such reduction or
increase no longer exists, as determined by Agent.

 

(c)                                  Agent and Lenders shall not, by any act,
delay, omission or otherwise be deemed to have expressly or impliedly waived any
of its or their rights, powers and/or remedies unless such waiver shall be in
writing and signed as provided herein.  Any such waiver shall be enforceable
only to the extent specifically set forth therein.  A waiver by Agent or any
Lender of any right, power and/or remedy on any one occasion shall not be
construed as a bar to or waiver of any such right, power and/or remedy which
Agent or any Lender would otherwise have on any future occasion, whether similar
in kind or otherwise.

 

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(d)                                 Notwithstanding anything to the contrary
contained in Section 11.3(a) hereof, in connection with any amendment, waiver,
discharge or termination, in the event that any Lender whose consent thereto is
required shall fail to consent or fail to consent in a timely manner (such
Lender being referred to herein as a “Non-Consenting Lender”), but the consent
of any other Lenders to such amendment, waiver, discharge or termination that is
required is obtained, if any, then Wells Fargo shall have the right, but not the
obligation, at any time thereafter, and upon the exercise by Wells Fargo of such
right, such Non-Consenting Lender shall have the obligation, to sell, assign and
transfer to Wells Fargo or such Eligible Transferee as Wells Fargo may specify,
the Commitment of such Non-Consenting Lender and all rights and interests of
such Non-Consenting Lender pursuant thereto.  Wells Fargo shall provide the
Non-Consenting Lender with prior written notice of its intent to exercise its
right under this Section, which notice shall specify on the date on which such
purchase and sale shall occur.  Such purchase and sale shall be pursuant to the
terms of an Assignment and Acceptance (whether or not executed by the
Non-Consenting Lender), except that on the date of such purchase and sale, Wells
Fargo, or such Eligible Transferee specified by Wells Fargo, shall pay to the
Non-Consenting Lender the amount equal to: (i) the principal balance of the
Loans held by the Non-Consenting Lender outstanding as of the close of business
on the business day immediately preceding the effective date of such purchase
and sale, plus (ii) amounts accrued and unpaid in respect of interest and fees
payable to the Non-Consenting Lender to the effective date of the purchase,
minus (iii) if such Non-Consenting Lender is a Lender, the amount of any closing
fee received by such Non-Consenting Lender in connection with the Existing Loan
Agreement and any closing, consent or amendment fee received by such
Non-Consenting Lender in connection with this Agreement, multiplied by the
fraction, the numerator of which is the number of months remaining, in the then
current term of the Revolving Loan Facility and the denominator of which is the
total number of months in the then current term of the Revolving Loan Facility. 
Such purchase and sale shall be effective on the date of the payment of such
amount to the Non-Consenting Lender and the Commitment of the Non-Consenting
Lender shall terminate on such date.

 

(e)                                  The consent of each applicable Agent shall
be required for any amendment, waiver or consent affecting the rights or duties
of such Agent hereunder or under any of the other Financing Agreements, in
addition to the consent of the Lenders otherwise required by this Section and
the exercise by Agent of any of its rights hereunder with respect to Reserves,
Term Loan Push Down Reserve, Eligible Credit Card Receivables, Eligible Damaged
Goods Vendors Receivables, Eligible Sell-Off Vendors Receivables, Eligible
Intellectual Property or Eligible Inventory shall not be deemed an amendment to
the advance rates provided for in this Section 11.3.

 

11.4                        Waiver of Counterclaims.  Each Borrower and
Guarantor waives all rights to interpose any claims, deductions, setoffs or
counterclaims of any nature (other than compulsory counterclaims) in any action
or proceeding with respect to this Agreement, the Obligations, the Collateral or
any matter arising therefrom or relating hereto or thereto.

 

11.5                        Indemnification.  Each Borrower and Guarantor shall
indemnify and hold each Appointed Agent and each Lender, and its respective
officers, directors, agents, employees, advisors and counsel and their
respective Affiliates (each such person being an “Indemnitee”), harmless from
and against any and all losses, claims, damages, liabilities, costs or expenses

 

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(including attorneys’ fees and expenses) imposed on, incurred by or asserted
against any of them in connection with any litigation, investigation, claim or
proceeding commenced or threatened related to the negotiation, preparation,
execution, delivery, enforcement, performance or administration of this
Agreement, any other Financing Agreements, or any undertaking or proceeding
related to any of the transactions contemplated hereby or any act, omission,
event or transaction related or attendant thereto, including amounts paid in
settlement, court costs, and the fees and expenses of counsel except that no
Borrower or Guarantor shall not have any obligation under this Section 11.5 to
indemnify an Indemnitee with respect to a matter covered hereby resulting from
the gross negligence or willful misconduct of such Indemnitee as determined
pursuant to a final, non-appealable order of a court of competent jurisdiction
(but without limiting the obligations of any Borrower or Guarantor as to any
other Indemnitee).  To the extent that the undertaking to indemnify, pay and
hold harmless set forth in this Section may be unenforceable because it violates
any law or public policy, Borrowers and Guarantors shall pay the maximum portion
which they are permitted to pay under applicable law to Each Appointed Agent and
Lenders in satisfaction of indemnified matters under this Section.  To the
extent permitted by applicable law, no Borrower or Guarantor shall assert, and
each Borrower and Guarantor hereby waives, any claim against any Indemnitee, on
any theory of liability, for special, indirect, consequential or punitive
damages (as opposed to direct or actual damages) arising out of, in connection
with, or as a result of, this Agreement, any of the other Financing Agreements
or any undertaking or transaction contemplated hereby.  All amounts due under
this Section shall be payable upon demand. The foregoing indemnity shall survive
the payment of the Obligations and the termination or non-renewal of this
Agreement.

 

SECTION 12.                  THE AGENT

 

12.1                        Appointment, Powers and Immunities.  Each Lender and
Issuing Bank irrevocably designates, appoints and authorizes Wells Fargo to act
as Agent and each Term Loan Lender  irrevocably designates, appoints and
authorizes Wells Capital to act as Term Loan Agent, in each case hereunder and
under the other Financing Agreements with such powers as are specifically
delegated to Agent and Term Loan respectively (each an “Appointed Agent” and
collectively, the “Appointed Agents”) by the terms of this Agreement and of the
other Financing Agreements, together with such other powers as are reasonably
incidental thereto.  Each Appointed Agent (a) shall have no duties or
responsibilities except those expressly set forth in this Agreement and in the
other Financing Agreements, and shall not by reason of this Agreement or any
other Financing Agreement be a trustee or fiduciary for any Lender; (b) shall
not be responsible to Lenders for any recitals, statements, representations or
warranties contained in this Agreement or in any of the other Financing
Agreements, or in any certificate or other document referred to or provided for
in, or received by any of them under, this Agreement or any other Financing
Agreement, or for the value, validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement or any other Financing Agreement
or any other document referred to or provided for herein or therein or for any
failure by any Borrower or any Guarantor or any other Person to perform any of
its obligations hereunder or thereunder; and (c) shall not be responsible to
Lenders for any action taken or omitted to be taken by it hereunder or under any
other Financing Agreement or under any other document or instrument referred to
or provided for herein or therein or in connection herewith or therewith, except
for its own gross negligence or willful misconduct as determined by a final
non-appealable judgment of a court of competent jurisdiction.  Each Appointed
Agent may employ agents and attorneys in fact and

 

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shall not be responsible for the negligence or misconduct of any such agents or
attorneys in fact selected by it in good faith.  Each Appointed Agent may deem
and treat the payee of any note as the holder thereof for all purposes hereof
unless and until the assignment thereof pursuant to an agreement (if and to the
extent permitted herein) in form and substance satisfactory to each Appointed
Agent shall have been delivered to and acknowledged by each Appointed Agent.

 

12.2                        Reliance by Agent.  Each Appointed Agent shall be
entitled to rely upon any certification, notice or other communication
(including any thereof by telephone, telecopy, telex, telegram or cable)
believed by it to be genuine and correct and to have been signed or sent by or
on behalf of the proper Person or Persons, and upon advice and statements of
legal counsel, independent accountants and other experts selected by Each
Appointed Agent.  As to any matters not expressly provided for by this Agreement
or any other Financing Agreement, each Appointed Agent shall in all cases be
fully protected in acting, or in refraining from acting, hereunder or thereunder
in accordance with instructions given by the Required Lenders, Required
Revolving Loan Lenders, Required Term Loan Lenders  or all of Lenders as is
required in such circumstance, and such instructions of such Appointed Agents
and any action taken or failure to act pursuant thereto shall be binding on all
Lenders.

 

12.3                        Events of Default.

 

(a)                                 No Appointed Agent shall be deemed to have
knowledge or notice of the occurrence of a Default or an Event of Default or
other failure of a condition precedent to the Loans and Letter of Credit
Accommodations hereunder, unless and until such Appointed Agent has received
written notice from a Lender, or a Borrower specifying such Event of Default or
any unfulfilled condition precedent, and stating that such notice is a “Notice
of Default or Failure of Condition” (each a “Notice of Default or Failure of
Condition”).  In the event that any Appointed Agent receives such a Notice of
Default or Failure of Condition, such Appointed Agent shall give prompt notice
thereof to the other Agent and Lenders.  Each Appointed Agent shall (subject to
Section 12.7 hereof) take such action with respect to any such Event of Default
or failure of condition precedent as shall be directed by the Required Lenders;
provided, that, unless and until such Appointed Agent shall have received such
directions, such Appointed Agent may (but shall not be obligated to) take such
action, or refrain from taking such action, with respect to or by reason of such
Event of Default or failure of condition precedent, as it shall deem advisable
in the best interest of the other Agent and Lenders.  Without limiting the
foregoing, and notwithstanding the existence or occurrence and continuance of an
Event of Default or any other failure to satisfy any of the conditions precedent
set forth in Section 4 of this Agreement to the contrary, subject to the
limitations set forth in Section 12.8 hereof, Agent may, but shall have no
obligation to, make Loans and issue or cause to be issued Letter of Credit
Accommodations for the ratable account and risk of Revolving Loan Lenders from
time to time if Agent reasonably and in good faith believes making such
Revolving Loans or issuing or causing to be issued such Letter of Credit
Accommodations is in the best interest of Revolving Loan Lenders.

 

(b)                                 Except with the prior written consent of
Agent, no Lender may assert or exercise any enforcement right or remedy in
respect of the Loans, Letter of Credit Accommodations or other Obligations, as
against any Borrower or any Guarantor or any of the Revolving Loan Collateral or
other property of any Borrower or Guarantor. Except with the prior

 

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written consent of Term Loan Agent, no Lender may assert or exercise any
enforcement right or remedy in respect of the Term Loans or other Obligations
related to Term Loans, as against any Borrower or any Guarantor or any of the
Term Loan Collateral or other property of any Borrower or Guarantor.  At the
request of Required Lenders to the extent provided herein, Agent may assert or
exercise any enforcement right or remedy under this Agreement or any Financing
Agreement.

 

12.4                        Wells Fargo in its Individual Capacity.

 

(a)                                 With respect to its Revolving Loan
Commitment and the Revolving Loans made and Letter of Credit Accommodations
issued or caused to be issued by it (and any successor acting as Agent), so long
as Wells Fargo shall be a Lender hereunder, it shall have the same rights and
powers hereunder as any other Lender and may exercise the same as though it were
not acting as Agent, and the term “Lender” or “Lenders” shall, unless the
context otherwise indicates, include Wells Fargo in its individual capacity as
Lender hereunder. With respect to its Term Loan Commitment and the Term Loans
made (and any successor acting as Term Loan Agent), so long as Wells shall be a
Term Loan Lender hereunder, it shall have the same rights and powers hereunder
as any other Term Loan Lender and may exercise the same as though it were not
acting as Term Loan Agent, and the term “Term Loan Lender” or “Term Loan
Lenders” shall, unless the context otherwise indicates, include Wells in its
individual capacity as Lender hereunder.

 

(b)                                 Wells Fargo (and any successor acting as
Agent) and its Affiliates may (without having to account therefor to any Lender)
lend money to, make investments in and generally engage in any kind of business
with any Borrower or Guarantor (and any of its Subsidiaries or Affiliates) as if
it were not acting as Agent, and Wells Fargo and its Affiliates may accept fees
and other consideration from any Borrower or any Guarantor and any of its
Subsidiaries and Affiliates for services in connection with this Agreement or
otherwise without having to account for the same to Lenders.

 

12.5                        Indemnification.  Lenders agree to indemnify each
Appointed Agent (to the extent not reimbursed by Borrowers or Guarantors
hereunder and without limiting any obligations of Borrowers or Guarantors
hereunder) ratably, in accordance with their Pro Rata Shares, for any and all
claims of any kind and nature whatsoever that may be imposed on, incurred by or
asserted against Agent arising out of or by reason of any investigation in or in
any way relating to or arising out of this Agreement or any other Financing
Agreement or any other documents contemplated by or referred to herein or
therein or the transactions contemplated hereby or thereby (including the costs
and expenses that each Appointed Agent is obligated to pay hereunder) or the
enforcement of any of the terms hereof or thereof or of any such other
documents, provided, that, no Lender shall be liable for any of the foregoing to
the extent it arises from the gross negligence or willful misconduct of the
party to be indemnified as determined by a final non-appealable judgment of a
court of competent jurisdiction.  The foregoing indemnity shall survive the
payment of the Obligations and the termination or non-renewal of this Agreement.

 

12.6                        Non Reliance on Agent and Other Lenders.  Each
Lender agrees that it has, independently and without reliance on any Appointed
Agent or other Lender, and based on such

 

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documents and information as it has deemed appropriate, made its own credit
analysis of Borrowers and Guarantors and has made its own decision to enter into
this Agreement and that it will, independently and without reliance upon Any
Appointed Agent or any other Lender, and based on such documents and information
as it shall deem appropriate at the time, continue to make its own analysis and
decisions in taking or not taking action under this Agreement or any of the
other Financing Agreements.  No Appointed Agent shall be required to keep itself
informed as to the performance or observance by Borrowers or Guarantors of any
term or provision of this Agreement or any of the other Financing Agreements or
any other document referred to or provided for herein or therein or to inspect
the properties or books of any Borrower or Guarantor.  Each Appointed Agent will
use reasonable efforts to provide Lenders with any information received by such
Appointed Agent from any Borrower or Guarantor which is required to be provided
to Lenders or which is deemed to be requested by Lenders hereunder and with a
copy of any Notice of Default or Failure of Condition received by such Appointed
Agent from any Borrower or Guarantor; provided, that,  no Appointed Agent shall
be liable to any Lender for any failure to do so, except to the extent that such
failure is attributable to such Appointed Agent’s own gross negligence or
willful misconduct as determined by a final non-appealable judgment of a court
of competent jurisdiction.  Except for notices, reports and other documents
expressly required to be furnished to Lenders by Agent hereunder, no Appointed
Agent shall have any duty or responsibility to provide any Lender with any other
credit or other information concerning the affairs, financial condition or
business of any Borrower or Guarantor that may come into the possession of such
Appointed Agent.

 

12.7                        Failure to Act.  Except for action expressly
required of an Appointed Agent hereunder and under the other Financing
Agreements, each Appointed Agent shall in all cases be fully justified in
failing or refusing to act hereunder and thereunder unless it shall receive
further assurances to its satisfaction from Lenders of their indemnification
obligations under Section 12.5 hereof against any and all liability and expense
that may be incurred by it by reason of taking or continuing to take any such
action.

 

12.8                        Additional Revolving Loans.  Agent shall not make
any Revolving Loans or provide any Letter of Credit Accommodations to Borrowers
on behalf of Lenders intentionally and with actual knowledge that such Revolving
Loans or Letter of Credit Accommodations would cause the aggregate amount of the
total outstanding Revolving Loans and Letter of Credit Accommodations to
Borrowers to exceed the Borrowing Base, without the prior consent of all
Lenders, provided, that notwithstanding any provision to the contrary, Agent
may, with the prior written consent of Term Agent, make any such additional
Revolving Loan or Letter of Credit Accommodation so long as:  (a) the total
principal amount of such additional Revolving Loans or such additional Letter of
Credit Accommodations together with the principal amount of Special Agent
Advances made pursuant to Section 12.11 hereof, shall not exceed the least of
(i) $5,000,000, (ii) the sum of (x) the amount which, when added to all other
Revolving Loans, Letter of Credit Accommodations and Special Agent Advances,
would not cause the principal amount of all outstanding Revolving Loans, Letter
of Credit Accommodations and Special Agent Advances to exceed the Borrowing Base
and (y) if applicable, an amount equal to any reduction, made with the consent
of all Lenders, of the Excess Availability required by Section 9.17 hereof, and
(iii) the amount which would not cause the total principal amount of all
Revolving Loans, Letter of Credit Accommodations and Special Agent Advances to
exceed the Maximum Credit, and (b) no such additional Revolving Loans or Letter
of Credit Accommodations shall be

 

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outstanding more than ninety (90) days after the date such additional Revolving
Loan or Letter of Credit Accommodation is made or issued (as the case may be),
except as the Required Lenders may otherwise agree.  Each Lender shall be
obligated to pay Agent the amount of its Pro Rata Share of any such additional
Revolving Loans or Letter of Credit Accommodations.

 

12.9                        Concerning the Collateral and the Related Financing
Agreements.  Each Lender authorizes and directs each Appointed Agent to enter
into this Agreement and the other Financing Agreements.  Each Lender agrees that
any action taken by Appointed Agent or Required Lenders in accordance with the
terms of this Agreement or the other Financing Agreements and the exercise by
Appointed Agent or Required Lenders of their respective powers set forth therein
or herein, together with such other powers that are reasonably incidental
thereto, shall be binding upon all of the Lenders.

 

12.10                 Field Audit, Examination Reports and other Information;
Disclaimer by Lenders.  By signing this Agreement, each Lender:

 

(a)                                 is deemed to have requested that Agent
furnish such Lender, promptly after it becomes available, a copy of each field
audit or examination report and a monthly or weekly Borrowing Base Certificate,
as the case may be, pursuant to Section 7.1(a)(ii) hereof, prepared by Agent
(each field audit or examination report and monthly or weekly report with
respect to the Borrowing Base being referred to herein as a “Report” and
collectively, “Reports”);

 

(b)                                 expressly agrees and acknowledges that Agent
(A) does not make any representation or warranty as to the accuracy of any
Report, or (B) shall not be liable for any information contained in any Report;

 

(c)                                  expressly agrees and acknowledges that the
Reports are not comprehensive audits or examinations, that Agent or any other
party performing any audit or examination will inspect only specific information
regarding any Borrower and any Guarantor and will rely significantly upon such
Borrower’s and Guarantor’s books and records, as well as on representations of
such Borrower’s and Guarantor’s personnel; and

 

(d)                                 agrees to keep all Reports confidential and
strictly for its internal use in accordance with the terms of Section 14.5
hereof, and not to distribute or use any Report in any other manner.

 

12.11                 Collateral Matters.

 

(a)                                 Subject to the limitations in Section 12.8
hereof, Agent may, at its option, from time to time, at any time on or after an
Event of Default and for so long as the same is continuing or upon any other
failure of a condition precedent to the Revolving Loans and Letter of Credit
Accommodations hereunder, make such disbursements and advances (“Special Agent
Advances”) which Agent, in its sole discretion, deems necessary or desirable
either (i) to preserve or protect the Collateral or any portion thereof or
(ii) to enhance the likelihood or maximize the amount of repayment by Borrowers
of the Loans and other Obligations, or (iii) to pay any other amount chargeable
to Borrowers or Obligors pursuant to the terms of this Agreement or any of the
other Financing Agreements consisting of (A) costs, fees and expenses

 

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and (B) payments to Issuing Bank of Letter of Credit Accommodations; provided,
that notwithstanding any provision to the contrary, Agent may make any such
Special Agent Advances so long as:  (a) the total principal amount of such
Special Agent Advances together with the principal amount of the additional
Revolving Loans and additional Letter of Credit Accommodations made pursuant to
Section 12.11 hereof, shall not exceed the least of (i) $5,000,000, (ii) the sum
of (x) the amount which, when added to all other Special Agent Advances,
Revolving Loans and Letter of Credit Accommodations, would not cause the
principal amount of all outstanding Special Agent Advances, Revolving Loans and
Letter of Credit Accommodations to exceed the Borrowing Base and (y) if
applicable, an amount equal to any reduction, made with the consent of all
Lenders, of the Excess Availability required by Section 9.17 hereof, and
(iii) the amount which would not cause the total principal amount of all
Revolving Loans, Letter of Credit Accommodations and Special Agent Advances to
exceed the Maximum Credit.  Special Agent Advances shall be repayable on demand
and be secured by the Collateral.  Special Agent Advances shall not constitute
Revolving Loans but shall otherwise constitute Obligations hereunder.  Agent
shall notify Lenders and Borrowers in writing of each such Special Agent
Advance, which notice shall include a description of the purpose of such Special
Agent Advance.  Without limitation of its obligations pursuant to Section 6.10
hereof, each Lender agrees that it shall make available to Agent, upon Agent’s
demand, in immediately available funds, the amount equal to such Lender’s Pro
Rata Share of each such Special Agent Advance.  If such funds are not made
available to Agent by such Lender, then such Lender shall be deemed a Defaulting
Lender and Agent shall be entitled to recover such funds, on demand from such
Lender together with interest thereon for each day from the date such payment
was due until the date such amount is paid to Agent at the Federal Funds Rate
for each day during such period (as published by the Federal Reserve Bank of New
York or at Agent’s option based on the arithmetic mean determined by Agent of
the rates for the last transaction in overnight Federal funds arranged prior to
9:00 a.m. (New York City time) on that day by each of the three leading brokers
of Federal funds transactions in New York City selected by Agent) and if such
amounts are not paid within three (3) days of Agent’s demand, at the highest
Interest Rate provided for in Section 3.1 hereof applicable to Prime Rate Loans.

 

(b)                                 Lenders hereby irrevocably authorize Agent,
at its option and in its discretion to release any security interest in,
mortgage or lien upon (i) any of the Collateral upon termination of all of the
Commitments of all Lenders and payment and satisfaction of all of the
Obligations and delivery of cash collateral to the extent required under
Section 14.1 below, or (ii) any of the Collateral constituting property being
sold or disposed of if the applicable Borrower or Guarantor certifies to Agent
that the sale or disposition is made in compliance with Section 9.7 hereof (and
Agent may rely conclusively on any such certificate, without further inquiry),
or (iii) any of the Collateral constituting property in which no Borrower or
Guarantor owned an interest at the time the security interest, mortgage or lien
was granted or at any time thereafter, or (iv) any of the Collateral (other than
Term Loan Priority Collateral without the prior written consent of the Required
Term Loan Lenders) having a value in the aggregate in any twelve (12) month
period of less than $1,000,000 or (v) any of the Collateral if required or
permitted under the terms of any of the other Financing Agreements, including
any intercreditor agreement, or (vi) any of the Collateral (other than Term Loan
Priority Collateral without the prior written consent of the Required Term Loan
Lenders) if approved, authorized or ratified in writing by all of Lenders. 
Except as provided above, Agent will not release any security interest in,
mortgage or lien upon, any of the Collateral without the prior written
authorization of all of

 

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Lenders.  Upon request by Agent at any time, Lenders will promptly confirm in
writing Agent’s authority to release particular types or items of Collateral
pursuant to this Section.

 

(c)                                  Without any manner limiting Agent’s
authority to act without any specific or further authorization or consent by the
Required Lenders, each Lender agrees to confirm in writing, upon request by
Agent, the authority to release Collateral conferred upon Agent under this
Section.  Agent shall (and is hereby irrevocably authorized by Lenders to)
execute such documents as may be necessary to evidence the release of the
security interest, mortgage or liens granted to Agent upon any Collateral to the
extent set forth above; provided, that, (i) Agent shall not be required to
execute any such document on terms which, in Agent’s opinion, would expose Agent
to liability or create any obligations or entail any consequence other than the
release of such security interest, mortgage or liens without recourse or
warranty and (ii) such release shall not in any manner discharge, affect or
impair the Obligations or any security interest, mortgage or lien upon (or
obligations of any Borrower or any Guarantor in respect of) the Collateral
retained by such Borrower or such Guarantor.

 

(d)                                 Appointed Agents shall have no obligation
whatsoever to any Lender or any other Person to investigate, confirm or assure
that the Collateral exists or is owned by any Borrower or Guarantor or is cared
for, protected or insured or has been encumbered, or that any particular items
of Collateral meet the eligibility criteria applicable in respect of the Loans
or Letter of Credit Accommodations hereunder, or whether any particular reserves
are appropriate, or that the liens and security interests granted to Agent
pursuant hereto or any of the Financing Agreements or otherwise have been
properly or sufficiently or lawfully created, perfected, protected or enforced
or are entitled to any particular priority, or to exercise at all or in any
particular manner or under any duty of care, disclosure or fidelity, or to
continue exercising, any of the rights, authorities and powers granted or
available to Agent in this Agreement or in any of the other Financing
Agreements, it being understood and agreed that in respect of the Collateral, or
any act, omission or event related thereto, Agent may act in any manner it may
deem appropriate, in its discretion, given Agent’s own interest in the
Collateral as a Lender and that Agent shall have no duty or liability whatsoever
to any other Lender.

 

12.12                 Agency for Perfection.  Each Lender hereby appoints Agent
and each other Lender as agent and bailee for the purpose of perfecting the
security interests in and liens upon the Collateral of Agent in assets which, in
accordance with Article 9 of the UCC can be perfected only by possession (or
where the security interest of a secured party with possession has priority over
the security interest of another secured party) and Agent and each Lender hereby
acknowledges that it holds possession of any such Collateral for the benefit of
Agent, the other Lenders and the Bank Product Providers as secured party. 
Should any Lender obtain possession of any such Collateral, such Lender shall
notify Agent thereof, and, promptly upon Agent’s request therefor shall deliver
such Collateral to Agent or in accordance with Agent’s instructions.

 

12.13                 Successor Agent.  Agent may resign as Agent upon thirty
(30) days’ notice to Term Loan Agent, Lenders and Borrowers.  If Agent resigns
under this Agreement, the Required Lenders shall appoint from among the Lenders
a successor agent for Lenders.  If no successor agent is appointed prior to the
effective date of the resignation of Agent, Agent may appoint, after consulting
with Lenders and Borrowers, a successor agent from among Lenders.  Upon the
acceptance by the Lender so selected of its appointment as successor agent
hereunder, such

 

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successor agent shall succeed to all of the rights, powers and duties of the
retiring Agent and the term “Agent” as used herein and in the other Financing
Agreements shall mean such successor agent and the retiring Agent’s appointment,
powers and duties as Agent shall be terminated.  After any retiring Agent’s
resignation hereunder as Agent, the provisions of this Section 12 shall inure to
its benefit as to any actions taken or omitted by it while it was Agent under
this Agreement.  If no successor agent has accepted appointment as Agent by the
date which is thirty (30) days after the date of a retiring Agent’s notice of
resignation, the retiring Agent’s resignation shall nonetheless thereupon become
effective and Lenders shall perform all of the duties of Agent hereunder until
such time, if any, as the Required Revolving Loan Lenders  appoint a successor
agent as provided for above.

 

12.14                 Term Loan Agent.

 

(a)                                 Each Term Loan Lender irrevocably
designates, appoints and authorizes Wells to act as Term Loan Agent hereunder
and under the other Financing Agreements with such powers as are specifically
delegated to the  Term Loan Agent by the terms of this Agreement and of the
other Financing Agreements, together with such other powers as are reasonably
incidental thereto.  Term Loan Agent (i) shall have no duties or
responsibilities except those expressly set forth in this Agreement and in the
other Financing Agreements, and shall not by reason of this Agreement or any
other Financing Agreement be a trustee or fiduciary for any Term Loan Lender;
(ii) shall not be responsible to the Term Loan Lenders for any recitals,
statements, representations or warranties contained in this Agreement or in any
of the other Financing Agreements, or in any certificate or other document
referred to or provided for in, or received by any of them under, this Agreement
or any other Financing Agreement, or for the value, validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement or any other
Financing Agreement or any other document referred to or provided for herein or
therein or for any failure by any Borrower or any Guarantor or any other Person
to perform any of its obligations hereunder or thereunder; and (iii) shall not
be responsible to the Term Loan Lenders for any action taken or omitted to be
taken by it hereunder or under any other Financing Agreement or under any other
document or instrument referred to or provided for herein or therein or in
connection herewith or therewith, except for its own gross negligence or willful
misconduct as determined by a final non-appealable judgment of a court of
competent jurisdiction.  Term Loan Agent may employ agents and attorneys-in-fact
and shall not be responsible for the negligence or misconduct of any such agents
or attorneys-in-fact selected by it in good faith.

 

(b)                                 With respect to its Commitment and the Term
Loans made by it (and any successor acting as Term Loan Agent), so long as Wells
shall be a Lender hereunder, it shall have the same rights and powers hereunder
as any other Lender and may exercise the same as though it were not acting as
Term Loan Agent, and the terms “Lender”, “Lenders”, “Term Loan Lender” or “Term
Loan Lenders” shall, unless the context otherwise indicates, include Madeleine
in its individual capacity as Lender hereunder.  Wells (and any successor acting
as Term Loan Agent) and its Affiliates may (without having to account therefor
to any Lender) lend money to, make investments in and generally engage in any
kind of business with Borrowers (and any of its Subsidiaries or Affiliates) as
if it were not acting as Term Loan Agent, and Wells and its Affiliates and
Approved Funds may accept fees and other consideration from any Borrower or
Guarantor and any of its Subsidiaries and Affiliates for services in connection
with

 

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this Agreement or otherwise without having to account for the same to Lenders.

 

(c)                                  Except for action expressly required of
Term Loan Agent hereunder and under the other Financing  Agreements, Term Loan
Agent shall in all cases be fully justified in failing or refusing to act
hereunder and thereunder unless it shall receive further assurances to its
satisfaction from Term Loan Lenders of their indemnification obligations under
Section 12.5 hereof against any and all liability and expense that may be
incurred by it by reason of taking or continuing to take any such action.

 

(d)                                 Term Loan Agent may resign as Term Loan
Agent upon thirty (30) days’ notice to Agent, Lenders and Borrowers.  If Term
Loan Agent resigns under this Agreement, the Required Term Loan Lenders shall
appoint from among the Term Loan Lenders a successor agent for Term Loan
Lenders.  If no successor agent is appointed prior to the effective date of the
resignation of Term Loan Agent, Term Loan Agent may appoint, after consulting
with Term Loan Lenders, Agent and Borrowers, a successor agent from among Term
Loan Lenders.  Upon the acceptance by the Term Loan Lender so selected of its
appointment as successor agent hereunder, such successor agent shall succeed to
all of the rights, powers and duties of the retiring Term Loan Agent and the
term “Term Loan Agent” as used herein and in the other  Financing Agreements
shall mean such successor agent and the retiring Term Loan Agent’s appointment,
powers and duties as Term Loan Agent shall be terminated.  After any retiring
Term Loan Agent’s resignation hereunder as Term Loan Agent, the applicable
provisions of this Section 12 shall inure to its benefit as to any actions taken
or omitted by it while it was Term Loan Agent under this Agreement.  If no
successor agent has accepted appointment as Term Loan Agent by the date which is
thirty (30) days after the date of a retiring Term Loan Agent’s notice of
resignation, the retiring Term Loan Agent’s resignation shall nonetheless
thereupon become effective and Lenders shall perform all of the duties of Term
Loan Agent hereunder until such time, if any, as the Required Term Loan Lenders
appoint a successor agent as provided for above.

 

SECTION 13.                  JOINT AND SEVERAL LIABILITY; SURETYSHIP WAIVERS.

