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Exhibit 10.48

AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT

by and among

CONGRESS FINANCIAL CORPORATION (WESTERN)

as Lender

and

WACHOVIA SECURITIES, INC.

as the Arranger and Administrative Agent

and

GUESS ?, INC.,

GUESS ? RETAIL, INC.

and

GUESS.COM, INC.

as Borrowers

Dated: December 20, 2002

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TABLE OF CONTENTS

 
   
   
  Page

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SECTION 1.       DEFINITIONS   1 SECTION 2.       CREDIT FACILITIES   20     2.1
  Loans   20     2.2   Letter of Credit Accommodations   20 SECTION 3.  
    INTEREST AND FEES   24     3.1   Interest   24     3.2   Closing Fee   25  
  3.3   Servicing Fee   25     3.4   Unused Line Fee   25     3.5   Changes in
Laws and Increased Costs of Loans   25 SECTION 4.       CONDITIONS PRECEDENT  
26     4.1   Conditions Precedent to Initial Loans and Letter of Credit
Accommodations   26     4.2   Conditions Precedent to All Loans and Letter of
Credit Accommodations   28 SECTION 5.       GRANT AND PERFECTION OF SECURITY
INTEREST   28     5.1   Grant of Security Interest   28     5.2   Perfection of
Security Interests   29 SECTION 6.       COLLECTION AND ADMINISTRATION   33    
6.1   Borrowers' Loan Account   33     6.2   Statements   33     6.3  
Collection of Accounts   34     6.4   Payments   35     6.5   Authorization to
Make Loans   36     6.6   Use of Proceeds   36 SECTION 7.       COLLATERAL
REPORTING AND COLLATERAL COVENANTS   36     7.1   Collateral Reporting   36    
7.2   Accounts Covenants   37     7.3   Inventory Covenants   38     7.4  
Equipment Covenants   38     7.5   Power of Attorney   39     7.6   Right to
Cure   39     7.7   Access to Premises   40 SECTION 8.       REPRESENTATIONS AND
WARRANTIES   40     8.1   Corporate Existence; Power and Authority   40     8.2
  Name; State of Organization; Chief Executive Office; Collateral Locations   40
    8.3   Financial Statements; No Material Adverse Change   41     8.4  
Priority of Liens; Title to Properties   41     8.5   Tax Returns   41     8.6  
Litigation   41     8.7   Compliance with Other Agreements and Applicable Laws  
41     8.8   Environmental Compliance   41     8.9   Employee Benefits   42    
8.10   Intellectual Property   42     8.11   Subsidiaries; Affiliates;
Capitalization; Solvency   43     8.12   Labor Disputes   44     8.13  
Restrictions on Subsidiaries   44     8.14   Material Contracts   44     8.15  
Payable Practices   44     8.16   Accuracy and Completeness of Information   44
    8.17   Survival of Warranties; Cumulative   44 SECTION 9.       AFFIRMATIVE
AND NEGATIVE COVENANTS   44     9.1   Maintenance of Existence   44     9.2  
New Collateral Locations   45

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    9.3   Compliance with Laws, Regulations, Etc   45     9.4   Payment of Taxes
and Claims   46     9.5   Insurance   46     9.6   Financial Statements and
Other Information   47     9.7   Sale of Assets, Consolidation, Merger,
Dissolution, Etc   48     9.8   Encumbrances   49     9.9   Indebtedness   50  
  9.10   Loans, Investments, Etc   52     9.11   Dividends and Redemptions   54
    9.12   Further Restriction on Loans, Investments, Dividends and Redemptions
  54     9.13   Transactions with Affiliates   54     9.14   Compliance with
ERISA   55     9.15   End of Fiscal Years, Fiscal Quarters   55     9.16  
Change in Business   55     9.17   Limitation of Restrictions Affecting
Subsidiaries   55     9.18   Net Worth   55     9.19   License Agreements   56  
  9.20   Costs and Expenses   56     9.21   Further Assurances   57 SECTION 10.
      EVENTS OF DEFAULT AND REMEDIES   57     10.1   Events of Default   57    
10.2   Remedies   59 SECTION 11.       JURY TRIAL WAIVER; OTHER WAIVERS AND
CONSENTS; GOVERNING
    LAW   62     11.1   Governing Law; Choice of Forum; Service of Process; Jury
Trial Waiver   62     11.2   Waiver of Notices   63     11.3   Amendments and
Waivers   63     11.4   Waiver of Counterclaims   63     11.5   Indemnification
  63 SECTION 12.       TERM OF AGREEMENT; MISCELLANEOUS   64     12.1   Term  
64     12.2   Interpretive Provisions   65     12.3   Notices   66     12.4  
Partial Invalidity   66     12.5   Successors   66     12.6   Entire Agreement  
67     12.7   Counterparts, Etc   67     12.8   Confidentiality   67 SECTION 13.
      JOINT AND SEVERAL LIABILITY AND SURETYSHIP WAIVERS   67     13.1  
Independent Obligations; Subrogation   67     13.2   Authority to Modify
Obligations and Security   68     13.3   Waiver of Defenses   68     13.4  
Exercise of Lender's Rights   68     13.5   Additional Waivers   69     13.6  
Additional Indebtedness   69     13.7   Subordination   69     13.8   Revival  
70     13.9   Understanding of Waivers   70

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INDEX TO
EXHIBITS AND SCHEDULES

•   Exhibit A   •   Information Certificate •   Exhibit B   •   Compliance
Certificate •   Schedule 4.1   •   Permitted Locations, etc. •   Schedule 5.2(b)
  •   Chattel Paper and Instruments •   Schedule 5.2(f)   •   Letters of Credit,
etc. •   Schedule 5.2(g)   •   Commercial Tort Claims •   Schedule 8.4   •  
Liens •   Schedule 8.8   •   Environmental Disclosures •   Schedule 8.10   •  
Intellectual Property •   Schedule 8.12   •   Labor Relations •   Schedule 8.14
  •   Material Contracts •   Schedule 9.9   •   Indebtedness •   Schedule 9.10  
•   Loans and Advances

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AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT

        This Amended and Restated Loan and Security Agreement dated December 20,
2002 is entered into by and among CONGRESS FINANCIAL CORPORATION (WESTERN), a
California corporation ("Lender"), WACHOVIA SECURITIES, INC., a Delaware
corporation (as the "Arranger and Administrative Agent"), and GUESS ?, INC., a
Delaware corporation, GUESS? RETAIL, INC., a Delaware corporation, and
GUESS.COM, INC., a Delaware corporation, jointly and severally as co-Borrowers
(each a "Borrower" and collectively, the "Borrowers").

W I T N E S S E T H:

        WHEREAS, Borrowers, Lender and Arranger and Administrative Agent have
previously entered into that certain Loan and Security Agreement, dated as of
September 27, 2002 (the "Original Loan Agreement"), pursuant to which Lender has
provided certain loans and other financial accommodations to Borrowers; and

        WHEREAS, the parties hereto have agreed to amend and restate in their
entirety the agreements contained in the Original Loan Agreement as amongst
themselves; and

        WHEREAS, Guess ?, Inc. owns all of the issued and outstanding capital
stock of the other Borrowers; and

        WHEREAS, Borrowers operate as an integrated business unit with common
product lines and the financial success of each of them is dependent upon the
financial success of each other; and

        WHEREAS, Guess ?, Inc. receives essentially all of the payments made on
account of the income of all of the Borrowers, and pays all of the expenses of
the Borrowers; and

        WHEREAS, all of the administrative and accounting functions of all of
the Borrowers are consolidated and performed at their chief executive office;
and

        WHEREAS, it would be impractical and uneconomical for Borrowers to
change their operations and their administrative and accounting functions so as
to act as separate and distinct enterprises; and

        WHEREAS, Borrowers have requested that Lender enter into certain
financing arrangements with Borrowers as an integrated business unit pursuant to
which Lender may make loans and provide other financial accommodations to
Borrowers as an integrated business unit; and

        WHEREAS, Lender is willing to make such loans and provide such financial
accommodations 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 are hereby acknowledged, the parties hereto agree as
follows:

SECTION 1.    DEFINITIONS    

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

        1.1    "Accounts"  shall mean all present and future rights of Borrowers
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, 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, charge or debit card
along with all information contained on or for use with such card.

        1.2    "Adjusted Eurodollar Rate"  shall mean, with respect to each
Interest Period for any Eurodollar Rate Loan, the rate per annum (rounded
upwards, if necessary, to the next one-sixteenth (1/16) of one 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

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Percentage" shall mean the reserve percentage, expressed as a decimal,
prescribed by any United States or foreign banking authority for determining the
reserve requirement which is or would be applicable to deposits of United States
dollars in a non-United States or an international banking office of Reference
Bank used to fund a Eurodollar Rate Loan or any Eurodollar Rate Loan made with
the proceeds of such deposit, whether or not the Reference Bank actually holds
or has made any such deposits or loans. The Adjusted Eurodollar Rate shall be
adjusted on and as of the effective day of any change in the Reserve Percentage.

        1.3    "Adjusted Tangible Net Worth"  shall mean as to any Person, at
any time, in accordance with GAAP (except as otherwise specifically set forth
below), on a consolidated basis for such Person and its Subsidiaries (if any),
the amount equal to the difference between: (a) the aggregate net book value of
all assets of such Person and its Subsidiaries (excluding the value of patents,
trademarks, tradenames, copyrights, licenses, goodwill, prepaid assets and other
intangible assets), calculating the book value of inventory for this purpose on
a first-in-first-out basis, after deducting from such book values all
appropriate reserves in accordance with GAAP (including all reserves for
doubtful receivables, obsolescence, depreciation and amortization) and (b) the
aggregate amount of the Indebtedness and other liabilities of such Person and
its Subsidiaries (including tax and other proper accruals).

        1.4    "Affiliate"  shall mean, with respect to a specified 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, and
without limiting the generality of the foregoing, includes (a) any Person which
beneficially owns or holds five percent (5%) or more of any class of Voting
Stock of such Person or other equity interests in such Person, (b) any Person of
which such Person beneficially owns or holds five percent (5%) or more of any
class of Voting Stock or in which such Person beneficially owns or holds five
percent (5%) or more of the equity interests and (c) any director or executive
officer of such Person. For 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 agreement or otherwise.

        1.5    "Availability Compliance Period"  shall mean the period of time
beginning upon an Availability Triggering Event or a Compliance Triggering
Event, as applicable from time to time under this Agreement, and continuing
through the Availability Compliance Reinstatement Date.

        1.6    "Availability Compliance Reinstatement Date"  shall mean the
180thconsecutive day on which U.S. Excess Availability or Compliance Excess
Availability, as applicable from time to time under this Agreement, is equal to
at least Twenty Million Dollars ($20,000,000) and the Canadian Compliance Excess
Availability is equal to at least the U.S. Dollar Equivalent of One Million
Dollars ($1,000,000).

        1.7    "Availability Compliance Report"  shall mean a compliance report
delivered by Borrowers to Lender on a monthly basis during the Availability
Compliance Period, in form and substance satisfactory to Lender.

        1.8    "Availability Triggering Event"  shall mean the occurrence of any
event or events or the existence of any circumstance or circumstances that cause
the aggregate of U.S. Excess Availability and Canadian Compliance Excess
Availability to be less than the U.S. Dollar Equivalent of Twenty Million
Dollars ($20,000,000).

        1.9    "Average Excess Availability"  shall mean the sum of the U.S.
Average Excess Availability and the Canadian Average Excess Availability.

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        1.10    "Blocked Accounts"  shall have the meaning set forth in
Section 0 hereof.

        1.11    "Borrowing Base"  shall mean, at any time, the amount equal to:
(a) eighty-five percent (85%) of the Net Amount of Eligible Accounts, plus
(b) the lowest of: (i) the sum of (A) sixty-five percent (65%) (or seventy-two
percent (72%) for the period from August 1 to October 31 of each year) of the
Value of Eligible Inventory consisting of finished goods plus (B) fifty percent
(50%) (or forty percent (40%) for the period commencing on the date hereof and
continuing until the first anniversary thereof) of the Value of Eligible
Inventory consisting of raw materials for such finished goods, up to a maximum
amount of Five Million Dollars ($5,000,000) or (ii) eighty-five percent (85%) of
the Net Recovery Value expressed as a percentage of cost of the Value of
Eligible Inventory as reflected on the most recent appraisal of the Inventory
received and accepted by Lender prior to the date of the calculation, or
(iii) the Inventory Sublimit minus the Canadian Inventory Sublimit, less (c) the
Gift Certificate and Store Credit Reserve, less (d) any Reserves. For purposes
of calculating the Borrowing Base, the amount of Eligible Inventory located in
Canada shall not exceed 10% of all the Eligible Inventory. For purposes only of
applying the sublimit on Loans based on Eligible Inventory set forth in
clause (b)(iii) above, Lender may treat the then undrawn amounts of outstanding
Letter of Credit Accommodations for the purpose of purchasing Eligible Inventory
as Loans to the extent Lender is in effect basing the issuance of the Letter of
Credit Accommodations on the Value of the Eligible Inventory being purchased
with such Letter of Credit Accommodations.

        1.12    "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 California or the State of North Carolina,
and a day on which the Reference Bank and Lender are open for the transaction of
business, except that if a determination of a Business Day shall relate to any
Eurodollar Rate Loans, the term Business Day shall also exclude any day on which
banks are closed for dealings in dollar deposits in the London interbank market
or other applicable Eurodollar Rate market.

        1.13    "Canadian Agreement"  shall mean that certain Canadian Loan and
Security Agreement to be entered into by and among Canadian Lender, Arranger (as
defined therein) and Canadian Borrowers, in form and substance satisfactory to
Lender, which may be amended from time to time.

        1.14    "Canadian Average Excess Availability"  shall mean an amount
equal to the U.S. Dollar Equivalent of the aggregate of the average daily
amount, as determined by Canadian Lender, for each fiscal quarter, of: (a) the
aggregate of the Canadian Borrowing Base and the credit balances in the Blocked
Accounts subject to Deposit Account Control Agreements on the date of
calculation, minus (b) the amount of all then outstanding and unpaid Canadian
Obligations; provided, however, that such definition may be amended from time to
time pursuant to the correlating calculation of "Average Excess Availability" as
defined in the Canadian Agreement.

        1.15    "Canadian Borrowers"  shall mean Guess? Canada Corporation and
Guess? Canada Retail Inc.

        1.16    "Canadian Borrowing Base"  shall mean the "Borrowing Base" as
defined in the Canadian Agreement.

        1.17    "Canadian Cash Equivalents"  shall mean the "Cash Equivalents"
as defined in the Canadian Agreement.

        1.18    "Canadian Compliance Excess Availability"  shall mean the
amount, as determined by Canadian Lender, as of any time, calculated in U.S.
Dollar Equivalent, equal to: (a) the Canadian Borrowing Base, minus (b) the
amount of all then outstanding and unpaid Canadian Obligations; provided,
however, that such definition may be amended from time to time pursuant to the
correlating calculation of "Compliance Excess Availability" as defined in the
Canadian Agreement.

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        1.19    "Canadian Domestic Subsidiary"  shall mean a Subsidiary of a
Canadian Borrower that is organized or incorporated under the laws of Canada, or
any state or province thereof.

        1.20    "Canadian Facility"  shall mean the revolving line of credit
made available to the Canadian Borrowers pursuant to the Canadian Agreement,
which shall not permit overadvances in excess of the Canadian Permitted
Overadvance, as such facility may be amended or replaced from time to time.

        1.21    "Canadian Guarantee"  shall mean the guarantee by the Borrowers
dated as of the date hereof, of any amounts borrowed by the Canadian Borrowers
under the Canadian Facility; provided that (i) such guarantee is made on terms
and conditions satisfactory to the Lender and (ii) the rights of the Canadian
Lenders under the Canadian Facility with respect to such guarantee rank in
priority to the rights of Lender under this Agreement on terms and conditions
satisfactory to Lender pursuant to an intercreditor agreement between the Lender
and the Canadian Lender.

        1.22    "Canadian Inventory Sublimit"  shall mean the U. S. Dollar
equivalent of the maximum amount that may be borrowed by the Canadian Borrowers
under the Canadian Facility against Inventory of the Canadian Borrowers, without
regard to limitations imposed by any borrowing base formulas.

        1.23    "Canadian Lender"  shall mean Congress Financial Corporation
(Canada), an Ontario corporation.

        1.24    "Canadian Maximum Credit"  shall mean the U.S. Dollar equivalent
of the maximum amount that may be borrowed by the Canadian Borrowers under the
Canadian Facility without regard to limitations imposed by any borrowing base
formulas or borrowing sublimits. The Canadian Maximum Credit shall be the U.S.
Dollar Equivalent of Fifteen Million Dollars ($15,000,000); provided that the
Canadian Borrowers will be permitted upon thirty (30) days prior written notice
to Lender to increase or decrease the Canadian Maximum Credit one time per year
beginning on October 1, 2003, effective on October 1 of each year and only in
increments of the U.S. Dollar Equivalent of One Million Dollars ($1,000,000);
provided further that the aggregate effect of all such elections may not
increase the Canadian Maximum Credit above the U.S. Dollar Equivalent of Fifteen
Million Dollars ($15,000,000) or decrease it below the U.S. Dollar Equivalent of
Ten Million Dollars ($10,000,000).

        1.25    "Canadian Net Amount of Eligible Accounts"  shall mean the "Net
Amount of Eligible Accounts" as defined in the Canadian Agreement.

        1.26    "Canadian Obligations"  shall mean the "Obligations" as defined
in the Canadian Agreement.

        1.27    "Canadian Permitted Overadvance"  shall mean the maximum amount
which may be borrowed by the Canadian Borrowers under the Canadian Facility in
excess of the amount otherwise permitted to be borrowed based on the Canadian
Borrowing Base (calculated without reference to the amount of any Canadian
Permitted Overadvance), provided that the amount of such Canadian Permitted
Overadvance may be changed only one time per calendar quarter on the first
Business Day following the end of each quarter, only in increments of the U.S.
Dollar Equivalent of One Million Dollars ($1,000,000) up to a maximum of the
U.S. Dollar Equivalent of Five Million Dollars ($5,000,000), and only upon three
(3) Business Days' prior written notice to Lender and subject to Lender being
satisfied at the time that such change is to take effect that there is
sufficient U.S. Excess Availability to permit the establishment of the
corresponding Canadian Permitted Overadvance.

        1.28    "Canadian Permitted Overadvance Reserve"  shall mean a Reserve
equal to the amount of the Canadian Permitted Overadvance.

        1.29    "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.

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        1.30    "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, partnership interests or limited liability
company 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).

        1.31    "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 of 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 Two Hundred
Fifty Million Dollars ($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 Two Hundred Fifty Million Dollars ($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 to 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; and
(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.

        1.32    "Central Collection Deposit Account"  shall mean any deposit
account established by any Borrower 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.

        1.33    "Change of Control"  shall mean (a) the transfer (in one
transaction or a series of transactions) of all or substantially all of the
assets of any Borrower to any Person or group (as such term is used in
Section 13(d)(3) of the Exchange Act); (b) the liquidation or dissolution of any
Borrower or the adoption of a plan by the stockholders of such Borrower relating
to the dissolution or liquidation of such Borrower; (c) with respect to Parent,
the acquisition by any Person or group (as such term is used in Section 13(d)(3)
of the Exchange Act), except for one or more Permitted Holders, of beneficial
ownership, directly or indirectly, of fifty percent (50%) or more of the voting
power of the total outstanding Voting Stock or the Board of Directors and with
respect to the other Borrowers, the acquisition by any Person other than Parent
of any outstanding Voting Stock of any such Borrower; (d) with respect to
Parent, during any period of two (2) consecutive years, individuals who at the
beginning of such period constituted the Board of Directors (together with any
new directors who have been appointed by any Permitted Holder, or whose
nomination for election by the stockholders of Parent, as the case may be, was
approved by a vote of at least sixty-six and two-thirds percent (662/3%) of the
directors then still in office who were either directors at the beginning of
such period or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the Board of
Directors then still in office, or in the case of the other Borrowers any
director shall be elected or appointed to the Board of Directors by any Person
other than Parent; or (e) the failure of the Permitted Holders to hold at least
fifty one percent (51%) of the voting power of

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the total outstanding Voting Stock of Parent, other than as a result of a public
offering of such Voting Stock, at which time the Permitted Holders shall hold at
least thirty percent (30%) of the voting power of the total outstanding Voting
Stock of Parent, and the failure of Parent to own one hundred percent (100%) of
the voting power of the total outstanding Voting Stock of the other Borrowers.

        1.34    "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.

        1.35    "Collateral"  shall have the meaning set forth in Section 5
hereof.

        1.36    "Collateral Access Agreement"  shall mean an agreement in
writing, in form and substance satisfactory to Lender, from any lessor of
premises to any Borrower, or any other person to whom any Collateral (including
Inventory, Equipment, bills of lading or other documents of title) 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, inter alia,
acknowledges the first priority security interest of Lender in such Collateral,
agrees to waive 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 Lender access to, and the right to remain on,
the premises of such lessor, consignee or other person so as to exercise
Lender'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 Lender and agrees to follow all
instructions of Lender with respect thereto.

        1.37    "Compliance Excess Availability"  shall mean the sum of the U.S.
Compliance Excess Availability and the Canadian Compliance Excess Availability.

        1.38    "Compliance Triggering Event"  shall mean the occurrence of any
event or events or the existence of any circumstance or circumstances that cause
the U.S. Compliance Excess Availability to be less than Twenty Million Dollars
($20,000,000).

        1.39    "Credit Facilities"  shall mean, collectively, the loan facility
contemplated herein and the Canadian Facility.

        1.40    "Credit Parties"  shall mean the Borrowers and the Canadian
Borrowers collectively, and "Credit Party" shall mean any one of such Credit
Parties.

        1.41    "Default"  shall mean an act, condition or event which with
notice or passage of time or both would constitute an Event of Default.

        1.42    "Deposit Account Control Agreement"  shall mean an agreement in
writing, in form and substance satisfactory to Lender, by and among Lender, any
Borrower and any bank at which any deposit account of such Borrower is at any
time maintained which provides that such bank will comply with instructions
originated by Lender directing disposition of the funds in the deposit account
without further consent by such Borrower and such other terms and conditions as
Lender 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 Lender, 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
Lender Payment Account all funds received or deposited into the Blocked
Accounts, as provided in Sections 6.3 and 6.4.

        1.43    "Dilution"  means, as of any date of determination, a
percentage, based upon the experience of the immediately prior 180 days, that is
the result of dividing the Dollar (or Dollar equivalent) amount of (a) bad debt
write-downs, discounts, advertising allowances, credits, or other dilutive items

6

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with respect to the Accounts during such period, by (b) Borrowers' gross
billings with respect to Accounts during such period.

        1.44    "Dilution Reserve"  means, as of any date of determination, a
Reserve sufficient to reduce the advance rate against Eligible Accounts by one
percentage point for each percentage point or fraction thereof by which Dilution
is in excess of six percent (6%).

        1.45    "Discount Reserve"  shall mean a Reserve equal to the discount
reserve taken by Borrowers on their financial statements prepared in accordance
with GAAP of discounts on sales of Inventory allowed by Borrowers as reported by
Borrowers in the financial statements delivered under Section 9.6.

        1.46    "Dollars"  or "$" means United States dollars.

        1.47    "Domestic Subsidiary"  shall mean a Subsidiary that is organized
or incorporated under the laws of the United States of America, any state
thereof or the District of Columbia.

        1.48    "EBITDA"  shall mean, with respect to any fiscal period,
Parent's and its Subsidiaries' consolidated net earnings (or loss), minus
extraordinary gains, plus interest expense, income taxes, and depreciation and
amortization, plus non-cash extraordinary losses for such period, as determined
in accordance with GAAP.

        1.49    "Eligible Accounts"  shall mean Accounts created by Borrowers
which are and continue to be acceptable to Lender based on the criteria set
forth below. In general, Accounts shall be Eligible Accounts if:

        (a)  such Accounts arise from the actual and bona fide sale and delivery
of goods by Borrowers or rendition of services by Borrowers in the ordinary
course of their business which transactions are completed in accordance with the
terms and provisions contained in any documents related thereto;

        (b)  such Accounts do not permit payment more than ninety (90) days
after the original invoice date, and are not unpaid more than sixty (60) days
after their original due date;

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

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

        (e)  such Accounts do not arise from or are related to the
Securitization Assets;

        (f)    the chief executive office of the account debtor with respect to
such Accounts is located in the United States of America or Canada (provided,
that, at any time promptly upon Lender's request, Borrowers shall execute and
deliver, or cause to be executed and delivered, such other agreements, documents
and instruments as may be required by Lender to perfect the security interests
of Lender in those Accounts of an account debtor with its chief executive office
or principal place of business in Canada in accordance with the applicable laws
of the Province of Canada in which such chief executive office or principal
place of business is located and take or cause to be taken such other and
further actions as Lender may request to enable Lender as secured party with
respect thereto to collect such Accounts under the applicable Federal or
Provincial laws of Canada) or, at Lender's option, if the chief executive office
and principal place of business of the account debtor with respect to such
Accounts is located other than in the United States of America or Canada, then
if either: (i) the account debtor has delivered to Borrowers an irrevocable
letter of credit issued or confirmed by a bank satisfactory to Lender and
payable only in the United States of America and in Dollars, sufficient to cover
such Account, in form and substance satisfactory to Lender and if required by
Lender, the original of such letter of

7

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credit has been delivered to Lender or Lender's agent and Borrowers have
complied with the terms of Section 0 hereof with respect to the assignment of
the proceeds of such letter of credit to Lender or naming Lender as transferee
beneficiary thereunder, as Lender may specify, or (ii) such Account is subject
to credit insurance payable to Lender issued by an insurer and on terms and in
an amount acceptable to Lender, or (iii) such Account is otherwise acceptable in
all respects to Lender (subject to such lending formula with respect thereto as
Lender may determine);

        (g)  such Accounts do not consist of progress billings (such that the
obligation of the account debtors with respect to such Accounts is conditioned
upon Borrowers' 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 Lender shall have received an agreement
in writing from the account debtor, in form and substance satisfactory to
Lender, confirming the unconditional obligation of the account debtor to take
the goods related thereto and pay such invoice;

        (h)  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 any Borrower to such
account debtor or claimed owed by such account debtor may be deemed Eligible
Accounts);

        (i)    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;

        (j)    such Accounts are subject to the first priority, valid and
perfected security interest of Lender 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;

        (k)  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;

        (l)    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 Lender'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 Lender;

        (m)  there are no proceedings or actions which are threatened or pending
against the account debtors with respect to such Accounts which might 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);

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

        (o)  such Accounts of a single account debtor or its affiliates do not
constitute more than twenty percent (20%) of all otherwise Eligible Accounts
except that with respect to the aggregate accounts of Federated Department
Stores, Inc. and May Department Stores Company and their respective affiliates,
such percentage shall be fifty percent (50%) (but in each case the portion of
the Accounts not in excess of such percentage may be deemed Eligible Accounts);

        (p)  such Accounts are not owed by an account debtor who has Accounts
that permit payment more than ninety (90) days after their original invoice date
or remain unpaid more than sixty (60) days after their original due date which
constitute more than fifty percent (50%) of the total Accounts of such account
debtor;

8

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        (q)  the account debtor is not located in a state requiring the filing
of a Notice of Business Activities Report or similar report in order to permit
Borrowers to seek judicial enforcement in such State of payment of such Account,
unless the relevant 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;

        (r)  such Accounts are owed by account debtors whose total indebtedness
to Borrowers does not exceed the credit limit with respect to such account
debtors as determined by Borrowers from time to time in the ordinary course of
business consistent with their current practices as of the date hereof and as is
reasonably acceptable to Lender (but the portion of the Accounts not in excess
of such credit limit may be deemed Eligible Accounts);

        (s)  such Accounts do not arise from any licensing or royalty rights;
and

        (t)    such Accounts are owed by account debtors deemed creditworthy at
all times by Lender in good faith.

The criteria for Eligible Accounts set forth above may only be changed and any
new criteria for Eligible Accounts may only be established by Lender 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 Lender 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 Lender. Any Accounts which are
not Eligible Accounts shall nevertheless be part of the Collateral.

        1.50    "Eligible Inventory"  shall mean Inventory consisting of
finished goods held for resale in the ordinary course of the business of
Borrowers and raw materials for such finished goods, in each case which are
acceptable to Lender based on the criteria set forth below. In general, Eligible
Inventory shall not include:

        (a)  work-in-process;

        (b)  short rolls;

        (c)  trim;

        (d)  packaging and shipping materials;

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

        (f)    Inventory at premises other than those listed on Schedule 4.1 as
permitted locations or at new store locations opened in accordance with
Section 9.2, except Inventory in transit from one permitted location within the
United States to another, and except any Inventory which would otherwise be
deemed Eligible Inventory that is not located at a premises described above may
nevertheless be considered Eligible Inventory:

          (i)  as to locations in landlord lien states (Borrowers do not need to
comply with this subparagraph with respect to locations other than those in
landlord lien states) which are leased by any Borrower if Lender shall have
received a Collateral Access Agreement from the owner and lessor of such
location, duly authorized, executed and delivered by such owner and lessor or if
Lender shall not have received such Collateral Access Agreement (or Lender shall
determine to accept a Collateral Access Agreement which does not include all
required provisions or provisions in the form otherwise required by Lender),
Lender may, at is option, nevertheless consider Inventory at such location to be
Eligible Inventory to the extent Lender shall have established such Reserves in
respect of amounts at any time payable by any Borrower to the owner and lessor
thereof as Lender shall determine, and

9

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        (ii)  as to locations owned and operated by a third person, if Lender
shall have received a Collateral Access Agreement from such owner and operator
with respect to such location, duly authorized, executed and delivered by such
owner and operator or if Lender shall not have received such Collateral Access
Agreement (or Lender shall determine to accept a Collateral Access Agreement
which does not include all required provisions or provisions in the form
otherwise required by Lender), Lender may, at its option, nevertheless consider
Inventory at such location to be Eligible Inventory to the extent Lender shall
have established such Reserves in respect of amounts at any time payable by any
Borrower to the owner and operator thereof as Lender shall determine, and, in
addition, as to locations owned and operated by a third person, Lender shall
have received, if required by Lender: (A) UCC-1 financing statements between the
owner and operator, as consignee or bailee, and the relevant Borrower, as
consignor or bailor, in form and substance satisfactory to Lender, which are
duly assigned to Lender and (B) a written notice to any lender to the owner and
operator of the first priority security interest in such Inventory of Lender;

        (g)  Inventory subject to a security interest or lien in favor of any
person other than Lender except those permitted in this Agreement;

        (h)  bill and hold goods;

        (i)    obsolete, excess or slow moving Inventory;

        (j)    Inventory which is not subject to the first priority, valid and
perfected security interest of Lender;

        (k)  returned, damaged and/or defective Inventory;

        (l)    Inventory purchased or sold on consignment; and

        (m)  Inventory located outside the United States of America or Canada,
unless such Inventory is in transit to a permitted location within the United
States or Canada and Lender has a perfected first priority security interest in
such Inventory and has received appropriate documentation to permit Lender to
gain possession and control of such Inventory.

The criteria for Eligible Inventory set forth above may only be changed and any
new criteria for Eligible Inventory may only be established by Lender 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 Lender 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 Lender. Any Inventory which is
not Eligible Inventory shall nevertheless be part of the Collateral.

        1.51    "Environmental Laws"  shall mean all foreign, Federal, State and
local laws (including common law), legislation, rules, codes, licenses, permits
(including any conditions imposed therein), authorizations, judicial or
administrative decisions, injunctions or agreements between any Borrower 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 human 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

10

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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.

        1.52    "Equipment"  shall mean all of Borrowers' now owned and
hereafter acquired equipment, wherever located, including machinery, data
processing and computer equipment and computer hardware and software, 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.

        1.53    "ERISA"  shall mean the United States Employee Retirement Income
Security Act of 1974, together with all final regulations thereunder.

        1.54    "ERISA Affiliate"  shall mean any person required to be
aggregated with any Borrower or any of its Subsidiaries under Sections 414(b),
414(c), 414(m) or 414(o) of the Code.

        1.55    "ERISA Event"  shall mean (a) any "reportable event", as defined
in Section 4043 of ERISA or the regulations issued thereunder, with respect to a
Plan (excluding those for which the provision for 30-day notice to the PBGC has
been waived by regulation); (b) the adoption of any amendment to a 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 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 Plan; (e) the
occurrence of a "prohibited transaction" with respect to which any Borrower or
any of its Subsidiaries is a "disqualified person" (within the meaning of
Section 4975 of the Code) or with respect to which any Borrower or any of its
Subsidiaries could otherwise be liable; (f) a complete or partial withdrawal by
any Borrower 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 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 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 Plan; (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 or any ERISA Affiliate; and (j) any other event or
condition with respect to a Plan including any Plan subject to Title IV of ERISA
maintained, or contributed to, by any ERISA Affiliate that could reasonably be
expected to result in a Material Adverse Change.

        1.56    "Eurodollar Rate"  shall mean with respect to the Interest
Period for a Eurodollar Rate Loan, the interest rate per annum equal to the
arithmetic average of the rates of interest per annum (rounded upwards, if
necessary, to the next one-sixteenth (1/16) of one percent (1%)) at which
Reference Bank is offered deposits of United States dollars in the London
interbank market (or other Eurodollar Rate market selected by Borrowers and
approved by Lender) on or about 9:00 a.m. (New York time) two (2) Business Days
prior to the commencement of such Interest Period in amounts substantially equal
to the principal amount of the Eurodollar Rate Loans requested by and available
to Borrowers in accordance with this Agreement, with a maturity of comparable
duration to the Interest Period selected by Borrowers.

        1.57    "Eurodollar Rate Loans"  shall mean any Loans or portion thereof
on which interest is payable based on the Adjusted Eurodollar Rate in accordance
with the terms hereof.

11

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        1.58    "Event of Default"  shall mean the occurrence or existence of
any event or condition described in Section 0 hereof.

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

        1.60    "Exchange Rate"  shall mean (a) except as otherwise provided in
paragraph (b) hereof, the prevailing spot rate of exchange of Reference Bank or,
if such rate is not available from Reference Bank such other bank as Lender may
reasonably select for the purpose of conversion of one currency to another, at
or around 11:00 a.m. New York time, on the date on which any such conversion of
currency is to be made under this Agreement; and (b) with respect to any
calculation being done by the Borrowers or Canadian Borrowers in respect of the
Canadian Borrowing Base, the prevailing spot "buy" rate of exchange of Bank of
Montreal or if such rate is not available from Bank of Montreal such other bank
as Lender may reasonably select for the purpose of conversion of one currency to
another, at or around 11:00 a.m. New York time, on the date on which any such
conversion of currency is to be made under this Agreement.

        1.61    "Federal Funds Rate"  means, for any day, the rate per annum
equal to the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers on such day, as published by the Federal Reserve Bank on the
Business Day next succeeding such day; provided that (a) if such day is not a
Business Day, the Federal Funds Rate for such day shall be such rate on such
transactions on the next preceding Business Day as so published on the next
succeeding Business Day, and (b) if no such rate is so published on such next
succeeding Business Day, the Federal Funds Rate for such day shall be the
average rate (rounded upward, if necessary, to a whole multiple of 1/100 of 1%)
charged to Lender on such day.

        1.62    "Financing Agreements"  shall mean, collectively, this Agreement
and all notes, guaranties, security agreements and other agreements, documents
and instruments now or at any time hereafter executed and/or delivered by
Borrowers or any Obligor in connection with this Agreement.

        1.63    "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 0 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 Lender
prior to the date hereof.

        1.64    "Gift Certificate and Store Credit Reserve"  shall mean, as of
any date of determination, a Reserve equal to the amount of fifty percent (50%)
of all (i) accrued and outstanding gift certificates issued by Borrowers in the
ordinary course of business and (ii) the aggregate amount of outstanding store
credits given by Borrowers to their customers in the ordinary course of
business.

        1.65    "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, any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government, and any corporation or other entity owned or
controlled, through stock or capital ownership or otherwise, by any of the
foregoing.

        1.66    "Guess Licensing"  shall mean Guess Licensing, Inc., a Delaware
corporation and a wholly-owned Subsidiary of Parent.

        1.67    "Hazardous Materials"  shall mean any hazardous, toxic or
dangerous substances, materials and wastes, including hydrocarbons (including
naturally occurring or man-made petroleum and

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hydrocarbons), flammable explosives, asbestos, urea formaldehyde insulation,
radioactive materials, biological substances, polychlorinated biphenyls,
pesticides, herbicides and any other kind and/or type of pollutants or
contaminants (including materials which include hazardous constituents), 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 regulated under any Environmental Law (including any that are
or become classified as hazardous or toxic under any Environmental Law).

        1.68    "Indebtedness"  shall mean, with respect to any Person, 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;
(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 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 (market 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 guaranty royalty payments.

        1.69    "Information Certificate"  shall mean the Information
Certificate of Borrowers constituting Exhibit A hereto containing material
information with respect to Borrowers, their business and assets provided by or
on behalf of Borrowers to Lender in connection with the preparation of this
Agreement and the other Financing Agreements and the financing arrangements
provided for herein.

        1.70    "Intellectual Property"  shall mean Borrowers' 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, trademark and service mark
applications, and licenses and rights to use any of the foregoing; 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; and trade secret rights, copyright
rights, rights in works of authorship, domain names and domain name
registrations; software and contract rights relating to software, in whatever
form created or maintained.