 

13.1                        Independent Obligations; Subrogation.  The
Obligations of each Borrower and of each Guarantor hereunder are joint and
several.  To the maximum extent permitted by law, each Borrower and Guarantor
hereby waives any claim, right or remedy which such Borrower or Guarantor now
has or hereafter acquires against any other Borrower or Guarantor that arises
hereunder including, without limitation, any claim, remedy or right of
subrogation, reimbursement, exoneration, contribution, indemnification, or
participation in any claim, right or remedy of Agent or any Lender against any
Borrower or Guarantor or any Collateral which Agent or any Lender now has or
hereafter acquires, whether or not such claim, right or remedy arises in equity,
under contract, by statute, under common law or otherwise until the Obligations
are fully paid and finally discharged.  In addition, each Borrower and Guarantor
hereby waives any right to proceed against the other Borrowers and Guarantors,
now or hereafter, for contribution, indemnity, reimbursement, and any other
suretyship rights and claims, whether direct or indirect, liquidated or
contingent, whether arising under express or implied contract or by operation of
law, which any Borrower or Guarantor may now have or hereafter have as against
the other Borrowers and Guarantors with respect to the Obligations until the
Obligations are fully paid and finally discharged.  Each Borrower and Guarantor
also hereby waives any

 

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rights of recourse to or with respect to any asset of the other Borrowers and
Guarantors until the Obligations are fully paid and finally discharged.

 

13.2                        Authority to Modify Obligations and Security.  Each
Borrower and Guarantor acknowledges that any action taken by Agent and/or
Lenders in accordance with the terms of this Agreement and applicable law to:
(a) renew, extend, accelerate, or otherwise change the time for payment of, or
otherwise change any other term or condition of, any document or agreement
evidencing or relating to any Obligations as such Obligations relate to the
other Borrowers and Guarantors, including, without limitation, to increase or
decrease the rate of interest thereon; (b) accept, substitute, waive, defease,
increase, release, exchange or otherwise alter any Collateral, in whole or in
part, securing the Obligations of each other Borrower or Guarantor; (c) apply
any and all such Collateral and direct the order or manner of sale thereof as
Agent and Lenders, in their sole discretion, may determine; (d) deal with the
other Borrowers and Guarantors as Agent or any Lender may elect; (e) in Agent’s
and Lenders’ sole discretion, settle, release on terms satisfactory to them, or
by operation of law or otherwise, compound, compromise, collect or otherwise
liquidate any Obligations of any other Borrower or Guarantor and/or any of the
Collateral in any manner, and bid and purchase any of the collateral at any sale
thereof; (f) apply any and all payments or recoveries from the other Borrowers
and Guarantors as Agent or Lenders, in their sole discretion, may determine,
whether or not such indebtedness relates to the Obligations; all whether such
Obligations are secured or unsecured or guaranteed or not guaranteed by others;
and (g) apply any sums realized from Collateral furnished by the other Borrowers
and Guarantors upon any of its indebtedness or obligations to Agent or Lenders
as they in their sole discretion, may determine, whether or not such
indebtedness relates to the Obligations; shall not in any way diminish, release
or discharge the liability of any Borrower or Guarantor hereunder (except to the
extent that the Obligations are in fact repaid as a result of such action).

 

13.3                        Waiver of Defenses.  Upon an Event of Default by any
Borrower or Guarantor in respect of any Obligations, Agent and Lenders may, at
their option and without notice to any Borrower or Guarantor, proceed directly
against any Borrower or Guarantor to collect and recover the full amount of the
liability hereunder, or any portion thereof, and each Borrower and Guarantor
waives any right to require Agent or any Lender to: (a) proceed against the
other Borrowers and Guarantors or any other person whomsoever; (b) proceed
against or exhaust any Collateral given to or held by Agent or any Lender in
connection with the Obligations; (c) give notice of the terms, time and place of
any public or private sale of any of the Collateral except as otherwise provided
herein; or (d) pursue any other remedy in Agent’s or any Lender’s power
whatsoever.  A separate action or actions may be brought and prosecuted against
any Borrower or Guarantor whether or not action is brought against the other
Borrowers and Guarantors and whether the other Borrowers and Guarantors be
joined in any such action or actions; and each Borrower and Guarantor waives the
benefit of any statute of limitations affecting the liability hereunder or the
enforcement hereof, and agrees that any payment of any Obligations or other act
which shall toll any statute of limitations applicable thereto shall similarly
operate to toll such statute of limitations applicable to the liability
hereunder.

 

13.4                        Exercise of Agent’s and Lenders’ Rights.  Each
Borrower and Guarantor hereby authorizes and empowers Agent and Lenders in their
sole discretion, without any notice or demand to such Borrower or Guarantor
whatsoever and without affecting the liability of such

 

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Borrower or Guarantor hereunder, to exercise any right or remedy which Agent or
any Lender may have available to them against the other Borrowers and
Guarantors.

 

13.5                        Additional Waivers.  Each Borrower and Guarantor
waives any defense arising by reason of any disability or other defense of the
other Borrowers and Guarantors or by reason of the cessation from any cause
whatsoever of the liability of any other Borrowers or Guarantors or by reason of
any act or omission of Agent or any Lender or others which directly or
indirectly results in or aids the discharge or release of any other Borrowers or
Guarantors or any Obligations or any Collateral by operation of law or
otherwise.  The Obligations shall be enforceable against each Borrower and
Guarantor without regard to the validity, regularity or enforceability of any of
the Obligations with respect to any other Borrowers or Guarantors or any of the
documents related thereto or any collateral security documents securing any of
the Obligations.  No exercise by Agent or any Lender of, and no omission of
Agent or any Lender to exercise, any power or authority recognized herein and no
impairment or suspension of any right or remedy of Agent or any Lender against
any Borrower or Guarantor or any Collateral shall in any way suspend, discharge,
release, exonerate or otherwise affect any of the Obligations or any Collateral
furnished by Borrowers or Guarantors or give to Borrowers or Guarantors any
right of recourse against Agent or any Lender.  Each Borrower and Guarantor
specifically agrees that the failure of Agent or any Lender: (a) to perfect any
lien on or security interest in any property heretofore or hereafter given any
Borrower or Guarantor to secure payment of the Obligations, or to record or file
any document relating thereto or (b) to file or enforce a claim against the
estate (either in administration, bankruptcy or other proceeding) of any
Borrower or Guarantor shall not in any manner whatsoever terminate, diminish,
exonerate or otherwise affect the liability of any Borrower or Guarantor
hereunder.

 

13.6                        Additional Indebtedness.  Additional Obligations may
be created from time to time at the request of any Borrower or Guarantor and
without further authorization from or notice to any other Borrower or Guarantor
even though the borrowing Borrower’s or Guarantor’s financial condition may
deteriorate since the date hereof.  Each Borrower and Guarantor waives the
right, if any, to require Agent or any Lender to disclose to such Borrower or
Guarantor any information it may now have or hereafter acquire concerning any
other Borrower’s or Guarantor’s character, credit, Collateral, financial
condition or other matters.  Each Borrower and Guarantor has established
adequate means to obtain from each other Borrower and Guarantor, on a continuing
basis, financial and other information pertaining to such Borrower’s or
Guarantor’s business and affairs, and assumes the responsibility for being and
keeping informed of the financial and other conditions of the other Borrowers
and Guarantors and of all circumstances bearing upon the risk of nonpayment of
the Obligations which diligent inquiry would reveal.  Neither Agent nor any
Lender need inquire into the powers of any Borrower or Guarantor or the
authority of any of their respective officers, directors, partners or agents
acting or purporting to act in their behalf, and any Obligations created in
reliance upon the purported exercise of such power or authority is hereby
guaranteed.  All Obligations of each Borrower and Guarantor to Agent and Lenders
heretofore, now or hereafter created shall be deemed to have been granted at
each Borrower’s and Guarantor’s special insistence and request and in
consideration of and in reliance upon this Agreement.

 

13.7                        Notices, Demands, Etc.  Except as expressly provided
by this Agreement, neither Agent nor any Lender shall be under any obligation
whatsoever to make or give to any Borrower

 

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or Guarantor, and each Borrower and Guarantor hereby waives diligence, all
rights of setoff and counterclaim against Agent or any Lender, all demands,
presentments, protests, notices of protests, notices of protests, notices of
nonperformance, notices of dishonor, and all other notices of every kind or
nature, including notice of the existence, creation or incurring of any new or
additional Obligations.

 

13.8                        Revival.  If any payments of money or transfers of
property made to Agent or any Lender by any Borrower or Guarantor should for any
reason subsequently be declared to be, or in Agent’s counsel’s good faith
opinion be determined to be, fraudulent (within the meaning of any state or
federal law relating to fraudulent conveyances), preferential or otherwise
voidable or recoverable in whole or in part for any reason (hereinafter
collectively called “voidable transfers”) under the Bankruptcy Code or any other
federal or state law and Agent or any Lender is required to repay or restore, or
in Agent’s counsel’s good faith opinion may be so liable to repay or restore,
any such voidable transfer, or the amount or any portion thereof, then as to any
such voidable transfer or the amount repaid or restored and all reasonable costs
and expenses (including reasonable attorneys’ fees) of Agent or any Lender
related thereto, such Borrower’s and Guarantor’s liability hereunder shall
automatically be revived, reinstated and restored and shall exist as though such
voidable transfer had never been made to Agent or such Lender.

 

13.9                        Understanding of Waivers.  Each Borrower and
Guarantor warrants and agrees that the waivers set forth in this Section 13 are
made with full knowledge of their significance and consequences.  If any of such
waivers are determined to be contrary to any applicable law or public policy,
such waivers shall be effective only to the maximum extent permitted by law.

 

SECTION 14.                  TERM; MISCELLANEOUS.

 

14.1                        Term.

 

(a)                                 This Agreement and the other Financing
Agreements shall become effective as of the date set forth on the first
page hereof and shall continue in full force and effect for a term ending on the
Maturity Date.  Agent may, at its option (or shall at the direction of any
Lender in writing received by Agent at least sixty (60) days prior to the
Maturity Date or the anniversary of any Maturity Date, as the case may be),
terminate this Agreement and the other Financing Agreements, or Borrowers may
terminate this Agreement and the other Financing Agreements, in each case,
effective on the Maturity Date or on the anniversary of the Maturity Date in any
year by giving to the other party at least sixty (60) days prior written notice;
provided, that, this Agreement and all other Financing Agreements still in
effect on such date, if any, must be terminated simultaneously.  In addition,
Borrowers may terminate this Agreement at any time upon three (3) Business Days
(or such shorter period acceptable to Agent) prior written notice to Agent
(which notice shall be irrevocable) and Agent may, at its option, and shall at
the direction of Required Lenders, terminate this Agreement at any time on or
after the occurrence and during the continuance of an Event of Default, subject
to any cure periods specified in Section 10.1 hereof.  Upon the Maturity Date or
any other effective date of termination of the Financing Agreements, Borrowers
shall pay to Agent all outstanding and unpaid Obligations (other than contingent
indemnification obligations and other contingent Obligations which expressly
survive the termination of this Agreement and the other Financing Agreements)
and shall furnish cash collateral to Agent (or at Agent’s option, a letter of
credit

 

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issued for the account of Borrowers and at Borrowers’ expense, in form and
substance satisfactory to Agent, by an issuer acceptable to Agent and payable to
Agent as beneficiary) in such amounts as Agent determines are reasonably
necessary to secure Agent, Lenders and Issuing Bank from loss, cost, damage or
expense, including attorneys’ fees and expenses, in connection with any
contingent Obligations, including issued and outstanding Letter of Credit
Accommodations and checks or other payments provisionally credited to the
Obligations and/or as to which Agent or any Lender has not yet received final
payment and any continuing obligations of Agent or any Lender pursuant to any
Deposit Account Control Agreement and for any of the Obligations arising under
or in connection with any Bank Products in such amounts as the Bank Product
Provider providing such Bank Products may require (unless such Obligations
arising under or in connection with any Bank Products are paid in full in cash
and terminated in a manner satisfactory to such Bank Product Provider.  The
amount of such cash collateral (or letter of credit, as Agent may determine) as
to any Letter of Credit Accommodations shall be in the amount equal to one
hundred five (105%) percent of the amount of the Letter of Credit Accommodations
plus the amount of any fees and expenses payable in connection therewith through
the end of the latest expiration date of the letters of credit giving rise to
such Letter of Credit Accommodations.  Such payments in respect of the
Obligations and cash collateral shall be remitted by wire transfer in Federal
funds to the Agent Payment Account or such other bank account of Agent, as Agent
may, in its discretion, designate in writing to Borrowers for such purpose. 
Interest shall be due until and including the next Business Day, if the amounts
so paid by Borrowers to the Agent Payment Account or other bank account
designated by Agent are received in such bank account later than 12:00 noon, New
York time.

 

(b)                                 No termination of the Revolving Loan
Facility or Term Loan Facility, this Agreement or the other Financing Agreements
shall relieve or discharge any Borrower or any Borrower of its respective
duties, obligations and covenants under this Agreement or the other Financing
Agreements until all Obligations have been fully and finally discharged and
paid, and Agent’s continuing security interest in the Collateral and the rights
and remedies of Agent and Lenders hereunder, under the other Financing
Agreements and applicable law, shall remain in effect until all such Obligations
have been fully and finally discharged and paid and Lenders have no further
obligations hereunder (following which all securing interests, liens and the
like shall be released).  Accordingly, each Borrower and Guarantor waives any
rights it may have under the UCC to demand the filing of termination statements
with respect to the Collateral and Agent shall not be required to send such
termination statements to any Borrower or Guarantor, or to file them with any
filing office, unless and until this Agreement and all Commitments of all
Lenders shall have been terminated in accordance with its terms and all
Obligations paid and satisfied in full in immediately available funds.

 

14.2                        Interpretative Provisions.

 

(a)                                 All terms used herein which are defined in
Article 1, Article 8 or Article 9 of the UCC shall have the meanings given
therein unless otherwise defined in this Agreement.

 

(b)                                 All references to the plural herein shall
also mean the singular and to the singular shall also mean the plural unless the
context otherwise requires.

 

(c)                                  All references to any Borrower, any
Guarantor, any Obligor, Agent and

 

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any Lender pursuant to the definitions set forth in the recitals hereto, or to
any other person herein, shall include their respective successors and assigns.

 

(d)                                 The words “hereof”, “herein”, “hereunder”,
“this Agreement” and words of similar import when used in this Agreement and any
of the other Financing Agreements shall refer to this Agreement and such
Financing Agreement as a whole and not any particular provision hereof or
thereof and as this Agreement or such Financing Agreements now exist or may
hereafter be amended, modified, supplemented, extended, renewed, restated or
replaced.

 

(e)                                  The word “including” when used in this
Agreement shall mean “including, without limitation”.

 

(f)                                   An Event of Default shall exist or
continue or be continuing until such Event of Default is waived in accordance
with Section 11.3 hereof or is cured in a manner satisfactory to Agent, if such
Event of Default is capable of being cured as determined by Agent.

 

(g)                                  All references to the term “good faith”
used herein when applicable to Agent or any Lender shall mean, notwithstanding
anything to the contrary contained herein or in the UCC, honesty in fact in the
conduct or transaction concerned.  Borrowers shall have the burden of proving
any lack of good faith on the part of Agent or any Lender alleged by Borrowers
at any time.

 

(h)                                 Any accounting term used in this Agreement
shall have, unless otherwise specifically provided herein, the meaning
customarily given in accordance with GAAP, and all financial computations
hereunder shall be computed unless otherwise specifically provided herein, in
accordance with GAAP as consistently applied and using the same method for
inventory valuation as used in the preparation of the financial statements of
Borrowers and Guarantors most recently received by Agent prior to the date
hereof.

 

(i)                                     In the computation of periods of time
from a specified date to a later specified date, the word “from” means “from and
including”, the words “to” and “until” each mean “to but excluding” and the word
“through” means “to and including”.

 

(j)                                    Unless otherwise expressly provided
herein, (i) references herein to any agreement, document or instrument in this
Agreement shall be deemed to include all subsequent amendments, modifications,
supplements, extensions, renewals, restatements or replacements with respect
thereto, but only to the extent the same are not prohibited by the terms hereof
or of any other Financing Agreement, and (ii) references to any statute or
regulation are to be construed as including all statutory and regulatory
provisions consolidating, amending, replacing, recodifying, supplementing or
interpreting the statute or regulation.

 

(k)                                 The captions and headings of this Agreement
are for convenience of reference only and shall not affect the interpretation of
this Agreement.

 

(l)                                     This Agreement and other Financing
Agreements may use several different limitations, tests or measurements to
regulate the same or similar matters.  All such limitations, tests and
measurements are cumulative and shall each be performed in accordance with their
terms.

 

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(m)                             This Agreement and the other Financing
Agreements are the result of negotiations among and have been reviewed by
counsel to Agent and the other parties, and are the products of all parties. 
Accordingly, this Agreement and the other Financing Agreements shall not be
construed against Agent or Lenders merely because of Agent’s or any Lender’s
involvement in their preparation.

 

14.3                        Notices.  Except as otherwise provided herein, all
notices, requests and demands hereunder shall be in writing and deemed to have
been given or made:  if delivered in person, immediately upon delivery; if by
telex, telegram or facsimile transmission, immediately upon sending and upon
confirmation of receipt; if by nationally recognized overnight courier service
with instructions to deliver the next Business Day, one (1) Business Day after
sending; and if by certified mail, return receipt requested, five (5) days after
mailing.  All notices, requests and demands upon the parties are to be given to
the following addresses (or to such other address as any party may designate by
notice in accordance with this Section):

 

If to any Borrower or Guarantor:

Lerner New York, Inc.
450 West 33rd Street
New York, NY 10001
Attention:  Chief Financial Officer
Telephone No.: (212) 884-2110
Telecopy No.: (212) 884-2103

and

Attention:  General Counsel

Telephone No.: (212) 884-2122
Telecopy No.: (212) 884-2965

 

 

With a copy to:

Kirkland & Ellis LLP

Citigroup Center
601 Lexington Avenue
New York, NY 10022
Attention:  Ashley Gregory
Telephone No.: (212) 446-4697
Telecopy No.:  (212) 446-6600

 

 

If to Agent:

Wells Fargo Bank, National Association, as Agent

One Boston Place, 19th Floor

Boston, Massachusetts 02108

Attention: Danielle Baldinelli

Telephone No.: (617) 854-7238

Telecopy No.: (877) 353-3045

 

 

If to Term Loan Agent:

Wells Fargo Bank, National Association, as Term Loan Agent

One Boston Place, 19th Floor

Boston, Massachusetts 02108

Attention:  Tamar Scoville

 

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Telephone No.: (617) 624-4448
Telecopy No.: (877) 353-3045

 

14.4                        Partial Invalidity.  If any provision of this
Agreement is held to be invalid or unenforceable, such invalidity or
unenforceability shall not invalidate this Agreement as a whole, but this
Agreement shall be construed as though it did not contain the particular
provision held to be invalid or unenforceable and the rights and obligations of
the parties shall be construed and enforced only to such extent as shall be
permitted by applicable law.

 

14.5                        Confidentiality.

 

(a)                                 Agent and each Lender shall use all
reasonable efforts to keep confidential, in accordance with its customary
procedures for handling confidential information and safe and sound lending
practices, any non-public information supplied to it by any Borrower or
Guarantor pursuant to this Agreement which is clearly and conspicuously marked
as confidential at the time such information is furnished by any Borrower or
Guarantor to Agent or such Lender, provided, that, nothing contained herein
shall limit the disclosure of any such information: (i) to the extent required
by statute, rule, regulation, subpoena or court order, (ii) to bank examiners
and other regulators, auditors and/or accountants, in connection with any
litigation to which Agent or such Lender is a party, (iii) to any Lender or
Participant (or prospective Lender or Participant) or to any Affiliate of any
Lender so long as such Lender or Participant (or prospective Lender or
Participant) or Affiliate shall have been instructed to treat such information
as confidential in accordance with this Section 14.5, or (iv) to counsel for
Agent or any Lender or Participant (or prospective Lender or Participant).

 

(b)                                 In the event that Agent or any Lender
receives a request or demand to disclose any confidential information pursuant
to any subpoena or court order, Agent or such Lender, as the case may be, agrees
(i) to the extent permitted by applicable law or if permitted by applicable law,
to the extent Agent or such Lender determines in good faith that it will not
create any risk of liability to Agent or such Lender, Agent or such Lender will
promptly notify Borrowers of such request so that Borrowers may seek a
protective order or other appropriate relief or remedy and (ii) if disclosure of
such information is required, disclose such information and, subject to
reimbursement by Borrowers of Agent’s or such Lender’s expenses, cooperate with
Borrowers in the reasonable efforts to obtain an order or other reliable
assurance that confidential treatment will be accorded to such portion of the
disclosed information which Borrowers so designate, to the extent permitted by
applicable law or if permitted by applicable law, to the extent Agent or such
Lender determines in good faith that it will not create any risk of liability to
Agent or such Lender.

 

(c)                                  In no event shall this Section 14.5 or any
other provision of this Agreement, any of the other Financing Agreements or
applicable law be deemed: (i) to apply to or restrict disclosure of information
that has been or is made public by any Borrower or Guarantor or any third party
or otherwise becomes generally available to the public other than as a result of
a disclosure in violation hereof, (ii) to apply to or restrict disclosure of
information that was or becomes available to Agent or any Lender (or any
Affiliate of any Lender) on a non-

 

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confidential basis from a person other than a Borrower or Guarantor, (iii) to
require Agent or any Lender to return any materials furnished by any Borrower or
Guarantor to Agent or a Lender or prevent Agent or a Lender from responding to
routine informational requests in accordance with the Code of Ethics for the
Exchange of Credit Information promulgated by The Robert Morris Associates or
other applicable industry standards relating to the exchange of credit
information.  The obligations of Agent and Lenders under this Section 14.5 shall
supersede and replace the obligations of Agent and Lenders under any
confidentiality letter signed prior to the date hereof.

 

14.6                        Successors.  This Agreement, the other Financing
Agreements and any other document referred to herein or therein shall be binding
upon and inure to the benefit of and be enforceable by Agent, Lenders, Bank
Product Providers, Borrowers, Guarantors and their respective successors and
assigns, except that no Borrower or Guarantor may assign its rights under this
Agreement, the other Financing Agreements and any other document referred to
herein or therein without the prior written consent of Agent and Lenders.  Any
such purported assignment without such express prior written consent shall be
void.  No Lender may assign its rights and obligations under this Agreement
without the prior written consent of Agent, except as provided in Section 14.7
below.  The terms and provisions of this Agreement and the other Financing
Agreements are for the purpose of defining the relative rights and obligations
of Borrowers, Guarantors, Agent and Lenders with respect to the transactions
contemplated hereby and there shall be no third party beneficiaries of any of
the terms and provisions of this Agreement or any of the other Financing
Agreements.

 

14.7                        Assignments; Participations.

 

(a)                                 Each Lender may assign all or, if less than
all, a portion equal to at least $10,000,000 in the aggregate for the assigning
Lender, of such rights and obligations under this Agreement to one or more
Eligible Transferees or Approved Funds (but not including for this purpose any
assignments in the form of a participation), each of which assignees shall
become a party to this Agreement as a Lender by execution of an Assignment and
Acceptance; provided, that, such transfer or assignment will not be effective
until:  (i) it is recorded by the applicable Agent on the applicable Register;
(ii) Agent shall have received for its sole account payment of a processing fee
from the assigning Lender or the assignee in the amount of $5,000; (iii) Agent
shall have provided its prior written consent to such assignment, and
(iv) Borrowers shall have provided their prior written consent, which consent
shall not be unreasonably withheld, conditioned or delayed; provided, that,
(A) Borrowers shall be deemed to have consented to a proposed assignment unless
they object to such assignment by written notice to Agent within five
(5) Business Days after having received notice thereof and (B) no consent of
Borrowers shall be required if a Default or an Event of Default exists or has
occurred and is continuing.  Anything contained in this Section 14.7 hereof to
the contrary notwithstanding, the consent of Borrowers or Agent shall not be
required, the minimum assignment amount shall not be applicable, an Assignment
and Acceptance shall not be required to be delivered to, accepted by or recorded
by Agent on the applicable Register in order to be effective, valid, binding and
enforceable and payments of the processing fee shall not be required if  such
assignment is in connection with any merger, consolidation, sale, transfer, or
other disposition of all or any substantial portion of the business or loan
portfolio of a Lender; provided, that, Borrowers and Agent may continue to deal
solely and directly with the assigning Lender in connection with the interest so
assigned until such time as written notice of such assignment shall have been

 

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delivered by the assigning Lender or the assignee to Agent.

 

(b)                                 Agent, acting for this purpose only as agent
of Borrowers, shall maintain a register of the names and addresses of Revolving
Loan Lenders, their Revolving Loan Commitments and the principal amount of their
Loans (the “Revolving Loan Register”); provided, that, in the case of an
assignment or delegation covered by Section 14.7(a) hereof, which is not
reflected in the Revolving Loan Register, the assigning Lender shall maintain a
comparable register (the “Revolving Loan Lender Register”) on behalf of
Borrowers.  Agent shall also maintain a copy of each Assignment and Acceptance
delivered to and accepted by it and shall modify the Revolving Loan Register to
give effect to each Assignment and Acceptance.  The entries in the Revolving
Loan Register and Lender Register shall be conclusive and binding for all
purposes, absent manifest error, and Borrowers, Guarantors, Agent and Revolving
Loan Lenders may treat each Person whose name is recorded in the Revolving Loan
Register or Revolving Loan Lender Register as a Revolving Loan Lender hereunder
for all purposes of this Agreement.  The Revolving Loan Register and Revolving
Loan Lender Register shall be available for inspection by Borrowers and any
Revolving Loan Lender at any reasonable time and from time to time upon
reasonable prior notice.  This Section 14.7(b) shall be construed so that the
Revolving Loan Loans and Revolving Loan Commitments are at all times maintained
in “registered form” within the meaning of Sections 163(f), 871(h)(2) and
881(c)(2) of the Code.

 

(c)                                  Term Loan Agent, acting for this purpose
only as agent of Borrowers, shall maintain a register of the names and addresses
of Term Loan Lenders, their Term Loan Commitments and the principal amount of
their Term Loan Loans (the “Term Loan Register”); provided, that, in the case of
an assignment or delegation covered by Section 14.7(a) hereof, which is not
reflected in the Register, the assigning Term Loan Lender shall maintain a
comparable register (the “Term Loan Lender Register”) on behalf of Borrowers. 
Agent shall also maintain a  copy of each Assignment and Acceptance delivered to
and accepted by it and  shall modify the Term Loan Register to give effect to
each Assignment and Acceptance.  The entries in the Term Loan Register and Term
Loan Lender Register shall be conclusive and binding for all purposes, absent
manifest error, and Borrowers, Guarantors, Term Loan Agent and Term Loan
Lenders  may treat each Person whose name is recorded in the Register or Lender
Register as a Term Loan Lender hereunder for all purposes of this Agreement. 
The Term Loan Register and Term Loan  Lender Register shall be available for
inspection by Borrowers and any Term Loan Lender at any reasonable time and from
time to time upon reasonable prior notice.  This Section 14.7(c) shall be
construed so that the Term Loan Loans and Term Loan  Commitments are at all
times maintained in “registered form” within the meaning of Sections 163(f),
871(h)(2) and 881(c)(2) of the Code.

 

(d)                                 If required under Section 14.7 hereof, upon
such execution, delivery, acceptance and recording, and otherwise from and after
the effective date specified in each Assignment and Acceptance, (i) the assignee
thereunder shall be a party hereto and to the other Financing Agreements and, to
the extent that rights and obligations hereunder have been assigned to it
pursuant to such Assignment and Acceptance, have the rights and obligations
(including, without limitation, the obligation to participate in Letter of
Credit Accommodations) of a Lender hereunder and thereunder and (ii) the
assigning Lender shall, to the extent that rights and obligations hereunder have
been assigned by it pursuant to such Assignment and Acceptance, relinquish its
rights and be released from its obligations under this Agreement.

 

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(e)                                  By execution and delivery to each other of
an Assignment and Acceptance, the assignor and assignee thereunder confirm to
and agree with each other and the other parties hereto as follows:  (i) other
than as provided in such Assignment and Acceptance, the assigning Lender makes
no representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with this
Agreement or any of the other Financing Agreements or the execution, legality,
enforceability, genuineness, sufficiency or value of this Agreement or any of
the other Financing Agreements furnished pursuant hereto, (ii) the assigning
Lender makes no representation or warranty and assumes no responsibility with
respect to the financial condition of any Borrower, any Guarantor or any of
their respective Subsidiaries or the performance or observance by any Borrower
or any Guarantor of any of the Obligations; (iii) such assignee confirms that it
has received a copy of this Agreement and the other Financing Agreements,
together with such other documents and information it has deemed appropriate to
make its own credit analysis and decision to enter into such Assignment and
Acceptance, (iv) such assignee will, independently and without reliance upon the
assigning Lender, Agent and based on such documents and information as it shall
deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under this Agreement and the other Financing
Agreements, (v) such assignee appoints and authorizes Agent to take such action
as agent on its behalf and to exercise such powers under this Agreement and the
other Financing Agreements as are delegated to Agent by the terms hereof and
thereof, together with such powers as are reasonably incidental thereto, and
(vi) such assignee agrees that it will perform in accordance with their terms
all of the obligations which by the terms of this Agreement and the other
Financing Agreements are required to be performed by it as a Lender.  Agent and
Lenders may furnish any information concerning any Borrower or any Guarantor in
the possession of Agent or any Lender from time to time to assignees and
Participants.

 

(f)                                   Each Lender may sell participations to one
or more banks or other entities in or to all or a portion of its rights and
obligations under this Agreement and the other Financing Agreements (including,
without limitation, all or a portion of its Commitment and the Loans owing to it
and its participation in the Letter of Credit Accommodations, without the
consent of Agent or the other Lenders); provided, that, (i) such Lender’s
obligations under this Agreement (including, without limitation, its Commitment
hereunder) and the other Financing Agreements shall remain unchanged, (ii) such
Lender shall remain solely responsible to the other parties hereto for the
performance of such obligations, and Borrowers, the other Lenders and Agent
shall continue to deal solely and directly with such Lender in connection with
such Lender’s rights and obligations under this Agreement and the other
Financing Agreements, (iii) the Participant shall not have any rights under this
Agreement or any of the other Financing Agreements (the Participant’s rights
against such Lender in respect of such participation to be those set forth in
the agreement executed by such Lender in favor of the Participant relating
thereto) and all amounts payable by Borrowers or any Guarantor hereunder
(including any amounts payable under Sections 3.3, 3.4, 3.5 and 3.6 hereof)
shall be determined as if such Lender had not sold such participation.

 

(g)                                  Nothing in this Agreement shall prevent or
prohibit any Lender from pledging its Loans hereunder to a Federal Reserve Bank
in support of borrowings made by such Lenders from such Federal Reserve Bank. 
Borrowers hereby acknowledge that the Lenders and their Affiliates may sell or
securitize the Loans (a “Securitization”) through the pledge of the

 

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Loans as collateral security for loans to the Lenders or their Affiliates or
through the sale of the Loans or the issuance of direct or indirect interests in
the Loans, which loans to the Lenders or their Affiliates or direct or indirect
interests will be rated by Moody’s, Standard & Poor’s or one or more other
rating agencies (the “Rating Agencies”).  Borrowers shall cooperate with the
Lenders and their Affiliates to effect the Securitization including, without
limitation, by (a) amending this Agreement and the other Financing Agreements,
and executing such additional documents, as reasonably requested by the Lenders
in connection with the Securitization, provided that (i) any such amendment or
additional documentation does not impose material additional costs on the
Borrowers and (ii) any such amendment or additional documentation does not
materially adversely affect the rights, or materially increase the obligations,
of the Borrowers under the Financing Agreements or change or affect in a manner
adverse to the Borrowers the financial terms of the Loans, (b) providing such
information as may be reasonably requested by the Lenders in connection with the
rating of the Loans or the Securitization, and (c) providing in connection with
any rating of the Loans a certificate (i) agreeing to indemnify the Lenders and
their Affiliates, any of the Rating Agencies, or any party providing credit
support or otherwise participating in the Securitization (collectively, the
“Securitization Parties”) for any losses, claims, damages or liabilities (the
“Liabilities”) to which the Lenders, their Affiliates or such Securitization
Parties may become subject insofar as the Liabilities arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in any Financing Agreement or in any writing delivered by or on behalf
of any Borrower or Guarantor to the Lenders in connection with any Financing
Agreement or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein, or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading, and such indemnity shall survive any transfer by
the Lenders or their successors or assigns of the Loans and (ii) agreeing to
reimburse the Lenders and their Affiliates for any legal or other expenses
reasonably incurred by such Persons in connection with defending the
Liabilities.