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        1.71    "Interest Period"  shall mean for any Eurodollar Rate Loan, a
period of approximately one (1), two (2), or three (3) 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.

        1.72    "Interest Rate"  shall mean, as to Prime Rate Loans, a rate
equal to the Prime Rate plus the Prime Rate Margin shown below as in effect from
time to time, and, as to Eurodollar Rate Loans, a rate equal to the Adjusted
Eurodollar Rate (based on the Eurodollar Rate applicable for the Interest Period
selected by Borrowers as in effect three (3) Business Days after the date of
receipt by Lender of the request 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) plus the Eurodollar Rate Margin shown below
as in effect from time to time:

 
  Trailing Four Quarters EBITDA

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

   
  Average Excess Availability
for the immediately preceding
Fiscal Quarter

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

  Margin over
Prime Rate

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

  Margin over
Adjusted
Eurodollar Rate

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

  •   Greater than or equal to the U.S. Dollar Equivalent of $70,000,000   •  
Greater than or equal to the U.S. Dollar Equivalent of $40,000,000   0.00 % 1.75
%
•
 
Greater than or equal to the U.S. Dollar Equivalent of $55,000,000 but less than
the U.S. Dollar Equivalent of $70,000,000
 
•
 
Greater than or equal to the U.S. Dollar Equivalent of $30,000,000 but less than
the U.S. Dollar Equivalent of $40,000,000
 
0.25
%
2.00
%
•
 
Greater than or equal to the U.S. Dollar Equivalent of $40,000,000 but less than
the U.S. Dollar Equivalent of $55,000,000
 
•
 
Greater than or equal to the U.S. Dollar Equivalent of $20,000,000 but less than
the U.S. Dollar Equivalent of $30,000,000
 
0.50
%
2.25
%
•
 
Greater than or equal to the U.S. Dollar Equivalent of $25,000,000 but less than
the U.S. Dollar Equivalent of $40,000,000
 
•
 
Less than the U.S. Dollar Equivalent of $20,000,000
 
0.75
%
2.50
%

If the Trailing Four Quarters EBITDA is less than the U.S. Dollar Equivalent of
Twenty Five Million Dollars ($25,000,000), the Interest Rate shall be calculated
using the margins based on Average Excess Availability set forth above. If
Trailing Four Quarters EBITDA is the U.S. Dollar Equivalent of Twenty Five
Million Dollars ($25,000,000) or more, the Interest Rate shall be calculated
using the lower of the margins applicable based on Trailing Four Quarters EBITDA
or Average Excess Availability. Notwithstanding the foregoing, the initial
interest rate shall be the Prime Rate plus one-half percent (0.50%) per annum
with respect to Prime Rate Loans and the Adjusted Eurodollar Rate plus two and
one-fourth percent (2.25%) per annum with respect to Eurodollar Rate Loans, and
such rates shall be in effect until financial statements for the Parent for the
period ending December 31, 2002 are delivered; thereafter, the Interest Rate
will be adjusted quarterly based on the margins set forth above, such
adjustments to take effect concurrently with any corresponding adjustments to
the Interest Rate under the Canadian Agreement on the first day of the month
following the timely delivery of financial statements to Lender under this
Agreement together with such daily reports of cash and Cash Equivalents of
Borrowers that are on deposit in a securities or deposit account subject to a
control agreement, in form and substance satisfactory to Lender, less the book
overdrafts of Borrowers, for such fiscal quarter as requested by Lender and in
form and substance reasonably satisfactory to Lender. If financial statements
are not timely delivered, the Interest Rate shall be set using the highest
margins

14

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shown above and shall remain at that rate until the delivery of financial
statements that permit the setting of the Interest Rate in accordance with the
table above.

        1.73    "Inventory"  shall mean all of Borrowers' now owned and
hereafter existing or acquired goods, wherever located, which (a) are leased by
any Borrower as lessor; (b) are held by any Borrower for sale or lease or to be
furnished under a contract of service or in transit; (c) are furnished by any
Borrower under a contract of service; or (d) consist of raw materials, work in
process, finished goods or materials used or consumed in Borrowers' business.

        1.74    "Inventory Sublimit"  shall mean an amount equal to the lesser
of (y) Sixty-Five Million Dollars ($65,000,000), or (z) an amount equal to
seventy-six percent (76%) of the Maximum Credit.

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

        1.76    "Lender Payment Account"  shall mean account no. 5000000030321
of Lender at First Union National Bank located at Charlotte, North Carolina,
with an ABA no. 053000219 or such other account of Lender as Lender may from
time to time designate to Borrowers as the Lender Payment Account for purposes
of this Agreement.

        1.77    "Letter of Credit Accommodations"  shall mean, collectively, the
letters of credit, merchandise purchase or other guaranties which are from time
to time either (a) issued or opened by Lender for the account of any Borrower or
(b) with respect to which Lender has agreed to indemnify the issuer or
guaranteed to the issuer the performance by any Borrower of its obligations to
such issuer; sometimes being referred to herein individually as a "Letter of
Credit Accommodation".

        1.78    "License Agreements"  shall have the meaning set forth in
Section 0 hereof.

        1.79    "Loans"  shall mean the loans now or hereafter made by Lender to
or for the benefit of Borrowers on a revolving basis (involving advances,
repayments and readvances) as set forth in Section 0 hereof.

        1.80    "Material Adverse Change"  shall mean (a) a material adverse
change in the business, prospects, operations, results of operations, assets,
liabilities or condition (financial or otherwise) of Borrowers taken as a whole,
(b) a material impairment of Borrowers' ability to perform their obligations
under the Financing Agreements or of Lender's ability to enforce the Obligations
or realize upon the Collateral, or (c) a material impairment of the
enforceability or priority of Lender's liens or security interests with respect
to the Collateral as a result of an action or failure to act on the part of a
Borrower.

        1.81    "Material Contract"  shall mean (a) any contract or other
agreement (other than the Financing Agreements or agreements relating solely to
the purchase by any Borrower of Inventory in the ordinary course of such
Borrower's business), written or oral, of any Borrower or Borrowers involving
monetary liability of or to any Person in an amount in excess of Ten Million
Dollars ($10,000,000) in any fiscal year and (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 on the business, assets, condition (financial or otherwise) or
results of operations or

15

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prospects of Borrowers or the validity or enforceability of this Agreement, any
of the other Financing Agreements, or any of the rights and remedies of Lender
hereunder or thereunder.

        1.82    "Maximum Credit"  shall mean at any time the amount of
Eighty-Five Million Dollars ($85,000,000) (subject to Borrowers' right to reduce
such amount under Section 12.1(d)) minus the Canadian Maximum Credit.

        1.83    "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.

        1.84    "Net Amount of Eligible Accounts"  shall mean the gross amount
of Eligible Accounts less returns, claims, credits and allowances of any nature
at any time issued, owing, granted, outstanding, available or claimed with
respect thereto.

        1.85    "Net Recovery Value"  shall mean the net cash Value derived from
the sale and disposition of the Eligible Inventory after deduction of all
liquidation costs and other fees and expenses associated therewith.

        1.86    "Obligations"  shall mean any and all Loans, the Letter of
Credit Accommodations and all other obligations, liabilities and indebtedness of
every kind, nature and description owing by Borrowers to Lender and/or its
affiliates, including principal, interest, charges, fees, costs and expenses,
however evidenced, whether as principal, surety, endorser, guarantor or
otherwise, whether arising under this Agreement or otherwise, whether now
existing or hereafter arising, 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 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, secured or unsecured, and
however acquired by Lender.

        1.87    "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, other than Borrowers.

        1.88    "Original Loan Agreement"  shall have the meaning set forth in
the recitals.

        1.89    "Parent"  shall mean Guess ?, Inc.

        1.90    "Permitted Holders"  shall mean collectively Maurice Marciano,
Paul Marciano and Armand Marciano, the members of their families, their
respective estates, spouses, heirs, ancestors, lineal descendants, spouses of
lineal descendants, legatees and legal representatives of any of the foregoing
and any trust of which one or more of the foregoing are the trustors, the
trustees and/or the beneficiaries.

        1.91    "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.

        1.92    "Plan"  means an employee benefit plan (as defined in
Section 3(3) of ERISA) which any Borrower sponsors, maintains, or to which it
makes, is making, or is obligated to make contributions, or in the case of a
Multiemployer Plan has made contributions at any time during the immediately
preceding six (6) plan years.

16

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

        1.93    "Prime Rate"  shall mean the rate from time to time publicly
announced by the Reference Bank as its prime rate, whether or not such announced
rate is the best rate available at such bank.

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

        1.95    "Receivables"  shall mean all of the following now owned or
hereafter arising or acquired property of Borrowers: (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; and
(c) all payment intangibles of any Borrower and other contract rights, chattel
paper, instruments, notes, and other forms of obligations owing to any Borrower,
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 any Borrower or to or for the
benefit of any third person (including loans or advances to any Affiliates or
Subsidiaries of any Borrower) or otherwise associated with any Accounts,
Inventory or general intangibles of any Borrower (including, without limitation,
choses in action, causes of action, tax refunds, tax refund claims, any funds
which may become payable to any Borrower in connection with the termination of
any Plan or other employee benefit plan and any other amounts payable to any
Borrower 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 any Borrower is a beneficiary).

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

        1.97    "Reference Bank"  shall mean Wachovia Bank, National
Association, its successor or such other bank as Lender may from time to time
designate.

        1.98    "Renewal Date"  shall the meaning set forth in Section 0 hereof.

        1.99    "Reserves"  shall mean as of any date of determination, such
amounts as Lender may from time to time establish and revise in good faith
reducing the amount of 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 Lender 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, (ii) the assets,
business or prospects of Borrowers or any Obligor or (iii) the security
interests and other rights of Lender in the Collateral (including the
enforceability, perfection and priority thereof) or (b) to reflect Lender's good
faith belief that any collateral report or financial information furnished by or
on behalf of Borrowers or any Obligor to Lender is or may have been incomplete,
inaccurate or misleading in any material respect or (c) to reflect outstanding
Letter of Credit Accommodations as provided in Section 0 hereof or (d) in
respect of any state of facts which Lender determines in good faith constitutes
a Default or an Event of Default. To the extent Lender may revise the lending
formulas used to determine the Borrowing Base or establish new criteria or
revise existing criteria for Eligible Accounts or Eligible Inventory so as to
address any circumstances, condition, event or contingency in a manner
satisfactory to Lender, Lender shall not establish a Reserve for the same
purpose. The amount of any Reserve established by Lender shall have a reasonable
relationship to the event, condition or other matter which is the basis for such
reserve as determined by Lender in good faith. Without limiting the generality
of the foregoing, Reserves shall include the Dilution Reserve, the

17

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

Shrinkage Reserve, the Discount Reserve and the Canadian Permitted Overadvance
Reserve and may at Lender's discretion include a reserve for sales tax
liability.

        1.100    "Securitization"  shall mean the series of related transactions
by which (i) Parent and Guess Licensing may transfer to a SPE all or any part of
the Securitization Assets, (ii) the SPE will transfer and/or pledge all or
certain of such Securitization Assets to another Subsidiary (which may be a
corporation, partnership, limited liability company, trust or other legal
entity) which will be wholly-owned by the SPE that will issue securities or debt
instruments evidencing interests in or secured by such assets and/or the
proceeds thereof, (iii) all accounts and other Securitization Assets of the SPE
and the proceeds thereof are segregated from and not commingled with the
Accounts, the other items of Collateral and the proceeds thereof.

        1.101    "Securitization Assets"  shall mean (i) all or any part of the
Intellectual Property that includes and is related to the registered and
unregistered trademarks and tradenames currently utilized in the business
operations of Parent and its Subsidiaries and Affiliates, including those that
are licensed to third parties in and outside of the United States by Parent and
Guess Licensing, (ii) all of their respective rights under all or specific
licenses granted by Parent and Guess Licensing and (iii) all proceeds from the
exploitation thereof or arising with respect thereto, including without
limitation all amounts payable by licensees under such licenses and all proceeds
of the enforcement of rights with respect to such Intellectual Property.

        1.102    "Securitization Closing Date"  shall mean the closing date of a
Securitization.

        1.103    "Securitization Documents"  shall mean the organizational
documents of a SPE and any documents entered into by any Borrower, Parent, any
direct or indirect Subsidiary or Affiliate of Parent or of a Borrower and/or a
SPE in connection with a Securitization.

        1.104    "SPE"  shall mean a direct or indirect Subsidiary of Parent,
which may be a corporation, partnership, limited liability company, trust or
other legal entity, formed solely for the purposes of effectuating a
Securitization.

        1.105    "Shrinkage Reserve"  shall mean a Reserve for reductions in
Inventory equal to the shrinkage reserve taken by Borrowers on their financial
statements prepared in accordance with GAAP.

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

        1.107    "Subordinated Notes"  shall mean the 9.50% Senior Subordinated
Notes due 2003 and 9.50% Series B Senior Subordinated Notes due 2003 of Parent
issued pursuant to an Indenture dated August 23, 1993 with First Trust National
Association as Trustee.

        1.108    "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

18

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

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.

        1.109    "Trailing Four Quarters EBITDA"  shall mean, with respect to
any fiscal period, the sum of Parent's and its Subsidiaries' consolidated EBITDA
for each of the four (4) fiscal quarters ending at the end of the fiscal period
for which the calculation is made.

        1.110    "UCC"  shall mean the Uniform Commercial Code as in effect in
the State of California, 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 California on the date hereof shall continue
to have the same meaning notwithstanding any replacement or amendment of such
statute except as Lender may otherwise determine.

        1.111    "U.S. Average Excess Availability"  shall mean the average
daily amount, as determined by Lender, for the immediately preceding fiscal
quarter, equal to: (a) the Borrowing Base, plus (b) Borrowers' unrestricted cash
and/or Cash Equivalents that are on deposit in a securities or deposit account
subject to a control agreement, in form and substance satisfactory to Lender,
minus (c) the book overdraft of Borrowers, minus (d) the amount of all then
outstanding and unpaid Obligations.

        1.112    "U.S. Compliance Excess Availability"  shall mean the amount,
as determined by Lender, as of any time, equal to: (a) the Borrowing Base, plus
(b) the lesser of (i) Five Million Dollars ($5,000,000) and (ii) the result of
(A) Borrowers' unrestricted cash and/or Cash Equivalents that are on deposit in
a securities or deposit account subject to a control agreement, in form and
substance satisfactory to Lender, minus (B) the book overdraft of Borrowers,
minus (C) the amount of all then outstanding and unpaid Obligations.

        1.113    "U.S. Dollar Equivalent"  shall mean at any time (a) as to any
amount denominated in U.S. Dollars, the amount thereof at such time, and (b) as
to any amount denominated in any other currency, the equivalent amount in U.S.
Dollars calculated by Lender in good faith at such time using the Exchange Rate
in effect on the Business Day of determination.

        1.114    "U.S. Excess Availability"  shall mean the amount, as
determined by Lender, calculated at any time, equal to: (a) the Borrowing Base,
plus (b) Borrowers' unrestricted cash and/or Cash Equivalents that are on
deposit in a securities or deposit account subject to a control agreement, in
form and substance satisfactory to Lender, minus (c) the book overdraft of
Borrowers, minus (d) the sum of: (i) the amount of all then outstanding and
unpaid Obligations, plus (ii) the aggregate amount of all then outstanding and
unpaid trade payables and other obligations of Borrowers which are more than
sixty (60) days past due as of the last day of the immediately preceding fiscal
month, and plus (iii) the amount of checks issued by Borrowers to pay trade
payables and other obligations which are more than sixty (60) days past due as
of such time, but not yet sent (but without duplication of clause (b)(ii)), as
of the last day of the immediately preceding fiscal month.

        1.115    "Value"  shall mean, as determined by Lender in good faith,
with respect to Inventory, the lower of (a) cost computed on a
first-in-first-out 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 any Affiliate on the sale thereof to any Borrower (known
as "intercompany profit") 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 Lender prior to the date hereof, if any.

19

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        1.116    "Voting Stock"  shall mean with respect to any Person, (a) one
(1) or more classes of Capital Stock of such Person having general voting power
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.

SECTION 2.    CREDIT FACILITIES    

        2.1    Loans.    

        (a)  Subject to and upon the terms and conditions contained herein,
Lender agrees to make Loans to Borrowers from time to time in amounts requested
by any Borrower or Borrowers up to the amount equal to the lesser of: (i) the
Borrowing Base or (ii) the Maximum Credit.

        (b)  Lender may, in its discretion, from time to time, upon not less
than five (5) days prior written notice to Borrowers, (i) reduce the lending
formula with respect to Eligible Accounts to the extent that Lender determines
in good faith that: (A) the dilution with respect to the Accounts for any period
(based on the ratio of (1) the aggregate amount of reductions in Accounts other
than as a result of payments in cash to (2) the aggregate amount of total sales)
has increased or may be reasonably anticipated to increase above historical
levels, or (B) the general creditworthiness of account debtors has declined, or
(ii) reduce the lending formula(s) with respect to Eligible Inventory to the
extent that Lender determines that: (A) the number of days of the turnover of
the Inventory for any period has changed or (B) the liquidation value of the
Eligible Inventory, or any category thereof, has decreased, including any such
decrease attributable to any change in the nature, quality or mix of the
Inventory; provided that Borrowers may respond in writing to such reductions
proposed by Lender within two (2) days of Lender's giving notice thereof, and
Lender will consider Borrowers' response in determining whether to make the
proposed reductions; provided, further, that such reductions will in every case
be made by Lender and in Lender's sole discretion. The amount of any decrease in
the lending formulas shall have a reasonable relationship to the event,
condition or circumstance that is the basis for such decrease as determined by
Lender in good faith. In determining whether to reduce the lending formula(s),
Lender may consider events, conditions, contingencies or risks which are also
considered in determining Eligible Accounts, Eligible Inventory or in
establishing Reserves.

        (c)  Except in Lender's discretion, the aggregate amount of the Loans
and the Letter of Credit Accommodations outstanding at any time shall not exceed
the Maximum Credit and the amount of Loans and the Letter of Credit
Accommodations outstanding at any time with respect to Eligible Inventory that
is in transit shall not exceed Fifteen Million Dollars ($15,000,000) in the
aggregate. In the event that the outstanding amount of any component of the
Loans, or the aggregate amount of the outstanding Loans and Letter of Credit
Accommodations, exceeds the amounts available pursuant to this Agreement, such
event shall not limit, waive or otherwise affect any rights of Lender in that
circumstance or on any future occasions and Borrowers shall, upon demand by
Lender, which may be made at any time or from time to time, immediately repay to
Lender the entire amount of any such excess(es) for which payment is demanded.

        2.2    Letter of Credit Accommodations.    

        (a)  Subject to and upon the terms and conditions contained herein, at
the request of Borrowers, Lender agrees to provide or arrange for Letter of
Credit Accommodations for the account of any Borrower containing terms and
conditions acceptable to Lender and the issuer thereof. Any payments made by
Lender to any issuer thereof and/or related parties in connection with the
Letter of Credit Accommodations shall constitute additional Loans to Borrowers
pursuant to this Section 2.

20

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        (b)  In addition to any charges, fees or expenses charged by any bank or
issuer in connection with the Letter of Credit Accommodations, Borrowers shall
pay to Lender a letter of credit fee equal to 1.75% per annum on the daily
outstanding balance of the Letter of Credit Accommodations for the immediately
preceding month (or part thereof) until the delivery of financial statements for
the period ending December 31, 2002. Thereafter, Borrowers shall pay to Lender a
letter of credit fee on the daily outstanding balance of the Letter of Credit
Accommodations for the immediately preceding month (or part thereof), payable in
arrears as of the first day of the month following the timely delivery of
financial statements to Lender pursuant to this Agreement based on the Trailing
Four Quarters EBITDA or Average Excess Availability as set forth below:

 
  Trailing Four Quarters EBITDA

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

   
  Average Excess Availability for the immediately
preceding Fiscal Quarter

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

  L/C Fee

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

  •   Greater than or equal to the U.S. Dollar Equivalent of $70,000,000   •  
Greater than or equal to the U.S. Dollar Equivalent of $40,000,000   1.50 %
•
 
Greater than or equal to the U.S. Dollar Equivalent of $55,000,000 but less than
the U.S. Dollar Equivalent of $70,000,000
 
•
 
Greater than or equal to the U.S. Dollar Equivalent of $30,000,000 but less than
the U.S. Dollar Equivalent of $40,000,000
 
1.75
%
•
 
Greater than or equal to the U.S. Dollar Equivalent of $40,000,000 but less than
the U.S. Dollar Equivalent of $55,000,000
 
•
 
Greater than or equal to the U.S. Dollar Equivalent of $20,000,000 but less than
the U.S. Dollar Equivalent of $30,000,000
 
1.75
%
•
 
Greater than or equal to the U.S. Dollar Equivalent of $25,000,000 but less than
the U.S. Dollar Equivalent of $40,000,000
 
•
 
Less than the U.S. Dollar Equivalent of $20,000,000
 
2.00
 

If the Trailing Four Quarters EBITDA is less than the U.S. Dollar Equivalent of
Twenty Five Million Dollars ($25,000,000), the letter of credit fee shall be
calculated using the margin based on Average Excess Availability set forth
above. If the Trailing Four Quarters EBITDA is the U.S. Dollar Equivalent of
Twenty Five Million Dollars ($25,000,000) or more, the letter of credit fee
shall be calculated using the lower of the margins applicable based on Trailing
Four Quarters EBITDA or Average Excess Availability. The letter of credit fee
will be adjusted quarterly based on the margins set forth above, such
adjustments to take effect on the first day of the month following the timely
delivery of financial statements to Lender under this Agreement together with
such daily reports of cash and Cash Equivalents of Borrowers that are on deposit
in a securities or deposit account subject to a control agreement, in form and
substance satisfactory to Lender, less the book overdrafts of Borrowers, for
such fiscal quarter as requested by Lender and in form and substance reasonably
satisfactory to Lender. If financial statements are not timely delivered, the
letter of credit fee shall be set using the highest margin shown above and shall
remain at that rate until the delivery of financial statements that permit the
setting of the letter of credit fee in accordance with the table above.
Notwithstanding the foregoing, Borrowers shall pay to Lender such letter of
credit fee, at Lender's option, without notice, at a rate equal to two percent
(2%) per annum higher than the highest rate set forth above on such daily
outstanding balance for: (i) the period from and after the date of termination
or non-renewal hereof until Lender has received full and final payment of all
Obligations (notwithstanding entry of a judgment against any Borrower) 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 Lender. Such
letter of credit fee

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shall, in each case, 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.

        (c)  Any Borrower or Borrowers shall give Lender two (2) Business Days'
prior written notice of Borrowers' request for the issuance of a 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.
The proposed form of the Letter of Credit Accommodation shall be attached to
such notice.

        (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 Lender: (i) a Borrower shall have delivered to the
proposed issuer of such Letter of Credit Accommodation at such times and in such
manner as such proposed issuer may require, an application in form and substance
satisfactory to such proposed issuer and Lender for the issuance of the Letter
of Credit Accommodation and such other documents as may be required pursuant to
the terms thereof, and the form and terms of the proposed Letter of Credit
Accommodation shall be satisfactory to Lender and such proposed issuer, (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
the proposed issuer of such Letter of Credit Accommodation refrain from, the
issuance of letters of credit generally or the issuance of such Letters of
Credit Accommodation; and (iii) availability under the Borrowing Base, prior to
giving effect to any Reserves with respect to such Letter of Credit
Accommodations, on the date of the proposed issuance of any Letter of Credit
Accommodations, shall be equal to or greater than: (A) if the proposed Letter of
Credit Accommodation is for the purpose of purchasing Eligible Inventory and the
documents of title with respect thereto are consigned to the issuer or such
Inventory is the subject of a Collateral Access Agreement, the sum of (1) the
percentage equal to one hundred percent (100%) minus the then applicable
percentage with respect to Eligible Inventory set forth in the definition of the
term Borrowing Base multiplied by the Value of such Eligible Inventory, plus
(2) freight, taxes, duty and other amounts which Lender estimates must be paid
in connection with such Inventory upon arrival and for delivery to one of
Borrowers' permitted locations for Eligible Inventory within the United States
of America, or (B) if the proposed Letter of Credit Accommodation is for any
other purpose, or the documents of title are either (y) not consigned to the
issuer in connection with a Letter of Credit Accommodation for purposes of
purchasing Inventory or (z) the documents of title are not in possession of
Lender or its bailees or for which Lender has not received Collateral Access
Agreements or otherwise, satisfactory to Lender, an amount equal to one hundred
percent (100%) of the face amount thereof and all other commitments and
obligations made or incurred by Lender with respect thereto. Effective on the
issuance of each Letter of Credit Accommodation, a Reserve shall be established
in the applicable amount set forth in Section 2.2(d)(iii)(A) or
Section 2.2(d)(iii)(B) above.

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        (e)  Except in Lender's discretion, the amount of all outstanding Letter
of Credit Accommodations and all other commitments and obligations made or
incurred by Lender in connection therewith shall not at any time exceed
Forty-Seven Million Five Hundred Thousand Dollars ($47,500,000) minus the
maximum amount of letter of credit accommodations available to the Canadian
Borrowers under the Canadian Facility.

        (f)    Borrowers shall indemnify and hold Lender harmless from and
against any and all losses, claims, damages, liabilities, costs and expenses
which Lender 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 any issuer or correspondent with respect to any Letter of
Credit Accommodation except for losses, claim, damages, liabilities, costs and
expenses arising from the gross negligence or willful misconduct of Lender as
determined pursuant to a final non-appealable order of a court of competent
jurisdiction. Borrowers assume 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 Borrowers' agent.
Borrowers assume 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.
Borrowers hereby release and hold Lender harmless from and against any acts,
waivers, errors, delays or omissions, whether caused by any Borrower, by any
issuer or correspondent or otherwise with respect to or relating to any Letter
of Credit Accommodation, except for the gross negligence or willful misconduct
of 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)  In connection with Inventory purchased pursuant to Letter of Credit
Accommodations, Borrowers shall, at Lender's request, instruct all suppliers,
carriers, forwarders, customs brokers, warehouses or others receiving or holding
cash, checks, Inventory, documents or instruments in which Lender holds a
security interest to deliver them to Lender and/or subject to Lender's order,
and if they shall come into any Borrower's possession, to deliver them, upon
Lender's request, to Lender in their original form.

        (h)  Borrowers hereby irrevocably authorize and direct any issuer of a
Letter of Credit Accommodation to name any Borrower as the account party therein
and to deliver to Lender all instruments, documents and other writings and
property received by issuer pursuant to the Letter of Credit Accommodations and
to accept and rely upon Lender'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 Lender in any
manner. Lender shall have no liability of any kind with respect to any Letter of
Credit Accommodation provided by an issuer other than Lender unless Lender has
duly executed and delivered to such issuer the application or a guaranty or
indemnification in writing with respect to such Letter of Credit Accommodation.
Borrowers shall be bound by any interpretation made in good faith by Lender or
any other issuer or correspondent under or in connection with any Letter of
Credit Accommodation or any documents, drafts or acceptances thereunder,
notwithstanding that such interpretation may be inconsistent with any
instructions of any Borrower. Lender shall have the sole and exclusive right and
authority to, and Borrowers shall not: (i) at any time an Event of Default
exists or has occurred and is continuing, (A) approve or resolve any questions
of non-compliance of documents, (B) give any instructions as to acceptance or
rejection of any documents or goods or (C) execute any and all applications for
steamship or airway guaranties, indemnities or delivery orders, and (ii) at all
times, (A) grant any extensions of the maturity of, time of payment for, or time
of presentation of, any drafts, acceptances, or documents, and (B) agree to any
amendments,

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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.

        (i)    Any rights, remedies, duties or obligations granted or undertaken
by any Borrower to any issuer or correspondent in any application for any Letter
of Credit Accommodation, or any other agreement in favor of any issuer or
correspondent relating to any Letter of Credit Accommodation, shall be deemed to
have been granted or undertaken by Borrowers to Lender. Any duties or
obligations undertaken by Lender to any issuer or correspondent in any
application for any Letter of Credit Accommodation, or any other agreement by
Lender in favor of any issuer or correspondent relating to any Letter of Credit
Accommodation, shall be deemed to have been undertaken by Borrowers to Lender
and to apply in all respects to Borrowers.

SECTION 3.    INTEREST AND FEES    

        3.1    Interest.    

        (a)  Borrowers shall pay to Lender interest on the outstanding principal
amount of the Loans at the Interest Rate. All interest accruing hereunder on and
after the date of any Event of Default or termination or non-renewal hereof
shall be payable on demand.

        (b)  Borrowers may from time to time request Eurodollar Rate Loans or
may request that Prime Rate Loans be converted to Eurodollar Rate Loans or that
any existing Eurodollar Rate Loans continue for an additional Interest Period.
Such request from Borrowers shall specify the amount of the Eurodollar Rate
Loans or the amount of the Prime Rate Loans to be converted to Eurodollar Rate
Loans or the amount of the 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,
three (3) Business Days after receipt by Lender of such a request from
Borrowers, 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 or
non-renewal of this Agreement, (iii) Borrowers shall have complied with such
customary procedures as are established by Lender and specified by Lender to
Borrowers from time to time for requests by 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 Five Million Dollars ($5,000,000) or an integral multiple of One
Million Dollars ($1,000,000) in excess thereof, (vi) Borrowers shall exercise
reasonable efforts to assure that the maximum amount of the Eurodollar Rate
Loans at any time requested by Borrowers shall not exceed the amount equal to
ninety percent (90%) of the lowest principal amount of the Loans which it is
anticipated will be outstanding during the applicable Interest Period, and
(vii) Lender shall have determined that the Interest Period or Adjusted
Eurodollar Rate is available to Lender through the Reference Bank and can be
readily determined as of the date of the request for such Eurodollar Rate Loan
by Borrowers. Any request by Borrowers for Eurodollar Rate Loans or to convert
Prime Rate Loans to Eurodollar Rate Loans or to continue any existing Eurodollar
Rate Loans shall be irrevocable. Notwithstanding anything to the contrary
contained herein, Lender and Reference Bank shall not be required to purchase
United States Dollar deposits in the London interbank market or other applicable
Eurodollar Rate market to fund any Eurodollar Rate Loans, but the provisions
hereof shall be deemed to apply as if Lender and Reference Bank had purchased
such deposits to fund the Eurodollar Rate Loans.

        (c)  Any Eurodollar Rate Loans shall automatically convert to Prime Rate
Loans upon the last day of the applicable Interest Period, unless Lender has
received and approved a request to continue such Eurodollar Rate Loan at least
three (3) Business Days prior to such last day in

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accordance with the terms hereof. Borrowers shall pay to Lender, upon demand by
Lender (or Lender may, at its option, charge any loan account of Borrowers) any
amounts required to compensate Lender, the Reference Bank or any participant
with Lender for any loss (including loss of anticipated profits), cost or
expense incurred by such person, as a result of the conversion of Eurodollar
Rate Loans to Prime Rate Loans pursuant to any of the foregoing.

        (d)  Interest shall be payable by Borrowers to Lender monthly in arrears
not later than the first day of each calendar month and shall be calculated on
the basis of a three hundred sixty (360) day year and actual days elapsed. The
interest rate on non-contingent Obligations (other than Eurodollar Rate Loans)
shall increase or decrease by an amount equal to each increase or decrease in
the Prime Rate effective on the first day of the month after any change in such
Prime Rate is announced based on the Prime Rate in effect on the last day of the
month in which any such change occurs. In no event shall charges constituting
interest payable by Borrowers to Lender exceed the maximum amount or the rate
permitted under any applicable law or regulation, and if any such part or
provision of this Agreement is in contravention of any such law or regulation,
such part or provision shall be deemed amended to conform thereto.

        (e)  Notwithstanding the foregoing, Borrowers shall pay to Lender
interest, at Lender's option, without notice, at a rate of two (2.0%) percent
per annum greater than the highest rates otherwise set forth in the definition
of "Interest Rate" as follows:

          (i)  on the non-contingent Obligations for the period from and after
the date of termination hereof, or the date of the occurrence of an Event of
Default, and for so long as such Event of Default is continuing as determined by
Lender and until such time as Lender has received full and final payment of all
such Obligations (notwithstanding entry of any judgment against Borrowers); and

        (ii)  on the Loans at any time outstanding in excess of the amounts
available to Borrowers under Section 2 (whether or not such excess(es) arise or
are made with or without Lender's knowledge or consent and whether made before
or after an Event of Default).

        All interest accruing hereunder on and after the occurrence of any of
the events referred to in this Section 3.1(e) shall be payable on demand.

        3.2    Closing Fee.    Borrowers shall pay to Lender as a closing fee
the amount of Five Hundred Thirty-Seven Thousand Five Hundred Dollars
($537,500), which shall be fully earned as of the date hereof and one-half of
which shall be payable on the date hereof and the remaining one-half shall be
payable on the first anniversary of the date hereof. This amount is intended to
include any closing fee that would otherwise be due in connection with the
Canadian Facility.

        3.3    Servicing Fee.    Borrowers shall pay to Lender monthly a
servicing fee in an amount equal to Seven Thousand Five Hundred Dollars ($7,500)
in respect of Lender's services for each month (or part thereof) while this
Agreement remains in effect and for so long thereafter as any of the Obligations
are outstanding, which fee shall be fully earned as of and payable in advance on
the date hereof and on the first day of each month hereafter. This amount is
intended to include any servicing fee that would otherwise be due in connection
with the Canadian Facility.

        3.4    Unused Line Fee.    Borrowers shall pay to Lender monthly an
unused line fee at a rate equal to three-eighths percent (0.375%) per annum
calculated upon the amount by which Sixty Million Dollars ($60,000,000) exceeds
the average daily principal balance of the outstanding 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, which fee shall be payable on the first day of each
month in arrears.

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        3.5    Changes in Laws and Increased Costs of Loans.    

        (a)  Notwithstanding anything to the contrary contained herein, all
Eurodollar Rate Loans shall, upon notice by Lender to Borrowers, convert to
Prime Rate Loans in the event that (i) any change in applicable law or
regulation (or the interpretation or administration thereof) shall either
(A) make it unlawful for Lender, Reference Bank or any participant with Lender
to make or maintain Eurodollar Rate Loans or to comply with the terms hereof in
connection with the Eurodollar Rate Loans, or (B) shall result in the increase
in the costs to Lender, Reference Bank or any participant of making or
maintaining any Eurodollar Rate Loans by an amount deemed by Lender to be
material, or (C) reduce the amounts received or receivable by Lender in respect
thereof, by an amount deemed by Lender to be material or (ii) the cost to
Lender, Reference Bank or any participant of making or maintaining any
Eurodollar Rate Loans shall otherwise increase by an amount deemed by Lender to
be material. Borrowers shall pay to Lender, upon demand by Lender (or Lender
may, at its option, charge any loan account of Borrowers) any amounts required
to compensate Lender, the Reference Bank or any participant with Lender for any
loss (including loss of anticipated profits), cost or expense incurred by such
person as a result of the foregoing, including, without limitation, any such
loss, cost or expense incurred by reason of the liquidation or reemployment of
deposits or other funds acquired by such person to make or maintain the
Eurodollar Rate Loans or any portion thereof; provided that no such person shall
be entitled to compensation for any such loss, cost or expense with respect to
any period prior to six months prior to the date of the demand delivered to
Borrowers.

        (b)  If any payments or prepayments in respect of the Eurodollar Rate
Loans are received by Lender other than on the last day of the applicable
Interest Period (whether pursuant to acceleration, upon maturity or otherwise),
including any payments pursuant to the application of collections under
Section 6.3 or any other payments made with the proceeds of Collateral,
Borrowers shall pay to Lender upon demand by Lender (or Lender may, at its
option, charge any loan account of Borrowers) any amounts required to compensate
Lender, the Reference Bank or any participant with Lender for any additional
loss (including loss of anticipated profits), cost or expense incurred by such
person as a result of such prepayment or payment, including, without limitation,
any loss, cost or expense incurred by reason of the liquidation or reemployment
of deposits or other funds acquired by such person to make or maintain such
Eurodollar Rate Loans or any portion thereof.

        (c)  A certificate of Lender setting forth the basis for the
determination of the amount necessary to compensate Lender or any participant
under this Section 3.5 shall be delivered to Borrowers and shall be conclusive,
absent manifest error.