 

(h)                                 Borrowers shall assist Agent or any Lender
permitted to sell assignments or participations under this Section 14.7 in
whatever manner reasonably necessary in order to enable or effect any such
assignment or participation, including (but not limited to) the execution and
delivery of any and all agreements, notes and other documents and instruments as
shall be requested and the delivery of informational materials, appraisals or
other documents for, and the participation of relevant management in meetings
and conference calls with, potential Lenders or Participants.  Borrowers shall
certify the correctness, completeness and accuracy, in all material respects, of
all descriptions of Borrowers and their affairs provided, prepared or reviewed
by Borrowers that are contained in any selling materials and all other
information provided by it and included in such materials.

 

14.8                        Separate Grants.  Each of the parties hereto
irrevocably acknowledges and agrees that (a) the claims and interests of Agent,
Revolving Loan Lenders and the Bank Product Provider and of Term Loan Agent and
Term Loan Lenders are not “substantially similar” within the meaning of Section
1122 of the United States Bankruptcy Code, or any comparable provision of any
other bankruptcy or insolvency Law, (b) the grants of the security interest and
liens to secure the Obligations in respect of the Revolving Loans and Letter of
Credit Obligations and the grants of the security interests and liens to secure
the Obligations in respect of the Term Loans constitute two separate and
distinct grants of security interests and liens, (c) the rights of Agent,

 

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Revolving Loan Lenders and Bank Product Providers in the Collateral are
fundamentally different from the rights of Term Loan Agent and Term Loan Lenders
in the Collateral and (d) as a result of the foregoing, among other things, the
Obligations in respect of the Revolving Loans and Letter of Credit Obligations
and Obligations in respect of the Term Loans must be separately classified in
any plan of reorganization proposed or adopted in any bankruptcy or insolvency
proceeding.

 

14.9                        Entire Agreement.  This Agreement, the other
Financing Agreements, any supplements hereto or thereto, and any instruments or
documents delivered or to be delivered in connection herewith or therewith
represents the entire agreement and understanding concerning the subject matter
hereof and thereof between the parties hereto, and supersede all other prior
agreements, understandings, negotiations and discussions, representations,
warranties, commitments, proposals, offers and contracts concerning the subject
matter hereof, whether oral or written.  In the event of any inconsistency
between the terms of this Agreement and any schedule or exhibit hereto, the
terms of this Agreement shall govern.

 

14.10                 Patriot Act.  Agent and each Lender hereby notifies
Borrowers and Guarantors that pursuant to the requirements of the Patriot Act,
it is required to obtain, verify and record information that identifies
Borrowers and Guarantors, which information includes the name and address of
each Borrower and Guarantor and other information that will allow Agent or such
Lender to identify Borrowers and Guarantors in accordance with the Patriot Act. 
In addition, if Agent or a Lender is required by law or regulation or internal
policies to do so, it shall have the right to periodically conduct (a) Patriot
Act searches, OFAC/PEP searches, and customary individual background checks for
any Borrower or Guarantor and (b) OFAC/PEP searches and customary individual
background checks for the senior management and key principals of any Borrower
and Guarantor, and any Borrower and each Guarantor agrees to cooperate in
respect of the conduct of such searches and further agrees that the reasonable
costs and charges for such searches shall be payable by Borrowers to Agent or
such Lender hereunder and shall be for the account of Borrowers.  Borrowers and
Guarantors are hereby advised that any Loans or Letter of Credit Accommodations
hereunder are subject to satisfactory results of such verification.

 

14.11                 Counterparts, Etc.  This Agreement or any of the other
Financing Agreements may be executed in any number of counterparts, each of
which shall be an original, but all of which taken together shall constitute one
and the same agreement. Delivery of an executed counterpart of this Agreement or
any of the other Financing Agreements by telefacsimile shall have the same force
and effect as the delivery of an original executed counterpart of this Agreement
or any of such other Financing Agreements.  Any party delivering an executed
counterpart of any such agreement by telefacsimile shall also deliver an
original executed counterpart, but the failure to do so shall not affect the
validity, enforceability or binding effect of such agreement.

 

SECTION 15.                 ACKNOWLEDGMENT AND RESTATEMENT

 

15.1                        Existing Obligations.  Each Borrower and Guarantor
hereby acknowledges, confirms and agrees that, as of the close of business on
October 23, 2014, Borrowers are indebted to Agent and Lenders in respect of
Loans under the Existing Loan Agreement in the aggregate principal amount of
$4,356,358.09 and Existing Letters of Credit under the Existing

 

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Loan Agreement in the aggregate principal amount of $20,929,194.10, in each case
together with all interest accrued and accruing thereon (to the extent
applicable), and all fees, costs, expenses and other charges relating thereto,
all of which are unconditionally owing by Borrowers and Guarantors to Agent and
Lenders, without offset, defense or counterclaim of any kind, nature or
description whatsoever.

 

15.2                        Acknowledgment of Security Interests.  Each Borrower
and Guarantor hereby acknowledges, confirms and agrees that Agent, for itself
and the ratable benefit of the Lenders and the Bank Product Providers, shall
continue to have a security interest in and lien upon the Collateral heretofore
granted to Agent pursuant to the Existing Financing Agreements to secure the
Obligations, as well as any Collateral granted to Agent under this Agreement or
under any of the other Financing Agreements or otherwise granted to or held by
Agent or any Lender.  The liens and security interests of Agent in the
Collateral shall be deemed to be continuously granted and perfected from the
earliest date of the granting and perfection of such liens and security
interests to Agent, whether under the Existing Financing Agreements, this
Agreement or any of the other Financing Agreements.

 

15.3                        Existing Financing Agreements.  Each Borrower and
Guarantor hereby acknowledges, confirms and agrees that: (a) the Existing
Financing Agreements have been duly executed and delivered by such Borrower and
Guarantor and are in full force and effect as of the date hereof and (b) the
agreements and obligations of such Borrower and Guarantor contained in the
Existing Financing Agreements constitute the legal, valid and binding
obligations of such Borrower and Guarantor enforceable against each of them in
accordance with their respective terms and such Borrower and Guarantor has no
valid defense to the enforcement of such obligations and (c) Agent, on behalf of
Lenders and Bank Product Providers, is entitled to all of the rights and
remedies provided for in favor of Agent, Lenders and Bank Product Providers in
the Existing Financing Agreements, as amended and restated by this Agreement.

 

15.4                        Restatement.  Except as otherwise stated in Section
15.2 hereof and this Section 15.4, as of the date hereof, the terms, conditions,
agreements, covenants, representations and warranties set forth in the Existing
Financing Agreements are hereby amended and restated in their entirety, and as
so amended and restated, replaced and superseded, by the terms, conditions,
agreements, covenants, representations and warranties set forth in this
Agreement and the other Financing Agreements.  The amendment and restatement
contained herein shall not, in any manner, be construed to constitute payment
of, or impair, limit, cancel or extinguish, or constitute a novation in respect
of, the Indebtedness and any other obligations and liabilities of Borrowers or
Guarantors evidenced by or arising under the Existing Financing Agreements, and
the liens and security interests of Agent, for itself and the ratable benefit of
the Lenders and the Bank Product Providers, in the Collateral (as such term is
defined herein) securing such Indebtedness and other obligations and
liabilities, which shall not in any manner be impaired, limited, terminated,
waived or released, but shall continue in full force and effect in favor of
Agent, for itself and the ratable benefit of the Lenders and the Bank Product
Providers.  The principal amount of the Loans and the amount of the Existing
Letters of Credit outstanding as of the date hereof under the Existing Financing
Agreements shall be allocated to the Loans and Letter of Credit Accommodations
hereunder in such manner and in such amounts as Agent shall determine.

 

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15.5                        Release.  Each Borrower and Guarantor, for itself
and its successors and assigns, does hereby remise, release, discharge and hold
Agent, Lenders, Bank Product Providers, and their respective officers,
directors, agents and employees and their respective predecessors, successors
and assigns harmless from all claims, demands, debts, sums of money, accounts,
damages, judgments, financial obligations, actions, causes of action, suits at
law or in equity, of any kind or nature whatsoever, whether or not now existing
or known, which any Borrower, any Guarantor or their respective successors or
assigns has had or may now or hereafter claim to have against Agent, any Lender,
any Bank Product Provider or their respective officers, directors, agents and
employees and their respective predecessors, successors and assigns in any way
arising from or connected with the Existing Financing Agreements or the
arrangements set forth therein or transactions thereunder up to and including
the date hereof, except to the extent Borrowers shall notify Agent in writing of
any specific exceptions to charges for interest, fees, costs and expenses set
forth in the most recent monthly statement of Borrowers’ loan accounts sent by
Agent to Borrowers prior to the date hereof pursuant to the Existing Financing
Agreements within thirty (30) days after the date hereof.

 

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the day and year first above written.

 

 

BORROWERS

 

 

 

 

 

 

LERNER NEW YORK, INC.

 

 

 

 

By:

/s/ Sheamus Toal

 

Name:

Sheamus Toal

 

Title:

Chief Financial Officer

 

 

 

 

 

 

 

LERNCO, INC.

 

 

 

 

By:

/s/ Sheamus Toal

 

Name:

Sheamus Toal

 

Title:

President

 

 

 

 

 

 

 

LERNER NEW YORK OUTLET, INC.

 

 

 

 

By:

/s/ Sheamus Toal

 

Name:

Sheamus Toal

 

Title:

Chief Financial Officer

 

 

 

 

 

 

 

GUARANTORS

 

 

 

 

 

 

NEW YORK & COMPANY, INC.

 

 

 

 

By:

/s/ Sheamus Toal

 

Name:

Sheamus Toal

 

Title:

Chief Financial Officer

 

 

 

 

 

 

NEVADA RECEIVABLE FACTORING, INC.

 

 

 

 

By:

/s/ Sheamus Toal

 

Name:

Sheamus Toal

 

Title:

President & Chief Financial Officer

 

[SIGNATURES CONTINUED ON NEXT PAGE]

 

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[SIGNATURES CONTINUED FROM PREVIOUS PAGE]

 

 

 

LERNER NEW YORK HOLDING, INC.

 

 

 

By:

/s/ Sheamus Toal

 

Name:

Sheamus Toal

 

Title:

Chief Financial Officer

 

 

 

 

 

LERNER NEW YORK GC, LLC

 

 

 

By:

/s/ Sheamus Toal

 

Name:

Sheamus Toal

 

Title:

President

 

 

 

 

 

NEW YORK & COMPANY STORES, INC.

 

 

 

By:

/s/ Sheamus Toal

 

Name:

Sheamus Toal

 

Title:

Treasurer

 

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AGENTS

 

 

 

 

WELLS FARGO BANK, NATIONAL ASSOCIATION, as Agent

 

 

 

 

By:

/s/ Danielle Baldinelli

 

Name:

Danielle Baldinelli

 

Title:

Director

 

 

 

 

 

 

 

WELLS FARGO BANK, NATIONAL ASSOCIATION, as Term Loan Agent

 

 

 

 

By:

/s/ Tamar Scoville

 

Name:

Tamar Scoville

 

Title:

Vice President

 

 

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REVOLVING LOAN LENDERS

 

 

 

 

WELLS FARGO BANK, NATIONAL ASSOCIATION, as Revolving Loan Lender

 

 

 

 

By:

/s/ Danielle Baldinelli

 

Name:

Danielle Baldinelli

 

Title:

Director

 

 

 

 

 

 

 

TERM LOAN LENDERS

 

 

 

 

WELLS FARGO BANK, NATIONAL ASSOCIATION, as Term Loan Lender

 

 

 

 

By:

/s/ Tamar Scoville

 

Name:

Tamar Scoville

 

Title:

Vice President

 

 

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EXHIBIT A
TO
FOURTH AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT

 

FORM OF

ASSIGNMENT AND ACCEPTANCE AGREEMENT

 

This ASSIGNMENT AND ACCEPTANCE AGREEMENT (this “Assignment and Acceptance”)
dated as of                         , 20     is made between
                                      (the “Assignor”) and
                                         (the “Assignee”).  Initially
capitalized terms used herein without definitions shall have the meanings given
in the Loan Agreement (as defined below).

 

W I T N E S S E T H:

 

WHEREAS, Wells Fargo Capital Finance, LLC, as arranger, Wells Fargo, National
Association, in its capacity as agent pursuant to the Loan Agreement (as
hereinafter defined) acting for and on behalf of the Persons which are parties
thereto as lenders (in such capacity, “Agent”), and the Persons which are
parties to the Loan Agreement as lenders (individually, each a “Lender” and
collectively, “Lenders”) have entered or are about to enter into financing
arrangements pursuant to which Agent and Lenders may make loans and, with regard
to Lenders only, provide other financial accommodations to Lerner New York, Inc.
(“Lerner”), Lernco, Inc. (“Lernco”), and Lerner New York Outlet, Inc. (“Lerner
Outlet” and together with Lerner, “Borrowers” and individually each a
“Borrower”) as set forth in the Fourth Amended and Restated Loan and Security
Agreement, dated October 24, 2014, by and among Borrowers, certain of their
affiliates, Agent, and Lenders (as the same now exists or may hereafter be
amended, modified, supplemented, extended, renewed, restated or replaced, the
“Loan Agreement”), and the other agreements, documents and instruments referred
to therein or at any time executed and/or delivered in connection therewith or
related thereto (all of the foregoing, together with the Loan Agreement, as the
same now exist or may hereafter be amended, modified, supplemented, extended,
renewed, restated or replaced, being collectively referred to herein as the
“Financing Agreements”);

 

WHEREAS, as provided under the Loan Agreement, Assignor committed to making
Revolving Loans (the “Committed Revolving Loans”) to Borrowers in an aggregate
amount not to exceed                              Dollars ($                  )
(the “Commitment”);

 

WHEREAS, Assignor wishes to assign to Assignee [part of the] [all] rights and
obligations of Assignor under the Loan Agreement in respect of its Commitment in
an amount equal to $                              (the “Assigned Commitment
Amount”) on the terms and subject to the conditions set forth herein and
Assignee wishes to accept assignment of such rights and to assume such
obligations from Assignor on such terms and subject to such conditions;

 

NOW, THEREFORE, in consideration of the foregoing and the mutual agreements
contained herein, the parties hereto agree as follows:

 

A-1

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1.              Assignment and Acceptance.

 

(a)         Subject to the terms and conditions of this Assignment and
Acceptance, Assignor hereby sells, transfers and assigns to Assignee, and
Assignee hereby purchases, assumes and undertakes from Assignor, without
recourse and without representation or warranty (except as provided in this
Assignment and Acceptance) an interest in (i) the Commitment and each of the
Committed Revolving Loans of Assignor and (ii) all related rights, benefits,
obligations, liabilities and indemnities of the Assignor under and in connection
with the Loan Agreement and the other Financing Agreements, so that after giving
effect thereto, the Commitment of Assignee shall be as set forth below and the
Pro Rata Share of Assignee shall be              (     %).

 

(b)         With effect on and after the Effective Date (as defined in Section 5
hereof), Assignee shall be a party to the Loan Agreement and succeed to all of
the rights and be obligated to perform all of the obligations of a Lender under
the Loan Agreement, including the requirements concerning confidentiality and
the payment of indemnification, with a Commitment in an amount equal to the
Assigned Commitment Amount.  Assignee agrees that it will perform in accordance
with their terms all of the obligations which by the terms of the Loan Agreement
are required to be performed by it as a Lender.  It is the intent of the parties
hereto that the Commitment of Assignor shall, as of the Effective Date, be
reduced by an amount equal to the Assigned Commitment Amount and Assignor shall
relinquish its rights and be released from its obligations under the Loan
Agreement to the extent such obligations have been assumed by Assignee;
provided, that, Assignor shall not relinquish its rights under Sections 2.1,
6.4, 6.9 and 6.10 of the Loan Agreement to the extent such rights relate to the
time prior to the Effective Date.

 

(c)          After giving effect to the assignment and assumption set forth
herein, on the Effective Date Assignee’s Commitment will be
                         Dollars ($                ).

 

(d)         After giving effect to the assignment and assumption set forth
herein, on the Effective Date Assignor’s Commitment will be
                         Dollars ($                ) (as such amount may be
further reduced by any other assignment by Assignor on or after the date
hereof).

 

2.              Payments.

 

(a)         As consideration for the sale, assignment and transfer contemplated
in Section 1 hereof, Assignee shall pay to Assignor on the Effective Date in
immediately available funds an amount equal to                           Dollars
($                ), representing Assignee’s Pro Rata Share of the amount owed
by Borrowers with respect to the Committed Revolving Loans assigned hereunder.

 

(b)         Assignee shall pay to Agent the processing fee in the amount
specified in Section 14.7(a) of the Loan Agreement.

 

3.              Reallocation of Payments.  Any interest, fees and other payments
accrued to the Effective Date with respect to the Commitment, Committed
Revolving Loans and outstanding Letter of Credit Accommodations shall be for the
account of Assignor.  Any interest, fees and other payments accrued on and after
the Effective Date with respect to the Assigned Commitment Amount shall be for
the account of Assignee.  Each of Assignor and Assignee

 

A-2

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agrees that it will hold in trust for the other party any interest, fees and
other amounts which it may receive to which the other party is entitled pursuant
to the preceding sentence and pay to the other party any such amounts which it
may receive promptly upon receipt.

 

4.              Independent Credit Decision.  Assignee acknowledges that it has
received a copy of the Loan Agreement and the Schedules and Exhibits thereto,
together with copies of the most recent financial statements of the Borrowers
and their Subsidiaries, and such other documents and information as it has
deemed appropriate to make its own credit and legal analysis and decision to
enter into this Assignment and Acceptance and agrees that it will, independently
and without reliance upon Assignor, Agent or any Lender and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit and legal decisions in taking or not taking action under the
Loan Agreement.

 

5.              Effective Date; Notices.

 

(a)         As between Assignor and Assignee, the effective date for this
Assignment and Acceptance shall be                               , 20     (the
“Effective Date”); provided, that, the following conditions precedent have been
satisfied on or before the Effective Date:

 

(i)                       this Assignment and Acceptance shall be executed and
delivered by Assignor and Assignee;

 

(ii)                    the consent of Agent as required for an effective
assignment of the Assigned Commitment Amount by Assignor to Assignee shall have
been duly obtained and shall be in full force and effect as of the Effective
Date;

 

(iii)                 written notice of such assignment, together with payment
instructions, addresses and related information with respect to Assignee, shall
have been given to Borrowers and Agent;

 

(iv)                Assignee shall pay to Assignor all amounts due to Assignor
under this Assignment and Acceptance; and

 

(v)                   the processing fee referred to in Section 2(b) hereof
shall have been paid to Agent.

 

(b)         Promptly following the execution of this Assignment and Acceptance,
Assignor shall deliver to Borrowers and Agent for acknowledgment by Agent, a
Notice of Assignment in the form attached hereto as Schedule 1.

 

6.              Agent.[INCLUDE ONLY IF ASSIGNOR IS AN AGENT]

 

(a)         Assignee hereby appoints and authorizes Wells Fargo Bank, National
Association in its capacity as Agent to take such action as agent on its behalf
to exercise such powers under the Loan Agreement as are delegated to Agent by
Lenders pursuant to the terms of the Loan Agreement.

 

(b)         Assignee shall assume no duties or obligations held by Assignor in
its capacity as

 

A-3

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[Agent under the Loan Agreement.]

 

7.              Withholding Tax.  Assignee (a) represents and warrants to
Assignor, Agent and Borrowers that under applicable law and treaties no tax will
be required to be withheld by Assignee, Agent or Borrowers with respect to any
payments to be made to Assignee hereunder or under any of the Financing
Agreements, (b) agrees to furnish (if it is organized under the laws of any
jurisdiction other than the United States or any State thereof) to Agent and
Borrowers prior to the time that Agent or Borrowers are required to make any
payment of principal, interest or fees hereunder, duplicate executed originals
of either U.S. Internal Revenue Service Form W-8ECI or U.S. Internal Revenue
Service Form W-8BEN (wherein Assignee claims entitlement to the benefits of a
tax treaty that provides for a complete exemption from U.S. federal income
withholding tax on all payments hereunder) and agrees to provide new Forms
W-8ECI or W-8BEN upon the expiration of any previously delivered form or
comparable statements in accordance with applicable U.S. law and regulations and
amendments thereto, duly executed and completed by Assignee, and (c) agrees to
comply with all applicable U.S. laws and regulations with regard to such
withholding tax exemption.

 

8.              Representations and Warranties.

 

(a)         Assignor represents and warrants that (i) it is the legal and
beneficial owner of the interest being assigned by it hereunder and that such
interest is free and clear of any security interest, lien, encumbrance or other
adverse claim, (ii) it is duly organized and existing and it has the full power
and authority to take, and has taken, all action necessary to execute and
deliver this Assignment and Acceptance and any other documents required or
permitted to be executed or delivered by it in connection with this Assignment
and Acceptance and to fulfill its obligations hereunder, (iii) no notices to, or
consents, authorizations or approvals of, any Person are required (other than
any already given or obtained) for its due execution, delivery and performance
of this Assignment and Acceptance, and apart from any agreements or undertakings
or filings required by the Loan Agreement, no further action by, or notice to,
or filing with, any Person is required of it for such execution, delivery or
performance, and (iv) this Assignment and Acceptance has been duly executed and
delivered by it and constitutes the legal, valid and binding obligation of
Assignor, enforceable against Assignor in accordance with the terms hereof,
subject, as to enforcement, to bankruptcy, insolvency, moratorium,
reorganization and other laws of general application relating to or affecting
creditors’ rights and to general equitable principles.

 

(b)         Assignor makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or representations
made in or in connection with the Loan Agreement or any of the other Financing
Agreements or the execution, legality, validity, enforceability, genuineness,
sufficiency or value of the Loan Agreement or any other instrument or document
furnished pursuant thereto.  Assignor makes no representation or warranty in
connection with, and assumes no responsibility with respect to, the solvency,
financial condition or statements of Borrowers, or the performance or observance
by Borrowers or any other Person, of any of its respective obligations under the
Loan Agreement or any other instrument or document furnished in connection
therewith.

 

(c)          Assignee represents and warrants that (i) it is duly organized and
existing and it

 

A-4

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

 

has full power and authority to take, and has taken, all action necessary to
execute and deliver this Assignment and Acceptance and any other documents
required or permitted to be executed or delivered by it in connection with this
Assignment and Acceptance, and to fulfill its obligations hereunder, (ii) no
notices to, or consents, authorizations or approvals of, any Person are required
(other than any already given or obtained) for its due execution, delivery and
performance of this Assignment and Acceptance, and apart from any agreements or
undertakings or filings required by the Loan Agreement, no further action by, or
notice to, or filing with, any Person is required of it for such execution,
delivery or performance; and (v) this Assignment and Acceptance has been duly
executed and delivered by it and constitutes the legal, valid and binding
obligation of Assignee, enforceable against Assignee in accordance with the
terms hereof, subject, as to enforcement, to bankruptcy, insolvency, moratorium,
reorganization and other laws of general application relating to or affecting
creditors’ rights to general equitable principles.

 

9.              Further Assurances.  Assignor and Assignee each hereby agree to
execute and deliver such other instruments, and take such other action, as
either party may reasonably request in connection with the transactions
contemplated by this Assignment and Acceptance, including the delivery of any
notices or other documents or instruments to Borrowers or Agent, which may be
required in connection with the assignment and assumption contemplated hereby.

 

10.       Miscellaneous.

 

(a)         Any amendment or waiver of any provision of this Assignment and
Acceptance shall be in writing and signed by the parties hereto.  No failure or
delay by either party hereto in exercising any right, power or privilege
hereunder shall operate as a waiver thereof and any waiver of any breach of the
provisions of this Assignment and Acceptance shall be without prejudice to any
rights with respect to any other for further breach thereof.

 

(b)         All payments made hereunder shall be made without any set-off or
counterclaim.

 

(c)          Assignor and Assignee shall each pay its own costs and expenses
incurred in connection with the negotiation, preparation, execution and
performance of this Assignment and Acceptance.

 

(d)         This Assignment and Acceptance may be executed in any number of
counterparts and all of such counterparts taken together shall be deemed to
constitute one and the same instrument.

 

(e)          THIS ASSIGNMENT AND ACCEPTANCE SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK.  Assignor and Assignee each
irrevocably submits to the non-exclusive jurisdiction of any State or Federal
court sitting in New York County, New York over any suit, action or proceeding
arising out of or relating to this Assignment and Acceptance and irrevocably
agrees that all claims in respect of such action or proceeding may be heard and
determined in such New York State or Federal court.  Each party to this
Assignment and Acceptance hereby irrevocably waives, to the fullest extent it
may effectively do so, the defense of an inconvenient forum to the maintenance
of such action or proceeding.

 

A-5

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(f)           ASSIGNOR AND ASSIGNEE EACH HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF
ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH
THIS ASSIGNMENT AND ACCEPTANCE, THE LOAN AGREEMENT, ANY OF THE OTHER FINANCING
AGREEMENTS OR ANY RELATED DOCUMENTS AND AGREEMENTS OR ANY COURSE OF CONDUCT,
COURSE OF DEALING, OR STATEMENTS (WHETHER ORAL OR WRITTEN).

 

A-6

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

 

IN WITNESS WHEREOF, Assignor and Assignee have caused this Assignment and
Acceptance to be executed and delivered by their duly authorized officers as of
the date first above written.

 

 

[ASSIGNOR]

 

 

 

 

By:

 

 

 

Title:

 

 

 

 

[ASSIGNEE]

 

 

 

 

By:

 

 

 

Title:

 

 

A-7

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

 

SCHEDULE 1

 

NOTICE OF ASSIGNMENT AND ACCEPTANCE

 

                             , 20    

 

Wells Fargo Bank, National Association

One Boston Place, 19th Floor

Boston, Massachusetts 02108

Attn.: Portfolio Manager-Lerner New York, Inc.

 

Ladies and Gentlemen:

 

Wells Fargo Capital Finance, LLC, as arranger, Wells Fargo Bank, National
Association, in its capacity as agent pursuant to the Loan Agreement (as
hereinafter defined) acting for and on behalf of the Persons which are parties
thereto as lenders (in such capacity, “Agent”), and the Persons which are
parties to the Loan Agreement as lenders (individually, each a “Lender” and
collectively, “Lenders”) have entered or are about to enter into financing
arrangements pursuant to which Agent and Lenders may make loans and, with regard
to Lenders only, provide other financial accommodations, to Lerner New York,
Inc. (“Lerner”), Lernco, Inc. (“Lernco”), and Lerner New York Outlet, Inc.
(“Lerner Outlet” and together with Lerner, “Borrowers” and individually each a
“Borrower”) as set forth in the Fourth Amended and Restated Loan and Security
Agreement, dated October 24, 2014, by and among Borrowers, certain of their
affiliates, Agent and Lenders (as the same now exists or may hereafter be
amended, modified, supplemented, extended, renewed, restated or replaced, the
“Loan Agreement”), and the other agreements, documents and instruments referred
to therein or at any time executed and/or delivered in connection therewith or
related thereto (all of the foregoing, together with the Loan Agreement, as the
same now exist or may hereafter be amended, modified, supplemented, extended,
renewed, restated or replaced, being collectively referred to herein as the
“Financing Agreements”).  Capitalized terms not otherwise defined herein shall
have the respective meanings ascribed thereto in the Loan Agreement.

 

We hereby give you notice of, and request your consent to, the assignment by
                                                     (the “Assignor”) to
                                                     (the “Assignee”) such that
after giving effect to the assignment Assignee shall have an interest equal to
                     (    %) of the Commitments pursuant to the Assignment and
Acceptance Agreement attached hereto (the “Assignment and Acceptance”).  We
understand that the Assignor’s Commitment shall be reduced by
                       Dollars ($                 ), as the same may be further
reduced by other assignments on or after the date hereof.

 

Assignee agrees that, upon receiving the consent of Agent to such assignment,
Assignee will be bound by the terms of the Loan Agreement as fully and to the
same extent as if the Assignee were the Lender originally holding such interest
under the Loan Agreement.

 

The following administrative details apply to Assignee:

 

A-8

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(A)                               Notice address:

 

Assignee name:

Address:

Attention:

Telephone:

Telecopier:

 

(B)                               Payment instructions:

 

Account No.:

At:

Reference:

Attention:

 

You are entitled to rely upon the representations, warranties and covenants of
each of Assignor and Assignee contained in the Assignment and Acceptance.

 

A-9

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IN WITNESS WHEREOF, Assignor and Assignee have caused this Notice of Assignment
and Acceptance to be executed by their respective duly authorized officials,
officers or agents as of the date first above mentioned.

 

 

Very truly yours,

 

 

 

[NAME OF ASSIGNOR]

 

 

 

 

 

By:

 

 

Title:

 

 

 

 

[NAME OF ASSIGNEE]

 

 

 

 

 

By:

 

 

Title:

 

 

 

ACKNOWLEDGED AND ASSIGNMENT

 

CONSENTED TO:

 

 

 

WELLS FARGO BANK, NATIONAL ASSOCIATION

 

as Agent

 

 

 

 

 

By:

 

 

 

Title:

 

 

 

 

A-10

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EXHIBIT B

TO

FOURTH AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT

 

Form of Borrowing Base Certificate

 

See attached.

 

B-1

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

 

EXHIBIT C
TO

FOURTH AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT

 

Form of Compliance Certificate

 

COMPLIANCE CERTIFICATE

 

To Wells Fargo Bank, National Association
One Boston Place, 19th Floor

Boston, Massachusetts 02108

 

Ladies and Gentlemen:

 

Each of the undersigned hereby certifies to you pursuant to Section 9.6(a) of
the Loan Agreement (as defined below) as follows:

 

1.              HE/SHE IS THE DULY ELECTED CHIEF FINANCIAL OFFICER OR OTHER
ELECTED OFFICER ACCEPTABLE TO AGENT (AS DEFINED BELOW) OF EACH BORROWER (AS
DEFINED BELOW) WITH RESPECT TO WHICH SUCH PERSON HAS EXECUTED THIS DOCUMENT. 
CAPITALIZED TERMS USED HEREIN WITHOUT DEFINITION SHALL HAVE THE MEANINGS GIVEN
TO SUCH TERMS IN THE FOURTH AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT,
DATED OCTOBER 24, 2014 (AS THE NOW EXISTS OR MAY HEREAFTER BE AMENDED, MODIFIED,
SUPPLEMENTED, EXTENDED, RENEWED, RESTATED OR REPLACED, THE “LOAN AGREEMENT”), BY
AND AMONG WELLS FARGO CAPITAL FINANCE, LLC, AS ARRANGER, WELLS FARGO BANK,
NATIONAL ASSOCIATION, AS AGENT FOR THE PERSONS PARTY THERETO AS LENDERS (IN SUCH
CAPACITY, “AGENT”), THE PERSONS PARTY THERETO AS LENDERS (COLLECTIVELY,
“LENDERS”), LERNER NEW YORK, INC. (“LERNER”), LERNCO, INC. (“LERNCO”), AND
LERNER NEW YORK OUTLET, INC. (“LERNER OUTLET” AND TOGETHER WITH LERNER AND
LERNCO, COLLECTIVELY, “BORROWERS” AND INDIVIDUALLY EACH A “BORROWER”) AND THE
OTHER PARTIES THERETO.