SECTION 4.    CONDITIONS PRECEDENT    

        4.1    Conditions Precedent to Initial Loans and Letter of Credit
Accommodations.    Each of the following is a condition precedent to Lender
making the initial Loans and providing the initial Letter of Credit
Accommodations hereunder, which have been satisfied:

        (a)  Lender shall have received, in form and substance satisfactory to
Lender, all releases, terminations and such other documents as Lender may
request to evidence and effectuate the termination by the existing lenders to
Borrowers of their respective financing arrangements with Borrowers and the
termination and release by it or them, as the case may be, of any interest in
and to any assets and properties of any Borrower and each Obligor, duly
authorized, executed and delivered by it or each of them, including, but not
limited to, UCC termination statements for all UCC financing statements
previously filed by it or any of them or their predecessors, as secured party
and any Borrower or any Obligor, as debtor;

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        (b)  all requisite corporate action and proceedings in connection with
this Agreement and the other Financing Agreements shall be satisfactory in form
and substance to Lender, and Lender shall have received all information and
copies of all documents, including records of requisite corporate action and
proceedings which Lender may have requested in connection therewith, such
documents where requested by Lender or its counsel to be certified by
appropriate corporate officers or Governmental Authority (and including a copy
of the certificate of incorporation of each Borrower certified by the Secretary
of State (or equivalent Governmental Authority) which shall set forth the same
complete corporate name of such Borrower as is set forth herein and such
document as shall set forth the organizational identification number of such
Borrower, if one is issued in its jurisdiction of incorporation);

        (c)  no Material Adverse Change shall have occurred since the date of
Lender's latest field examination;

        (d)  Lender shall have completed a field review of the Records and such
other information with respect to the Collateral as Lender may require to
determine the amount of Loans available to Borrowers (including, without
limitation, current perpetual inventory records and/or roll-forwards of Accounts
and Inventory through the date of closing and test counts of the Inventory in a
manner satisfactory to Lender, together with such supporting documentation as
may be necessary or appropriate, and other documents and information that will
enable Lender to accurately identify and verify the Collateral), the results of
which each case shall be satisfactory to Lender, not more than five (5) Business
Days prior to the date hereof;

        (e)  Lender shall have received, in form and substance satisfactory to
Lender, all consents, waivers, acknowledgments and other agreements from third
persons which Lender may deem necessary or desirable in order to permit, protect
and perfect its security interests in and liens upon the Collateral or to
effectuate the provisions or purposes of this Agreement and the other Financing
Agreements, including, without limitation, agreements with Customs Brokers and
the Collateral Access Agreements listed on Schedule 4.1 by owners and lessors of
leased premises of Borrowers and by warehouses at which Collateral is located;

        (f)    the U.S. Excess Availability as determined by Lender, as of the
date hereof shall be not less than Twenty Million Dollars ($20,000,000) after
giving effect to the initial Loans made or to be made and Letter of Credit
Accommodations issued or to be issued in connection with the transactions
hereunder;

        (g)  Lender shall have received, in form and substance satisfactory to
Lender, Deposit Account Control Agreements by and among Lender, Borrowers and
each bank where any Borrower has the Central Collection Deposit Accounts set
forth on Schedule 4.1, in each case, duly authorized, executed and delivered by
such bank and the relevant Borrower (or Lender shall be the bank's customer with
respect to such deposit account as Lender may specify);

        (h)  Lender shall have received evidence, in form and substance
satisfactory to Lender, that Lender has a valid perfected first priority
security interest in all of the Collateral, subject to the liens permitted
pursuant to Section 9.8;

        (i)    Lender shall have received and reviewed lien and judgment search
results for the jurisdictions of incorporation or organization of Borrowers, the
jurisdictions of the chief executive offices of Borrowers and all jurisdictions
listed on Schedule 4.1 in which assets of Borrowers are located, which search
results shall be in form and substance satisfactory to Lender;

        (j)    Lender shall have received evidence of insurance and loss payee
endorsements required hereunder and under the other Financing Agreements, in
form and substance satisfactory to Lender, and certificates of insurance
policies and/or endorsements naming Lender as loss payee;

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        (k)  Lender shall have received, in form and substance satisfactory to
Lender, such opinion letters of counsel to Borrowers with respect to the
Financing Agreements and such other matters as Lender may request; and

        (l)    the other Financing Agreements and all instruments and documents
hereunder and thereunder shall have been duly executed and delivered to Lender,
in form and substance satisfactory to Lender.

        4.2    Conditions Precedent to All Loans and Letter of Credit
Accommodations.    Each of the following is an additional condition precedent to
Lender making Loans and/or providing Letter of Credit Accommodations to
Borrowers, including the initial Loans and Letter of Credit Accommodations and
any future Loans and Letter of Credit Accommodations:

        (a)  all representations and warranties contained herein and in the
other Financing Agreements shall be true and correct in all material respects
with the same effect as though such representations and warranties had been made
on and as of the date of the making of each such Loan or providing each such
Letter of Credit 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 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 or
could reasonably be expected to have a Material Adverse Change; 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.

        4.3    Conditions Subsequent.    The following conditions subsequent
must be performed within the time frames specified. The failure of these
conditions, or any of them, shall constitute an Event of Default under this
Agreement.

        (a)  The Canadian Facility must be in effect on or before January 3,
2003. The lenders under the Canadian Facility shall have entered into an
intercreditor agreement with Lender on terms and conditions satisfactory to
Lender. Borrowers shall deliver the Canadian Guarantee in connection with the
Canadian Facility. Lender shall have received an updated collateral audit of the
Canadian Borrowers, each in form and substance reasonably satisfactory to
Lender.

        (b)  Lender shall have conducted an updated audit of Canadian Borrowers
within ten (10) days prior to the effectiveness of the Canadian Facility, and
Lender must be satisfied with the results of such audit.

        (c)  On or prior to February 28, 2003, Borrowers shall have extended the
maturity date of the Subordinated Notes so that the maturity date of the
Subordinated Notes shall be later than September 27, 2006 or shall have
refinanced the Subordinated Notes with debt that has a maturity date later than
September 27, 2006, in any case on terms and conditions satisfactory to Lender.

SECTION 5.    GRANT AND PERFECTION OF SECURITY INTEREST    

        5.1    Grant of Security Interest.    To secure payment and performance
of all Obligations, each Borrower hereby grants to Lender a continuing security
interest in, a lien upon, and a right of set off

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against, and hereby assigns to Lender as security, all personal property and
trade fixtures and interests in property and fixtures of such Borrower, 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 Lender, collectively, the "Collateral"), including:

        (a)  all Accounts;

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

        (c)  all goods, including, without limitation, Inventory and Equipment;

        (d)  all fixtures;

        (e)  all chattel paper (including all tangible and electronic chattel
paper);

        (f)    all instruments (including all promissory notes);

        (g)  all documents;

        (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 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) other than securities issued by the
SPE or any Subsidiary that is not a Domestic Subsidiary and (ii) monies, credit
balances, deposits and other property of such Borrower now or hereafter held or
received by or in transit to Lender or its Affiliates or at any other depository
or other institution from or for the account of such Borrower, whether for
safekeeping, pledge, custody, transmission, collection or otherwise;

        (l)    all commercial tort claims, including, without limitation, those
identified in on Schedule 5.2(g) 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.

        5.2    Perfection of Security Interests.    

        (a)  Each Borrower irrevocably and unconditionally authorizes Lender (or
its agent) to file at any time and from time to time such financing statements
with respect to the Collateral naming Lender or its designee as the secured
party and any Borrower as debtor, as Lender may require, and including any other
information with respect to any Borrower or otherwise required by part 5

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of Article 9 of the Uniform Commercial Code of such jurisdiction as Lender 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. Borrowers hereby ratify and approve all financing
statements naming Lender or its designee as secured party and any Borrower as
debtor with respect to the Collateral (and any amendments with respect to such
financing statements) filed by or on behalf of Lender prior to the date hereof
and ratify and confirm the authorization of Lender to file such financing
statements (and amendments, if any). Borrowers hereby authorize Lender to adopt
on behalf of any Borrower any symbol required for authenticating any electronic
filing. In the event that the description of the collateral in any financing
statement naming Lender or its designee as the secured party and any Borrower as
debtor includes assets and properties of such Borrower that do not at any time
constitute Collateral, whether hereunder, under any of the Financing Agreements
or otherwise, the filing of such financing statement shall nonetheless be deemed
authorized by Borrowers 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 without Lender's prior
written consent, 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 Lender or
its designee as secured party and any Borrower as debtor so long as any
Obligations (including any Letter of Credit Accommodations) have not been paid
and satisfied in full in cash or Lender is obligated to provide Loans or Letter
of Credit Accommodations to any Borrower pursuant to the Financing Agreements.

        (b)  Borrowers do not have 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 shall be entitled to or
shall receive any chattel paper or instrument after the date hereof, Borrowers
shall promptly notify Lender thereof in writing. Promptly upon the receipt
thereof by or on behalf of any Borrower (including by any agent or
representative), Borrowers shall deliver, or cause to be delivered to Lender,
all tangible chattel paper and instruments that any Borrower may at any time
acquire, accompanied by such instruments of transfer or assignment duly executed
in blank as Lender may from time to time specify, in each case except as Lender
may otherwise agree. At Lender's option, Borrowers shall, or Lender may at any
time on behalf of any Borrower, cause the original of any such instrument or
chattel paper to be conspicuously marked in a form and manner acceptable to
Lender with the following legend referring to chattel paper or instruments as
applicable: "This chattel paper/instrument is subject to the security interest
of Congress Financial Corporation (Western) 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 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), Borrowers shall
promptly notify Lender thereof in writing. Promptly upon Lender's request,
Borrowers shall take, or cause to be taken, such actions as Lender may
reasonably request to give Lender 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 has any deposit accounts as of the date hereof, except
as set forth in the Information Certificate. No Borrower shall, directly or
indirectly, after the date hereof open, establish or maintain any Central
Collection Deposit Account unless each of the following

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conditions is satisfied: (i) Lender shall have received not less than five
(5) Business Days prior written notice of the intention of such Borrower to open
or establish such Central Collection Deposit Account which notice shall specify
in reasonable detail and specificity acceptable to Lender 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 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 acceptable to Lender, and (iii) on or before the opening
of such Central Collection Deposit Account, such Borrower shall as Lender may
specify either (A) deliver to Lender a Deposit Account Control Agreement with
respect to such Central Collection Deposit Account duly authorized, executed and
delivered by such Borrower and the bank at which such Central Collection Deposit
Account is opened and maintained or (B) arrange for Lender to become the
customer of the bank with respect to the Central Collection Deposit Account on
terms and conditions acceptable to Lender. The terms of this Section 5.2(d)
shall not apply to 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 salaried employees.

        (e)  No Borrower 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 in the Information Certificate.

          (i)  In the event that any Borrower shall be entitled to or shall at
any time after the date hereof hold or acquire any certificated securities, such
Borrower shall promptly endorse, assign and deliver the same to Lender,
accompanied by such instruments of transfer or assignment duly executed in blank
as Lender may from time to time specify. If any securities, now or hereafter
acquired by any Borrower are uncertificated and are issued to such Borrower or
its nominee directly by the issuer thereof, Borrowers shall immediately notify
Lender thereof and such Borrower shall as Lender may specify, either (A) cause
the issuer to agree to comply with instructions from Lender as to such
securities, without further consent of such Borrower or such nominee, or
(B) arrange for Lender to become the registered owner of the securities.

        (ii)  No Borrower 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 or
an account that relates solely to a 401(k), pension plan or other similar
employee benefit program) with any securities intermediary or commodity
intermediary unless each of the following conditions is satisfied: (A) Lender
shall have received not less than five (5) Business Days prior written notice of
the intention of such Borrower to open or establish such account which notice
shall specify in reasonable detail and specificity acceptable to Lender 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 is
dealing and the purpose of the account, (B) the securities intermediary or
commodity intermediary (as the case may be) where such account is opened or
maintained shall be acceptable to Lender, and (C) on or before the opening of
such investment account, securities account or other similar account with a
securities intermediary or commodity intermediary, such Borrower shall as Lender
may specify either (1) execute and deliver, and cause to be executed and
delivered to Lender, an Investment Property Control Agreement with respect
thereto duly authorized, executed and delivered by such Borrower and such
securities

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intermediary or commodity intermediary or (2) arrange for Lender to become the
entitlement holder with respect to such investment property on terms and
conditions acceptable to Lender.

        (f)    No Borrower 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(f). If an Event of
Default has occurred and is continuing and in the event that any Borrower 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, such Borrower shall promptly notify Lender
thereof in writing. If an Event of Default has occurred and is continuing, such
Borrower shall immediately, as Lender may specify, either (i) deliver, or cause
to be delivered to Lender, 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 Lender, consenting to the assignment of the proceeds of the
letter of credit to Lender by such Borrower and agreeing to make all payments
thereon directly to Lender or as Lender may otherwise direct or (ii) cause
Lender to become, at such Borrower's expense, the transferee beneficiary of the
letter of credit, banker's acceptance or similar instrument (as the case may
be).

        (g)  Borrowers have no commercial tort claims as of the date hereof,
except as set forth on Schedule 5.2(g). In the event that any Borrower shall at
any time after the date hereof have any commercial tort claims in excess of One
Million Dollars ($1,000,000) in any one case, Borrowers shall promptly notify
Lender 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 to Lender 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
Borrowers to Lender shall be deemed to constitute such grant to Lender. 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 Lender provided in Section 5.2(a) hereof or
otherwise arising by the execution by Borrowers of this Agreement or any of the
other Financing Agreements, Lender is hereby irrevocably authorized from time to
time and at any time to file such financing statements naming Lender or its
designee as secured party and any Borrower as debtor, or any amendments to any
financing statements, covering any such commercial tort claim as Collateral. In
addition, Borrowers shall promptly upon Lender's request, execute and deliver,
or cause to be executed and delivered, to Lender such other agreements,
documents and instruments as Lender may require in connection with such
commercial tort claim.

        (h)  No Borrower 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 the Information Certificate and except for goods in
transit to a location of Borrowers permitted herein in the ordinary course of
business of Borrowers in the possession of the carrier transporting such goods
and except for goods being manufactured in the United States. In the event that
any goods, documents of title or other Collateral are at any time after the date
hereof in the custody, control or possession of any other person not referred to
in the Information Certificate, Borrowers shall promptly notify Lender thereof
in writing. Promptly upon Lender's request, any Borrower shall deliver to Lender
a Collateral Access Agreement duly authorized, executed and delivered by such
person and such Borrower.

        (i)    Borrowers shall take any other actions reasonably requested by
Lender from time to time to cause the attachment, perfection and first priority
(subject to the liens granted to secure the Canadian Guarantee) of, and the
ability of Lender to enforce, the security interest of Lender in

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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 any Borrower's signature thereon is required therefor, (ii) causing
Lender'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 Lender to enforce, the security interest of Lender 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
Lender to enforce, the security interest of Lender in such Collateral,
(iv) obtaining the consents and approvals of 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 any
earlier versions of the UCC or by other law, as applicable in any relevant
jurisdiction.

        5.3    Release of Security Interest in Connection with
Securitization.    On any Securitization Closing Date and, so long as no
Availability Triggering Event and/or an Event of Default has occurred, is
continuing or would result therefrom and an Availability Compliance Period
(related to an Availability Triggering Event) is not in effect, Parent shall
deliver an officer's certificate to Lender stating that such Securitization will
close in accordance with the terms of the Securitization Documents where upon
the security interest of Lender in the Securitization Assets will be released.
Upon the receipt of such officer's certificate, the security interest of Lender
in the Securitization Assets associated with such Securitization shall be
released without further action by any party, including Lender or any assignee
or participant, and Lender, as requested by, and at the expense of, Parent,
shall without the necessity of obtaining consent from any assignee or any
participant, execute any documents or instruments necessary, in the reasonable
judgment of Parent, to evidence such release; provided, in each case, that
(i) Lender has received an irrevocable license, in form and substance
satisfactory to Lender, from the SPE to use the Intellectual Property included
in the Securitization Assets to dispose of or otherwise exercise its rights with
respect to any Inventory, (ii) Borrowers have received an irrevocable license,
in form and substance satisfactory to Lender, from the SPE to use the
Intellectual Property included in the Securitization Assets to conduct their
business, (iii) Lender has received from Borrowers a sublicense, in form and
substance satisfactory to Lender, extending Borrowers' licensed rights in the
Intellectual Property included in the Securitization Assets to Lender, and
(iv) receipt by Lender of an opinion of counsel to Borrowers to the effect that
the Securitization Documents do not violate, breach or result in a Default under
the Financing Agreements, in form and substance reasonably satisfactory to
Lender.

SECTION 6.    COLLECTION AND ADMINISTRATION    

        6.1    Borrowers' Loan Account.    Lender shall maintain one or more
loan account(s) on its books in which shall be recorded (a) all Loans, Letter of
Credit Accommodations and other Obligations and the Collateral, (b) all payments
made by or on behalf of Borrowers and (c) all other appropriate debits and
credits as provided in this Agreement, including fees, charges, costs, expenses
and interest. All entries in the loan account(s) shall be made in accordance
with Lender's customary practices as in effect from time to time.

        6.2    Statements.    Lender shall render to Borrowers each month a
statement setting forth the balance in the Borrowers' loan account(s) maintained
by Lender for Borrowers pursuant to the provisions of this Agreement, including
principal, interest, fees, costs and expenses. Each such statement shall be
subject to subsequent adjustment by Lender 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 Lender receives a written notice from Borrowers of any specific exceptions
of Borrowers thereto within thirty (30) days after the date such statement has
been mailed by Lender. Until such time as Lender shall have rendered to
Borrowers a written statement as provided above, the balance in Borrowers' loan
account(s) shall be presumptive evidence of the amounts due and owing to Lender
by Borrowers.

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        6.3    Collection of Accounts.    

        (a)  Prior to the occurrence of a Compliance Triggering Event or Event
of Default, Borrowers shall retain control of their cash, including payments and
proceeds of Collateral. Concurrently with this Agreement, Borrowers shall
establish and maintain, at their expense, blocked accounts or lockboxes and
related blocked accounts (in either case, "Blocked Accounts"), as Lender may
specify, with such banks as are acceptable to Lender. Such Blocked Accounts may
be Central Collection Deposit Accounts, and the term Blocked Accounts shall mean
and include the Central Collection Deposit Accounts. Upon an Event of Default or
a Compliance Triggering Event, and during any Availability Compliance Period
(related to a Compliance Triggering Event), and upon Lender's request, Borrowers
shall promptly deposit into one or more Blocked Accounts and direct their
account debtors to directly remit into such Blocked Accounts all payments on
Receivables and all payments constituting proceeds of Inventory or other
Collateral in the identical form in which such payments are made, whether by
cash, check or other manner. Concurrently with this Agreement, Borrowers shall
deliver, or cause to be delivered to Lender, a Deposit Account Control Agreement
duly authorized, executed and delivered by each bank where a Blocked Account is
maintained which agreement shall provide that upon notice from Lender (which
shall be given upon an Event of Default or a Compliance Triggering Event and
revoked promptly after the related Availability Compliance Reinstatement Date),
such bank will send funds on a daily basis to the Lender Payment Account and
otherwise take instruction with respect to such Blocked Account only from
Lender. Promptly upon Lender's request, Borrowers shall execute and deliver such
agreements or documents as Lender may require in connection therewith. Borrowers
agree that after notice by Lender to the bank under the Deposit Account Control
Agreement, all payments made to such Blocked Accounts or other funds received
and collected by Lender, whether in respect of the Receivables, as proceeds of
Inventory or other Collateral or otherwise shall be treated as payments to
Lender in respect of the Obligations and therefore shall constitute the property
of Lender to the extent of the then outstanding Obligations.