 

2.              He/She has reviewed the terms of the Loan Agreement, and has
made, or has caused to be made under his/her supervision, a review in reasonable
detail of the transactions and the financial condition of Borrowers and their
Subsidiaries, during the immediately preceding fiscal month.

 

3.              The review described in Section 2 above did not disclose the
existence during or at the end of such fiscal month, and he/she has no knowledge
of the existence and continuance on the date hereof, of any condition or event
which constitutes a Default or an Event of Default, except as set forth on
Schedule I attached hereto.  Described on Schedule I attached hereto are the
exceptions, if any, to this Section 3 listing, in detail, the nature of the
condition or event, the

 

C-1

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

 

period during which it has existed and the action which Borrowers or any Obligor
has taken, is taking, or proposes to take with respect to such condition or
event.

 

4.              He/She further certifies that, based on the review described in
Section 2 above, no Borrower or Guarantor has at any time during or at the end
of such fiscal month, except as specifically described on Schedule II attached
hereto or as permitted by the Loan Agreement, done any of the following:

 

(a)         Changed its corporate name, or transacted business under any trade
name, style, or fictitious name, other than those previously described to you
and set forth in the Financing Agreements.

 

(b)         Changed the location of its chief executive office, changed its
jurisdiction of incorporation, changed its type of organization or changed the
location of or disposed of any of its properties or assets (other than pursuant
to the sale of Inventory in the ordinary course of its business or as otherwise
permitted by Section 9.7 of the Loan Agreement), or established any new asset
locations.

 

(c)          Materially changed the terms upon which it sells goods (including
sales on consignment) or provides services, nor has any vendor or trade supplier
to any Borrower or any Guarantor during or at the end of such period materially
adversely changed the terms upon which it supplies goods to such Borrower or
such Guarantor.

 

(d)         Permitted or suffered to exist any security interest in or liens on
any of its properties, whether real or personal, other than as specifically
permitted in the Financing Agreements.

 

(e)          Received any notice of, or obtained knowledge of any of the
following not previously disclosed to Agent:  (i) the occurrence of any event
involving the release, spill or discharge of any Hazardous Material in violation
of applicable Environmental Law in a material respect or (ii) any investigation,
proceeding, complaint, order, directive, claims, citation or notice with respect
to: (A) any non-compliance with or violation of any applicable Environmental Law
by any Borrower or any Guarantor in any material respect or (B) the release,
spill or discharge of any Hazardous Material in violation of applicable
Environmental Law in a material respect or (C) the generation, use, storage,
treatment, transportation, manufacture, handling, production or disposal of any
Hazardous Materials in violation of applicable Environmental Laws in a material
respect or (D) any other environmental, health or safety matter, which has a
material adverse effect on any Borrower or any Guarantor or its business,
operations or assets or any properties at which such Borrower or such Guarantor
transported, stored or disposed of any Hazardous Materials.

 

(f)           Become aware of, obtained knowledge of, or received notification
of, any breach or violation of any material covenant contained in any instrument
or agreement in respect of Indebtedness for money borrowed by any Borrower or
any Guarantor.

 

5.              Attached hereto as Schedule III are the calculations used in
determining, as of the end of such fiscal month whether Borrowers are in
compliance with the covenants set forth in Section 9.17 of the Loan Agreement
for such fiscal month.

 

C-2

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6.              Attached hereto as Schedule IV are the calculations used in
determining, as of the end of such fiscal month whether Borrowers are in
compliance with (a) the requirements of Section 7.6 of the Loan Agreement with
respect to whether an appraisal of the Intellectual Property may be required for
such fiscal period, and (b) the requirements of Section 2.9 of the Loan
Agreement with respect to whether a Term Loan Push Down Reserve Trigger Event
exists or has occurred and is continuing.

 

C-3

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The foregoing certifications are made and delivered this day of
                      , 20    .

 

 

Very truly yours,

 

 

 

LERNER NEW YORK, INC.

 

 

 

 

By:

 

 

Name: Sheamus Toal

 

Title: Executive Vice President,

 

Chief Financial Officer, Treasurer and Secretary

 

 

 

LERNCO, INC.

 

 

 

 

By:

 

 

Name: Sheamus Toal

 

Title: President

 

 

 

LERNER NEW YORK OUTLET, INC.

 

 

 

 

By:

 

 

Name: Sheamus Toal

 

Title: Executive Vice President,

 

Chief Financial Officer and Treasurer

 

C-4

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EXHIBIT D

TO

FOURTH AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT

 

Information Certificates

 

See Attached.

 

D-1

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

 

EXHIBIT E
TO
FOURTH AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT

 

Location of Inventory

 

See Attached.

 

E-1

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

 

EXHIBIT F

TO

FOURTH AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT

 

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

 

 

 

2013

 

2014

 

2015

 

2016

 

2017

 

2018

 

2019

Fiscal Month-End Closing Dates:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

February

 

March 2, 2013

 

March 1, 2014

 

February 28, 2015

 

February 27, 2016

 

February 25, 2017

 

February 24, 2018

 

March 2, 2019

March

 

April 6, 2013

 

April 5, 2014

 

April 4, 2015

 

April 2, 2016

 

April 1, 2017

 

March 31, 2018

 

April 6, 2019

April

 

May 4, 2013

 

May 3, 2014

 

May 2, 2015

 

April 30, 2016

 

April 29, 2017

 

April 28, 2018

 

May 4, 2019

May

 

June 1, 2013

 

May 31, 2014

 

May 30, 2015

 

May 28, 2016

 

May 27, 2017

 

May 26, 2018

 

June 1, 2019

June

 

July 6, 2013

 

July 5, 2014

 

July 4, 2015

 

July 2, 2016

 

July 1, 2017

 

June 30, 2018

 

July 6, 2019

July

 

August 3, 2013

 

August 2, 2014

 

August 1, 2015

 

July 30, 2016

 

July 29, 2017

 

July 28, 2018

 

August 3, 2019

August

 

August 31, 2013

 

August 30, 2014

 

August 29, 2015

 

August 27, 2016

 

August 26, 2017

 

August 25, 2018

 

August 31, 2019

September

 

October 5, 2013

 

October 4, 2014

 

October 3, 2015

 

October 1, 2016

 

September 30, 2017

 

September 29, 2018

 

October 5, 2019

October

 

November 2, 2013

 

November 1, 2014

 

October 31, 2015

 

October 29, 2016

 

October 28, 2017

 

October 27, 2018

 

November 2, 2019

November

 

November 30, 2013

 

November 29, 2014

 

November 28, 2015

 

November 26, 2016

 

November 25, 2017

 

November 24, 2018

 

November 30, 2019

December

 

January 4, 2013

 

January 3, 2014

 

January 2, 2015

 

December 31, 2016

 

December 30, 2017

 

December 29, 2018

 

January 4, 2019

January

 

February 1, 2014

 

January 31, 2015

 

January 30, 2016

 

January 28, 2017

 

January 27, 2018

 

February 2, 2019

 

February 1, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fiscal Quarter-End Closing Dates:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Q1

 

May 4, 2013

 

May 3, 2014

 

May 2, 2015

 

April 30, 2016

 

April 29, 2017

 

April 28, 2018

 

May 4, 2019

Q2

 

August 3, 2013

 

August 2, 2014

 

August 1, 2015

 

July 30, 2016

 

July 29, 2017

 

July 28, 2018

 

August 3, 2019

Q3

 

November 2, 2013

 

November 1, 2014

 

October 31, 2015

 

October 29, 2016

 

October 28, 2017

 

October 27, 2018

 

November 2, 2019

Q4

 

February 1, 2014

 

January 31, 2015

 

January 30, 2016

 

January 28, 2017

 

January 27, 2018

 

February 2, 2019

 

February 1, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fiscal Year-End Closing Dates:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fiscal 2013

 

February 1, 2014

 

 

 

 

 

 

 

 

 

 

 

 

Fiscal 2014

 

 

 

January 31, 2015

 

 

 

 

 

 

 

 

 

 

Fiscal 2015

 

 

 

 

 

January 30, 2016

 

 

 

 

 

 

 

 

Fiscal 2016

 

 

 

 

 

 

 

January 28, 2017

 

 

 

 

 

 

Fiscal 2017

 

 

 

 

 

 

 

 

 

January 27, 2018

 

 

 

 

Fiscal 2018

 

 

 

 

 

 

 

 

 

 

 

February 2, 2019

 

 

Fiscal 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

February 1, 2020

 

F-1

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

 

SCHEDULE 1
TO
FOURTH AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT

 

Commitments

 

 

 

 

Lender’s Commitment

 

Revolving Loan Lender

 

 

 

Wells Fargo Bank, National Association

 

$

75,000,000

 

 

 

 

 

Total Revolving Loan Commitments:

 

$

75,000,000

 

 

 

 

 

Term Loan Lender

 

 

 

Wells Fargo Bank, National Association

 

$

15,000,000

 

 

 

 

 

Total Term Loan Commitments

 

$

15,000,000

 

 

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

 

SCHEDULE 1.87

TO

 FOURTH AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT

 

Freight Forwarders

 

Freight Forwarders - OCEAN CARRIERS

 

a) Maersk Line

Elizabeth Hassert

Key Client Manager

Maersk, Inc.

1 Tower Lane, Suite 2800

Oak Brook Terrace, IL 60181

PH: 630-645-3622

FX: 630-645-3667

Email: Elizabeth.hassert@maersk.com

 

b) American President Lines

Jim Dietz

Senior Account Executive

700 Commerce Dr. Suite 110

Suite 110

Oak Brook, IL 60523

PH: 630-326-9776

Email: Jim_Dietz@apl.com

 

c) APL Logistics

Greg Finley

Director of Global Accounts

APL Logistics

3265 Rothschild Court

Dublin, OH 43017

PH: 440-725-7368

Email: Greg_Finley@apl.com

 

d) NYK Lines (North American)

Gary Garback

Director of Global Services

NYK Line (North America) Inc.

377 East Butterfield Road

5th Floor

Lombard, IL 60148

PH: 630-435-7803

Email: gary.garback@na.nykline.com

 

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

 

e) Mitsui OSK Lines

Aaron Ambrite

Sales Account Executive

700 E. Butterfield, Suite 250

Lombard, IL 60148

PH: 630-812-3776

Email: Aaron.Ambrite@mol-liner.com

 

f) US Lines

Holly Halloran

Director of Strategic Accounts

6180 Memorial Drive

Dublin, OH 43017

PH: 847-989-9988

Email: hhalloran@uslines.com

 

Freight Forwarders - AIRFREIGHT FORWARDERS

 

a) Morrison Express

Vincent Kao

Morrison Express Corp, USA

2000 Hughes Way

El Segundo, CA 90245

Tel: 310-322-8999

E-mail: vincent_kao@morrisonexpress.com

 

b) Schenker, Inc.

Denice Miller

General Manager

1941 Williams Road, Suite #B-2

Columbus, Ohio 43207

Tel: 614-497-1319

E-mail: denice.miller@dbschenker.com

 

c) Trinity Logistics, USA, Inc.

Erin Horn

Branch Manager

TRINITY LOGISTICS USA, INC

10 East Merrick Rd Suite 304

Valley Stream, NY 11580

O +1 516 612 3381

F +1 516 612 3383

M +1 917 868 9214

www.tliworldus.com

ehorn@tliworldus.com

 

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

 

d) Sovereign

Jenn Milller

Sr. Acct. Mgr.

10 Boice Road

Hyde Park, NY 12538

Tel: 845-229-8808

Email: jmiller@sovlog.com

 

e) Expolanka

Chandana Rodrigo

Regional Director

172-11 148th Road

Jamaica, NY 11434

PH: 615-295-3944

Email: chandanar@expofreight.com

 

f) Expeditors International

Regan Grundey

2550 John Glenn Avenue, Suite J

Columbus, OH 43217

PH: 614-295-3944

Email: regan.grundey@expidtors.com

 

g) RCS Logistics

Evan Rosen

Vice President, Sales

RCS Logistics

One Harmon Plaza, 10th Floor

Secaucus, NJ 07094

Tel:  201-867-1222

evan.rosen@rcslogistics.com

 

h) Hellmann Worldwide

Andrea Goldstein

10450 Doral Boulevard

Doral, Florida 33178

Tel: 305-406-4585

E-mail: aagoldst@us.hellmann.net

 

i) Savino Del Bene

Alessandro De Giusti

Savino Del Bene USA

149-10 183rd Street

Jamaica, NY 11413-4035

Cell: 646-492-1188

Fax: 718-906-2769

Email: alessandrod@nyc.sdbusa.com

 

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

 

E-Commerce Warehouse

 

a) GSI Commerce

Kim Smith Glisson

Site Leader, Martinsville

307 Hollie Drive

Martinsville, VA 24112

PH: 276-670-6146

CL: 276-734-0148

FX: 276-670-6131

 

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

 

SCHEDULE 5.2(b)

TO

 FOURTH AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT

 

Chattel Paper and Instruments

 

NONE.

 

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

 

SCHEDULE 5.2(e)

TO

 FOURTH AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT

 

Investment Property

 

Lerner New York, Inc.

 

1.                     Wells Fargo Bank N.A.

 

2.                     Federated US Treasury Cash Reserves

 

3.                     JP Morgan 100% US Treasury Securities

 

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

 

SCHEDULE 5.2(g)

TO

FOURTH AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT

 

Letter of Credit Accommodations

 

NONE.

 

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

 

SCHEDULE 5.2(h)

TO

FOURTH AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT

 

Commercial Tort Claims

 

NONE.

 

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

 

SCHEDULE 8.8

TO

FOURTH AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT

 

Environmental Compliance

 

NONE.

 

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

 

SCHEDULE 8.9(c)

TO

FOURTH AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT

 

ERISA Affiliates Transactions

 

NONE.

 

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

 

SCHEDULE 8.11

TO

FOURTH AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT

 

Certain Intellectual Property

 

Patents

 

Owner

 

Application No.
and Date

 

Registration No.
and Date

 

Description

Lerner New York, Inc.

 

D/299,217
12/18/2007

 

D588,920
3/24/2009

 

ornamental design for a bottle

Lerner New York, Inc.

 

D/299,026
12/18/2007

 

D582,283
12/9/2008

 

ornamental design for a jar

New York & Company, Inc.

 

D299,201
12/18/2007

 

D583,254
12/23/2008

 

ornamental design for a pump container

New York & Company, Inc.

 

D299,024
12/18/2007

 

D569,735
5/27,2008

 

ornamental design for a spray container

 

Copyright

 

Owner

 

Registration No. and Date

 

Type of Work/Title/Description

Lernco, Inc.

 

VAu000506749
3/10/2000

 

visual material/ New York & Company/ photoprint on credit card

Lernco, Inc.

 

VA0001671205

 

visual materal/ New York & Company/ poodle image

 

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

 

SCHEDULE 8.13

TO

FOURTH AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT

 

Collective Bargaining Agreements

 

1.              Collective Bargaining Agreement between Local 1102, RWDSU UFCW
and Lerner New York, Inc. (New York City Metropolitan Area), dated September 1,
2005. The Company and Local 1102 have reached an agreement in principle on the
terms of a new collective bargaining agreement, subject to final negotiation of
the agreement and ratification by the union membership.  We have three contracts
with this union — NYC Metropolitan Area, Md & Pa and Upstate NY.  The most
recent contracts are dated Sept 1, 2010 through August 31, 2013.  We are
currently in the process of negotiating an agreement with the union.

 

2.              Agreement, dated February 6, 2009, by and between Lerner New
York, Inc. and the New England Joint Board, affiliated with the Retail,
Wholesale and Department Store Union/UFCW. The Agreement is effective from
February 6, 2009 through February 5, 2012.  Our agreement with this union is
effective from Feb 6, 2012 through Feb 5, 2015.

 

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

 

SCHEDULE 8.15

TO

FOURTH AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT

 

Material Contracts

 

1.                                      Amended and Restated Private Label
Credit Card Program Agreement, dated as of November 1, 2004, between World
Financial Network National Bank and New York & Company, Inc., as amended.

 

2.                                      Transition Services Agreement, dated as
of November 27, 2002, by and between Lerner New York Holding, Inc., New York &
Company, Inc., and Limited Brands, Inc., as amended.

 

3.                                      Information Technology:

 

a.                                      Master Services Agreement, dated
April 8, 2003, between Infocrossing, Inc. and New York & Company, Inc., as
amended.

 

b.                                      Master Services Agreement and Statement
of Work, dated August 10, 2009, between Epsilon Data Management, LLC and New
York & Company, Inc.

 

c.                                       On Demand Services Ordering Document,
dated April 1, 2013, by and between Lerner New York, Inc. and Oracle
America, Inc.

 

d.                                      CenturyLink Total Advantage Agreement,
dated February 15, 2007, by and between CenturyLink Communications, LLC f/k/a
Qwest Communications Company, LLC and New York & Company, Inc. as subsequently
amended.

 

4.                                      License and Spokesperson Agreement,
dated February 4, 2013, between Spooky, Inc. and Lerner New York, Inc.

 

5.                                      Lease, dated as of February 25, 2014, by
and between Vornado 330 West 34th Street, L.L.C., and New York & Company, Inc.

 

6.                                      Lease, dated June 29, 2000, between 450
Westside Partners, L.L.C. and Lerner New York, Inc.

 

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

 

SCHEDULE 8.16

TO

FOURTH AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT

 

Credit Card Agreements

 

1.                                      Merchant Services Bankcard Agreement,
dated August 7, 2003, between Lerner New York, Inc. and Bank of America Merchant
Services (as successor in interest by assignment), as amended.

 

2.                                      American Express Service Agreement,
dated April 4, 2003, between Lerner New York, Inc. and American Express Travel
Related Services Company, Inc.

 

3.                                      Merchant Services Agreement, dated
May 1, 2003, between Lerner New York, Inc. and Discover Financial Services, Inc.

 

4.                                      Amended and Restated Private Label
Credit Card Program Agreement, dated as of November 1, 2004, between World
Financial Network National Bank and New York & Company, Inc., as amended.

 

5.                                      CardinalCommerce Merchant Software
License Agreement, dated March 1, 2013, between New York & Company, Inc. and
CardinalCommerce Corporation.

 

6.                                      PayPal Service Agreement, dated
February 21, 2013, between New York & Company, Inc. and PayPal, Inc.

 

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

 

SCHEDULE 9.9(h)

TO

FOURTH AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT

 

Permitted Intercompany Indebtedness

 

1.                                      Promissory Note, dated March 20, 2014,
by New York & Company, Inc. payable to the order of Nevada Receivable
Factoring, Inc. in the principal amount of                      (such Note to be
cancelled in the event of consolidation) and subject to Intercompany
Subordination Agreement.

 

2.                                      Promissory Note, dated June 20, 2014, by
Lerner New York, Inc. payable to the order of Lernco, Inc. in the principal
amount of                    and subject to Intercompany Subordination
Agreement.

 

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

 

SCHEDULE 9.10

TO

FOURTH AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT

 

Permitted Loans

 

Incidental travel and relocation expenses to employees in the ordinary course of
business.

 

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

 

SCHEDULE 9.11(d)

TO

FOURTH AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT

 

Permitted Uses of Certain Permitted Dividends

 

1.                                      Professional Audit & Consulting Fees

 

2.                                      Insurance Consulting

 

3.                                      Legal Fees and Settlements

 

4.                                      Real Estate/Construction Consulting

 

5.                                      Benefits Consulting

 

6.                                      Public Relations

 

7.                                      General Insurance, Liability, Auto,
Worker’s Compensation

 

8.                                      Transition Services Agreement - Real
Estate, Tax, Treasury

 

9.                                      Head Office Rent

 

10.                               Management Bonus and payments

 

11.                               Other reasonable ordinary course compensation
to officers, directors and employees

 

12.                               Internal Processing Fees

 

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

 

Exhibit B

 

 

Cert. #:

 

Updates Monthly: Due 15 Days After Month End (Populate Blue Font Only)

Date:

 

Updates Weekly: When Compliance Excess Availability is < 15% of Revolving Loan
Limit. Due 3 Business Days after Week End

 

 

 

BORROWING BASE

 

 

 

Total Sell-Off Vendor Receivables

 

0

 

Total Damaged Goods Vendor Receivables

 

0

 

Less: Accounts unpaid within 90 days of invoice date

 

0

 

Foreign receivables (outside US or Canada)

 

0

 

Progress billings

 

0

 

Government receivables

 

0

 

Eligible Sell-Off Vendor and Damaged Goods Vendor Receivables

 

0

 

Advance Rate

 

90.0

%

Sell-Off Vendor and Damaged Goods Vendor Receivable Availability (Capped at
$3.5MM)

 

0

 

 

 

 

 

Total Credit Card Receivables (Visa/MC/Discover/Amex/PLCC-Paypal capped at
$500M)

 

0

 

Less: Ineligibles (Amounts Unpaid in Excess of 10 Days)

 

0

 

Eligible Credit Card Receivables

 

0

 

Advance Rate

 

90.0

%

Eligible Credit Card Receivable Availability

 

0

 

 

 

 

 

Total Landed Inventory

 

0

 

Less: Inventory Subject to Perfected Security Interest or Lien in Favor of Any
Person Other than Agent

 

0

 

Obsolete, Out-of-Season or Slow Moving

 

0

 

Damaged or Defective Inventory

 

0

 

Inventory returned by customer and not held for resale

 

0

 

Sample or display inventory

 

0

 

Return to vendor inventory

 

0

 

Inventory purchased or sold on consignment

 

0

 

Shrink

 

0

 

Total Ineligible Inventory

 

0

 

Eligible Inventory

 

0

 

 

 

 

 

Advance Rate

 

0.0

%

Eligible Landed Inventory Availability

 

0

 

 

 

 

 

Total In-Transit Inventory

 

0

 

Less: In transit inventory in possession of ineligible carrier

 

0

 

Merchandise in-transit for more than 45 days (Foreign In-Transit) 15 days
(Domestic In-Transit)

 

0

 

Merchandise not consigned to company

 

0

 

Total ineligible in-transit inventory

 

0

 

Eligible In-Transit Inventory

 

0

 

 

 

 

 

Total In-Transit LC Inventory

 

0

 

Less: In transit inventory in possession of ineligible carrier

 

0

 

Merchandise in-transit for more than 75 days

 

0

 

Merchandise not consigned to company

 

0

 

Total ineligible in-transit LC inventory

 

0

 

Eligible In-Transit LC Inventory

 

0

 

 

 

 

 

Advance Rate

 

0.0

%

Eligible In-Transit Inventory & Eligible In-Transit LC Inventory Availability
(Capped at $10MM)

 

0

 

 

 

 

 

Eligible Cash Collateral

 

0

 

 

 

 

 

Total Revolver Borrowing Base Availability Before Reserves

 

0

 

 

 

 

 

LESS: Gift certificates/gift cards @ 51%

 

—

 

0.0

%

0

 

Merchandise credits @ 51%

 

—

 

0.0

%

0

 

Rent reserve (3 months rent for landlord lien states)

 

—

 

100.0

%

0

 

Payments owed to bailees, customs broker or freight forwards

 

—

 

0.00

%

0

 

Freight Reserve for In Transit & LC Inventory

 

—

 

0.00

%

0

 

Taxes or Other obligations for In Transit & LC Inventory

 

—

 

0.00

%

0

 

Customs & duty for In Transit & LC Inventory

 

—

 

0.00

%

0

 

Sub-total LC reserves for freight/duty/customs/taxes -(Capped at $1MM)

 

 

 

 

 

0

 

Other

 

 

 

 

 

0

 

Intellectual Property Reserve

 

 

 

 

 

0

 

Term Loan Push Down Reserve (Triggered if TTM EBITDA < $20MM)(see calculation
below)

 

 

 

 

 

0

 

Total Availability Reserves

 

 

 

 

 

0

 

 

 

 

 

 

 

 

 

Revolver Borrowing Base Availability After Reserves (Capped at Revolving Loan
Limit presently $75MM)

 

 

 

 

 

0

 

 

 

 

 

 

 

 

 

Term Loan Push Down Reserve Calculation

 

0

 

 

 

 

 

Term Loan Borrowing Base

 

N/A

 

Appraised Value of Eligible Intellectual Property

 

0

 

Advance Rate

 

50.0

%

Eligible Term Loan Intellectual Property Availability

 

0

 

Less: Term Loan Outstanding

 

0

 

 

 

 

 

Total Term Loan Push Down Reserve

 

0

 

 

 

 

 

Reconciliation of Loan Balance

 

 

 

Principal Amount of Outstanding Loan for Prior Month

 

0

 

Less: Collections Since Prior Certificate

 

0

 

Add: Principal Amount of Loans Made Since Prior Certificate

 

0

 

Add: Charges, Fees & Other

 

0

 

Current Principal Amount of Outstanding Loans

 

0

 

Total Standby Letters of Credit

 

0

 

Total Documentary Letters of Credit

 

0

 

Total Loans & Letters of Credit

 

0

 

Total Compliance Excess Availability

 

0

 

 

 

 

 

Less: Trade Accounts Payable Outstanding in Excess of 45 Days

 

0

 

Less: Checks Outstanding in Excess of 45 Days

 

0

 

Excess Availability (subject to terms outlined in loan agreement)

 

0

 

 

 

 

 

Less: Minimum Excess Availability Covenant (Greater of 10% of the Revolving Loan
Limit or $7.5MM)

 

0

 

Excess Availability variance vs. Minimum Excess Availability Covenant

 

0

 

 

The undersigned, an Authorized Person (as defined below) of each of Lerner New
York, Inc., Lernco, Inc. and Lerner New York Outlet, Inc. (“New York &
Company”), represents and warrants that (A) the information set forth above and
the supporting documentation and information delivered herewith (i) is true and
correct in all respects, (ii) has been prepared in accordance with the
requirements of that certain Fourth Amended & Restated Loan and Security
Agreement dated October     , 2014, (as amended, restated, supplemented or
otherwise modified from time to time, the “Loan Agreement”), by, among others,
(1) New York & Company as Borrowers, (2) the Lenders party thereto, (3) Wells
Fargo Bank, National Association, as Agent (in such capacity, the “Agent”), and
(iii) is based on supporting documentation that is satisfactory to the Agent,
and (B) no Default or Event of Default (as such terms are defined in the Loan
Agreement) has occurred and is continuing.  As used herein, the term “Authorized
Person” means the chief financial officer or other designated senior officer of
New York & Company satisfactory to Agent.

 

Lerner New York, Inc., Lernco, Inc. and Lerner New York Outlet, Inc.

 

By:

 

 

Name:

Sheamus Toal

 

Title:

Chief Financial Officer

 

 

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

 

AMEDNED AND RESTATED INFORMATION CERTIFICATE

 

OF

 

LERNER NEW YORK, INC.

 

Dated: October 24, 2014

 

Wells Fargo Bank, National Association, as Agent

One Boston Place, 19th Floor

Boston, Massachusetts 02108

 

In order to assist you in the evaluation of the financing you are considering of
Lerner New York, Inc. (the “ Company “), pursuant to the Fourth Amended and
Restated Loan and Security Agreement, dated of even date herewith, Wells Fargo
Bank, National Association, as Agent (in such capacity “Agent” or “you”), for
the persons thereto as Lenders (collectively “Lenders” or “you”), the Company
certain affiliates of the Company (as the same now exists or may hereafter be
amended, modified, supplemented, renewed, restated or registered, the “Loan
Agreement”), to expedite the preparation of required documentation, and to
induce you to provide financing to the Company, we represent and warrant to you
and the Lenders the following information about the Company, its organizational
structure and other matters of interest to you:

 

1.                         The Company has been formed by filing the following
document with the Secretary of State of the Delaware:

 

x                       Certificate/Articles of Incorporation

o                         Certificate/Articles of Organization

o                         Other [specify]                           

 

The date of formation of the Company by the filing of the document specified
above with the Secretary of State was March 1, 1985.

 

2.                         The Company was not formed by filing a document with
any Secretary of State. The Company is organized as a [specify type of
organization, (e.g., general partnership, sole
proprietorship, etc.)]           . The Company’s governing document is a [name
legal document, if one exists, (e.g., partnership agreement, etc.)

 

Not applicable.

 

3.                         The full and exact name of the Company as set forth
in the document specified in Item 1 or 2, or (if no document is specified in
Item 1 or 2) the full and exact legal name used in the Company’s business, is:

 

Lerner New York, Inc.

 

4.                         The Company uses and owns the following trade
name(s) in the operation of its business (e.g. billing, advertising, etc.; note:
do not include names which are product names only):

 

Lerner New York, New York & Company, Lerner Stores.

 

[Check one of the boxes below.]

 

o                        We have attached a blank sample of every invoice that
uses a tradename.

x                      We do not use any tradename other than the tradenames
listed in Item 4 on any invoices.

 

5.                         The Company maintains offices, leases or owns real
estate, has employees, pays taxes, or otherwise conducts business in the
following States (including the State of its organization):

 

See Schedule 5.

 

6.                         The Company has filed the necessary documents with
the Secretary of State to qualify as a foreign corporation in the following
States:

 

See Schedule 6.

 

1

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

 

7.                         The Company’s authority to do business has been
revoked or suspended, or the Company is otherwise not in good standing in the
following States:

 

None.

 

8.                         The Company and its subsidiaries have all licenses
and permits necessary for the operation of the business of the Company, as such
business is being operated as of the date hereof.

 

9.                         In conducting its business activities, the Company is
subject to regulation by federal, state or local agencies or authorities (e.g.,
FDA, EPA, state or municipal liquor licensing agencies, federal or state carrier
commissions, etc.) as follows:

 

Not applicable.

 

10.                  The Company has never been involved in a bankruptcy or
reorganization except: [explain]

 

None since the Parent’s purchase of the company in 1985. We have no knowledge of
a bankruptcy or reorganization of the Company prior to that time.

 

11.                  Between the date the Company was formed and now, the
Company has used other names as set forth below:

 

Period of Time

 

Prior Name

From

 

3/1/85 to 4/12/85

 

Milton Acquisition Corp.

From

 

4/12/85 to 9/13/90

 

Lerner Stores, Inc.

 

12.                  Between the date the Company was formed and now, the
Company has made or entered into mergers or acquisitions with other companies as
set forth below:

 

Acquired Jasmine Company, Inc. on July 19, 2005.

 

13.                  The chief executive office of the Company is located at the
street address set forth below, which is in New York County, in the State of New
York:

 

450 W. 33rd St.

New York, NY 10001

 

14.                  The books and records of the Company pertaining to
accounts, contract rights, inventory, etc. are located at the following street
address:

 

450 W. 33rd St.

New York, NY 10001

 

15.                  In addition to the chief executive office, the Company has
inventory, equipment or other assets located at the addresses set forth below.
In each case, we have noted whether the location is owned, leased or operated by
third parties and the names and addresses of any mortgagee, lessor or third
party operator:

 

 

 

 

 

Name and Address of Third

 

 

 

 

Party with Interest in Location

 

 

Company’s Interest

 

(e.g., mortgagee, lessor or

Street Address with County

 

(e.g., owner, lessee or bailee)

 

warehouseman)

See Exhibit E to Loan Agreement.

 

 

 

 

 

16.                  In the course of its business, the Company’s inventory
and/or other assets are handled by the following customs brokers and/or freight
forwarders:

 

Name

 

Address

 

Type of Service/Assets Handled

See Schedule 16.