        (b)  For purposes of calculating the amount of the Loans available to
Borrowers, such payments will be applied (conditional upon final collection) to
the Obligations on the Business Day of receipt by Lender of immediately
available funds in the Lender Payment Account provided such payments and notice
thereof are received in accordance with Lender's usual and customary practices
as in effect from time to time and within sufficient time to credit Borrowers'
loan account on such day, and if not, then on the next Business Day. In the
event an Event of Default has occurred and is continuing or during any
Availability Compliance Period (related to a Compliance Triggering Event), for
the purposes of calculating interest on the Obligations, such payments or other
funds received will be applied (conditional upon final collection) to the
Obligations one (1) Business Day after receipt of immediately available funds by
Lender in the Lender Payment Account, provided such payments or other funds and
notice thereof are received in accordance with Lender's usual and customary
practices as in effect from time to time and within sufficient time to credit
Borrowers' loan account on such day, and if not, then on the next Business Day.
In the event that at any time or from time to time upon or after Event of
Default or during any Availability Compliance Period (related to a Compliance
Triggering Event) there are no Loans outstanding, Lender shall be entitled to an
administrative charge in an amount equivalent to the interest Lender would have
received for such Business Day had there been Loans outstanding on such day.

        (c)  Upon an Event of Default or any Compliance Triggering Event and
during any Availability Compliance Period (related to a Compliance Triggering
Event), Borrowers and their respective shareholders, directors, employees,
agents, Subsidiaries or other Affiliates shall, acting as trustee for Lender,
receive, as the property of Lender, any monies, checks, notes, drafts or any
other payment relating to and/or proceeds of Accounts or other Collateral which
come into their

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possession or under their control and immediately upon receipt thereof, shall
deposit or cause the same to be deposited in the Blocked Accounts, or remit the
same or cause the same to be remitted, in kind, to Lender. In no event shall the
same be commingled with any Borrower's funds. Borrowers agree to reimburse
Lender on demand for any amounts owed or paid to any bank at which a Blocked
Account is established or any other bank or person involved in the transfer of
funds to or from the Blocked Accounts arising out of Lender's payments to or
indemnification of such bank or person. The obligation of Borrowers to reimburse
Lender for such amounts pursuant to this Section 6.3 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 Lender Payment
Account or, at any time when an Event of Default or Availability Compliance
Period (related to a Compliance Triggering Event) exists by payments and
proceeds of Collateral being directly remitted to the Lender Payment Account as
provided in Section 6.3 or such other place as Lender may designate from time to
time. Lender shall apply payments received or collected from Borrowers or for
the account of Borrowers (including the monetary proceeds of collections or of
realization upon any Collateral) as follows: first, to pay any fees, indemnities
or expense reimbursements then due to Lender from Borrowers; second, to pay
interest due in respect of any Loans; third, to pay principal due in respect of
the Loans; fourth, to pay or prepay any other Obligations whether or not then
due, in such order and manner as Lender determines. Notwithstanding anything to
the contrary contained in this Agreement, (i) unless so directed by Borrowers,
Lender shall not apply any payments which it receives to any Eurodollar Rate
Loans except on the expiration date of the Interest Period applicable to any
such Eurodollar Rate Loans, if payments are received or collected from Borrowers
that otherwise would be applied to Eurodollar Rate Loans. Provided no Event of
Default or Availability Compliance Period (related to a Compliance Triggering
Event) exists, Borrowers may instruct Lender to remit such funds to Borrowers.
Otherwise, such payments shall be held by Lender and shall bear interest at the
Federal Funds Rate minus 0.25% 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 Lender's sole discretion,
remitted to Borrowers, and (ii) to the extent Borrowers use 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 Borrowers acquired such rights or use.

        (b)  At Lender'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 account(s) of Borrowers.
Borrowers shall make all payments to Lender on the Obligations free and clear
of, and without deduction or withholding for or on account of, any setoff,
counterclaim, defense, duties, taxes, levies, imposts, fees, deductions,
withholding, 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, 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 Lender. Borrowers shall be liable to pay to

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Lender, and do hereby indemnify and hold Lender harmless for the amount of any
payments or proceeds surrendered or returned. This Section 6.4 shall remain
effective notwithstanding any contrary action which may be taken by Lender in
reliance upon such payment or proceeds. This Section 6.4 shall survive the
payment of the Obligations and the termination or non-renewal of this Agreement.

        6.5    Authorization to Make Loans.    Lender is authorized to make the
Loans and provide the Letter of Credit Accommodations based upon telephonic or
other instructions received from anyone purporting to be an officer of any
Borrower or other authorized person or, at the discretion of Lender, if such
Loans are necessary to satisfy any Obligations. All requests for 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) and the amount of the requested Loan. Requests received
after 11:00 a.m. Los Angeles time on any day shall be deemed to have been made
as of the opening of business on the immediately following Business Day. All
Loans and Letter of Credit Accommodations under this Agreement shall be
conclusively presumed to have been made to, and at the request of and for the
benefit of, Borrowers 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.

        6.6    Use of Proceeds.    Borrowers shall use the initial proceeds of
the Loans provided by Lender to Borrowers hereunder only for: (a) payments to
each of the persons listed in the disbursement direction letter furnished by
Borrowers to Lender on or about the date hereof and (b) costs, expenses and fees
in connection with the preparation, negotiation, execution and delivery of this
Agreement and the other Financing Agreements. All other Loans made or Letter of
Credit Accommodations provided by Lender to Borrowers pursuant to the provisions
hereof shall be used by Borrowers only for general operating, working capital
and other proper corporate purposes of Borrowers not otherwise prohibited by the
terms hereof. None of the proceeds 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 Loans to be considered a "purpose credit" within the meaning of Regulation U
of the Board of Governors of the Federal Reserve System, as amended.

SECTION 7.    COLLATERAL REPORTING AND COLLATERAL COVENANTS    

        7.1    Collateral Reporting.    

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

          (i)  on a regular basis as required by Lender, a schedule of sales
made, credits issued and cash received;

        (ii)  as soon as possible after the end of each month (but in any event
within ten (10) Business Days after the end thereof), on a monthly basis or more
frequently as Lender may request, (A) perpetual inventory reports, (B) inventory
reports by location and category (including identifying Inventory at locations
owned and operated by third parties or on consignment), (C) listings of
Borrowers' accounts payable until ten (10) Business Days after December 31,
2002, and thereafter, agings of accounts payable (and including information
indicating the status of payments to owners and lessors of the leased premises
of Borrowers), and (D) agings of accounts receivable (together with a
reconciliation to the previous month's aging and general ledger);

        (iii)  upon Lender's request, (A) copies of customer statements and
credit memos, remittance advices and reports, and copies of deposit slips and
bank statements, (B) copies of

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shipping and delivery documents, and (C) copies of purchase orders, invoices and
delivery documents for Inventory and Equipment acquired by Borrowers;

        (iv)  monthly, in form and substance satisfactory to Lender, a
calculation of (A) the Borrowing Base, certified by the chief financial officer,
or vice president and corporate controller of Parent, (B) the Canadian Borrowing
Base, certified by the chief financial officer of Canadian Borrowers, which
calculation shall include quarterly confirmations of the daily credit balances
in the Blocked Accounts, and (C) the combined Borrowing Base and the Canadian
Borrowing Base, certified by the chief financial officer, or vice president and
corporate controller of Parent (which Borrowing Base and Canadian Borrowing Base
calculation shall include quarterly confirmations of the daily credit balances
in the Blocked Accounts and the calculation of Net Amount of Eligible Accounts
and Canadian Net Amount of Eligible Accounts, respectively, 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 such certified calculations
shall be delivered weekly upon the occurrence of a Compliance Triggering Event
and during any Availability Compliance Period (related to a Compliance
Triggering Event);

        (v)  such other reports as to the Collateral as Lender shall request
from time to time; and

        (b)  If any of Borrowers' records or reports of the Collateral are
prepared or maintained by an accounting service, contractor, shipper or other
agent, Borrowers hereby irrevocably authorize such service, contractor, shipper
or agent to deliver such records, reports, and related documents to Lender and
to follow Lender'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)  Borrowers shall notify Lender promptly of: (i) any material delay
in Borrowers' performance of any of its obligations to any account debtor,
(ii) all material adverse information relating to the financial condition of any
account debtor and (iii) any event or circumstance which, to Borrowers'
knowledge would cause Lender to consider any then existing Accounts as no longer
constituting Eligible Accounts. No credit, discount, allowance or extension or
agreement for any of the foregoing shall be granted to any account debtor
without Lender's consent, except in the ordinary course of Borrowers' business
in accordance with practices and policies previously disclosed in writing to
Lender and except as set forth in the schedules delivered to Lender pursuant to
Section 7.1(a) above. So long as no Event of Default exists or has occurred and
is continuing, Borrowers shall settle, adjust or compromise any claim, offset,
counterclaim or dispute with any account debtor. At any time that an Event of
Default exists or has occurred and is continuing, Lender shall, at its option,
have the exclusive right to settle, adjust or compromise any claim, offset,
counterclaim or dispute with account debtors or grant any credits, discounts or
allowances.

        (b)  With respect to each Account: (i) the amounts shown on any invoice
delivered to Lender or schedule thereof delivered to Lender shall be true and
complete, (ii) no payments shall be made thereon except payments immediately
delivered to Lender pursuant to the terms of this Agreement, (iii) no credit,
discount, allowance or extension or agreement for any of the foregoing shall be
granted to any account debtor except as reported to Lender in accordance with
this Agreement and except for credits, discounts, allowances or extensions made
or given in the ordinary course of Borrowers' business in accordance with
practices and policies previously disclosed to Lender, (iv) there shall be no
setoffs, deductions, contras, defenses, counterclaims or disputes existing or
asserted with respect thereto except as reported to Lender in accordance with
the terms of this Agreement, (v) none of the transactions giving rise thereto
will violate any

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applicable foreign, Federal, State or local 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)  Lender shall have the right at any time or times, in Lender's name
or in the name of a nominee of Lender, to verify the validity, amount or any
other matter relating to any Account or other Collateral, by mail, telephone,
facsimile transmission or otherwise.

        7.3    Inventory Covenants.    With respect to the Inventory:
(a) Borrowers shall at all times maintain inventory records reasonably
satisfactory to Lender, keeping correct and accurate records itemizing and
describing the kind, type, quality and quantity of Inventory, Borrowers' cost
therefor and daily withdrawals therefrom and additions thereto; (b) Borrowers
shall conduct a physical count of the Inventory at least once each year, but at
any time or times as Lender may request on or after an Event of Default, and
promptly following such physical inventory shall supply Lender with a report in
the form and with such specificity as may be reasonably satisfactory to Lender
concerning such physical count; (c) Borrowers shall not remove any Inventory
from the locations set forth or permitted herein, without the prior written
consent of Lender, except for sales of Inventory in the ordinary course of
Borrowers' 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 any Borrower which is in transit to the
locations set forth or permitted herein; (d) upon Lender's request, Borrowers
shall, at their expense, no more than once in any twelve (12) month period in
which no Availability Triggering Event occurs or twice in any twelve (12) month
period during which an Availability Triggering Event occurs or an Availability
Compliance Period (related to an Availability Triggering Event) exists, but at
any time or times as Lender may request on or after an Event of Default, deliver
or cause to be delivered to Lender written appraisals as to the Inventory in
form, scope and methodology acceptable to Lender and by an appraiser acceptable
to Lender, addressed to Lender and upon which Lender is expressly permitted to
rely; (e) Borrowers 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); (f) none of the Inventory or other
Collateral constitutes farm products or the proceeds thereof; (g) Borrowers
assume all responsibility and liability arising from or relating to the
production, use, sale or other disposition of the Inventory; (h) Borrowers shall
not sell Inventory to any customer on approval, or any other basis which
entitles the customer to return or may obligate any Borrower to repurchase such
Inventory; (i) Borrowers shall keep the Inventory in good and marketable
condition; and (j) Borrowers shall not, without prior written notice to Lender
or the specific identification of such Inventory with respect thereto provided
by Borrowers to Lender pursuant to Section 7.1(a) hereof, acquire or accept any
Inventory on consignment or approval.

        7.4    Equipment Covenants.    With respect to the Equipment:
(a) Borrowers shall keep the Equipment in good order, repair, running and
marketable condition (ordinary wear and tear excepted); (b) Borrowers 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; (c) the Equipment is and shall be used in Borrowers' business and not for
personal, family, household or farming use; (d) Borrowers shall not remove any
Equipment from the locations set forth or permitted herein, except (i) to the
extent necessary to have any Equipment repaired or maintained in the ordinary
course of the business of Borrowers, (ii) to move Equipment directly from one
location set forth or permitted herein to another such location, (iii) motor
vehicles used by or for the benefit of Borrowers in the ordinary course of
business; and (iv) to move Equipment between Borrowers' store locations in the
United States and Canada or to "shop-in-shop" locations operated by Borrowers'
customers in the United States and Canada, (e) the Equipment is now and shall
remain personal property and Borrowers shall

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not permit any of the Equipment to be or become a part of or affixed to real
property; and (f) Borrowers assume all responsibility and liability arising from
the use of the Equipment.

        7.5    Power of Attorney.    Borrowers hereby irrevocably designate and
appoint Lender (and all persons designated by Lender) as each Borrower's true
and lawful attorney-in-fact, and authorizes Lender, in such Borrower's or
Lender's name, to: (a) 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 Borrowers' 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 the Lender deems advisable, (v) settle,
adjust, compromise, extend or renew an Account, (vi) discharge and release any
Receivable, (vii) prepare, file and sign any Borrower'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 Lender, and open and dispose of all mail
addressed to any Borrower and handle and store all mail relating to the
Collateral, (ix) do all acts and things which are necessary, in Lender's
determination, to fulfill Borrowers' obligations under this Agreement and the
other Financing Agreements, (x) endorse any Borrower's name upon any warehouse
or other receipts, or bills of lading and other negotiable or non-negotiable
documents or other chattel paper, document, instrument, invoice and similar
document or agreement relating to any Inventory or Equipment or any goods
pertaining thereto or any other Collateral, and (xi) clear Inventory the
purchase of which was financed with Letter of Credit Accommodations through U.S.
Customs or foreign export control authorities in any Borrower's name, Lender's
name or the name of Lender's designee, and to sign and deliver to customs
officials powers of attorney in any Borrower's name for such purpose, and to
complete in any Borrower's or Lender's name, any order, sale or transaction,
obtain the necessary documents in connection therewith and collect the proceeds
thereof, (b) at any time an Event of Default exists or has occurred and is
continuing or during an Availability Compliance Period (related to an
Availability Triggering Event), (i) 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
Lender, (ii) 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, (iii) endorse any Borrower's name
upon any items of payment in respect of Receivables or constituting Collateral
or otherwise received by Lender and deposit the same in Lender's account for
application to the Obligations, and (iv) endorse any Borrower's name upon any
chattel paper, instrument, invoice, or similar document or agreement relating to
any Receivable, and (c) at any time to sign any Borrower's name on any
verification of Receivables and notices thereof to account debtors or any
secondary obligors or other obligors in respect thereof. Borrowers hereby
release Lender and its 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 Lender's own
gross negligence or willful misconduct as determined pursuant to a final
non-appealable order of a court of competent jurisdiction.

        7.6    Right to Cure.    Lender may, at its option, (a) upon notice to
Borrowers, cure any default by Borrowers under any material agreement with a
third party that affects the Collateral, its value or the ability of Lender to
collect, sell or otherwise dispose of the Collateral or the rights and remedies
of Lender therein or the ability of Borrowers to perform its obligations
hereunder or under the other Financing Agreements, (b) pay or bond on appeal any
judgment entered against any Borrower, (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 Lender's judgment, is necessary or appropriate to preserve, protect,
insure or maintain the Collateral and the rights of Lender with respect thereto.
Lender may add any amounts so expended to the

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Obligations and charge Borrowers' account therefor, such amounts to be repayable
by Borrowers on demand. Lender 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 Borrowers. Any payment made or other action taken by
Lender under this Section shall be without prejudice to any right to assert an
Event of Default hereunder and to proceed accordingly.

        7.7    Access to Premises.    From time to time as requested by Lender,
at the cost and expense of Borrowers, (a) Lender or its designee shall have
complete access to all of Borrowers' premises during normal business hours and
after notice to Borrowers, or at any time and without notice to Borrowers 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 Borrowers' books
and records, including the Records, and (b) Borrowers shall promptly furnish to
Lender such copies of such books and records or extracts therefrom as Lender may
request, and (c) Lender or its designee may use during normal business hours
such of Borrowers' personnel, 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.

SECTION 8.    REPRESENTATIONS AND WARRANTIES    

        Borrowers hereby represents and warrants to Lender 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 by Lender to Borrowers:

        8.1    Corporate Existence; Power and Authority.    Each Borrower is a
corporation duly organized and in good standing under the laws of its state of
incorporation and is duly qualified as a foreign corporation 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 Borrowers' financial condition,
results of operation or business or the rights of Lender 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
(a) are all within each Borrower's corporate powers, (b) have been duly
authorized, (c) are not in contravention of law or the terms of any Borrower's
certificate of incorporation, by-laws, or other organizational documentation, or
any indenture, agreement or undertaking to which any Borrower is a party or by
which any Borrower or its property are bound 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
any Borrower. This Agreement and the other Financing Agreements constitute
legal, valid and binding obligations of Borrowers 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 is as set forth on the
signature page of this Agreement and in the Information Certificate. Borrowers
have not, during the past five years, been known by or used by 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 their property or assets out of the ordinary course of business, except as
set forth in the Information Certificate.

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

        (c)  The chief executive office and mailing address of Borrowers and
Borrowers' Records concerning Accounts are located only at the address
identified as such in the Information

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Certificate and its only other places of business and the only other locations
of Collateral, if any, are the addresses set forth in the Information
Certificate, subject to the right of Borrowers to establish new locations in
accordance with Section 9.2 below. The Information Certificate correctly
identifies any of such locations which are not owned by Borrowers and sets forth
the owners and/or operators thereof.

        8.3    Financial Statements; No Material Adverse Change.    All
financial statements relating to Borrowers which have been or may hereafter be
delivered by Borrowers to Lender 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 the financial condition and the results of operation of Borrowers
as at the dates and for the periods set forth therein. Except as disclosed in
any interim financial statements furnished by Borrowers to Lender prior to the
date of this Agreement, there has been no Material Adverse Change since the date
of the most recent audited financial statements furnished by Borrowers to Lender
prior to the date of this Agreement.

        8.4    Priority of Liens; Title to Properties.    The security interests
and liens granted to Lender under this Agreement and the other Financing
Agreements constitute valid and perfected first priority liens and security
interests in and upon the Collateral subject only to the liens indicated on
Schedule 8.4 hereto and the other liens permitted under Section 9.8 hereof. Each
Borrower has good, valid and merchantable title to all of its other properties
and assets subject to no liens, mortgages, pledges, security interests,
encumbrances or charges of any kind, except those granted to Lender and such
others as are specifically listed on Schedule 8.4 hereto or permitted under
Section 9.8 hereof.