 

 

 

 

 

17.                  The places of business or other locations of any assets
used by the Company during the last four (4) months other than those listed
above are as follows:

 

2

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

 

None.

 

18.                  The Company is affiliated with, or has ownership in, the
following entities (including subsidiaries):

 

Name of Entity

 

Chief Executive Office

 

Jurisdiction of
 Incorporation

 

Ownership
 Percentage or
 Relationship

 

 

 

 

 

 

 

New York & Company, Inc.

 

450 West 33rd Street

New York, NY 10001

 

Delaware

 

Ultimate Parent / 100%

 

 

 

 

 

 

 

Lerner New York Holding, Inc.

 

450 West 33rd Street

New York, NY 10001

 

Delaware

 

Parent / 100%

 

 

 

 

 

 

 

Lernco, Inc.

 

1105 North Market Street,

Suite 1300

Wilmington, DE 19801

 

Delaware

 

Subsidiary of Parent / 100%

 

 

 

 

 

 

 

Nevada Receivable Factoring, Inc.

 

6700 Via Austi Pkwy

Parkway, Suite C

Las Vegas, Nevada 89119

 

Nevada

 

Subsidiary of Parent / 100%

 

 

 

 

 

 

 

New York & Company Stores, Inc.

 

450 West 33rd Street

New York, NY 10001

 

New York

 

Subsidiary / 100%

 

 

 

 

 

 

 

Lerner New York GC, LLC

 

3 Limited Pkwy

Columbus, Ohio 43230

 

Ohio

 

Subsidiary / 100%

 

 

 

 

 

 

 

Lerner New York Outlet, Inc. (formerly known as Jasmine Company, Inc.)

 

450 West 33rd Street

New York, NY 10001

 

Massachusetts

 

Subsidiary / 100%

 

19.                  The Federal Employer Identification Number of the Company
is 13-3262137

 

20.                  Under the Company’s charter documents, and under the laws
of the State in which the Company is organized, the shareholders, members or
other equity holders do not have to consent in order for the Company to borrow
money, incur debt or obligations, pledge or mortgage the property of the
Company, grant a security interest in the property of the Company or guaranty
the debt of obligations of another person or entity.

 

x True

 

o Incorrect [explain]:

 

The power to take the foregoing actions is vested exclusively in the Board of
Directors.

 

21.                  The officers of the Company (or people performing similar
functions) and their respective titles are as follows:

 

Name

 

Title

Gregory Scott

 

Chief Executive Officer

Kevin Finnegan

 

Executive Vice President, Global Sales & Operations

Linda Vilaikeo

 

Executive Vice President, Planning & Allocation

Hope Grey

 

Executive Vice President, Product Life Cycle & Corporate Initiatives

Christine Munnelly

 

Executive Vice President, Merchandising

Sheamus Toal

 

Executive Vice President, Chief Financial Officer, Treasurer & Secretary

David Witkewicz

 

Executive Vice President, Design

Faeth Bradley

 

Executive Vice President, Human Resources

Chau Banks

 

Executive Vice President, Chief Information Officer

Cheryl Callan

 

Executive Vice President, Chief Marketing Officer

Adam Ratner

 

Vice President, General Counsel & Assistant Secretary

 

3

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

 

The following people will have signatory powers as to all your of transactions
with the Company:

 

The Officers authorized in the Company’s Board of Director resolutions.

 

22.                  With respect to the officers noted above, such officers are
affiliated with and hold a 5% or more beneficial ownership in the following
corporations (indicate name and address of affiliated companies, type of
operations, ownership percentage or other relationship):

 

None.

 

23.                  The Company is governed by the Board of Directors. The
members of such governing body of the Company are:

 

Bodil M. Arlander, Jill Beraud, David H. Edwab, James O. Egan, John D. Howard,
Grace Nichols, Michelle Pearlman,

Richard L. Perkal, Arthur E. Reiner, and Gregory Scott.

 

24.                  The name of the stockholders, members, partners or other
equity holders of the Company and their equity holdings are as follows (if
equity interests are widely held indicate only equity owners with 10% or more of
the equity interests):

 

Name

 

No. of Shares or Units

 

Ownership Percentage

 

Lerner New York Holding, Inc.

 

100 Common Shares

 

100

%

 

25.                  There are no judgments or litigation pending by or against
the Company, its subsidiaries and/or affiliates or any of its
officers/principals, except as follows:

 

None.

 

26.                  At the present time, there are no delinquent taxes due
(including, but not limited to, all payroll taxes, personal property taxes, real
estate taxes or income taxes) except as follows:

 

None.

 

27.                  The Company’s assets are owned and held free and clear of
any security interests, liens or attachments, except as follows:

 

 

 

 

 

Amount of Debt

Lienholder

 

Assets Pledged

 

Secured

As set forth in Schedule 27.

 

 

 

 

 

28.                  The Company has not guaranteed and is not otherwise liable
for the obligations of others, except as follows:

 

None.

 

29.                  The Company does not own or license any trademarks,
patents, copyrights or other intellectual property, except as follows (indicate
type of intellectual property and whether owned or licensed, registration
number, date of registration, and, if licensed, the name and address of the
licensor):

 

 

 

Registration

 

 

 

Name and Address

Type of Intellectual

 

Number and Date of

 

Owned or

 

of

Property

 

Registration

 

Licensed

 

Licensor

See Schedule 29.

 

 

 

 

 

 

 

30.                  The Company owns or uses the following materials (e.g.,
software, film footage, scripts, etc.) that are subject to registration with the
United States Copyright Office, though at present copyright registrations have
not been filed with respect to such materials:

 

None.

 

31.                  The Company does not have any deposit or investment
accounts with any bank, savings and loan or other financial institution, except
as follows, for the purposes and of the types indicated:

 

 

 

Contact Person and

 

 

 

 

Bank Name and Branch Address

 

Phone Number

 

Account No.

 

Purpose/Type

See Schedule 31.

 

 

 

 

 

 

 

4

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

 

32.                  The Company has no processing arrangements for credit card
payments or payments made by check (e.g. Telecheck) except as follows:

 

Bank Name and Branch
Address

 

Contact Person and Phone Number

 

Account No.

Chase

 

 

 

 

ADS

 

 

 

 

AMEX

 

 

 

 

Discover

 

 

 

 

Telecheck

 

 

 

 

SVS

 

 

 

 

Paypal

 

 

 

 

Cardinal Commerce — in connection with PayPal receivables

 

 

 

 

 

33.                  The Company owns or has registered to it the following
motor vehicles, the original title certificates for which shall be delivered to
Lender prior to closing:

 

None.

 

34.                    With regard to any pension or profit sharing plan:

 

The Company sponsors a single employer defined benefit pension plan covering
substantially all union employees. The plan provides retirement benefits for
union employees who have attained the age of 21 and complete 1,000 or more hours
of service in any calendar year following the date of employment.  The plan
provides benefits based on the length of service.

 

The Company is currently providing ancillary benefits (dental and disability)
for Local 1102 union employees.

 

35.                  The Company’s fiscal year is a 52 or 53 week year that ends
on the Saturday closest to January 31. The results for fiscal year 2014
represent the fifty-two week period ending January 31, 2015. The results for
fiscal years 2015 and 2016 represent the fifty-two week period ending
January 30, 2016 and January 28, 2017.

 

36.                  Certified Public Accountants for the Company is the firm
of:

 

Name:

 

Ernst & Young

Address:

 

5 Times Square

 

 

New York, NY 10036-6530

Telephone:

 

(516) 336-0377

Facsimile:

 

(866) 313-0949

E-Mail:

 

Joy.Fernandez@ey.com

Partner Handling Relationship:

 

Joy Fernandez

Were statements uncertified for any fiscal year?

 

Statements for year end 2013 (2/3/13-2/1/14) were certified

 

37.                  The Company’s counsel with respect to the proposed loan
transaction is the firm of:

 

Name:

 

Kirkland & Ellis

Address:

 

601 Lexington Avenue

 

 

New York, NY 10022

Telephone:

 

(212) 446-4800

Facsimile:

 

(212) 446-4900

E-Mail:

 

medsall@kirkland.com

Partner Handling Relationship:

 

Michael Edsall

 

38.                  The Company’s counsel with respect to matters other than
the proposed loan transaction, if different, is the firm of:

 

5

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

 

Name:

 

Same as above

Address:

 

 

Telephone:

 

 

Facsimile:

 

 

E-Mail:

 

 

Partner Handling Relationship:

 

 

 

We agree to give you prompt written notice of any change or amendment with
respect to any of the foregoing information. Until you receive such notice, you
will be entitled to rely in all respects on the foregoing information. This
Amended and Restated Information Certificate amends and restates all of the
information set forth in the Information Certificate, dated August 10, 2011.

 

6

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

 

 

Very truly yours,

 

 

 

LERNER NEW YORK, INC

 

 

 

 

 

By:

/s/ Sheamus Toal

 

 

Title:

Executive Vice President, Chief Financial Officer, Treasurer & Secretary

 

7

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

 

AMEDNED AND RESTATED INFORMATION CERTIFICATE

 

OF

 

LERNCO, INC.

 

Dated: October 24, 2014

 

Wells Fargo Bank, National Association, as Agent

One Boston Place, 19th Floor

Boston, Massachusetts 02108

 

In order to assist you in the evaluation of the financing you are considering of
Lernco, Inc. (the “Company”), pursuant to the Fourth Amended and Restated Loan
and Security Agreement, dated of even date herewith, Wells Fargo Bank, National
Association, as Agent (in such capacity “Agent” or “you”), for the persons
thereto as Lenders (collectively “Lenders” or “you”), the Company certain
affiliates of the Company (as the same now exists or may hereafter be amended,
modified, supplemented, renewed, restated or registered, the “Loan Agreement”),
to expedite the preparation of required documentation, and to induce you to
provide financing to the Company, we represent and warrant to you and the
Lenders the following information about the Company, its organizational
structure and other matters of interest to you:

 

 

1.                           The Company has been formed by filing the following
document with the Secretary of State of Delaware:

 

x                                             Certificate/Articles of
Incorporation

o                                              Certificate/Articles of
Organization

o                                              Other [specify]

 

The date of formation of the Company by the filing of the document specified
above with the Secretary of State was May 2, 1985.

 

2.                           The Company was not formed by filing a document
with any Secretary of State. The Company is organized as a [specify type of
organization, (e.g., general partnership, sole
proprietorship, etc.)]                        . The Company’s governing document
is a [name legal document, if one exists, (e.g., partnership agreement, etc.)

 

Not applicable.

 

3.                           The full and exact name of the Company as set forth
in the document specified in Item 1 or 2, or (if no document is specified in
Item 1 or 2) the full and exact legal name used in the Company’s business, is:

 

Lernco, Inc.

 

4.                           The Company uses and owns the following trade
name(s) in the operation of its business (e.g. billing, advertising, etc.; note:
do not include names which are product names only):

 

None.

 

[Check one of the boxes below.]

 

o                         We have attached a blank sample of every invoice that
uses a tradename.

x                       We do not use any tradename other than the tradenames
listed in Item 4 on any invoices.

 

5.                           The Company maintains offices, leases or owns real
estate, has employees, pays taxes, or otherwise conducts business in the
following States (including the State of its organization):

 

Delaware.

 

6.                           The Company has filed the necessary documents with
the Secretary of State to qualify as a foreign corporation in the following
States:

 

None.

 

7.                           The Company’s authority to do business has been
revoked or suspended, or the Company is otherwise not in good standing in the
following States:

 

1

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

 

None.

 

8.                           The Company and its subsidiaries have all licenses
and permits necessary for the operation of the business of the Company, as such
business is being operated as of the date hereof.

 

9.                           In conducting its business activities, the Company
is subject to regulation by federal, state or local agencies or authorities
(e.g., FDA, EPA, state or municipal liquor licensing agencies, federal or state
carrier commissions, etc.) as follows:

 

Not applicable.

 

10.                    The Company has never been involved in a bankruptcy or
reorganization except: [explain]

 

None.

 

11.                    Between the date the Company was formed and now, the
Company has used other names as set forth below:

 

Period of Time

 

Prior Name

None.

 

 

 

12.                    Between the date the Company was formed and now, the
Company has made or entered into mergers or acquisitions with other companies as
set forth below:

 

None other than mergers and reorganizations of internal companies in the
ordinary course of business.

 

13.                    The chief executive office of the Company is located at
the street address set forth below:

 

1105 North Market Street, Suite 1300

Wilmington, DE 19801

 

14.                    The books and records of the Company pertaining to
accounts, contract rights, inventory, etc. are located at the following street
address:

 

1105 North Market Street, Suite 1300

Wilmington, DE 19801

 

15.                    In addition to the chief executive office, the Company
has inventory, equipment or other assets located at the addresses set forth
below. In each case, we have noted whether the location is owned, leased or
operated by third parties and the names and addresses of any mortgagee, lessor
or third party operator:

 

 

 

 

 

Name and Address of Third

 

 

 

 

Party with Interest in Location

 

 

Company’s Interest

 

(e.g., mortgagee, lessor or

Street Address with County

 

(e.g., owner, lessee or bailee)

 

warehouseman)

See Exhibit E to the Loan Agreement.

 

 

 

 

 

16.                    In the course of its business, the Company’s inventory
and/or other assets are handled by the following customs brokers and/or freight
forwarders:

 

Name

 

Address

 

Type of Service/Assets Handled

None.

 

 

 

 

 

17.                    The places of business or other locations of any assets
used by the Company during the last four (4) months other than those listed
above are as follows:

 

None.

 

18.                    The Company is affiliated with, or has ownership in, the
following entities (including subsidiaries):

 

2

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

 

Name of Entity

 

Chief Executive Office

 

Jurisdiction of

Incorporation

 

Ownership

Percentage or

Relationship

New York & Company, Inc.

 

450 West 33rd Street

New York, NY 10001

 

Delaware

 

Ultimate Parent / 100%

 

 

 

 

 

 

 

Lerner New York Holding, Inc.

 

450 West 33rd Street

New York, NY 10001

 

Delaware

 

Parent / 100%

 

 

 

 

 

 

 

Lerner New York, Inc.

 

450 West 33rd Street

New York, NY 10001

 

Delaware

 

Subsidiary of Parent / 100%

 

 

 

 

 

 

 

Nevada Receivable Factoring, Inc.

 

6700 Via Austi Pkwy

Parkway, Suite C

Las Vegas, Nevada 89119

 

Nevada

 

Subsidiary of Parent / 100%

 

 

 

 

 

 

 

New York & Company Stores, Inc.

 

450 West 33rd Street

New York, NY 10001

 

New York

 

Subsidiary / 100%

 

 

 

 

 

 

 

Lerner New York GC, LLC

 

3 Limited Pkwy

Columbus, Ohio 43230

 

Ohio

 

Subsidiary / 100%

 

 

 

 

 

 

 

Lerner New York Outlet, Inc. (formerly known as Jasmine Company, Inc.)

 

450 West 33rd Street

New York, NY 10001

 

Massachusetts

 

Subsidiary / 100%

 

19.                    The Federal Employer Identification Number of the Company
is 51-0284787

 

20.                    Under the Company’s charter documents, and under the laws
of the State in which the Company is organized, the shareholders, members or
other equity holders do not have to consent in order for the Company to borrow
money, incur debt or obligations, pledge or mortgage the property of the
Company, grant a security interest in the property of the Company or guaranty
the debt of obligations of another person or entity.

 

x
True                                                                                     o
Incorrect [explain]:

 

The power to take the foregoing actions is vested exclusively in the Board of
Directors.

 

21.                    The officers of the Company (or people performing similar
functions) and their respective titles are as follows:

 

Title

 

Name

Sheamus Toal

 

President

John Gargano

 

Secretary

Chris Consi

 

Treasurer

William Langan

 

Assistant Secretary

Wai Kam

 

Assistant Treasurer

 

The following people will have signatory powers as to all your of transactions
with the Company:

 

The Officers authorized in the Company’s Board of Director resolutions

 

22.                    With respect to the officers noted above, such officers
are affiliated with and hold a 5% or more beneficial ownership in the following
corporations (indicate name and address of affiliated companies, type of
operations, ownership percentage or other relationship):

 

None.

 

23.                    The Company is governed by the Board of Directors. The
members of such governing body of the Company are:

 

Chris Consi, John Gargano, Heather Hill, Wai Kam, William K. Langan, and Sheamus
Toal.

 

24.                    The name of the stockholders, members, partners or other
equity holders of the Company and their equity holdings are as

 

3

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

 

follows (if equity interests are widely held indicate only equity owners with
10% or more of the equity interests):

 

Name

 

No. of Shares or Units

 

Ownership Percentage

 

Lerner New York Holding, Inc.

 

100 Common shares

 

100

%

 

25.                    There are no judgments or litigation pending by or
against the Company, its subsidiaries and/or affiliates or any of its
officers/principals, except as follows:

 

None.

 

26.                    At the present time, there are no delinquent taxes due
(including, but not limited to, all payroll taxes, personal property taxes, real
estate taxes or income taxes) except as follows:

 

None.

 

27.                    The Company’s assets are owned and held free and clear of
any security interests, liens or attachments, except as follows:

 

 

 

 

 

Amount of Debt

 

Lienholder

 

Assets Pledged

 

Secured

 

None.

 

 

 

 

 

 

28.                    The Company has not guaranteed and is not otherwise
liable for the obligations of others, except as follows:

 

None.

 

29.                    The Company does not own or license any trademarks,
patents, copyrights or other intellectual property, except as follows (indicate
type of intellectual property and whether owned or licensed, registration
number, date of registration, and, if licensed, the name and address of the
licensor):

 

 

 

Registration

 

 

 

Name and Address

 

Type of Intellectual

 

Number and Date of

 

Owned or

 

of

 

Property

 

Registration

 

Licensed

 

Licensor

 

See Schedule 29.

 

 

 

 

 

 

 

 

30.                    The Company owns or uses the following materials (e.g.,
software, film footage, scripts, etc.) that are subject to registration with the
United States Copyright Office, though at present copyright registrations have
not been filed with respect to such materials:

 

None.

 

31.                    The Company does not have any deposit or investment
accounts with any bank, savings and loan or other financial institution, except
as follows, for the purposes and of the types indicated:

 

Bank Name and Branch Address

 

Contact Person and
Phone Number

 

Account No.

 

Purpose/Type

 

Wilmington Trust

 

 

 

 

 

Checking

 

 

32.                    The Company has no processing arrangements for credit
card payments or payments made by check (e.g. Telecheck) except as follows:

 

Bank Name and Branch
Address

 

Contact Person and Phone Number

 

Account No.

 

None.

 

 

 

 

 

 

33.                    The Company owns or has registered to it the following
motor vehicles, the original title certificates for which shall be delivered to
Lender prior to closing:

 

None.

 

34.                    With regard to any pension or profit sharing plan:

 

4

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

 

None.

 

35.                    The Company’s fiscal year is a 52 or 53 week year that
ends on the Saturday closest to January 31. The results for fiscal year 2014
represent the fifty-two week period ending January 31, 2015. The results for
fiscal years 2015 and 2016 represent the fifty-two week period ending
January 30, 2016 and January 28, 2017.

 

36.                    Certified Public Accountants for the Company is the firm
of:

 

Name:

 

Ernst & Young

Address:

 

5 Times Square

 

 

New York, NY 10036-6530

Telephone:

 

(516) 336-0377

Facsimile:

 

(866) 313-0949

E-Mail:

 

Joy.Fernandez@ey.com

Partner Handling Relationship:

 

Joy Fernandez

Were statements uncertified for any fiscal year?

 

Statements for year end 2013 (2/3/13-2/1/14) were certified

 

37.                    The Company’s counsel with respect to the proposed loan,
transaction is the firm of:

 

Name:

 

Kirkland & Ellis

Address:

 

601 Lexington Avenue

 

 

New York, NY 10022

Telephone:

 

(212) 446-4800

Facsimile:

 

(212) 446-4900

E-Mail:

 

medsall@kirkland.com

Partner Handling Relationship:

 

Michael Edsall

 

38.                    The Company’s counsel with respect to matters other than
the proposed loan transaction, if different, is the firm of:

 

Partner Handling Relationship:

 

Michael Edsall

 

38.                    The Company’s counsel with respect to matters other than
the proposed loan transaction, if different, is the firm of:

 

Name:

 

Same as above

Address:

 

 

Telephone:

 

 

Facsimile:

 

 

E-Mail:

 

 

Partner Handling Relationship:

 

 

 

We agree to give you prompt written notice of any change or amendment with
respect to any of the foregoing information. Until you receive such notice, you
will be entitled to rely in all respects on the foregoing information. This
Amended and Restated Information Certificate amends and restates all of the
information set forth in the Information Certificate, dated August 10, 2011.

 

5

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

 

 

Very truly yours,

 

 

 

LERNCO INC

 

 

 

 

 

 

By:

/s/ Sheamus Toal

 

 

Title:  President

 

6

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

 

AMEDNED AND RESTATED INFORMATION CERTIFICATE

 

OF

 

LERNER NEW YORK OUTLET, INC. (f/k/a JASMINE COMPANY, INC.)

 

Dated: October 24, 2014

 

Wells Fargo Bank, National Association, as Agent

One Boston Place, 19th Floor

Boston, Massachusetts 02108

 

In order to assist you in the evaluation of the financing you are considering of
Lerner New York Outlet, Inc. (formerly known as Jasmine Company, Inc.) (the “
Company “), pursuant to the Fourth Amended and Restated Loan and Security
Agreement, dated of even date herewith, Wells Fargo Bank, National Association,
as Agent (in such capacity “Agent” or “you”), for the persons thereto as Lenders
(collectively “Lenders” or “you”), the Company certain affiliates of the Company
(as the same now exists or may hereafter be amended, modified, supplemented,
renewed, restated or registered, the “Loan Agreement”), to expedite the
preparation of required documentation, and to induce you to provide financing to
the Company, we represent and warrant to you and the Lenders the following
information about the Company, its organizational structure and other matters of
interest to you:

 

1.

The Company has been formed by filing the following document with the Secretary
of State of the Commonwealth of Massachusetts:

 

 

 

o

Certificate/Articles of Incorporation

 

x

Certificate/Articles of Organization

 

o

Other [specify]                              

 

The date of formation of the Company by the filing of the document specified
above with the Secretary of State was July 20, 1973.

 

2.

The Company was not formed by filing a document with any Secretary of State. The
Company is organized as a [specify type of organization, (e.g., general
partnership, sole proprietorship, etc.)]                  . The Company’s
governing document is a [name legal document, if one exists, (e.g., partnership
agreement, etc.)

 

Not applicable

 

 

3.

The full and exact name of the Company as set forth in the document specified in
Item 1 or 2, or (if no document is specified in Item 1 or 2) the full and exact
legal name used in the Company’s business, is:                   

 

 

 

Lerner New York Outlet, Inc. (f/k/a Jasmine Company, Inc.)

 

 

4.

The Company uses and owns the following trade name(s) in the operation of its
business (e.g. billing, advertising, etc.; note: do not include names which are
product names only):

 

 

 

New York & Company Outlet

 

 

[Check one of the boxes below.]

 

 

o

We have attached a blank sample of every invoice that uses a tradename.

x

We do not use any tradename other than the tradenames listed in Item 4 on any
invoices.

 

 

5.

The Company maintains offices, leases or owns real estate, has employees, pays
taxes, or otherwise conducts business in the following States (including the
State of its organization):

 

 

 

AL, CA, CT, DE, FL, GA, IL, KY, LA, MD, MI, MN, MO, NV, NJ, NY, NC, OH, PA, RI,
SC, TN, TX, VA, WI, MA

 

 

6.

The Company has filed the necessary documents with the Secretary of State to
qualify as a foreign corporation in the following States:

 

1

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

 

 

AL, CA, CT, DE, FL, GA, IL, KY, LA, MD, MI, MN, MO, NV, NJ, NY, NC, OH, PA, RI,
SC, TN, TX, VA, WI

 

 

7.

The Company’s authority to do business has been revoked or suspended, or the
Company is otherwise not in good standing in the following States:

 

 

 

None.

 

 

8.

The Company and its subsidiaries have all licenses and permits necessary for the
operation of the business of the Company, as such business is being operated as
of the date hereof.

 

 

9.

In conducting its business activities, the Company is subject to regulation by
federal, state or local agencies or authorities (e.g., FDA, EPA, state or
municipal liquor licensing agencies, federal or state carrier commissions, etc.)
as follows:

 

 

 

None.

 

 

10.

The Company has never been involved in a bankruptcy or reorganization except:
[explain]

 

 

 

None.

 

 

11.

Between the date the Company was formed and now, the Company has used other
names as set forth below:

 

Period of Time

 

Prior Name

 

 

 

From July 20, 1973 to January 7, 2010

 

Jasmine Company, Inc.

 

12.

Between the date the Company was formed and now, the Company has made or entered
into mergers or acquisitions with other companies as set forth below:

 

 

 

Merged with Shoe-Shine, Inc. (7/1/94); Merged with Flirt, Inc. (12/10/04);
Acquired by Lerner New York Inc (7/19/05).

 

 

13.

The chief executive office of the Company is located at the street address set
forth below, which is in New York County, in the State of New York:

 

 

 

450 W. 33rd Street

 

New York, NY 10001

 

 

14.

The books and records of the Company pertaining to accounts, contract rights,
inventory, etc. are located at the following street address:

 

 

 

450 W. 33rd Street

 

New York, NY 10001

 

 

15.

In addition to the chief executive office, the Company has inventory, equipment
or other assets located at the addresses set forth below. In each case, we have
noted whether the location is owned, leased or operated by third parties and the
names and addresses of any mortgagee, lessor or third party operator:

 

 

 

 

 

Name and Address of Third

 

 

 

 

 

Party with Interest in Location

 

 

 

Company’s Interest

 

(e.g., mortgagee, lessor or

 

Street Address with County

 

(e.g., owner, lessee or bailee)

 

warehouseman)

 

 

 

 

 

 

 

See Exhibit E to Loan Agreement.

 

 

 

 

 

 

16.

In the course of its business, the Company’s inventory and/or other assets are
handled by the following customs brokers and/or freight forwarders:

 

2

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

 

Name

 

Address

 

Type of Service/Assets Handled

 

 

 

 

 

 

 

See Schedule 16.

 

 

 

 

 

 

17.

The places of business or other locations of any assets used by the Company
during the last four (4) months other than those listed above are as follows:

 

 

 

None.

 

 

18.

The Company is affiliated with, or has ownership in, the following entities
(including subsidiaries):

 

Name of Entity

 

Chief Executive Office

 

Jurisdiction of
Incorporation

 

Ownership
Percentage or
Relationship

New York & Company, Inc.

 

450 West 33rd Street

New York, NY 10001

 

Delaware

 

Ultimate Parent / 100%

 

 

 

 

 

 

 

Lerner New York Holding, Inc.

 

450 West 33rd Street

New York, NY 10001

 

Delaware

 

Parent / 100%

 

 

 

 

 

 

 

Lernco, Inc.

 

1105 North Market Street, Suite 1300

Wilmington, DE 19801

 

Delaware

 

Subsidiary of Parent / 100%

 

 

 

 

 

 

 

Nevada Receivable Factoring, Inc.

 

6700 Via Austi Pkwy

Parkway, Suite C

Las Vegas, Nevada 89119

 

Nevada

 

Subsidiary of Parent / 100%

 

 

 

 

 

 

 

New York & Company Stores, Inc.

 

450 West 33rd Street

New York, NY 10001

 

New York

 

Subsidiary / 100%

 

 

 

 

 

 

 

Lerner New York GC, LLC

 

3 Limited Pkwy

Columbus, Ohio 43230

 

Ohio

 

Subsidiary / 100%

 

 

 

 

 

 

 

Lerner New York, Inc.

 

450 West 33rd Street

New York, NY 10001

 

Delaware

 

Subsidiary of Parent / 100%

 

19.

The Federal Employer Identification Number of the Company is 04-2526617

 

 

20.

Under the Company’s charter documents, and under the laws of the State in which
the Company is organized, the shareholders, members or other equity holders do
not have to consent in order for the Company to borrow money, incur debt or
obligations, pledge or mortgage the property of the Company, grant a security
interest in the property of the Company or guaranty the debt of obligations of
another person or entity.

 

 

 

x     True

o     Incorrect [explain]:

 

 

 

The power to take the foregoing actions is vested exclusively in the Board of
Directors.

 

 

21.

The officers of the Company (or people performing similar functions) and their
respective titles are as follows:

 

 

 

Name

 

Title

 

 

 

Gregory Scott

 

President & Chief Executive Officer

Sheamus Toal

 

Executive Vice President, Chief Financial Officer & Treasurer

Chris Consi

 

Vice President, Controller

 

3

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

 

 

The following people will have signatory powers as to all your of transactions
with the Company:

 

 

 

The Officers authorized in the Company’s Board of Director resolutions

 

 

22.

With respect to the officers noted above, such officers are affiliated with and
hold a 5% or more beneficial ownership in the following corporations (indicate
name and address of affiliated companies, type of operations, ownership
percentage or other relationship):

 

 

 

None.

 

 

23.

The Company is governed by the Board of Directors. The members of such governing
body of the Company are:

 

 

 

Gregory Scott and Sheamus Toal

 

 

24.

The name of the stockholders, members, partners or other equity holders of the
Company and their equity holdings are as follows (if equity interests are widely
held indicate only equity owners with 10% or more of the equity interests):

 

Name

 

No. of Shares or Units

 

Ownership Percentage

 

 

 

 

 

 

 

Lerner New York, Inc.

 

100,300 Common Shares

 

100

%

 

25.

There are no judgments or litigation pending by or against the Company, its
subsidiaries and/or affiliates or any of its officers/principals, except as
follows:

 

 

 

None.

 

 

26.

At the present time, there are no delinquent taxes due (including, but not
limited to, all payroll taxes, personal property taxes, real estate taxes or
income taxes) except as follows:

 

 

 

None.

 

 

27.

The Company’s assets are owned and held free and clear of any security
interests, liens or attachments, except as follows:

 

Lienholder

 

Assets Pledged

 

Amount of Debt
 Secured

 

 

 

 

 

 

 

None.

 

 

 

 

 

 

28.

The Company has not guaranteed and is not otherwise liable for the obligations
of others, except as follows:

 

 

 

None.

 

 

29.

The Company does not own or license any trademarks, patents, copyrights or other
intellectual property, except as follows (indicate type of intellectual property
and whether owned or licensed, registration number, date of registration, and,
if licensed, the name and address of the licensor):

 

 

 

Registration

 

 

 

Name and Address

Type of Intellectual

 

Number and Date of

 

Owned or

 

of

Property

 

Registration

 

Licensed

 

Licensor

None.

 

 

 

 

 

 

 

30.

The Company owns or uses the following materials (e.g., software, film footage,
scripts, etc.) that are subject to registration with the United States Copyright
Office, though at present copyright registrations have not been filed with
respect to such materials:

 

4

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

 

 

None.

 

 

31.

The Company does not have any deposit or investment accounts with any bank,
savings and loan or other financial institution, except as follows, for the
purposes and of the types indicated:

 

Bank Name and Branch Address

 

Contact Person and
 Phone Number

 

Account No.

 

Purpose/Type

 

See schedule 31.

 

 

 

 

 

 

 

 

32.

The Company has no processing arrangements for credit card payments or payments
made by check (e.g. Telecheck) except as follows:

 

Bank Name and Branch
Address

 

Contact Person and Phone Number

 

Account No.

 

Chase

 

 

 

 

 

ADS

 

 

 

 

 

AMEX

 

 

 

 

 

Discover

 

 

 

 

 

Telecheck

 

 

 

 

 

SVS

 

 

 

 

 

Paypal

 

 

 

 

 

Cardinal Commerce — in connection with PayPal receivables

 

 

 

 

 

 

33.

The Company owns or has registered to it the following motor vehicles, the
original title certificates for which shall be delivered to Lender prior to
closing:

 

 

 

None.

 

 

34.

With regard to any pension or profit sharing plan:

 

 

 

None.

 

 

35.

The Company’s fiscal year is a 52 or 53 week year that ends on the Saturday
closest to January 31. The results for fiscal year 2014 represent the fifty-two
week period ending January 31, 2015. The results for fiscal years 2015 and 2016
represent the fifty-two week period ending January 30, 2016 and January 28,
2017.

 

 

36.

Certified Public Accountants for the Company is the firm of:

 

Name:

Ernst & Young

Address:

5 Times Square

 

New York, NY 10036-6530

Telephone:

(516) 336-0377

Facsimile:

(866) 313-0949

E-Mail:

Joy.Fernandez@ey.com

Partner Handling Relationship:

Joy Fernandez

Were statements uncertified for any fiscal year?

Statements for year end 2013 (2/3/13-2/1/14) were certified

 

37.

The Company’s counsel with respect to the proposed loan transaction is the firm
of:

 

Name:

Kirkland & Ellis

Address:

601 Lexington Avenue

 

New York, NY 10022

Telephone:

(212) 446-4800

Facsimile:

(212) 446-4900

 

5

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

 

E-Mail:

medsall@kirkland.com

Partner Handling Relationship:

Michael Edsall

 

38.

The Company’s counsel with respect to matters other than the proposed loan
transaction, if different, is the firm of:

 

Same as above

 

We agree to give you prompt written notice of any change or amendment with
respect to any of the foregoing information. Until you receive such notice, you
will be entitled to rely in all respects on the foregoing information. This
Amended and Restated Information Certificate amends and restates all of the
information set forth in the Information Certificate, dated August 10, 2011.

 

 

Very truly yours,

 

 

 

LERNER NEW YORK OUTLET, INC. (f/k/a JASMINE COMPANY, INC.)

 

 

 

 

 

 

 

By:

/s/ Sheamus Toal

 

 

Title:   Executive Vice President, Chief Financial Officer & Treasurer

 

6

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

 

AMEDNED AND RESTATED INFORMATION CERTIFICATE

 

OF

 

NEW YORK & COMPANY, INC.

 

Dated: October 24, 2014

 

Wells Fargo Bank, National Association, as Agent

One Boston Place, 19th Floor

Boston, Massachusetts 02108

 

In order to assist you in the evaluation of the financing you are considering of
New York & Company, Inc. (the “ Company “), pursuant to the Fourth Amended and
Restated Loan and Security Agreement, dated of even date herewith, Wells Fargo
Bank, National Association, as Agent (in such capacity “Agent” or “you”), for
the persons thereto as Lenders (collectively “Lenders” or “you”), the Company
certain affiliates of the Company (as the same now exists or may hereafter be
amended, modified, supplemented, renewed, restated or registered, the “Loan
Agreement”), to expedite the preparation of required documentation, and to
induce you to provide financing to the Company, we represent and warrant to you
and the Lenders the following information about the Company, its organizational
structure and other matters of interest to you:

 

1.

The Company has been formed by filing the following document with the Secretary
of State of Delaware:

 

 

 

x

Certificate/Articles of Incorporation

 

o

Certificate/Articles of Organization

 

o

Other [specify]                                

 

The date of formation of the Company by the filing of the document specified
above with the Secretary of State was November 8, 2002.

 

2.

The Company was not formed by filing a document with any Secretary of State. The
Company is organized as a [specify type of organization, (e.g., general
partnership, sole proprietorship, etc.)]                        . The Company’s
governing document is a [name legal document, if one exists, (e.g., partnership
agreement, etc.)

 

 

 

Not applicable

 

 

3.

The full and exact name of the Company as set forth in the document specified in
Item 1 or 2, or (if no document is specified in Item 1 or 2) the full and exact
legal name used in the Company’s business, is:

 

 

 

New York & Company, Inc.

 

 

4.

The Company uses and owns the following trade name(s) in the operation of its
business (e.g. billing, advertising, etc.; note: do not include names which are
product names only):

 

 

 

None.

 

 

o

We have attached a blank sample of every invoice that uses a tradename.

x

We do not use any tradename other than the tradenames listed in Item 4 on any
invoices.

 

 

5.

The Company maintains offices, leases or owns real estate, has employees, pays
taxes, or otherwise conducts business in the following States (including the
State of its organization):

 

 

 

Delaware and New York.

 

 

6.

The Company has filed the necessary documents with the Secretary of State to
qualify as a foreign corporation in the following States:

 

 

 

None.

 

1

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

 

7.

The Company’s authority to do business has been revoked or suspended, or the
Company is otherwise not in good standing in the following States:

 

 

 

None.

 

 

8.

The Company and its subsidiaries have all licenses and permits necessary for the
operation of the business of the Company, as such business is being operated as
of the date hereof.

 

 

9.

In conducting its business activities, the Company is subject to regulation by
federal, state or local agencies or authorities (e.g., FDA, EPA, state or
municipal liquor licensing agencies, federal or state carrier commissions, etc.)
as follows:

 

 

 

Not applicable.

 

 

10.

The Company has never been involved in a bankruptcy or reorganization except:
[explain]

 

 

 

None. Since the Parent’s purchase of the Company in 1985. We have no knowledge
of a bankruptcy or reorganization of the Company prior to that time.

 

 

11.

Between the date the Company was formed and now, the Company has used other
names as set forth below:

 

Period of Time

 

Prior Name

 

 

 

From 11/8/02 to 5/20/04

 

NY & CO GROUP, INC.

 

12.

Between the date the Company was formed and now, the Company has made or entered
into mergers or acquisitions with other companies as set forth below:

 

 

 

None other than mergers and reorganizations of internal companies in the
ordinary course of business.

 

 

13.

The chief executive office of the Company is located at the street address set
forth below, which is in New York County, in the State of New York:

 

 

 

450 W. 33rd St.

 

New York, NY 10001

 

 

14.

The books and records of the Company pertaining to accounts, contract rights,
inventory, etc. are located at the following street address:

 

 

 

450 W. 33rd St.

 

New York, NY 10001

 

 

15.

In addition to the chief executive office, the Company has inventory, equipment
or other assets located at the addresses set forth below. In each case, we have
noted whether the location is owned, leased or operated by third parties and the
names and addresses of any mortgagee, lessor or third party operator:

 

 

 

 

 

Name and Address of Third

 

 

 

 

Party with Interest in Location

 

 

Company’s Interest

 

(e.g., mortgagee, lessor or

Street Address with County

 

(e.g., owner, lessee or bailee)

 

warehouseman)

 

 

 

 

 

See Exhibit E to Loan Agreement.

 

 

 

 

 

16.

In the course of its business, the Company’s inventory and/or other assets are
handled by the following customs brokers and/or freight forwarders:

 

2

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

 

Name

 

Address

 

Type of Service/Assets Handled

 

 

 

 

 

None.

 

 

 

 

 

17.

The places of business or other locations of any assets used by the Company
during the last four (4) months other than those listed above are as follows:

 

 

 

None.

 

 

18.

The Company is affiliated with, or has ownership in, the following entities
(including subsidiaries):

 

Name of Entity

 

Chief Executive Office

 

Jurisdiction of

Incorporation

 

Ownership

Percentage or

Relationship

Lerner New York, Inc.

 

450 West 33rd Street

New York, NY 10001

 

Delaware

 

Subsidiary of Parent / 100%

 

 

 

 

 

 

 

Lerner New York Holding, Inc.

 

450 West 33rd Street

New York, NY 10001

 

Delaware

 

Parent / 100%

 

 

 

 

 

 

 

Lernco, Inc.

 

1105 North Market Street, Suite 1300

Wilmington, DE 19801

 

Delaware

 

Subsidiary of Parent / 100%

 

 

 

 

 

 

 

Nevada Receivable Factoring, Inc.

 

6700 Via Austi Pkwy

Parkway, Suite C

Las Vegas, Nevada 89119

 

Nevada

 

Subsidiary of Parent / 100%

 

 

 

 

 

 

 

New York & Company Stores, Inc.

 

450 West 33rd Street

New York, NY 10001

 

New York

 

Subsidiary / 100%

 

 

 

 

 

 

 

Lerner New York GC, LLC

 

3 Limited Pkwy

Columbus, Ohio 43230

 

Ohio

 

Subsidiary / 100%

 

 

 

 

 

 

 

Lerner New York Outlet, Inc. (formerly known as Jasmine Company, Inc.)

 

450 West 33rd Street

New York, NY 10001

 

Massachusetts

 

Subsidiary / 100%

 

19.

The Federal Employer Identification Number of the Company is 33-1031445

 

 

20.

Under the Company’s charter documents, and under the laws of the State in which
the Company is organized, the shareholders, members or other equity holders do
not have to consent in order for the Company to borrow money, incur debt or
obligations, pledge or mortgage the property of the Company, grant a security
interest in the property of the Company or guaranty the debt of obligations of
another person or entity.

 

 

 

x
True                                                                                     o
Incorrect [explain]:

 

 

 

The power to take the foregoing actions is vested exclusively in the Board of
Directors.

 

 

21.

The officers of the Company (or people performing similar functions) and their
respective titles are as follows:

 

Name

 

Title

 

 

 

Gregory Scott

 

Chief Executive Officer

Faeth Bradley

 

Executive Vice President, Human Resources

Kevin Finnegan

 

Executive Vice President, Global Sales & Operations

Sheamus Toal

 

Executive Vice President, Chief Financial Officer, Treasurer & Secretary

Adam Ratner

 

Vice President, General Counsel & Assistant Secretary

 

3

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

 

 

The following people will have signatory powers as to all your of transactions
with the Company:

 

 

 

The Officers authorized in the Company’s Board of Director resolutions.

 

 

22.

With respect to the officers noted above, such officers are affiliated with and
hold a 5% or more beneficial ownership in the following corporations (indicate
name and address of affiliated companies, type of operations, ownership
percentage or other relationship):

 

 

 

None.

 

 

23.

The Company is governed by the Board of Directors. The members of such governing
body of the Company are:

 

 

 

Bodil M. Arlander, Jill Beraud, David H. Edwab, James O. Egan, John D. Howard,
Grace Nichols, Michelle Pearlman, Richard L. Perkal, Arthur E. Reiner, and
Gregory Scott.

 

 

24.

The name of the stockholders, members, partners or other equity holders of the
Company and their equity holdings are as follows (if equity interests are widely
held indicate only equity owners with 10% or more of the equity interests):

 

Name

 

No. of Shares or Units

 

Ownership Percentage

 

 

 

 

 

 

 

Irving Place Capital (Formerly Bear Sterns Merchant Banking)

 

31,618,972

 

49.41

%

 

25.

There are no judgments or litigation pending by or against the Company, its
subsidiaries and/or affiliates or any of its officers/principals, except as
follows:

 

 

 

See Schedule 25.

 

 

26. 

At the present time, there are no delinquent taxes due (including, but not
limited to, all payroll taxes, personal property taxes, real estate taxes or
income taxes) except as follows:

 

 

 

None.

 

 

27.

The Company’s assets are owned and held free and clear of any security
interests, liens or attachments, except as follows:

 

 

 

 

 

Amount of Debt

 

Lienholder

 

Assets Pledged

 

Secured

 

 

 

 

 

 

 

See Schedule 27

 

 

 

 

 

 

28.

The Company has not guaranteed and is not otherwise liable for the obligations
of others, except as follows:

 

 

 

None.

 

 

29.

The Company does not own or license any trademarks, patents, copyrights or other
intellectual property, except as follows (indicate type of intellectual property
and whether owned or licensed, registration number, date of registration, and,
if licensed, the name and address of the licensor):

 

 

 

Registration

 

 

 

Name and Address

 

Type of Intellectual

 

Number and Date of

 

Owned or

 

of

 

Property

 

Registration

 

Licensed

 

Licensor

 

See Schedule 29.

 

 

 

 

 

 

 

 

30.

The Company owns or uses the following materials (e.g., software, film footage,
scripts, etc.) that are subject to registration with the United States Copyright
Office, though at present copyright registrations have not been filed with
respect to such materials:

 

 

 

None.

 

4

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

 

31.

The Company does not have any deposit or investment accounts with any bank,
savings and loan or other financial institution, except as follows, for the
purposes and of the types indicated:

 

Bank Name and Branch Address

 

Contact Person and
Phone Number

 

Account No.

 

Purpose/Type

 

Bank of New York

 

 

 

 

 

Checking

 

Bank of America

 

 

 

 

 

Escrow

 

 

32.

The Company has no processing arrangements for credit card payments or payments
made by check (e.g. Telecheck) except as follows:

 

Bank Name

 

 

 

 

 

and Branch

 

 

 

 

 

Address

 

Contact Person and Phone Number

 

Account No.

 

 

 

 

 

 

 

None.

 

 

 

 

 

 

33.

The Company owns or has registered to it the following motor vehicles, the
original title certificates for which shall be delivered to Lender prior to
closing:

 

 

 

None.

 

 

34.

With regard to any pension or profit sharing plan:

 

 

 

None.

 

 

35.

The Company’s fiscal year is a 52 or 53 week year that ends on the Saturday
closest to January 31. The results for fiscal year 2014 represent the fifty-two
week period ending January 31, 2015. The results for fiscal years 2015 and 2016
represent the fifty-two week period ending January 30, 2016 and January 28,
2017.

 

 

36.

Certified Public Accountants for the Company is the firm of:

 

Name:

Ernst & Young

Address:

5 Times Square

 

New York, NY 10036-6530

Telephone:

(516) 336-0377

Facsimile:

(866) 313-0949

E-Mail:

Joy.Fernandez@ey.com

Partner Handling Relationship:

Joy Fernandez

Were statements uncertified for any fiscal year?

Statements for year end 2013 (2/3/13-2/1/14) were certified

 

37.

The Company’s counsel with respect to the proposed loan transaction is the firm
of:

 

Name:

Kirkland & Ellis

Address:

601 Lexington Avenue

 

New York, NY 10022

Telephone:

(212) 446-4800

Facsimile:

(212) 446-4900

E-Mail:

medsall@kirkland.com

Partner Handling Relationship:

Michael Edsall

 

38.

The Company’s counsel with respect to matters other than the proposed loan
transaction, if different, is the firm of:

 

Name:

Same as above

Address:

 

Telephone:

 

Facsimile:

 

 

5

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

 

E-Mail:

 

Partner Handling Relationship:

 

 

We agree to give you prompt written notice of any change or amendment with
respect to any of the foregoing information. Until you receive such notice, you
will be entitled to rely in all respects on the foregoing information. This
Amended and Restated Information Certificate amends and restates all of the
information set forth in the Information Certificate, dated August 10, 2011.

 

 

Very truly yours,

 

 

 

NEW YORK & COMPANY, INC.

 

 

 

 

 

 

By:

/s/ Sheamus Toal

 

 

Title:  Executive Vice President, Chief Financial Officer, Treasurer & Secretary

 

6

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

 

AMEDNED AND RESTATED INFORMATION CERTIFICATE

 

OF

 

NEVADA RECEIVABLE FACTORING, INC

 

Dated: October 24, 2014

Wells Fargo Bank, National Association, as Agent

One Boston Place, 19th Floor

Boston, Massachusetts 02108

 

In order to assist you in the evaluation of the financing you are considering of
Nevada Receivable Factoring, Inc. (the “ Company “), pursuant to the Fourth
Amended and Restated Loan and Security Agreement, dated of even date herewith,
Wells Fargo Bank, National Association, as Agent (in such capacity “Agent” or
“you”), for the persons thereto as Lenders (collectively “Lenders” or “you”),
the Company certain affiliates of the Company (as the same now exists or may
hereafter be amended, modified, supplemented, renewed, restated or registered,
the “Loan Agreement”), to expedite the preparation of required documentation,
and to induce you to provide financing to the Company, we represent and warrant
to you and the Lenders the following information about the Company, its
organizational structure and other matters of interest to you:

 

1.                           The Company has been formed by filing the following
document with the Secretary of State of Nevada:

 

x                       Certificate/Articles of Incorporation

o                        Certificate/Articles of Organization

o                        Other [specify]                           

 

The date of formation of the Company by the filing of the document specified
above with the Secretary of State was August 24, 1993.

 

2.                           The Company was not formed by filing a document
with any Secretary of State. The Company is organized as a [specify type of
organization, (e.g., general partnership, sole
proprietorship, etc.)]                 . The Company’s governing document is a
[name legal document, if one exists, (e.g., partnership agreement, etc.)   Not
applicable

 

3.                           The full and exact name of the Company as set forth
in the document specified in Item 1 or 2, or (if no document is specified in
Item 1 or 2) the full and exact legal name used in the Company’s business, is:

 

Nevada Receivable Factoring, Inc.

 

4.                           The Company uses and owns the following trade
name(s) in the operation of its business (e.g. billing, advertising, etc.; note:
do not include names which are product names only):

 

None.

 

[Check one of the boxes below.]

 

o                       We have attached a blank sample of every invoice that
uses a tradename.

x                      We do not use any tradename other than the tradenames
listed in Item 4 on any invoices.

 

5.                           The Company maintains offices, leases or owns real
estate, has employees, pays taxes, or otherwise conducts business in the
following States (including the State of its organization):

 

Nevada.

 

6.                           The Company has filed the necessary documents with
the Secretary of State to qualify as a foreign corporation in the following
States:

 

None.

 

7.                           The Company’s authority to do business has been
revoked or suspended, or the Company is otherwise not in good standing in the
following States:

 

None.

 

1

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

 

8.                           The Company and its subsidiaries have all licenses
and permits necessary for the operation of the business of the Company, as such
business is being operated as of the date hereof.

 

9.                           In conducting its business activities, the Company
is subject to regulation by federal, state or local agencies or authorities
(e.g., FDA, EPA, state or municipal liquor licensing agencies, federal or state
carrier commissions, etc.) as follows:

 

Not applicable.

 

10.                    The Company has never been involved in a bankruptcy or
reorganization except: [explain]

 

None.

 

11.                    Between the date the Company was formed and now, the
Company has used other names as set forth below:

 

Period of Time

 

Prior Name

 

 

 

From 8/24/93 to 1/18/94

 

Lerner New York Factoring, Inc.

 

12.                   Between the date the Company was formed and now, the
Company has made or entered into mergers or acquisitions with other companies as
set forth below:

 

None.

 

13.                   The chief executive office of the Company is located at
the street address set forth below:

 

6700 Via Austi Pkwy, Suite C,

Las Vegas, Nevada 89119

 

14.                    The books and records of the Company pertaining to
accounts, contract rights, inventory, etc. are located at the following street
address:

 

6700 Via Austi Pkwy, Suite C,

Las Vegas, Nevada 89119

 

15.                    In addition to the chief executive office, the Company
has inventory, equipment or other assets located at the addresses set forth
below. In each case, we have noted whether the location is owned, leased or
operated by third parties and the names and addresses of any mortgagee, lessor
or third party operator:

 

 

 

 

 

Name and Address of Third

 

 

 

 

Party with Interest in Location

 

 

Company’s Interest

 

(e.g., mortgagee, lessor or

Street Address with County

 

(e.g., owner, lessee or bailee)

 

warehouseman)

 

 

 

 

 

Exhibit E to Loan Agreement.

 

 

 

 

 

16.                    In the course of its business, the Company’s inventory
and/or other assets are handled by the following customs brokers and/or freight
forwarders:

 

Name

 

Address

 

Type of Service/Assets Handled

 

 

 

 

 

None.

 

 

 

 

 

17.                    The places of business or other locations of any assets
used by the Company during the last four (4) months other than those listed
above are as follows:

 

None.

 

18.                    The Company is affiliated with, or has ownership in, the
following entities (including subsidiaries):

 

2

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

 

Name of Entity

 

Chief Executive Office

 

Jurisdiction of
Incorporation

 

Ownership
Percentage or
Relationship

 

 

 

 

 

 

 

New York & Company, Inc.

 

450 West 33rd Street

New York, NY 10001

 

Delaware

 

Ultimate Parent / 100%

 

 

 

 

 

 

 

Lerner New York Holding, Inc.

 

450 West 33rd Street

New York, NY 10001

 

Delaware

 

Parent / 100%

 

 

 

 

 

 

 

Lernco, Inc.

 

1105 North Market Street,

Suite 1300,

Wilmington, DE 19801

 

Delaware

 

Subsidiary of Parent / 100%

 

 

 

 

 

 

 

Lerner New York, Inc.

 

450 West 33rd Street

New York, NY 10001

 

Delaware

 

Subsidiary of Parent / 100%

 

 

 

 

 

 

 

New York & Company Stores, Inc.

 

450 West 33rd Street

New York, NY 10001

 

New York

 

Subsidiary / 100%

 

 

 

 

 

 

 

Lerner New York GC, LLC

 

3 Limited Pkwy

Columbus, Ohio 43230

 

Ohio

 

Subsidiary / 100%

 

 

 

 

 

 

 

Lerner New York Outlet, Inc. (formerly known as Jasmine Company, Inc.).

 

450 West 33rd Street

New York, NY 10001

 

Massachusetts

 

Subsidiary / 100%

 

19.                    The Federal Employer Identification Number of the Company
is 88-0306309

 

20.                    Under the Company’s charter documents, and under the laws
of the State in which the Company is organized, the shareholders, members or
other equity holders do not have to consent in order for the Company to borrow
money, incur debt or obligations, pledge or mortgage the property of the
Company, grant a security interest in the property of the Company or guaranty
the debt of obligations of another person or entity.

 

x True

 

o Incorrect [explain]:

 

The power to take the foregoing actions is vested exclusively in the Board of
Directors.

 

21.                    The officers of the Company (or people performing similar
functions) and their respective titles are as follows:

 

Name

 

Title

Sheamus Toal

 

President & Chief Financial Officer

Jackie Smith

 

Treasurer

John N. Brewer

 

Assistant Secretary

Chris Consi

 

Assistant Treasurer

 

The following people will have signatory powers as to all your of transactions
with the Company:

 

The Officers authorized in the Company’s Board of Director resolutions

 

22.                    With respect to the officers noted above, such officers
are affiliated with and hold a 5% or more beneficial ownership in the following
corporations (indicate name and address of affiliated companies, type of
operations, ownership percentage or other relationship):

 

None.

 

23.                    The Company is governed by the Board of Directors.  The
members of such governing body of the Company are:

 

John N. Brewer, Charles H. Buckingham, Chris Consi, John Farello, John Gargano,
Wai Kam,  Jackie Smith, and Sheamus Toal.

 

24.                    The name of the stockholders, members, partners or other
equity holders of the Company and their equity holdings are as follows (if
equity interests are widely held indicate only equity owners with 10% or more of
the equity interests):

 

3

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

 

Name

 

No. of Shares or Units

 

Ownership Percentage

 

 

 

 

 

 

 

Lerner New York Holding, Inc.

 

100 Common Shares

 

100

%

 

25.                    There are no judgments or litigation pending by or
against the Company, its subsidiaries and/or affiliates or any of its
officers/principals, except as follows:

 

None.

 

26.                    At the present time, there are no delinquent taxes due
(including, but not limited to, all payroll taxes, personal property taxes, real
estate taxes or income taxes) except as follows:

 

None.

 

27.                    The Company’s assets are owned and held free and clear of
any security interests, liens or attachments, except as follows:

 

 

 

 

 

Amount of Debt

 

Lienholder

 

Assets Pledged

 

Secured

 

 

 

 

 

 

 

None.

 

 

 

 

 

 

28.                    The Company has not guaranteed and is not otherwise
liable for the obligations of others, except as follows:

 

None.

 

29.                    The Company does not own or license any trademarks,
patents, copyrights or other intellectual property, except as follows (indicate
type of intellectual property and whether owned or licensed, registration
number, date of registration, and, if licensed, the name and address of the
licensor):

 

 

 

Registration

 

 

 

Name and Address

Type of Intellectual

 

Number and Date of

 

Owned or

 

of

Property

 

Registration

 

Licensed

 

Licensor

None.

 

 

 

 

 

 

 

30.                    The Company owns or uses the following materials (e.g.,
software, film footage, scripts, etc.) that are subject to registration with the
United States Copyright Office, though at present copyright registrations have
not been filed with respect to such materials:

 

None.

 

31.                    The Company does not have any deposit or investment
accounts with any bank, savings and loan or other financial institution, except
as follows, for the purposes and of the types indicated:

 

Bank Name and Branch Address

 

Contact Person and
 Phone Number

 

Account No.

 

Purpose/Type

Bank of America

 

 

 

 

 

Checking

 

32.               The Company has no processing arrangements for credit card
payments or payments made by check (e.g. Telecheck) except as follows:

 

Bank Name and Branch

 

 

 

 

Address

 

Contact Person and Phone Number

 

Account No.

None.

 

 

 

 

 

33.                    The Company owns or has registered to it the following
motor vehicles, the original title certificates for which shall be delivered to
Lender prior to closing: None.

 

34.                    With regard to any pension or profit sharing plan:

 

None.

 

4

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

 

35.                    The Company’s fiscal year is a 52 or 53 week year that
ends on the Saturday closest to January 31. The results for fiscal year 2014
represent the fifty-two week period ending January 31, 2015. The results for
fiscal years 2015 and 2016 represent the fifty-two week period ending
January 30, 2016 and January 28, 2017.

 

36.                    Certified Public Accountants for the Company is the firm
of:

 

Name:

 

Ernst & Young

Address:

 

5 Times Square

 

 

New York, NY 10036-6530

Telephone:

 

(516) 336-0377

Facsimile:

 

(866) 313-0949

E-Mail:

 

Joy.Fernandez@ey.com

Partner Handling Relationship:

 

Joy Fernandez

Were statements uncertified for any fiscal year?

 

Statements for year end 2013 (2/3/13-2/1/14) were certified

 

37.                    The Company’s counsel with respect to the proposed loan
transaction is the firm of:

 

Name:

 

Kirkland & Ellis

Address:

 

601 Lexington Avenue

 

 

New York, NY 10022

Telephone:

 

(212) 446-4800

Facsimile:

 

(212) 446-4900

E-Mail:

 

medsall@kirkland.com

Partner Handling Relationship:

 

Michael Edsall

 

38.                    The Company’s counsel with respect to matters other than
the proposed loan transaction, if different, is the firm of:

 

Name:

 

Same as above

Address:

 

 

Telephone:

 

 

Facsimile:

 

 

 

Name:

 

Same as above

Address:

 

 

Telephone:

 

 

Facsimile:

 

 

E-Mail:

 

 

Partner Handling Relationship:

 

 

 

We agree to give you prompt written notice of any change or amendment with
respect to any of the foregoing information. Until you receive such notice, you
will be entitled to rely in all respects on the foregoing information. This
Amended and Restated Information Certificate amends and restates all of the
information set forth in the Information Certificate, dated August 10, 2011.

 

5

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

 

 

Very truly yours,

 

 

 

NEVADA RECEIVABLE FACTORING, INC

 

 

 

 

 

By:

/s/ Sheamus Toal

 

 

Title: President & Chief Financial Officer

 

6

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AMEDNED AND RESTATED INFORMATION CERTIFICATE

 

OF

 

LERNER NEW YORK HOLDING, INC

 

Dated: October 24, 2014

Wells Fargo Bank, National Association, as Agent

One Boston Place, 19th Floor

Boston, Massachusetts 02108

 

In order to assist you in the evaluation of the financing you are considering of
Lerner New York Holding, Inc. (the “ Company “), pursuant to the pursuant to the
Fourth Amended and Restated Loan and Security Agreement, dated of even date
herewith, Wells Fargo Bank, National Association, as Agent (in such capacity
“Agent” or “you”), for the persons thereto as Lenders (collectively “Lenders” or
“you”), the Company certain affiliates of the Company (as the same now exists or
may hereafter be amended, modified, supplemented, renewed, restated or
registered, the “Loan Agreement”), to expedite the preparation of required
documentation, and to induce you to provide financing to the Company, we
represent and warrant to you and the Lenders the following information about the
Company, its organizational structure and other matters of interest to you:

 

1.                          The Company has been formed by filing the following
document with the Secretary of State of Delaware:

 

x                       Certificate/Articles of Incorporation

o                       Certificate/Articles of Organization

o                       Other [specify]                                

 

The date of formation of the Company by the filing of the document specified
above with the Secretary of State was November 4, 1994.

 

2.                          The Company was not formed by filing a document with
any Secretary of State. The Company is organized as a [specify type of
organization, (e.g., general partnership, sole
proprietorship, etc.)]                  . The Company’s governing document is a
[name legal document, if one exists, (e.g., partnership agreement, etc.)

 

Not applicable

 

3.                          The full and exact name of the Company as set forth
in the document specified in Item 1 or 2, or (if no document is specified in
Item 1 or 2) the full and exact legal name used in the Company’s business, is:

 

Lerner New York Holding, Inc.

 

4.                          The Company uses and owns the following trade
name(s) in the operation of its business (e.g. billing, advertising, etc.; note;
do not include names which are product names only):

 

None.

 

[Check one of the boxes below.]

 

o                                  We have attached a blank sample of every
invoice that uses a tradename.

x                                  We do not use any tradename other than the
tradenames listed in Item 4 on any invoices.

 

5.                          The Company maintains offices, leases or owns real
estate, has employees, pays taxes, or otherwise conducts business in the
following States (including the State of its organization):

 

Delaware.

 

6.                          The Company has filed the necessary documents with
the Secretary of State to qualify as a foreign corporation in the following
States:

 

None.

 

7.                          The Company’s authority to do business has been
revoked or suspended, or the Company is otherwise not in good standing in

 

1

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

 

the following States:

 

None.

 

8.                          The Company and its subsidiaries have all licenses
and permits necessary for the operation of the business of the Company, as such
business is being operated as of the date hereof.

 

9.                          In conducting its business activities, the Company
is subject to regulation by federal, state or local agencies or authorities
(e.g., FDA, EPA, state or municipal liquor licensing agencies, federal or state
carrier commissions, etc.) as follows:

 

Not applicable.

 

10.                   The Company has never been involved in a bankruptcy or
reorganization except: [explain]

 

None.

 

11.                   Between the date the Company was formed and now, the
Company has used other names as set forth below:

 

Period of Time

 

Prior Name

 

 

 

From 11/4/1994 to 5/15/2001

 

Fifth Co., Inc.

 

12.                   Between the date the Company was formed and now, the
Company has made or entered into mergers or acquisitions with other companies as
set forth below:

 

None other than mergers and reorganizations of internal companies in the
ordinary course of business.

 

13.                   The chief executive office of the Company is located at
the street address set forth below, which is in New York County, in the State of
New York:

 

450 W. 33rd Street

New York, NY 10001

 

14.                   The books and records of the Company pertaining to
accounts, contract rights, inventory, etc. are located at the following street
address:

 

450 W. 33rd Street

New York, NY 10001

 

15.                   In addition to the chief executive office, the Company has
inventory, equipment or other assets located at the addresses set forth below.
In each case, we have noted whether the location is owned, leased or operated by
third parties and the names and addresses of any mortgagee, lessor or third
party operator:

 

 

 

 

 

Name and Address of Third
Party with Interest in Location

 

 

Company’s Interest

 

(e.g., mortgagee, lessor or

Street Address with County

 

(e.g., owner, lessee or bailee)

 

warehouseman)

 

 

 

 

 

None.

 

 

 

 

 

16.                   In the course of its business, the Company’s inventory
and/or other assets are handled by the following customs brokers and/or freight
forwarders:

 

Name

 

Address

 

Type of Service/Assets Handled

 

 

 

 

 

None.

 

 

 

 

 

17.                   The places of business or other locations of any assets
used by the Company during the last four (4) months other than those listed
above are as follows:

 

2

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

 

None.