        8.5    Tax Returns.    Borrowers have filed, or caused to be filed, in a
timely manner all tax returns, reports and declarations which are required to be
filed by them or any of them. All information in such tax returns, reports and
declarations is complete and accurate in all material respects. Borrowers have
paid or caused to be paid all taxes due and payable or claimed due and payable
in any assessment received by any of them, except taxes the validity of which
are being contested in good faith by appropriate proceedings diligently pursued
and available to Borrowers and with respect to which adequate reserves have been
set aside on their books. Adequate provision has been made for the payment of
all accrued and unpaid Federal, State, county, local, foreign and other taxes
whether or not yet due and payable and whether or not disputed.

        8.6    Litigation.    Except as set forth in the Information
Certificate, there is no present investigation by any Governmental Authority
pending, or to the best of Borrowers' knowledge threatened, against or affecting
any Borrower, its assets or business and there is no action, suit, proceeding or
claim by any Person pending, or to the best of Borrowers' knowledge threatened,
against any Borrower or its assets or goodwill, or against or affecting any
transactions contemplated by this Agreement, which if adversely determined
against any Borrower would result in any Material Adverse Change.

        8.7    Compliance with Other Agreements and Applicable Laws.    No
Borrower is, in any material respect, in default under, or in violation 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 and each
Borrower is in compliance in all material respects with all applicable
provisions of laws, rules, regulations, licenses, permits, approvals and orders
of any foreign, Federal, State or local Governmental Authority.

        8.8    Environmental Compliance.    

        (a)  Except as set forth on Schedule 8.8 hereto, no Borrower and no
Subsidiary 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

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violates any applicable Environmental Law or any license, permit, certificate,
approval or similar authorization thereunder and the operations of Borrowers and
any Subsidiaries comply in all material respects with all Environmental Laws and
all licenses, permits, certificates, approvals and similar authorizations
thereunder.

        (b)  Except as set forth on Schedule 8.8 hereto, there has been no
investigation, 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 Borrowers' knowledge threatened, with respect to any
non-compliance with or violation of the requirements of any Environmental Law by
any Borrower and any Subsidiary or the release, spill or discharge, threatened
or actual, of any Hazardous Material or the generation, use, storage, treatment,
transportation, manufacture, handling, production or disposal of any Hazardous
Materials or any other environmental, health or safety matter, which affects
Borrowers or their business, operations or assets or any properties at which any
Borrower has transported, stored or disposed of any Hazardous Materials.

        (c)  Borrowers and their Subsidiaries have no 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)  Borrowers and their Subsidiaries have all licenses, permits,
certificates, approvals or similar authorizations required to be obtained or
filed in connection with the operations of Borrowers under any Environmental Law
and all of such licenses, permits, certificates, approvals or similar
authorizations are valid and in full force and effect.

        8.9    Employee Benefits.    

        (a)  Each Plan is in material compliance with the applicable provisions
of ERISA, the Code and other federal or state law. 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 and to the best of
Borrowers' knowledge, nothing has occurred which would cause the loss of such
qualification. Each Borrower and its ERISA Affiliates have made all required
contributions to any 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 Plan.

        (b)  There are no pending, or to the best of Borrowers' knowledge,
threatened, claims, actions or lawsuits, or action by any Governmental
Authority, with respect to any Plan. There has been no prohibited transaction or
violation of the fiduciary responsibility rules with respect to any Plan.

        (c)  (i) No ERISA Event has occurred or is reasonably expected to occur;
(ii) with respect to Plans subject to Section 412 of the Code, the current value
of each Plan's assets (determined in accordance with the assumptions used for
funding such Plan pursuant to Section 412 of the Code) are not less than such
Plan's liabilities under Section 4001(a)(16) of ERISA by an amount which exceeds
Five Million Dollars ($5,000,000); (iii) each Borrower and its ERISA Affiliates
have not incurred and do not reasonably expect to incur, any liability under
Title IV of ERISA with respect to any Plan (other than premiums due and not
delinquent under Section 4007 of ERISA); (iv) each Borrower and its ERISA
Affiliates have not incurred and do not 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) each Borrower and
its ERISA Affiliates have not engaged in a transaction that could be subject to
Section 4069 or 4212(c) of ERISA.

        8.10    Intellectual Property.    Each Borrower 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

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be conducted. As of the date hereof, Borrowers do not have 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 the Information Certificate hereto and
have not granted any licenses with respect thereto other than as set forth in
the Information Certificate. No event has occurred which permits or would permit
after notice or passage of time or both, the revocation, suspension or
termination of such rights. To the best of Borrowers' knowledge, 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 infringes any
patent, trademark, servicemark, tradename, copyright, license or other
Intellectual Property owned by any other Person presently and no claim or
litigation is pending or threatened against or affecting any Borrower contesting
its right to sell or use any such Intellectual Property. The Information
Certificate sets forth all of the agreements or other arrangements of Borrowers
pursuant to which any Borrower has a license or other right to use any
trademarks, logos, designs, representations or other Intellectual Property owned
by another person as in effect on the date hereof and the dates of the
expiration of such agreements or other arrangements of Borrowers as in effect on
the date hereof (collectively, together with such agreements or other
arrangements as may be entered into by Borrowers after the date hereof,
collectively, the "License Agreements" and individually, a "License Agreement").
No trademark, servicemark or other Intellectual Property at any time used by any
Borrower which is owned by another person, or owned by any Borrower subject to
any security interest, lien, collateral assignment, pledge or other encumbrance
in favor of any person other than Lender, is affixed to any Eligible Inventory,
except pursuant to a Securitization as permitted in this Agreement.

        8.11    Subsidiaries; Affiliates; Capitalization; Solvency.    

        (a)  No Borrower has any direct or indirect Subsidiaries or Affiliates
and no Borrower is engaged in any joint venture or partnership except as set
forth in the Information Certificate, subject to the right of Borrowers to form
or acquire Subsidiaries in accordance with Section 9.10 hereof.

        (b)  Each Borrower is the record and beneficial owner of all of the
issued and outstanding shares of Capital Stock of each of the Subsidiaries
listed in the Information Certificate as being owned by such Borrower and there
are no proxies, irrevocable or otherwise, with respect to such shares and no
equity securities of any of the Subsidiaries 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 is or may become bound to
issue additional shares of it Capital Stock or securities convertible into or
exchangeable for such shares.

        (c)  The issued and outstanding shares of Capital Stock of each Borrower
are directly and beneficially owned and held by the persons indicated in the
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 disclosed in writing to
Lender prior to the date hereof.

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

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        8.12    Labor Disputes.    

        (a)  Set forth on Schedule 8.12 hereto is a list (including dates of
termination) of all collective bargaining or similar agreements between or
applicable to any Borrower and any union, labor organization or other bargaining
agent in respect of the employees of such Borrower on the date hereof.

        (b)  There is (i) no significant unfair labor practice complaint pending
against any Borrower or, to the best of Borrowers' knowledge, threatened against
it, before the National Labor Relations Board, and no significant grievance or
significant arbitration proceeding arising out of or under any collective
bargaining agreement is pending on the date hereof against any Borrower or, to
best of Borrowers' knowledge, threatened against it, and (ii) no significant
strike, labor dispute, slowdown or stoppage is pending against any Borrower or,
to the best of Borrowers' knowledge, threatened against any Borrower.

        8.13    Restrictions on Subsidiaries.    Except for restrictions
contained in this Agreement, the Securitization Documents or any other agreement
with respect to Indebtedness of Borrowers permitted hereunder as in effect on
the date hereof, there are no contractual or consensual restrictions on any
Borrower or any of its Subsidiaries which prohibit or otherwise restrict (a) the
transfer of cash or other assets (i) between such Borrower and any of its
Subsidiaries or (ii) between any Subsidiaries of such Borrower or (b) the
ability of such Borrower or any of its Subsidiaries to incur Indebtedness or
grant security interests to Lender in the Collateral.

        8.14    Material Contracts.    Schedule 8.14 hereto sets forth all
Material Contracts to which any Borrower is a party or is bound as of the date
hereof. Borrowers have delivered true, correct and complete copies of such
Material Contracts to Lender on or before the date hereof. No Borrower is in
breach of or in default under any Material Contract and no Borrower has received
any notice of the intention of any other party thereto to terminate any Material
Contract.

        8.15    Payable Practices.    No Borrower has made any material change
in the historical accounts payable practices from those in effect immediately
prior to the date hereof.

        8.16    Accuracy and Completeness of Information.    All information
furnished by or on behalf of Borrowers in writing to 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
Certificate, 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 on the business, assets or prospects of Borrowers,
which has not been fully and accurately disclosed to Lender in writing.

        8.17    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 Lender on the date of each additional borrowing or
other credit accommodation hereunder and shall be conclusively presumed to have
been relied on by Lender regardless of any investigation made or information
possessed by Lender. The representations and warranties set forth herein shall
be cumulative and in addition to any other representations or warranties which
Borrowers shall now or hereafter give, or cause to be given, to Lender.

SECTION 9.    AFFIRMATIVE AND NEGATIVE COVENANTS    

        9.1    Maintenance of Existence.    

        (a)  Borrowers shall at all times preserve, renew and keep in full,
force and effect each Borrower's corporate existence and rights and franchises
with respect thereto and maintain in full

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force and effect all permits, licenses, trademarks, tradenames, approvals,
authorizations, leases and contracts necessary to carry on the business of
Borrowers as presently or proposed to be conducted.

        (b)  No Borrower shall change its name unless each of the following
conditions is satisfied: (i) Lender shall have received not less than thirty
(30) days prior written notice from Borrowers of such proposed change in its
corporate name, which notice shall accurately set forth the new name; and
(ii) Lender shall have received a copy of the amendment to the Certificate of
Incorporation of such Borrower providing for the name change certified by the
Secretary of State of the jurisdiction of incorporation or organization of such
Borrower as soon as it is available.

        (c)  No Borrower 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 Lender shall have received not less than thirty
(30) days' prior written notice from Borrowers of such proposed change, which
notice shall set forth such information with respect thereto as Lender may
require and Lender shall have received such agreements as Lender may reasonably
require in connection therewith. No Borrower shall change its type of
organization, jurisdiction of organization or other legal structure.

        9.2    New Collateral Locations.    

        (a)  Borrowers may open new Inventory warehouse locations only within
the continental United States provided Borrowers:

          (i)  give Lender thirty (30) days prior written notice of the intended
opening of any such new location, and

        (ii)  execute and deliver, or cause to be executed and delivered, to
Lender such agreements, documents, and instruments as Lender may deem necessary
or desirable to protect its interests in the Collateral at such location.

        (b)  Borrowers may open any new retail store locations within the United
States upon ten (10) days prior written notice to Lender.

        (c)  Borrowers may open new Inventory warehouse locations within Canada
provided Borrowers:

          (i)  give Lender sixty (60) days prior written notice of the intended
opening of any such new location, and

        (ii)  execute and deliver, or cause to be executed and delivered, to
Lender such agreements, documents, and instruments as Lender may deem necessary
or desirable to provide Lender with a first priority security interest under
Canadian law subject to the liens permitted pursuant to Section 9.8 and the
relevant law of the provinces of Canada in the Inventory located there and to
protect Lender's interests in the Collateral at such location, including but not
limited to lien searches, financing statements and Collateral Access Agreements.
In addition, Lender may establish Reserves relating to Eligible Inventory
located in Canada in its reasonable discretion.

        9.3    Compliance with Laws, Regulations, Etc.    

        (a)  Each Borrower shall, and shall cause any Subsidiary to, at all
times, comply in all material respects with all laws, rules, regulations,
licenses, permits, approvals and orders applicable to it and duly observe all
requirements of any foreign, Federal, State or local Governmental Authority,
including ERISA, the Code, the Occupational Safety and Health Act of 1970, as
amended, the Fair Labor Standards Act of 1938, as amended, and all statutes,
rules, regulations, orders, permits and

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stipulations relating to environmental pollution and employee health and safety,
including all of the Environmental Laws.

        (b)  Borrowers shall give written notice to Lender immediately upon
Borrowers' receipt of any notice of, or Borrowers' otherwise obtaining knowledge
of, (i) the occurrence of any event involving the release, spill or discharge,
threatened or actual, of any Hazardous Material 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 (B) the release, spill or discharge, threatened or actual, of
any Hazardous Material 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 to Lender. Borrowers shall take prompt and appropriate action to
respond to any non-compliance with any of the Environmental Laws and shall
regularly report to Lender on such response.

        (c)  Without limiting the generality of the foregoing, whenever Lender
reasonably determines that there is non-compliance, or any condition which
requires any action by or on behalf of Borrowers in order to avoid any material
non-compliance, with any Environmental Law, Borrowers shall, at Lender's request
and Borrowers' expense: (i) cause an independent environmental engineer
acceptable to Lender to conduct such tests of the site where Borrowers'
non-compliance or alleged non-compliance with such Environmental Laws has
occurred as to such non-compliance and prepare and deliver to Lender a report as
to such non-compliance setting forth the results of such tests, a proposed plan
for responding to any environmental problems described therein, and an estimate
of the costs thereof and (ii) provide to Lender a supplemental report of such
engineer whenever the scope of such non-compliance, or Borrowers' response
thereto or the estimated costs thereof, shall change in any material respect.

        (d)  Borrowers shall indemnify and hold harmless Lender, its directors,
officers, employees, agents, invitees, representatives, successors and assigns,
from and against any and all losses, claims, damages, liabilities, costs, and
expenses (including attorneys' fees and legal 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 and the preparation and implementation of any closure, remedial or
other required plans. All representations, warranties, covenants and
indemnifications in this Section 9.3 shall survive the payment of the
Obligations and the termination or non-renewal of this Agreement.

        9.4    Payment of Taxes and Claims.    Borrowers shall, and shall cause
any Subsidiary to, duly pay and discharge all taxes, assessments, contributions
and governmental charges upon or against it or its properties or assets, except
for taxes the validity of which are being contested in good faith by appropriate
proceedings diligently pursued and available to Borrowers or such Subsidiary, as
the case may be, and with respect to which adequate reserves have been set aside
on its books. Borrowers shall be liable for any tax or penalties imposed on
Lender as a result of the financing arrangements provided for herein and
Borrowers agree to indemnify and hold Lender harmless with respect to the
foregoing, and to repay to Lender on demand the amount thereof, and until paid
by Borrowers such amount shall be added and deemed part of the Loans, provided,
that nothing contained herein shall be construed to require Borrowers to pay any
income or franchise taxes attributable to the income of Lender from any amounts
charged or paid hereunder to Lender. The foregoing indemnity shall survive the
payment of the Obligations and the termination or non-renewal of this Agreement.

        9.5    Insurance.    Borrowers shall, and shall cause any Subsidiary to,
at all times, maintain with financially sound and reputable insurers insurance
with respect to the Collateral against loss or damage

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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 satisfactory to Lender as to form, amount and insurer. Borrowers shall
furnish certificates, policies or endorsements to Lender as Lender shall require
as proof of such insurance, and, if Borrowers fail to do so, Lender is
authorized, but not required, to obtain such insurance at the expense of
Borrowers. All policies shall provide for at least thirty (30) days (ten
(10) days for nonpayment of premium) prior written notice to Lender of any
cancellation or reduction of coverage and that Lender may act as attorney for
any Borrower at any time an Event of Default exists or has occurred and is
continuing, in obtaining, adjusting, settling, amending and canceling such
insurance. Borrowers shall cause Lender to be named as a loss payee and an
additional insured (but without any liability for any premiums) under such
insurance policies and Borrowers shall obtain non-contributory lender's loss
payable endorsements to all insurance policies in form and substance
satisfactory to Lender. Such lender's loss payable endorsements shall specify
that the proceeds of such insurance shall be payable to Lender and the named
insured as their interests may appear and further specify that Lender shall be
paid regardless of any act or omission by any Borrower or any of its Affiliates.
At its option, Lender may apply any insurance proceeds received by Lender at any
time to the cost of repairs or replacement of Collateral and/or to payment of
the Obligations, whether or not then due, in any order and in such manner as
Lender may determine or hold such proceeds as cash collateral for the
Obligations.

        9.6    Financial Statements and Other Information.    

        (a)  Borrowers shall, and shall cause any Subsidiary 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
Borrowers and their Subsidiaries in accordance with GAAP. Borrowers shall
promptly furnish to Lender any financial or and all other information as Lender
may reasonably request relating to the Collateral and the assets, business and
operations of Borrowers, and to notify the auditors and accountants of Borrowers
that Lender is authorized to obtain such information directly from them. Without
limiting the foregoing, Borrowers shall furnish or cause to be furnished to
Lender, the following: (i) within forty-five (45) days after the end of each of
the first three (3) fiscal quarters in each fiscal year and within ninety
(90) days after the end of the fourth fiscal quarter in each fiscal year,
quarterly unaudited consolidated financial statements (including balance sheets,
statements of income and loss, statements of cash flow, and statements of
shareholders' equity), and unaudited consolidating financial statements
(including balance sheets and statements of income and loss), all in reasonable
detail, fairly presenting the financial position and the results of the
operations of Borrowers and their Subsidiaries as of the end of and through such
fiscal quarter, certified to be correct by the chief financial officer of
Parent, subject to normal year-end adjustments and accompanied by a compliance
certificate substantially in the form of Exhibit B hereto, along with a schedule
in form reasonably satisfactory to Lender during any Availability Compliance
Period (related to an Availability Triggering Event) of the calculations used in
determining, as of the end of such month, whether Borrowers were in compliance
with the covenant set forth in Sections 9.18 of this Agreement for such quarter,
(ii) during any Availability Compliance Period (related to an Availability
Triggering Event), on the last Business Day of any month therein and at any
other date as determined by Borrowers in their sole discretion, Borrowers will
deliver to Lender an Availability Compliance Report, along with a schedule in
form and substance reasonably satisfactory to Lender, 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 U.S. Excess Availability is equal to
at least Twenty Million Dollars ($20,000,000) and Canadian Compliance Excess
Availability is equal to at least the U.S. Dollar Equivalent of One Million
Dollars ($1,000,000), and (iii) within ninety (90) days after the end of each
fiscal year, audited consolidated financial statements (including balance
sheets, statements of income and loss, statements of cash flow and statements of
shareholders' equity) and unaudited

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consolidating financial statements of Borrowers and its Subsidiaries (including
balance sheets and statements of income and loss), and the accompanying notes
thereto, all in reasonable detail, fairly presenting the financial position and
the results of the operations of Borrowers and their Subsidiaries as of the end
of and for such fiscal year, together with the unqualified opinion of
independent certified public accountants, which accountants shall be an
independent accounting firm selected by Borrowers and reasonably acceptable to
Lender, that such financial statements have been prepared in accordance with
GAAP, and present fairly the results of operations and financial condition of
Borrowers and their Subsidiaries as of the end of and for the fiscal year then
ended.