 

18.                   The Company is affiliated with, or has ownership in, the
following entities (including subsidiaries):

 

Name of Entity

 

Chief Executive Office

 

Jurisdiction of
 Incorporation

 

Ownership
 Percentage or
 Relationship

New York & Company, Inc.

 

450 West 33rd Street

New York, NY 10001

 

Delaware

 

Ultimate Parent / 100%

 

 

 

 

 

 

 

Lerner New York, Inc.

 

450 West 33rd Street

New York, NY 10001

 

Delaware

 

Subsidiary of Parent / 100%

 

 

 

 

 

 

 

Lernco, Inc.

 

1105 North Market Street,

Suite 1300

Wilmington, DE 19801

 

Delaware

 

Subsidiary of Parent / 100%

 

 

 

 

 

 

 

Nevada Receivable Factoring, Inc.

 

6700 Via Austi Pkwy

Parkway, Suite C

Las Vegas, Nevada 89119

 

Nevada

 

Subsidiary of Parent / 100%

 

 

 

 

 

 

 

New York & Company Stores, Inc.

 

450 West 33rd Street

New York, NY 10001

 

New York

 

Subsidiary / 100%

 

 

 

 

 

 

 

Lerner New York GC, LLC

 

3 Limited Pkwy

Columbus, Ohio 43230

 

Ohio

 

Subsidiary / 100%

 

 

 

 

 

 

 

Lerner New York Outlet, Inc. (formerly known as Jasmine Company, Inc.)

 

450 West 33rd Street

New York, NY 10001

 

Massachusetts

 

Subsidiary / 100%

 

19.                   The Federal Employer Identification Number of the Company
is 31-1422460

 

20.                   Under the Company’s charter documents, and under the laws
of the State in which the Company is organized, the shareholders, members or
other equity holders do not have to consent in order for the Company to borrow
money, incur debt or obligations, pledge or mortgage the property of the
Company, grant a security interest in the property of the Company or guaranty
the debt of obligations of another person or entity.

 

x True

o Incorrect [explain]:

 

The power to take the foregoing actions is vested exclusively in the Board of
Directors.

 

21.                   The officers of the Company (or people performing similar
functions) and their respective titles are as follows:

 

Name

 

Title

 

 

 

Gregory Scott

 

Chief Executive Officer

Sheamus Toal

 

Executive Vice President, Chief Financial Officer, Treasurer & Secretary

Adam Ratner

 

Vice President, General Counsel & Assistant Secretary

 

The following people will have signatory powers as to all your of transactions
with the Company:

 

The Officers authorized in the Company’s Board of Director resolutions.

 

22.                   With respect to the officers noted above, such officers
are affiliated with and hold a 5% or more beneficial ownership in the following
corporations (indicate name and address of affiliated companies, type of
operations, ownership percentage or other relationship):

 

3

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

 

None.

 

23.                   The Company is governed by the Board of Directors.  The
members of such governing body of the Company are:

 

Bodil M. Arlander, Jill Beraud, David H. Edwab, James O. Egan, John D. Howard,
Grace Nichols, Michelle Pearlman,

Richard L. Perkal, Arthur E. Reiner, and Gregory Scott.

 

24.                   The name of the stockholders, members, partners or other
equity holders of the Company and their equity holdings are as follows (if
equity interests are widely held indicate only equity owners with 10% or more of
the equity interests):

 

Name

 

No. of Shares or Units

 

Ownership Percentage

 

 

 

 

 

 

 

New York & Company, Inc.

 

100 Common Shares

 

100

%

 

25.                   There are no judgments or litigation pending by or against
the Company, its subsidiaries and/or affiliates or any of its
officers/principals, except as follows:

 

None.

 

26.                   At the present time, there are no delinquent taxes due
(including, but not limited to, all payroll taxes, personal property taxes, real
estate taxes or income taxes) except as follows:

 

None.

 

27.                   The Company’s assets are owned and held free and clear of
any security interests, liens or attachments, except as follows:

 

 

 

 

 

Amount of Debt

 

Lienholder

 

Assets Pledged

 

Secured

 

 

 

 

 

 

 

None.

 

 

 

 

 

 

28.                   The Company has not guaranteed and is not otherwise liable
for the obligations of others, except as follows:

 

None.

 

29.                   The Company does not own or license any trademarks,
patents, copyrights or other intellectual property, except as follows (indicate
type of intellectual property and whether owned or licensed, registration
number, date of registration, and, if licensed, the name and address of the
licensor):

 

 

 

Registration

 

 

 

Name and Address

Type of Intellectual

 

Number and Date of

 

Owned or

 

of

Property

 

Registration

 

Licensed

 

Licensor

 

 

 

 

 

 

 

None.

 

 

 

 

 

 

 

30.                   The Company owns or uses the following materials (e.g.,
software, film footage, scripts, etc.) that are subject to registration with the
United States Copyright Office, though at present copyright registrations have
not been filed with respect to such materials:

 

None.

 

31.                   The Company does not have any deposit or investment
accounts with any bank, savings and loan or other financial institution, except
as follows, for the purposes and of the types indicated:

 

 

 

Contact Person and

 

 

 

 

Bank Name and Branch Address

 

Phone Number

 

Account No.

 

Purpose/Type

 

 

 

 

 

 

 

None.

 

 

 

 

 

 

 

32.                   The Company has no processing arrangements for credit card
payments or payments made by check (e.g. Telecheck) except as follows:

 

4

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

 

Bank Name and Branch

 

 

 

 

Address

 

Contact Person and Phone Number

 

Account No.

None.

 

 

 

 

 

33.                   The Company owns or has registered to it the following
motor vehicles, the original title certificates for which shall be delivered to
Lender prior to closing:

 

None.

 

34.                   With regard to any pension or profit sharing plan:

 

None.

 

35.

The Company’s fiscal year is a 52 or 53 week year that ends on the Saturday
closest to January 31. The results for fiscal year 2014 represent the fifty-two
week period ending January 31, 2015. The results for fiscal years 2015 and 2016
represent the fifty-two week period ending January 30, 2016 and January 28,
2017.

 

36.                   Certified Public Accountants for the Company is the firm
of:

 

Name:

 

Ernst & Young

Address:

 

5 Times Square

 

 

New York, NY 10036-6530

Telephone:

 

(516) 336-0377

Facsimile:

 

(866) 313-0949

E-Mail:

 

Joy.Fernandez@ey.com

Partner Handling Relationship:

 

Joy Fernandez

Were statements uncertified for any fiscal year?

 

Statements for year end 2013 (2/3/13-2/1/14) were certified

 

37.                   The Company’s counsel with respect to the proposed loan
transaction is the firm of:

 

Name:

 

Kirkland & Ellis

Address:

 

601 Lexington Avenue

 

 

New York, NY 10022

Telephone:

 

(212) 446-4800

Facsimile:

 

(212) 446-4900

E-Mail:

 

medsall@kirkland.com

Partner Handling Relationship:

 

Michael Edsall

 

38.                   The Company’s counsel with respect to matters other than
the proposed loan transaction, if different, is the firm of:

 

Partner Handling Relationship:

 

Michael Edsall

 

38.                   The Company’s counsel with respect to matters other than
the proposed loan transaction, if different, is the firm of:

 

Name:

 

Same as above

Address:

 

 

Telephone:

 

 

Facsimile:

 

 

E-Mail:

 

 

Partner Handling Relationship:

 

 

 

We agree to give you prompt written notice of any change or amendment with
respect to any of the foregoing information.

 

5

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

 

Until you receive such notice, you will be entitled to rely in all respects on
the foregoing information. This Amended and Restated Information Certificate
amends and restates all of the information set forth in the Information
Certificate, dated August 10, 2011.

 

6

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

 

 

Very truly yours,

 

 

 

LERNER NEW YORK HOLDINGS, INC

 

 

 

By:

/s/ Sheamus Toal

 

 

Title:

Executive Vice President, Chief Financial Officer, Treasurer & Secretary

 

7

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

 

AMEDNED AND RESTATED INFORMATION CERTIFICATE

 

OF

 

LERNER NEW YORK GC, LLC

 

Dated: October    , 2014

 

Wells Fargo Bank, National Association, as Agent

One Boston Place, 19th Floor

Boston, Massachusetts 02108

 

In order to assist you in the evaluation of the financing you are considering of
Lerner New York GC, LLC. (the “ Company “), pursuant to the Fourth Amended and
Restated Loan and Security Agreement, dated of even date herewith, Wells Fargo
Bank, National Association, as Agent (in such capacity “Agent” or “you”), for
the persons thereto as Lenders (collectively “Lenders” or “you”), the Company
certain affiliates of the Company (as the same now exists or may hereafter be
amended, modified, supplemented, renewed, restated or registered, the “Loan
Agreement”), to expedite the preparation of required documentation, and to
induce you to provide financing to the Company, we represent and warrant to you
and the Lenders the following information about the Company, its organizational
structure and other matters of interest to you:

 

1.                         The Company has been formed by filing the following
document with the Secretary of State of Ohio:

 

o                         Certificate/Articles of Incorporation

x                       Certificate/Articles of Organization

o                         Other [specify]                        

 

The date of formation of the Company by the filing of the document specified
above with the Secretary of State was November 19, 2001.

 

2.                         The Company was not formed by filing a document with
any Secretary of State. The Company is organized as a [specify type of
organization, (e.g., general partnership, sole
proprietorship, etc.)]            . The Company’s governing document is a [name
legal document, if one exists, (e.g., partnership agreement, etc.)

 

Not applicable.

 

3.                         The full and exact name of the Company as set forth
in the document specified in Item 1 or 2, or (if no document is specified in
Item 1 or 2) the full and exact legal name used in the Company’s business, is:

 

Lerner New York GC, LLC

 

4.                         The Company uses and owns the following trade
name(s) in the operation of its business (e.g. billing, advertising, etc.; note:
do not include names which are product names only):

 

None.

 

[Check one of the boxes below.]

 

o      We have attached a blank sample of every invoice that uses a tradename.

x                      We do not use any tradename other than the tradenames
listed in Item 4 on any invoices.

 

5.                         The Company maintains offices, leases or owns real
estate, has employees, pays taxes, or otherwise conducts business in the
following States (including the State of its organization):

 

Ohio.

 

6.                          The Company has filed the necessary documents with
the Secretary of State to qualify as a foreign corporation in the following
States:

 

None.

 

1

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

 

7.                         The Company’s authority to do business has been
revoked or suspended, or the Company is otherwise not in good standing in the
following States:

 

None.

 

8.                         The Company and its subsidiaries have all licenses
and permits necessary for the operation of the business of the Company, as such
business is being operated as of the date hereof.

 

9.                         In conducting its business activities, the Company is
subject to regulation by federal, state or local agencies or authorities (e.g.,
FDA, EPA, state or municipal liquor licensing agencies, federal or state carrier
commissions, etc.) as follows:

 

Not applicable.

 

10.                  The Company has never been involved in a bankruptcy or
reorganization except: [explain]

 

None.

 

11.                  Between the date the Company was formed and now, the
Company has used other names as set forth below:

 

Period of Time

 

Prior Name

None.

 

 

 

12.                  Between the date the Company was formed and now, the
Company has made or entered into mergers or acquisitions with other companies as
set forth below:

 

None other than mergers and reorganizations of internal companies in the
ordinary course of business.

 

13.                  The chief executive office of the Company is located at the
street address set forth below, which is in New York County, in the State of New
York:

 

3 Limited Pwky

Columbus, OH 43230

 

14.                  The books and records of the Company pertaining to
accounts, contract rights, inventory, etc. are located at the following street
address:

 

3 Limited Pwky

Columbus, OH 43230

 

15.                  In addition to the chief executive office, the Company has
inventory, equipment or other assets located at the addresses set forth below.
In each case, we have noted whether the location is owned, leased or operated by
third parties and the names and addresses of any mortgagee, lessor or third
party operator:

 

 

 

 

 

Name and Address of Third

 

 

 

 

Party with Interest in Location

 

 

Company’s Interest

 

(e.g., mortgagee, lessor or

Street Address with County

 

(e.g., owner, lessee or bailee)

 

warehouseman)

 

 

 

 

 

None.

 

 

 

 

 

16.                  In the course of its business, the Company’s inventory
and/or other assets are handled by the following customs brokers and/or freight
forwarders:

 

Name

 

Address

 

Type of Service/Assets Handled

 

 

 

 

 

None.

 

 

 

 

 

2

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

 

17.                  The places of business or other locations of any assets
used by the Company during the last four (4) months other than those listed
above are as follows:

 

None.

 

18.                  The Company is affiliated with, or has ownership in, the
following entities (including subsidiaries):

 

Name of Entity

 

Chief Executive Office

 

Jurisdiction of
 Incorporation

 

Ownership
 Percentage or
 Relationship

 

 

 

 

 

 

 

New York & Company, Inc.

 

450 West 33rd Street

New York, NY 10001

 

Delaware

 

Ultimate Parent / 100%

 

 

 

 

 

 

 

Lerner New York Holding, Inc.

 

450 West 33rd Street

New York, NY 10001

 

Delaware

 

Parent / 100%

 

 

 

 

 

 

 

Lernco, Inc.

 

1105 North Market Street,

Suite 1300

Wilmington, DE 19801

 

Delaware

 

Subsidiary of Parent / 100%

 

 

 

 

 

 

 

Nevada Receivable Factoring, Inc.

 

6700 Via Austi Pkwy

Parkway, Suite C

Las Vegas, Nevada 89119

 

Nevada

 

Subsidiary of Parent / 100%

 

 

 

 

 

 

 

New York & Company Stores, Inc.

 

450 West 33rd Street

New York, NY 10001

 

New York

 

Subsidiary / 100%

 

 

 

 

 

 

 

Lerner New York, Inc.

 

450 West 33rd Street

New York, NY 10001

 

Delaware

 

Subsidiary of Parent / 100%

 

 

 

 

 

 

 

Lerner New York Outlet, Inc. (formerly known as Jasmine Company, Inc.)

 

450 West 33rd Street

New York, NY 10001

 

Massachusetts

 

Subsidiary / 100%

 

19.                  The Federal Employer Identification Number of the Company
is 31-1816095

 

20.                  Under the Company’s charter documents, and under the laws
of the State in which the Company is organized, the shareholders, members or
other equity holders do not have to consent in order for the Company to borrow
money, incur debt or obligations, pledge or mortgage the property of the
Company, grant a security interest in the property of the Company or guaranty
the debt of obligations of another person or entity.

 

x   True

 

o   Incorrect [explain]:

 

The power to take the foregoing actions is vested exclusively in the Board of
Directors.

 

21.                  The officers of the Company (or people performing similar
functions) and their respective titles are as follows:

 

Name

 

Title

Sheamus Toal

 

President

Kevin Katchmar

 

Vice President

Chris Consi

 

Treasurer

 

The following people will have signatory powers as to all your of transactions
with the Company:

 

The Officers authorized in the Company’s Board of Director resolutions

 

22.                  With respect to the officers noted above, such officers are
affiliated with and hold a 5% or more beneficial ownership in the following
corporations (indicate name and address of affiliated companies, type of
operations, ownership percentage or other

 

3

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

 

relationship):

 

None.

 

23.                  The Company is governed by the Board of Directors. The
members of such governing body of the Company are:

 

None.

 

24.                  The name of the stockholders, members, partners or other
equity holders of the Company and their equity holdings are as follows (if
equity interests are widely held indicate only equity owners with 10% or more of
the equity interests):

 

Name

 

No. of Shares or Units

 

Ownership Percentage

 

 

 

 

 

None.

 

 

 

 

 

25.                  There are no judgments or litigation pending by or against
the Company, its subsidiaries and/or affiliates or any of its
officers/principals, except as follows:

 

None.

 

26.                  At the present time, there are no delinquent taxes due
(including, but not limited to, all payroll taxes, personal property taxes, real
estate taxes or income taxes) except as follows:

 

None.

 

27.                  The Company’s assets are owned and held free and clear of
any security interests, liens or attachments, except as follows:

 

Lienholder

 

Assets Pledged

 

Amount of Debt
 Secured

 

 

 

 

 

None.

 

 

 

 

 

28.                  The Company has not guaranteed and is not otherwise liable
for the obligations of others, except as follows:

 

None.

 

29.                  The Company does not own or license any trademarks,
patents, copyrights or other intellectual property, except as follows (indicate
type of intellectual property and whether owned or licensed, registration
number, date of registration, and, if licensed, the name and address of the
licensor):

 

 

 

Registration

 

 

 

Name and Address

Type of Intellectual

 

Number and Date of

 

Owned or

 

of

Property

 

Registration

 

Licensed

 

Licensor

None.

 

 

 

 

 

 

 

30.                  The Company owns or uses the following materials (e.g.,
software, film footage, scripts, etc.) that are subject to registration with the
United States Copyright Office, though at present copyright registrations have
not been filed with respect to such materials:

 

None.

 

31.                  The Company does not have any deposit or investment
accounts with any bank, savings and loan or other financial institution, except
as follows, for the purposes and of the types indicated:

 

Bank Name and Branch Address

 

Contact Person and
 Phone Number

 

Account No.

 

Purpose/Type

 

 

 

 

 

 

 

None.

 

 

 

 

 

 

 

32.                  The Company has no processing arrangements for credit card
payments or payments made by check (e.g. Telecheck) except as follows:

 

Bank Name and Branch Address

 

Contact Person and
Phone Number

 

Account No.

None.

 

 

 

 

 

4

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

 

33.                  The Company owns or has registered to it the following
motor vehicles, the original title certificates for which shall be delivered to
Lender prior to closing:

 

None.

 

34.                  With regard to any pension or profit sharing plan:

 

None.

 

35.                  The Company’s fiscal year is a 52 or 53 week year that ends
on the Saturday closest to January 31. The results for fiscal year 2014
represent the fifty-two week period ending January 31, 2015. The results for
fiscal years 2015 and 2016 represent the fifty-two week period ending
January 30, 2016 and January 28, 2017.

 

36.                  Certified Public Accountants for the Company is the firm
of:

 

Name:

 

Ernst & Young

Address:

 

5 Times Square

 

 

New York, NY 10036-6530

Telephone:

 

(516) 336-0377

Facsimile:

 

(866) 313-0949

E-Mail:

 

Joy.Fernandez@ey.com

Partner Handling Relationship:

 

Joy Fernandez

Were statements uncertified for any fiscal year?

 

Statements for year end 2013 (2/3/13-2/1/14) were certified

 

37.                  The Company’s counsel with respect to the proposed loan
transaction is the firm of:

 

Name:

 

Kirkland & Ellis

Address:

 

601 Lexington Avenue

 

 

New York, NY 10022

Telephone:

 

(212) 446-4800

Facsimile:

 

(212) 446-4900

E-Mail:

 

medsall@kirkland.com

Partner Handling Relationship:

 

Michael Edsall

 

38.                  The Company’s counsel with respect to matters other than
the proposed loan transaction, if different, is the firm of:

 

Name:

 

Same as above

Address:

 

 

 

38.                  The Company’s counsel with respect to matters other than
the proposed loan transaction, if different, is the firm of:

 

Name:

 

Same as above

Address:

 

 

Telephone:

 

 

Facsimile:

 

 

E-Mail:

 

 

Partner Handling Relationship:

 

 

 

We agree to give you prompt written notice of any change or amendment with
respect to any of the foregoing information. Until you receive such notice, you
will be entitled to rely in all respects on the foregoing information. This
Amended and Restated Information Certificate amends and restates all of the
information set forth in the Information Certificate, dated August 10, 2011.

 

5

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

 

 

Very truly yours,

 

 

 

LERNER NEW YORK GC, LLC

 

 

 

 

 

By:

/s/ Sheamus Toal

 

 

Title:      President

 

6

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

 

AMEDNED AND RESTATED INFORMATION CERTIFICATE

 

OF

 

NEW YORK & COMPANY STORES, INC. (f/k/a ASSOCIATED LERNER SHOPS OF AMERICA, INC.)

 

Dated: October 24, 2014

 

Wells Fargo Bank, National Association, as Agent

One Boston Place, 19th Floor

Boston, Massachusetts 02108

 

In order to assist you in the evaluation of the financing you are considering of
New York & Company Stores, Inc. (formerly known as Associated Lerner Shops of
America, Inc.) (the “ Company “), pursuant to the Fourth Amended and Restated
Loan and Security Agreement, dated of even date herewith, Wells Fargo Bank,
National Association, as Agent (in such capacity “Agent” or “you”), for the
persons thereto as Lenders (collectively “Lenders” or “you”), the Company
certain affiliates of the Company (as the same now exists or may hereafter be
amended, modified, supplemented, renewed, restated or registered, the “Loan
Agreement”), to expedite the preparation of required documentation, and to
induce you to provide financing to the Company, we represent and warrant to you
and the Lenders the following information about the Company, its organizational
structure and other matters of interest to you:

 

1.                         The Company has been formed by filing the following
document with the Secretary of State of New York:

 

x                    Certificate/Articles of Incorporation

o                      Certificate/Articles of Organization

o                      Other [specify]                         

 

The date of formation of the Company by the filing of the document specified
above with the Secretary of State was January 24, 1933.

 

2.                         The Company was not formed by filing a document with
any Secretary of State. The Company is organized as a [specify type of
organization, (e.g., general partnership, sole
proprietorship, etc.)]           . The Company’s governing document is a [name
legal document, if one exists, (e.g., partnership agreement, etc.) Not
applicable

 

3.                         The full and exact name of the Company as set forth
in the document specified in Item 1 or 2, or (if no document is specified in
Item 1 or 2) the full and exact legal name used in the Company’s business, is:

 

New York & Company Stores, Inc. (f/k/a Associated Lerner Shops of America, Inc.)

 

4.                         The Company uses and owns the following trade
name(s) in the operation of its business (e.g. billing, advertising, etc.; note:
do not include names which are product names only):

 

None.

 

[Check one of the boxes below.]

 

o                        We have attached a blank sample of every invoice that
uses a tradename.

x                      We do not use any tradename other than the tradenames
listed in Item 4 on any invoices.

 

5.                         The Company maintains offices, leases or owns real
estate, has employees, pays taxes, or otherwise conducts business in the
following States (including the State of its organization):

 

New York.

 

6.                         The Company has filed the necessary documents with
the Secretary of State to qualify as a foreign corporation in the following
States:

 

None.

 

7.                         The Company’s authority to do business has been
revoked or suspended, or the Company is otherwise not in good standing in the
following States:

 

None.

 

1

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

 

8.                         The Company and its subsidiaries have all licenses
and permits necessary for the operation of the business of the Company, as such
business is being operated as of the date hereof.

 

9.                         In conducting its business activities, the Company is
subject to regulation by federal, state or local agencies or authorities (e.g.,
FDA, EPA, state or municipal liquor licensing agencies, federal or state carrier
commissions, etc.) as follows:

 

Not applicable.

 

10.                  The Company has never been involved in a bankruptcy or
reorganization except: [explain]

 

None.

 

11.                  Between the date the Company was formed and now, the
Company has used other names as set forth below:

 

Period of Time

 

Prior Name

 

 

 

From January 24, 1933 to July 21, 2011

 

Associated Lerner Shops of America, Inc.

 

12.                  Between the date the Company was formed and now, the
Company has made or entered into mergers or acquisitions with other companies as
set forth below:

 

None other than mergers and reorganizations of internal companies in the
ordinary course of business.

 

13.                  The chief executive office of the Company is located at the
street address set forth below, which is in New York County, in the State of New
York:

 

450 W. 33rd Street

New York, NY 10001

 

14.                  The books and records of the Company pertaining to
accounts, contract rights, inventory, etc. are located at the following street
address:

 

450 W. 33rd Street

New York, NY 10001

 

15.                  In addition to the chief executive office, the Company has
inventory, equipment or other assets located at the addresses set forth below.
In each case, we have noted whether the location is owned, leased or operated by
third parties and the names and addresses of any mortgagee, lessor or third
party operator:

 

Street Address with County

 

Company’s Interest
(e.g., owner, lessee or bailee)

 

Name and Address of Third
Party with Interest in Location
(e.g., mortgagee, lessor or
warehouseman)

 

 

 

 

 

None.

 

 

 

 

 

16.                  In the course of its business, the Company’s inventory
and/or other assets are handled by the following customs brokers and/or freight
forwarders:

 

Name

 

Address

 

Type of Service/Assets Handled

 

 

 

 

 

None.

 

 

 

 

 

17.                  The places of business or other locations of any assets
used by the Company during the last four (4) months other than those listed
above are as follows:

 

None.

 

18.                  The Company is affiliated with, or has ownership in, the
following entities (including subsidiaries):

 

2

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

 

Name of Entity

 

Chief Executive Office

 

Jurisdiction of
Incorporation

 

Ownership
Percentage or
Relationship

 

 

 

 

 

 

 

New York & Company, Inc.

 

450 West 33rd Street

New York, NY 10001

 

Delaware

 

Ultimate Parent / 100%

 

 

 

 

 

 

 

Lerner New York Holding, Inc.

 

450 West 33rd Street

New York, NY 10001

 

Delaware

 

Parent / 100%

 

 

 

 

 

 

 

Lernco, Inc.

 

1105 North Market Street,

Suite 1300

Wilmington, DE 19801

 

Delaware

 

Subsidiary of Parent / 100%

 

 

 

 

 

 

 

Nevada Receivable Factoring, Inc.

 

6700 Via Austi Pkwy

Parkway, Suite C

Las Vegas, Nevada 89119

 

Nevada

 

Subsidiary of Parent / 100%

 

 

 

 

 

 

 

Lerner New York, Inc.

 

450 West 33rd Street

New York, NY 10001

 

Delaware

 

Subsidiary of Parent / 100%

 

 

 

 

 

 

 

Lerner New York GC, LLC

 

3 Limited Pkwy

Columbus, Ohio 43230

 

Ohio

 

Subsidiary / 100%

 

 

 

 

 

 

 

Lerner New York Outlet, Inc. (formerly known as Jasmine Company, Inc.)

 

450 W. 33rd Street

New York, NY 10001

 

Massachusetts

 

Subsidiary / 100%

 

19.                  The Federal Employer Identification Number of the Company
is 13-5566483

 

20.                  Under the Company’s charter documents, and under the laws
of the State in which the Company is organized, the shareholders, members or
other equity holders do not have to consent in order for the Company to borrow
money, incur debt or obligations, pledge or mortgage the property of the
Company, grant a security interest in the property of the Company or guaranty
the debt of obligations of another person or entity.

 

x    True

o    Incorrect [explain]:

 

The power to take the foregoing actions is vested exclusively in the Board of
Directors.

 

21.                  The officers of the Company (or people performing similar
functions) and their respective titles are as follows:

 

Name

 

Title

Gregory Scott

 

President

Sheamus Toal

 

Treasurer

 

The following people will have signatory powers as to all your of transactions
with the Company:

 

The Officers authorized in the Company’s Board of Director resolutions

 

22.                  With respect to the officers noted above, such officers are
affiliated with and hold a 5% or more beneficial ownership in the following
corporations (indicate name and address of affiliated companies, type of
operations, ownership percentage or other relationship):

 

None.

 

23.                  The Company is governed by the Board of Directors. The
members of such governing body of the Company are:

 

Gregory Scott and Sheamus Toal

 

24.                  The name of the stockholders, members, partners or other
equity holders of the Company and their equity holdings are as follows (if
equity interests are widely held indicate only equity owners with 10% or more of
the equity interests):

 

3

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

 

Name

 

No. of Shares or Units

 

Ownership Percentage

 

 

 

 

 

 

 

Lerner New York, Inc.

 

250 Common Shares

 

100

%

 

25.                  There are no judgments or litigation pending by or against
the Company, its subsidiaries and/or affiliates or any of its
officers/principals, except as follows:

 

None.

 

26.                  At the present time, there are no delinquent taxes due
(including, but not limited to, all payroll taxes, personal property taxes, real
estate taxes or income taxes) except as follows:

 

None.

 

27.                  The Company’s assets are owned and held free and clear of
any security interests, liens or attachments, except as follows:

 

Lienholder

 

Assets Pledged

 

Amount of Debt
 Secured

None.

 

 

 

 

 

28.                  The Company has not guaranteed and is not otherwise liable
for the obligations of others, except as follows:

 

None.

 

29.                  The Company does not own or license any trademarks,
patents, copyrights or other intellectual property, except as follows (indicate
type of intellectual property and whether owned or licensed, registration
number, date of registration, and, if licensed, the name and address of the
licensor):

 

 

 

Registration

 

 

 

Name and Address

Type of Intellectual

 

Number and Date of

 

Owned or

 

of

Property

 

Registration

 

Licensed

 

Licensor

None.

 

 

 

 

 

 

 

30.                  The Company owns or uses the following materials (e.g.,
software, film footage, scripts, etc.) that are subject to registration with the
United States Copyright Office, though at present copyright registrations have
not been filed with respect to such materials:

None.

 

31.                  The Company does not have any deposit or investment
accounts with any bank, savings and loan or other financial institution, except
as follows, for the purposes and of the types indicated:

 

 

 

Contact Person and

 

 

 

 

Bank Name and Branch Address

 

Phone Number

 

Account No.

 

Purpose/Type

None.

 

 

 

 

 

 

 

32.                  The Company has no processing arrangements for credit card
payments or payments made by check (e.g. Telecheck) except as follows:    None.

 

Bank Name and Branch
Address

 

Contact Person and Phone Number

 

Account No.

None.

 

 

 

 

 

33.                  The Company owns or has registered to it the following
motor vehicles, the original title certificates for which shall be delivered to
Lender prior to closing:   None.

 

34.                  With regard to any pension or profit sharing plan:

 

None.

 

35.                  The Company’s fiscal year is a 52 or 53 week year that ends
on the Saturday closest to January 31. The results for fiscal year 2014
represent the fifty-two week period ending January 31, 2015. The results for
fiscal years 2015 and 2016 represent the

 

4

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

 

fifty-two week period ending January 30, 2016 and January 28, 2017.

 

36.                  Certified Public Accountants for the Company is the firm
of:

 

Name:

 

Ernst & Young

Address:

 

5 Times Square

 

 

New York, NY 10036-6530

Telephone:

 

(516) 336-0377

Facsimile:

 

(866) 313-0949

E-Mail:

 

Joy.Fernandez@ey.com

Partner Handling Relationship:

 

Joy Fernandez

Were statements uncertified for any fiscal year?

 

Statements for year end 2013 (2/3/13-2/1/14) were certified

 

37.                   The Company’s counsel with respect to the proposed loan
transaction is the firm of:

 

Name:

 

Kirkland & Ellis

Address:

 

601 Lexington Avenue New York, NY 10022

Telephone:

 

(212) 446-4800

Facsimile:

 

(212) 446-4900

E-Mail:

 

medsall@kirkland.com

Partner Handling Relationship:

 

Michael Edsall

 

38.                   The Company’s counsel with respect to matters other than
the proposed loan transaction, if different, is the firm of:

 

Name:

 

Same as above

Address:

 

 

Telephone:

 

 

Facsimile:

 

 

E-Mail:

 

 

Partner Handling Relationship:

 

 

 

Telephone:

 

 

Facsimile:

 

 

E-Mail:

 

 

Partner Handling Relationship:

 

 

 

We agree to give you prompt written notice of any change or amendment with
respect to any of the foregoing information. Until you receive such notice, you
will be entitled to rely in all respects on the foregoing information. This
Amended and Restated Information Certificate amends and restates all of the
information set forth in the Information Certificate, dated August 10, 2011.

 

5

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

 

 

Very truly yours,

 

 

 

NEW YORK & COMPANY STORES, INC. (f/k/a ASSOCIATED LERNER SHOPS OF AMERICA, INC.)

 

 

 

 

 

By:

/s/ Sheamus Toal

 

 

Title:         Treasurer

 

6

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

 

SCHEDULE 5

 

The Company maintains offices, leases or owns real estate, has employees, pays
taxes, or otherwise conducts business in the following States (including the
State of its organization):

 

Alabama

Arizona

Arkansas

California

Colorado

Connecticut

Delaware

Florida

Georgia

Illinois

Indiana

Iowa

Kansas

Kentucky

Louisiana

Maine

Maryland

Massachusetts

Michigan

Minnesota

Mississippi

Missouri

Nebraska

Nevada

New Hampshire

New Jersey

New Mexico

New York

North Carolina

North Dakota

Ohio

Oklahoma

Pennsylvania

Rhode Island

South Carolina

South Dakota

Tennessee

Texas

Utah

Virginia

Washington

West Virginia

Wisconsin

 

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

 

SCHEDULE 6

 

The Company has filed the necessary documents with the Secretary of State to
qualify as a foreign corporation in the following States:

 

Alabama

Arizona

Arkansas

California

Colorado

Connecticut

Delaware

District of Columbia

Florida

Georgia

Idaho

Illinois

Indiana

Iowa

Kansas

Kentucky

Louisiana

Maine

Maryland

Massachusetts

Michigan

Minnesota

Mississippi

Missouri

Montana; inactive

Nebraska

Nevada

New Hampshire

New Jersey

New Mexico

New York

North Carolina

North Dakota

Ohio

Oklahoma

Oregon

Pennsylvania

Rhode Island

South Carolina

South Dakota

Tennessee

Texas

Utah

Vermont

Virginia

Washington

West Virginia

Wisconsin

Wyoming

 

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

 

SCHEDULE 16

 

Freight Forwarders

 

1. Custom Brokers

 

a) Expeditors International of Washington, Inc.

1015 Third Ave, 12th Floor

Seattle, WA 98104

Phone: 206-674-3400

Attn: Patrick Douglas, Director Security, Health, & Safety, the Americas

 

b) Retail Brokerage Solutions, Inc.

Two Limited Parkway

Columbus, OH 43230

Phone: 614-415-3564

Attn: Dan Donovan, Assistant Secretary

 

2. Freight Forwarders - OCEAN CARRIERS

 

a) Maersk Line

Elizabeth Hassert

Key Client Manager

Maersk, Inc.

1 Tower Lane, Suite 2800

Oak Brook Terrace, IL 60181

PH: 630-645-3622

FX: 630-645-3667

Email: Elizabeth.hassert@maersk.com

 

b) American President Lines

Jim Dietz

Senior Account Executive

700 Commerce Dr. Suite 110

Suite 110

Oak Brook, IL 60523

PH: 630-326-9776

Email: Jim_Dietz@apl.com

 

c) APL Logistics

Greg Finley

Director of Global Accounts

APL Logistics

3265 Rothschild Court

Dublin, OH 43017

PH: 440-725-7368

Email: Greg_Finley@apl.com

 

d) NYK Lines (North American)

Gary Garback

 

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

 

Director of Global Services

NYK Line (North America) Inc.

377 East Butterfield Road

5th Floor

Lombard, IL 60148

PH: 630-435-7803

Email: gary.garback@na.nykline.com

 

e) Mitsui OSK Lines

Aaron Ambrite

Sales Account Executive

700 E. Butterfield, Suite 250

Lombard, IL 60148

PH: 630-812-3776

Email: Aaron.Ambrite@mol-liner.com

 

f) US Lines

Holly Halloran

Director of Strategic Accounts

6180 Memorial Drive

Dublin, OH 43017

PH: 847-989-9988

Email: hhalloran@uslines.com

 

3. Freight Forwarders - AIRFREIGHT FORWARDERS

 

a) Morrison Express

Vincent Kao

Morrison Express Corp, USA

2000 Hughes Way

El Segundo, CA 90245

Tel: 310-322-8999

E-mail: vincent_kao@morrisonexpress.com

 

b) Schenker, Inc.

Denice Miller

General Manager

1941 Williams Road, Suite #B-2

Columbus, Ohio 43207

Tel: 614-497-1319

E-mail: denice.miller@dbschenker.com

 

c) Trinity Logistics, USA, Inc.

Erin Horn

Branch Manager

TRINITY LOGISTICS USA, INC

10 East Merrick Rd Suite 304

Valley Stream, NY 11580

O +1 516 612 3381

 

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

 

F +1 516 612 3383

M +1 917 868 9214

www.tliworldus.com

ehorn@tliworldus.com

 

d) Sovereign

Jenn Milller

Sr. Acct. Mgr.

10 Boice Road

Hyde Park, NY 12538

Tel: 845-229-8808

Email: jmiller@sovlog.com

 

e) Expolanka

Chandana Rodrigo

Regional Director

172-11 148th Road

Jamaica, NY 11434

PH: 615-295-3944

Email: chandanar@expofreight.com

 

f) Expeditors International

Regan Grundey

2550 John Glenn Avenue, Suite J

Columbus, OH 43217

PH: 614-295-3944

Email: regan.grundey@expidtors.com

 

g) RCS Logistics

Evan Rosen

Vice President, Sales

RCS Logistics

One Harmon Plaza, 10th Floor

Secaucus, NJ 07094

Tel:  201-867-1222

evan.rosen@rcslogistics.com

 

h) Hellmann Worldwide

Andrea Goldstein

10450 Doral Boulevard

Doral, Florida 33178

Tel: 305-406-4585

E-mail: aagoldst@us.hellmann.net

 

i) Savino Del Bene

Alessandro De Giusti

Savino Del Bene USA

149-10 183rd Street

Jamaica, NY 11413-4035

Cell: 646-492-1188

Fax: 718-906-2769

Email: alessandrod@nyc.sdbusa.com

 

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

 

4. E-Commerce Warehouse

 

a) GSI

Kim Smith Glisson

Site Leader, Martinsville

307 Hollie Drive

Martinsville, VA 24112

PH: 276-670-6146

CL: 276-734-0148

FX: 276-670-6131

 

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

 

SCHEDULE 25

 

New York & Company, Inc. and Subsidiaries

Summary of Legal Proceedings

As of October 21, 2014

 

Date Reported

 

Description

 

Claim

 

Legal Representative

 

Status

 

Required Accrual

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

(1)             The Company is involved in various legal proceedings in the
ordinary course of business, which are currently not material.

 

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

 

SCHEDULE 27

 

Permitted Liens

 

NONE.

 

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

 

SCHEDULE 29

 

Intellectual Property

 

(1)                                 See attached list of trademarks.

 

(2)                                 Domain Names:

 

·                  Domain names currently registered by Lernco, Inc.:

 

Domain Name

 

Registration
Date

 

Registry
Expiration Date

cocoandlolly.com

 

07-Apr-2009

 

07-Apr-2015

imagenyandc.com

 

20-Apr-2009

 

20-Apr-2015

jasminesola.com

 

03-Dec-1998

 

22-Jul-2017

learnercatalog.com

 

27-Nov-2001

 

27-Nov-2015

learnersny.com

 

27-Apr-2002

 

27-Apr-2016

lernco.com

 

01-Mar-1995

 

02-Mar-2015

lerner-catalog.com

 

24-Jun-2002

 

24-Jun-2016

lerner.com.mx

 

19-Mar-2004

 

18-Mar-2016

lernerandco.com

 

29-Jun-2007

 

29-Jun-2016

lernercalalog.com

 

22-Sep-2005

 

22-Sep-2016

lernercatalog.biz

 

08-Mar-2002

 

07-Mar-2016

lernercatalog.com

 

06-Apr-1999

 

06-Apr-2015

lernercatalog.net

 

08-Jan-2002

 

08-Jan-2016

lernercatalog.org

 

08-Jan-2002

 

08-Jan-2016

lernercataloge.com

 

28-May-2003

 

28-May-2016

lernercatalogue.com

 

02-Feb-2001

 

02-Feb-2016

lernercatatlog.com

 

04-Mar-2006

 

04-Mar-2016

lernercatelog.com

 

27-May-2003

 

27-May-2016

lernercatelogs.com

 

09-Mar-2005

 

09-Mar-2016

lernercatlogue.com

 

28-Apr-2007

 

28-Apr-2015

lernercreditcard.com

 

22-Jan-2007

 

22-Jan-2015

lernerdepartmentstore.com

 

28-Mar-2007

 

28-Mar-2015

lernerdirect.biz

 

08-Mar-2002

 

07-Mar-2016

lernerdirect.com

 

06-Apr-1999

 

06-Apr-2016

lernerdirect.net

 

08-Jan-2002

 

08-Jan-2016

lernerdirect.org

 

08-Jan-2002

 

08-Jan-2016

lernerdirect.us

 

10-Dec-2004

 

09-Dec-2014

lernerfashion.com

 

27-Nov-2005

 

27-Nov-2014

lernerfashions.com

 

27-Nov-2005

 

27-Nov-2015

lernerkatalog.com

 

02-Feb-2006

 

02-Feb-2016

lernermagazine.com

 

15-Mar-2006

 

15-Mar-2016

lernermetrostyle.com

 

27-May-2007

 

27-May-2015

lernernewyork.biz

 

15-Nov-2001

 

18-Nov-2015

lernernewyork.ca

 

13-Apr-2004

 

13-Apr-2015

lernernewyork.com

 

06-Mar-1995

 

07-Mar-2016

lernernewyork.com.mx

 

19-Mar-2004

 

18-Mar-2016

 

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

 

lernernewyork.info

 

10-Aug-2001

 

09-Aug-2015

lernernewyork.us

 

19-Apr-2002

 

18-Apr-2016

lernernewyorkandcompany.com

 

22-Sep-2005

 

22-Sep-2016

lernernewyorkcompany.com

 

03-May-2007

 

03-May-2015

lernerneyyork.com

 

17-Aug-2006

 

17-Aug-2016

lernerny.biz

 

15-Nov-2001

 

18-Nov-2015

lernerny.ca

 

13-Apr-2004

 

13-Apr-2015

lernerny.com

 

17-Dec-1996

 

16-Dec-2015

lernerny.com.mx

 

19-Mar-2004

 

18-Mar-2016

lernerny.eu

 

07-Apr-2006

 

30-Apr-2016

lernerny.info

 

05-Dec-2003

 

05-Dec-2014

lernerny.us

 

24-Apr-2002

 

23-Apr-2015

lernerny.xxx

 

06-Dec-2011

 

06-Dec-2015

lernero.com

 

16-Aug-2006

 

16-Aug-2016

lernerofny.com

 

28-Apr-2007

 

28-Apr-2016

lerneroutlet.com

 

14-Aug-2007

 

14-Aug-2015

lerners-catalog.com

 

21-Oct-2003

 

21-Oct-2015

lerners.net

 

16-Oct-2000

 

16-Oct-2014

lernerscatalog.com

 

27-Nov-2001

 

27-Nov-2015

lernerscatalogue.com

 

06-May-2007

 

06-May-2015

lernersclothing.com

 

06-May-2007

 

06-May-2015

lernersfashions.com

 

24-May-2007

 

24-May-2015

lernershoes.com

 

28-Mar-2007

 

28-Mar-2015

lernershops.com

 

26-Nov-2005

 

26-Nov-2015

lernersjewelry.com

 

21-Jun-2000

 

21-Jun-2015

lernersnewyork.com

 

27-Apr-2002

 

27-Apr-2016

lernersny.com

 

30-Mar-2000

 

30-Mar-2015

lernersnyc.com

 

01-Jun-2008

 

01-Jun-2015

lernersofny.com

 

01-Nov-2006

 

01-Nov-2014

lernersstore.com

 

09-Jun-2004

 

09-Jun-2016

lernerstores.com

 

06-Mar-1995

 

07-Mar-2015

lernerswoman.com

 

04-Jan-2006

 

30-Mar-2015

lernerwoman.com

 

27-Nov-2005

 

27-Nov-2014

lernerwomen.com

 

07-May-2007

 

07-May-2015

lernner.com

 

05-Oct-2007

 

05-Oct-2015

lny.com

 

02-Mar-1995

 

03-Mar-2015

lrener.com

 

02-May-2006

 

02-May-2016

metrolerners.com

 

09-Aug-2006

 

09-Aug-2016

metrostylelerner.com

 

17-Aug-2006

 

17-Aug-2016

mewyorkandcompany.com

 

24-Jul-2008

 

24-Jul-2015

neworkandcompany.com

 

25-Nov-2009

 

25-Nov-2015

newtorkandcompany.com

 

16-Jul-2008

 

16-Jul-2016

newyoekandcompany.com

 

03-Nov-2008

 

03-Nov-2014

newyokandcompany.com

 

16-Jul-2008

 

16-Jul-2016

newyorandcompany.com

 

02-May-2007

 

02-May-2015

newyorkaccessories.ca

 

13-Apr-2004

 

13-Apr-2015

 

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

 

newyorkaccessories.co.ve

 

22-Mar-2004

 

22-Mar-2015

newyorkaccessories.com

 

24-Feb-2004

 

24-Feb-2015

newyorkaccessories.com.mx

 

19-Mar-2004

 

18-Mar-2016

newyorkaccessories.com.ve

 

22-Mar-2004

 

22-Mar-2015

newyorkaccessories.net

 

24-Feb-2004

 

24-Feb-2015

newyorkamdcompany.com

 

14-Jun-2010

 

14-Jun-2016

newyorkancompany.com

 

26-Sep-2005

 

26-Sep-2015

newyorkandcmpany.com

 

27-Apr-2007

 

27-Apr-2015

newyorkandco.ca

 

13-Apr-2004

 

13-Apr-2015

newyorkandco.com.mx

 

19-Mar-2004

 

18-Mar-2016

newyorkandco.eu

 

07-Apr-2006

 

30-Apr-2016

newyorkandco.name

 

28-Mar-2007

 

28-Mar-2015

newyorkandco.net

 

28-Feb-2000

 

28-Feb-2016

newyorkandcoaccessories.com

 

24-Feb-2004

 

24-Feb-2015

newyorkandcoaccessories.net

 

24-Feb-2004

 

24-Feb-2015

newyorkandcoextras.com

 

24-Feb-2004

 

24-Feb-2015

newyorkandcoextras.net

 

24-Feb-2004

 

24-Feb-2015

newyorkandcomapny.com

 

03-May-2007

 

03-May-2015

newyorkandcommpany.com

 

28-Mar-2005

 

28-Mar-2015

newyorkandcompamy.com

 

09-Nov-2009

 

09-Nov-2015

newyorkandcompan.com

 

02-Jan-2008

 

02-Jan-2016

newyorkandcompanny.com

 

10-Mar-2013

 

10-Mar-2015

newyorkandcompany.biz

 

15-Nov-2001

 

18-Nov-2015

newyorkandcompany.ca

 

13-Apr-2004

 

13-Apr-2015

newyorkandcompany.co

 

21-Jul-2010

 

20-Jul-2015

newyorkandcompany.co.ve

 

22-Mar-2004

 

22-Mar-2015

newyorkandcompany.com

 

12-Jun-1998

 

11-Jun-2016

newyorkandcompany.com.mx

 

19-Mar-2004

 

18-Mar-2016

newyorkandcompany.com.ve

 

29-Mar-2004

 

29-Mar-2015

newyorkandcompany.eu

 

07-Apr-2006

 

30-Apr-2016

newyorkandcompany.name

 

28-Mar-2007

 

28-Mar-2015

newyorkandcompany.net

 

06-Nov-2005

 

06-Nov-2015

newyorkandcompany.us

 

24-Apr-2002

 

23-Apr-2015

newyorkandcompany.xxx

 

06-Dec-2011

 

06-Dec-2015

newyorkandcompanyaccessories.com

 

24-Feb-2004

 

24-Feb-2015

newyorkandcompanyaccessories.net

 

24-Feb-2004

 

24-Feb-2015

newyorkandcompanycard.com

 

31-Dec-2010

 

31-Dec-2014

newyorkandcompanycatalog.com

 

28-Mar-2007

 

28-Mar-2015

newyorkandcompanyclothes.com

 

23-Dec-2005

 

23-Dec-2015

newyorkandcompanyclothing.com

 

16-Oct-2006

 

16-Oct-2015

newyorkandcompanycoupon.com

 

05-Jun-2011

 

05-Jun-2015

newyorkandcompanycoupon.org

 

09-Sep-2011

 

09-Sep-2015

newyorkandcompanycouponcodes.com

 

05-Jun-2011

 

05-Jun-2015

newyorkandcompanycoupons.com

 

19-May-2007

 

19-May-2015

newyorkandcompanycoupons.net

 

26-May-2012

 

26-May-2016

newyorkandcompanycreditcard.com

 

29-Feb-2008

 

28-Feb-2016

 

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

 

newyorkandcompanystore.com

 

23-Feb-2012

 

23-Feb-2015

newyorkandcompay.com

 

23-Nov-2007

 

23-Nov-2015

newyorkandcompnay.com

 

06-May-2007

 

06-May-2015

newyorkandconpany.com

 

02-Jul-2008

 

02-Jul-2016

newyorkandompany.com

 

03-Nov-2008

 

03-Nov-2014

newyorkanscompany.com

 

12-Oct-2009

 

12-Oct-2016

newyorkcompani.com

 

29-Apr-2007

 

29-Apr-2015

newyorkcompanycoupons.com

 

26-Oct-2010

 

26-Oct-2014

newyorkextras.com

 

24-Feb-2004

 

24-Feb-2015

newyorkextras.net

 

24-Feb-2004

 

24-Feb-2015

newyorkincompany.com

 

04-Nov-2009

 

04-Nov-2015

newyorklerner.com

 

27-Apr-2002

 

27-Apr-2016

newyorkycompany.com

 

08-Feb-2000

 

28-Mar-2015

neyorkandcompany.com

 

27-Apr-2007

 

27-Apr-2015

nweyorkandcompany.com

 

29-Jan-2007

 

29-Jan-2017

nwyorkandcompany.com

 

18-Nov-2006

 

18-Nov-2015

ny-and-company.com

 

16-Feb-1999

 

16-Feb-2015

ny-company.com

 

29-Aug-2006

 

29-Aug-2016

nyanccompany.com

 

30-Mar-2007

 

30-Mar-2015

nyandccustomerservice.com

 

05-Oct-2011

 

05-Oct-2015

nyandcfulfillment.com

 

16-May-2006

 

16-May-2016

nyandco.ca

 

13-Apr-2004

 

13-Apr-2015

nyandco.co

 

21-Jul-2010

 

20-Jul-2015

nyandco.com

 

31-May-1998

 

31-May-2016

nyandco.com.mx

 

19-Mar-2004

 

18-Mar-2016

nyandco.eu

 

07-Apr-2006

 

30-Apr-2016

nyandco.fr

 

28-May-2004

 

27-May-2015

nyandcoextras.com

 

24-Feb-2004

 

24-Feb-2016

nyandcoextras.net

 

24-Feb-2004

 

24-Feb-2015

nyandcomapany.com

 

14-Apr-2013

 

14-Apr-2015

nyandcompamy.com

 

28-Apr-2013

 

28-Apr-2015

nyandcompant.com

 

16-Sep-2007

 

16-Sep-2015

nyandcompany.biz

 

11-Mar-2004

 

10-Mar-2016

nyandcompany.ca

 

13-Apr-2004

 

13-Apr-2015

nyandcompany.co

 

17-Nov-2010

 

16-Nov-2014

nyandcompany.co.ve

 

29-Mar-2004

 

29-Mar-2015

nyandcompany.com

 

28-Apr-2000

 

28-Apr-2015

nyandcompany.com.mx

 

19-Mar-2004

 

18-Mar-2016

nyandcompany.com.ve

 

29-Mar-2004

 

29-Mar-2015

nyandcompany.eu

 

07-Apr-2006

 

30-Apr-2016

nyandcompany.mobi

 

08-Sep-2012

 

08-Sep-2016

nyandcompany.net

 

28-Apr-2000

 

28-Apr-2016

nyandcompany.tv

 

01-Feb-2001

 

01-Feb-2015

nyandcompany.us

 

24-Apr-2002

 

23-Apr-2015

nyandcompany.xxx

 

06-Dec-2011

 

06-Dec-2015

nyandcompanyaccessories.ca

 

13-Apr-2004

 

13-Apr-2015

 

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

 

nyandcompanyaccessories.com

 

24-Feb-2004

 

24-Feb-2015

nyandcompanyaccessories.com.mx

 

19-Mar-2004

 

18-Mar-2016

nyandcompanyaccessories.net

 

24-Feb-2004

 

24-Feb-2015

nyandcompanycareers.com

 

06-Nov-2007

 

06-Nov-2015

nyandcompanycoupons.com

 

21-Apr-2007

 

21-Apr-2015

nyandcompanycoupons.net

 

28-Aug-2011

 

28-Aug-2015

nyandcompanyextras.com

 

28-Apr-2000

 

28-Apr-2016

nyandcompanyextras.net

 

28-Apr-2000

 

28-Apr-2016

nyandcompanyhome.com

 

28-Apr-2000

 

28-Apr-2016

nyandcompanyhome.net

 

28-Apr-2000

 

28-Apr-2016

nyandcompanykids.com

 

28-Apr-2000

 

28-Apr-2016

nyandcompanykids.net

 

28-Apr-2000

 

28-Apr-2016

nyandcompanymen.com

 

28-Apr-2000

 

28-Apr-2015

nyandcompanymen.net

 

28-Apr-2000

 

28-Apr-2015

nyandcompay.com

 

06-May-2007

 

06-May-2015

nyandcompnay.com

 

04-May-2008

 

04-May-2015

nyandcompony.com

 

11-Jan-2008

 

11-Jan-2016

nyandcomppany.com

 

14-Mar-2008

 

14-Mar-2016

nyandcquality1st.com

 

22-Mar-2004

 

22-Mar-2016

nyclerner.com

 

23-Aug-2004

 

23-Aug-2016

nycoaccessories.com

 

24-Feb-2004

 

24-Feb-2015

nycoaccessories.net

 

24-Feb-2004

 

24-Feb-2015

nycofashionlookbook.com

 

14-Apr-2008

 

14-Apr-2016

nycredlabel.com

 

28-Jul-2008

 

28-Jul-2016

nyjeans.com

 

12-Jan-1999

 

12-Jan-2015

nylearner.com

 

27-Apr-2002

 

27-Apr-2016

nyredlabel.com

 

28-Jul-2008

 

28-Jul-2016

nyredlabelcollection.com

 

28-Jul-2008

 

28-Jul-2016

nystyl.com

 

24-Jul-2009

 

24-Jul-2015

nystyletour.com

 

12-Sep-2008

 

12-Sep-2016

redlabelny.com

 

28-Jul-2008

 

28-Jul-2016

redlabelnyc.com

 

28-Jul-2008

 

28-Jul-2016

shoplerner.com

 

03-Nov-2008

 

03-Nov-2014

tellusnyandcompany.com

 

07-Oct-2010

 

07-Oct-2016

thelernercatalog.com

 

08-May-2006

 

08-May-2016

thenewyorkandcompany.com

 

01-Sep-2009

 

01-Sep-2015

thenystyletour.com

 

12-Sep-2008

 

12-Sep-2016

 

(3)                                 Copyrights:

 

·                  Copyright registration number VAU506749 dated October 3, 2000
for Lernco’s New York & Company Skyline design.

 

·                  Copyright registration number VA0001671205 dated June 12,
2009 for New York & Company, Inc’s Poodle

 

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

 

Design Patents:

 

·                  Lerner New York, Inc.: D588,920 and D582,283

 

·                  New York & Company, Inc.: D583,254 and D569,735

 

Lincensed Eva Trademarks:

 

·                  Eva Mendes®  , Registration Number 4466774, Registration Date
January 14, 2014, International Class 25 (clothing)

 

·                  Eva MendesTM , Serial Number 85749763, Filing Date October 9,
2012, International Class 18 (handbags)

 

(4)                                 License Agreements:

 

·                  The right of the Company and its Subsidiaries to use and
enjoy licensed software and related copyrights is subject to the terms and
conditions of such licenses.

 

·                  Trademark Protection Agreement, dated February 4, 2001,
between Lernco, Inc. and Lerner New York, Inc.

 

·                  Sublicense Agreement, dated as of February 3, 2002, between
Lerner New York, Inc. and Lerner New York GC, LLC.

 

·                  License and Spokesperson Agreement, dated February 4, 2013,
between Spooky, Inc. and Lerner New York, Inc.

 

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

 

SCHEDULE 31

 

Bank Account Contact Information

 

Bank Name

 

Bank Address

 

Contact Person

 

Phone Number

 

Account Number

 

Type of Account

CORPORATE BANK ACCOUNTS

 

 

 

 

 

 

 

 

 

 

The Bank of New York

 

 

 

 

 

 

 

 

 

Lerner New York Accounts Payable

The Bank of New York

 

 

 

 

 

 

 

 

 

Lerner New York Payroll

The Bank of New York

 

 

 

 

 

 

 

 

 

NY&CO Group Payroll

The Bank of New York

 

 

 

 

 

 

 

 

 

NY&CO Group Accounts Payable

The Bank of New York

 

 

 

 

 

 

 

 

 

NY&CO Group Master Account

Wells Fargo/Wachovia

 

 

 

 

 

 

 

 

 

Lerner New York Concentration

 

 

 

 

 

 

 

 

 

 

 

Huntington

 

 

 

 

 

 

 

 

 

Tax Payment

 

 

 

 

 

 

 

 

 

 

 

Bank of America Merrill Lynch

 

 

 

 

 

 

 

 

 

UnitedHealth Medical Claims Escrow Account

Bank of America Merrill Lynch

 

 

 

 

 

 

 

 

 

UnitedHealth FSA/CERA Escrow Account

Chase Metlife

 

 

 

 

 

 

 

 

 

Metlife Dental Medical Claims Escrow Account

Citicorp

 

 

 

 

 

 

 

 

 

Connecticut General Life Insurance Company — A Cigna Company

 

 

 

 

 

 

 

 

 

 

 

PNC

 

 

 

 

 

 

 

 

 

LLC Escrow Account

 

 

 

 

 

 

 

 

 

 

 

STORE DEPOSITORY ACCOUNTS

 

 

 

 

 

 

 

 

 

 

Bank of America

 

 

 

 

 

 

 

 

 

Consolidated

JP Morgan Chase

 

 

 

 

 

 

 

 

 

Consolidated

Citizens

 

 

 

 

 

 

 

 

 

Consolidated

Comerica

 

 

 

 

 

 

 

 

 

Consolidated

Fifth Third

 

 

 

 

 

 

 

 

 

Consolidated

First Tennessee

 

 

 

 

 

 

 

 

 

Consolidated

Wells Fargo

 

 

 

 

 

 

 

 

 

Consolidated

HSBC

 

 

 

 

 

 

 

 

 

Consolidated

Huntington

 

 

 

 

 

 

 

 

 

Consolidated

 

 

 

 

 

 

 

 

 

 

 

Key Bank

 

 

 

 

 

 

 

 

 

Consolidated

PNC

 

 

 

 

 

 

 

 

 

Consolidated

Regions

 

 

 

 

 

 

 

 

 

Consolidated

IBC

 

 

 

 

 

 

 

 

 

Consolidated

 

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

 

US Bank

 

 

 

 

 

 

 

 

 

Consolidated

TD BANK NORTH

 

 

 

 

 

 

 

 

 

Consolidated

 

 

 

 

 

 

 

 

 

 

 

Wells Fargo

 

 

 

 

 

 

 

 

 

Consolidated

FIRST NIAGARA BANK

 

 

 

 

 

 

 

 

 

Consolidated

BB&T

 

 

 

 

 

 

 

 

 

Consolidated

 

 

 

 

 

 

 

 

 

 

 

UNITED NATIONAL BANK

 

 

 

 

 

 

 

 

 

Outlier

 

 

 

 

 

 

 

 

 

 

 

SALEM FIVE CENTS SAVINGS BANK

 

 

 

 

 

 

 

 

 

Outlier

CAPITAL ONE

 

 

 

 

 

 

 

 

 

Outlier

GREAT SOUTHERN BANK

 

 

 

 

 

 

 

 

 

Outlier

NORTHWEST SAVINGS BANK

 

 

 

 

 

 

 

 

 

Outlier

UNITED NATIONAL BANK

 

 

 

 

 

 

 

 

 

Outlier

FIRST NATIONAL BANK

 

 

 

 

 

 

 

 

 

Outlier

HARRIS BANK

 

 

 

 

 

 

 

 

 

Outlier

CAPITAL CITY BANK

 

 

 

 

 

 

 

 

 

Outlier

CITIBANK

 

 

 

 

 

 

 

 

 

Outlier

Citizens Bank & Trust

 

 

 

 

 

 

 

 

 

Outlier

UMB BANK

 

 

 

 

 

 

 

 

 

Outlier

MB FINANCIAL BANK

 

 

 

 

 

 

 

 

 

Outlier

FIRST NATIONAL BANK

 

 

 

 

 

 

 

 

 

Outlier

FIRST SENTRY BANK

 

 

 

 

 

 

 

 

 

Outlier

NBT BANK

 

 

 

 

 

 

 

 

 

Outlier

SOUTH BANK

 

 

 

 

 

 

 

 

 

Outlier

FIRST AMERICAN BANK

 

 

 

 

 

 

 

 

 

Outlier

CITIBANK

 

 

 

 

 

 

 

 

 

Outlier

PROSPERITY BANK

 

 

 

 

 

 

 

 

 

Outlier

FIRST MERIT BANK, N.A.

 

 

 

 

 

 

 

 

 

Outlier

MB FINANCIAL

 

 

 

 

 

 

 

 

 

Outlier

BOONE COUNTY NATIONAL BANK

 

 

 

 

 

 

 

 

 

Outlier

Plains Capital Bank

 

 

 

 

 

 

 

 

 

Outlier

Sumner Bank and Trust

 

 

 

 

 

 

 

 

 

Outlier

 

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

 

SCHEDULE 31

 

Bank Account Contact Information

 

CORPORATE BANK ACCOUNTS

 

Bank Name

 

Bank Address

 

Contact Person

 

Phone Number

 

Account Number

 

Type of Account

The Bank of New York

 

 

 

 

 

 

 

 

 

Lerner New York Outlet Inc Accounts Payable

Wells Fargo/Wachovia

 

 

 

 

 

 

 

 

 

Lerner New York Concentration

 

 

 

 

 

 

 

 

 

 

 

STORE DEPOSITORY ACCOUNTS

 

 

 

 

 

 

 

 

 

 

Bank of America -Outlets

 

 

 

 

 

 

 

 

 

Consolidated

Citizens- Outlets

 

 

 

 

 

 

 

 

 

Consolidated

JP Morgan Chase- Outlets

 

 

 

 

 

 

 

 

 

Consolidated

Comerica - Outlet

 

 

 

 

 

 

 

 

 

Consolidated

PNC - Outlet

 

 

 

 

 

 

 

 

 

Consolidated

IBC - Outlet

 

 

 

 

 

 

 

 

 

Consolidated

Wells Fargo - Outlet

 

 

 

 

 

 

 

 

 

Consolidated

Compass Bank

 

 

 

 

 

 

 

 

 

Outlet — Outlier

Highland Bank

 

 

 

 

 

 

 

 

 

Outlet — Outlier

First Federal Bank

 

 

 

 

 

 

 

 

 

Outlet — Outlier

 

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

 

EXHIBIT E
TO
SECOND AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT

 

Locations of Inventory

 

1.                                      450 West 33rd Street

New York, NY 10001

 

2.                                      Three Limited Parkway

Columbus, OH 43216

 

3.                                      466-472 53rd Street, Brooklyn, NY (owned
property)

 

4.                                      See attached lease summaries for store
listings (schedule 1.64).

 

5.                                      GSI Commerce (e-commerce warehouse)

307 Hollie Drive

Martinsville, VA 24112

 

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