        (b)  Borrowers shall promptly notify Lender in writing of the details of
(i) any material loss, damage, investigation, action, suit, proceeding or claim
relating to the Collateral or any other property which is security for the
Obligations or which would result in any Material Adverse Change, (ii) any
Material Contract of any Borrower being terminated or amended or any new
Material Contract being entered into (in which event Borrowers shall provide
Lender with a copy of such Material Contract), (iii) any order, judgment or
decree in excess of One Million Dollars ($1,000,000) having been entered against
any Borrower or any of its properties or assets, (iv) any notification of the
violation of any law or regulation received by any Borrower, (v) any ERISA
Event, and (vi) the occurrence of any Default or Event of Default.

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

        (d)  Borrowers shall furnish or cause to be furnished to Lender such
budgets, forecasts, projections and other information in respect of the
Collateral and the business of Borrowers, as Lender may, from time to time,
reasonably request. Lender is hereby authorized to deliver a copy of any
financial statement or any other information relating to the business of
Borrowers to any court or other Governmental Authority or to any participant or
assignee or prospective participant or assignee. Borrowers hereby irrevocably
authorize and direct all accountants or auditors to deliver to Lender, at
Borrowers' expense, copies of the financial statements of Borrowers and any
reports or management letters prepared by such accountants or auditors on behalf
of Borrowers and to disclose to Lender such information as they may have
regarding the business of Borrowers. Any documents, schedules, invoices or other
papers delivered to Lender may be destroyed or otherwise disposed of by Lender
one (1) year after the same are delivered to Lender, except as otherwise
designated by Borrowers to Lender in writing.

        (e)  Concurrently with the quarterly financial statements required under
Section 9.6(a)(ii), Borrowers shall furnish or cause to be furnished to Lender
individual store summary profit and loss statements.

        9.7    Sale of Assets, Consolidation, Merger, Dissolution, Etc.    No
Borrower shall, and no Borrower shall permit any Domestic Subsidiary to (and
Lender does not authorize any Borrower 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; or

        (b)  sell, assign, lease, transfer, abandon or otherwise dispose of any
Capital Stock or Indebtedness to any other Person or any of its assets to any
other Person (other than a Borrower or a Domestic Subsidiary that has executed
in favor of Lender a guaranty of the Obligations and a security agreement
granting Lender a first priority security interest in all of its assets, each in
form

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and substance satisfactory to Lender), except for (i) sales of Inventory in the
ordinary course of business, (ii) the disposition of Equipment so long as
(A) after any Event of Default or during any Availability Compliance Period
(related to an Availability Triggering Event), any proceeds are paid to Lender
and (B) such sales do not involve Equipment having an aggregate fair market
value, when taken together with sales of Equipment by all other Credit Parties,
in excess of the U.S. Dollar Equivalent of Ten Million Dollars ($10,000,000) for
all such Equipment disposed of in any fiscal year of the relevant Borrower,
(iii) transfers of Securitization Assets to a SPE in connection with a
Securitization so long as (A) Lender has received an irrevocable license, in
form and substance satisfactory to Lender, from the SPE to use the Intellectual
Property included in the Securitization Assets to dispose of or otherwise
exercise its rights with respect to any Inventory, (B) Borrowers have received
an irrevocable license, in form and substance satisfactory to Lender, from the
SPE to use the Intellectual Property included in the Securitization Assets to
conduct their business, and (C) Lender has received from Borrowers a sublicense,
in form and substance satisfactory to Lender, extending Borrowers' licensed
rights in the Intellectual Property included in the Securitization Assets to
Lender, (D) receipt by Lender of an opinion of counsel to Borrowers to the
effect that the Securitization Documents do not violate, breach or result in a
Default under the Financing Agreements, in form and substance reasonably
satisfactory to Lender, (iv) the issuance and sale by a Borrower of Capital
Stock of such Borrower after the date hereof; provided, that such sale of
Capital Stock does not result in any Change in Control and as of the date of
such issuance and sale and after giving effect thereto, no Default or Event of
Default shall exist or have occurred, (v) licensing by any Borrower of any of
its Intellectual Property, in the ordinary course of its business,
(vi) disposition by any Borrower of any of its warehouse space not necessary to
such Borrower's business, in the ordinary course of such Borrower's business,
(vii) sales of Cash Equivalents, as provided under Section 9.10(b), and
(viii) sales of any publicly traded securities owned by any Borrower, as
provided under Section 9.10(c).

        (c)  wind up, liquidate or dissolve, except that Guess Licensing may
wind up, liquidate or dissolve following the transfer by it of the
Securitization Assets owned by it upon the closing of the Securitization; or

        (d)  agree to do any of the foregoing.

        9.8    Encumbrances.    No Borrower shall, and no Borrower shall permit
any Domestic Subsidiary to, create, incur, assume, suffer or permit to exist any
security interest, mortgage, pledge, lien, charge or other encumbrance of any
nature whatsoever on any of its assets or properties, including the Collateral,
except: (a) the security interests and liens of Lender and the security
interests and liens granted pursuant to the Canadian Guarantee; (b) liens
securing the payment of taxes, either not yet overdue or the validity of which
are being contested in good faith by appropriate proceedings diligently pursued
and available to Borrowers or such 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 or such Subsidiary's
business to the extent: (i) such liens secure Indebtedness or other obligations
of such Borrower 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 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 or such Subsidiary
as presently conducted thereon; (e) purchase money security interests in
Equipment (including Capital Leases) to secure Indebtedness permitted under
Section 9.9(b) hereof; (f) mortgages on real property, (g) the security
interests and liens set forth on

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Schedule 8.4 hereto, (h) pledges or deposits in connection with workers'
compensation, unemployment insurance and other social security legislation,
(i) any interest or title of a licensee or licensor under any license entered
into by a Borrower in the ordinary course of business, (j) liens on property
acquired after the date hereof (including liens on property of a Subsidiary
acquired after the date hereof) securing Indebtedness permitted under
Section 9.9 but only if such lien was not created in contemplation of such
acquisition and is limited in scope to the property so acquired, (k) deposits to
secure the performance of bids, trade contracts (other than for borrowed money),
leases, customer, appeal and performance bonds and other like obligations
incurred in the ordinary course of business and (1) security interests and liens
on assets of a SPE in connection with a Securitization.

        9.9    Indebtedness.    No Borrower shall, and no Borrower shall permit
any Domestic Subsidiary to, incur, create, assume, become or be liable in any
manner with respect to, suffer or permit to exist, any Indebtedness or
guarantee, assume, endorse, or otherwise become responsible for (directly or
indirectly) the performance, dividends or other obligations of any Person,
except:

        (a)  the Obligations;

        (b)  purchase money Indebtedness (including Capital Leases) arising
after the date hereof to the extent secured by purchase money security interests
in Equipment (including Capital Leases), real property and insurance policies
other than any policy insuring any Collateral; provided, that the amount of all
such Indebtedness shall not, together with all such Indebtedness incurred by all
other Credit Parties, exceed the U.S. Dollar Equivalent of Twelve Million Five
Hundred Thousand Dollars ($12,500,000) in any fiscal year (provided that any of
such amount that is not expended in a fiscal year may be carried forward to
subsequent fiscal years for purposes of calculating the restriction under this
section) so long as such security interests do not apply to any property of such
Borrower other than the Equipment, real property and insurance so acquired, and
the Indebtedness secured thereby does not exceed the cost of the Equipment, real
property and insurance so acquired;

        (c)  Indebtedness in respect of appeal bonds, surety bonds, performance
bonds and similar obligations incurred in the ordinary course of business;

        (d)  unsecured Indebtedness of a Domestic Subsidiary acquired after the
date hereof if such Indebtedness exists at the time of such acquisition and was
not incurred in contemplation of such acquisition and does not, when taken
together with unsecured Indebtedness of other Domestic Subsidiaries and the
Canadian Domestic Subsidiaries acquired after the date hereof, exceed the U.S.
Dollar Equivalent of Ten Million Dollars ($10,000,000) in the aggregate;

        (e)  guaranties of operating leases by Parent to, or for the benefit of,
its Domestic Subsidiaries (other than a SPE) in the ordinary course of Parent's
business;

        (f)    intercompany advances made by any Borrower to another Borrower or
a Domestic Subsidiary (other than a SPE); so long as such Domestic Subsidiary
executes for the benefit of Lender and delivers to Lender a continuing guaranty
guaranteeing the payment and satisfaction in full in cash of all of Borrowers'
Obligations and a security agreement granting Lender a first priority security
interest in all of its assets, in form and substance satisfactory to Lender;

        (g)  guaranties by any Subsidiaries of any Borrower of the Obligations
in favor of Lenders;

        (h)  Indebtedness of any Borrower under swap agreements, cap agreements,
collar agreements, exchange agreements and similar contractual agreements
entered into for the purpose of protecting a Person against fluctuations in
interest rates or currency values; provided, that such arrangements are with
banks or other financial institutions that have combined capital and surplus and
undivided profits of not less than Two Hundred Fifty Million Dollars
($250,000,000), are not for speculative purposes and are unsecured;

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        (i)    unsecured Indebtedness of any Borrower arising after the date
hereof to any third person (other than Indebtedness otherwise permitted under
this Section 9.9), provided, that each of the following conditions is satisfied
as determined by Lender: (i) such Indebtedness shall be on terms and conditions
acceptable to Lender and shall be subject and subordinate in right of payment to
the right of Lender to receive the prior indefeasible payment and satisfaction
in full payment of all of the Obligations pursuant to the terms of an
intercreditor agreement between Lender and such third party, in form and
substance satisfactory to Lender, (ii) Lender shall have received not less than
ten (10) days prior written notice of the intention of such Borrower to incur
such Indebtedness, which notice shall set forth in reasonable detail
satisfactory to Lender 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 hereto and such other information as
Lender may reasonably request with respect thereto, (iii) Lender shall have
received true, correct and complete copies of all agreements, documents and
instruments evidencing or otherwise related to such Indebtedness, (iv) on and
before the date of incurring such Indebtedness and after giving effect thereto,
no Default or Event of Default shall exist or have occurred, (v) such Borrower
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 may, after prior written notice to Lender, 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 (vi) Borrowers shall
furnish to Lender all notices or demands in connection with such Indebtedness
either received by such Borrower or on its behalf promptly after the receipt
thereof, or sent by such Borrower or on its behalf concurrently with the sending
thereof, as the case may be;

        (j)    the Indebtedness set forth on Schedule 9.9 hereto; provided, that
(i) Borrowers may only make regularly scheduled payments of principal and
interest in respect of such Indebtedness in accordance with the terms of the
agreement or instrument evidencing or giving rise to such Indebtedness as in
effect on the date hereof, except for payments in connection with the
refinancing, redemption or repurchase of Subordinated Notes permitted by
Section 4.3 and Section 9.10(i), (ii) no Borrower shall, directly or indirectly,
(A) amend, modify, alter or change the terms of such Indebtedness or any
agreement, document or instrument related thereto as in effect on the date
hereof except, that a Borrower may, after prior written notice to Lender, 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 payment thereof), or to
reduce the interest rate or any fees in connection therewith, except that Parent
may amend, modify, alter or change the terms of the Subordinated Notes so long
as the scope and priority of liens securing the Subordinated Notes are not
enlarged or improved thereby, or (B) redeem, retire, defease, purchase or
otherwise acquire such Indebtedness, or set aside or otherwise deposit or invest
any sums for such purpose, except for the redemption or repurchase of
Subordinated Notes permitted by Section 9.10(i), and (iii) Borrowers shall
furnish to Lender all notices or demands in connection with such Indebtedness
either received by a Borrower or on its behalf, promptly after the receipt
thereof, or sent by a Borrower or on its behalf, concurrently with the sending
thereof, as the case may be;

        (k)  the Canadian Guarantee;

        (l)    Indebtedness of a SPE in connection with a Securitization so long
as (i) the amount of such Indebtedness does not exceed (A) the U.S. Dollar
Equivalent of One Hundred Ten Million Dollars ($110,000,000) in the aggregate at
any one time if such Indebtedness is incurred during the

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period commencing as of the date hereof and continuing through the second
anniversary of the date hereof, and (B) thereafter, the U.S. Dollar Equivalent
of One Hundred Twenty-Five Million Dollars ($125,000,000) in the aggregate at
any one time, and (ii) the financial terms of the instruments or documents
evidencing such Indebtedness are not materially adverse when compared to the
term sheet with respect to a Securitization delivered to Lender, and the
interest rate charged in respect to such Indebtedness does not exceed twelve
percent (12%) per annum; and

        (m)  other Indebtedness not listed above which outstanding amount shall
not, when taken together with other Indebtedness not listed above of the other
Credit Parties, exceed (i) the U.S. Dollar Equivalent of Five Million Dollars
($5,000,000) in the aggregate at any one time if such Indebtedness is incurred
during the period commencing as of the date hereof and continuing through the
second anniversary of the date hereof, and (ii) thereafter, the U.S. Dollar
Equivalent of Ten Million Dollars ($10,000,000) in the aggregate at any one
time.

        9.10    Loans, Investments, Etc.    No Borrower shall, and no Borrower
shall permit any Domestic Subsidiary to, directly or indirectly, make, or suffer
or permit to exist, any loans or advances of money or property to any person, or
any investment 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:

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

        (b)  investments in cash or Cash Equivalents;

        (c)  investments in respect to any publicly traded securities, which
public securities are traded in a nationally recognized stock exchange
association, and which investment shall not, when taken together with
investments in public securities by the other Credit Parties, exceed the sum of
the U.S. Dollar Equivalent of Two Million Dollars ($2,000,000), in the aggregate
at any one time, at original cost plus the amount of proceeds from the sale of
such publicly traded securities;

        (d)  the existing equity investments of any Borrower as of the date
hereof in its Subsidiaries, provided, that such Borrower shall have no
obligation to make any other investment in, or loans to, or other payments in
respect of, any such Subsidiaries;

        (e)  investments of any Borrower in a SPE or of any Borrower or a SPE in
a Subsidiary of a SPE, and investments of a SPE in the Securitization Assets;

        (f)    investments of any Borrower in a Subsidiary that is not a
Domestic Subsidiary; provided that (i) as of the date of any payment in respect
of such investment and after giving effect thereto, no Default or Event of
Default shall exist or have occurred, (ii) (A) as of the date of any payment in
respect of such investment and after giving effect thereto, U.S. Excess
Availability is equal to at least Twenty Million Dollars ($20,000,000) and
Canadian Compliance Excess Availability is equal to at least the U.S. Dollar
Equivalent of One Million Dollars ($1,000,000) and (B) for each of the
immediately preceding thirty (30) consecutive days, the U.S. Excess Availability
is at least Twenty Million Dollars ($20,000,000) and Canadian Compliance Excess
Availability is equal to at least the U.S. Dollar Equivalent of One Million
Dollars ($1,000,000), and (iii) the U.S. Dollar Equivalent of the amounts so
invested in any such Subsidiary may not, when taken together with amount
invested in all such Subsidiaries of the Borrowers that are not Domestic
Subsidiaries and all Subsidiaries of the Canadian Borrowers that are not
Canadian Domestic Subsidiaries, exceed (1) the U.S. Dollar Equivalent of Five
Million Dollars ($5,000,000) in the aggregate plus (2) such additional amount as
may be permitted under Section 9.12;

        (g)  equity investments of any Borrower or any Domestic Subsidiary in
any wholly-owned Domestic Subsidiary formed or acquired after the date hereof,
provided, that (i) promptly upon such formation or acquisition, Borrowers shall
cause any such Subsidiary to execute and deliver to

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Lender, in form and substance satisfactory to Lender, (A) an absolute and
unconditional guaranty of payment of the Obligations, (B) a security agreement
granting to Lender a first security interest and lien (except as otherwise
consented to in writing by Lender) upon all of the assets of such Subsidiary,
and (C) such other agreements, documents and instruments as Lender may require,
including, but not limited to, supplements and amendments hereto and other loan
agreements or instruments evidencing Indebtedness of such new Subsidiary to
Lender, (ii) promptly upon Lender's request: (A) the Borrowers that formed such
Subsidiary shall execute and deliver to Lender, in form and substance
satisfactory to Lender, a pledge and security agreement granting to Lender a
first pledge of and lien on all of the issued and outstanding shares of Capital
Stock of such Subsidiary, and (B) such Borrower shall deliver the original stock
certificates evidencing such shares of Capital Stock (or such other evidence as
may be issued in the case of a limited liability company or other entity)
together with stock powers with respect thereto duly executed in blank (or the
equivalent thereof in the case of a limited liability company), (iii) as of the
date of any payment in respect of such investment and after giving effect
thereto, no Default or Event of Default shall exist or have occurred,
(iv) (A) as of the date of any payment in respect of such investment and after
giving effect thereto, U.S. Excess Availability is equal to at least Twenty
Million Dollars ($20,000,000) and Canadian Compliance Excess Availability is
equal to at least the U.S. Dollar Equivalent of One Million Dollars ($1,000,000)
and (B) for each of the immediately preceding thirty (30) consecutive days, the
U.S. Excess Availability is at least Twenty Million Dollars ($20,000,000) and
Canadian Compliance Excess Availability is equal to at least the U.S. Dollar
Equivalent of One Million Dollars ($1,000,000), and (v) the U.S. Dollar
Equivalent of the amounts so invested in any Subsidiary may not, when taken
together with amounts invested in all other wholly-owned Domestic Subsidiaries
and wholly-owned Canadian Domestic Subsidiaries, exceed (1) the U.S. Dollar
Equivalent of Ten Million Dollars ($10,000,000), provided that such Subsidiary
conducts and engages in business similar to any business of Borrowers, plus
(2) net profits after tax of such Subsidiary for each fiscal year during the
term of this Agreement, which amount shall not be less than zero, plus (3) such
additional amount as may be permitted under Section 9.12;

        (h)  equity investments of any Borrower in any other Borrower;

        (i)    stock or obligations issued to any Borrower by any Person (or the
representative of such Person) in respect of Indebtedness of such Person owing
to such Borrower 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 Lender, upon Lender's
request, together with such stock power, assignment or endorsement by Borrowers
as Lender may request;

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

        (k)  the loans and advances set forth on Schedule 9.10 hereto; provided,
that, as to such loans and advances, (i) Borrowers 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) Borrowers
shall furnish to Lender all notices or demands in connection with such loans and
advances either received by any Borrower or on its behalf, promptly after the
receipt thereof, or sent by any Borrower or on its behalf, concurrently with the
sending thereof, as the case may be;

        (l)    (i) redemptions or repurchases of the Subordinated Notes in
connection with a refinancing of the Subordinated Notes, and (ii) subject to
Section 9.12, redemptions or repurchases of the Subordinated Notes prior to the
date of the refinancing required under Section 4.3;

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        (m)  subject to Section 9.12, loans to suppliers and licensees in the
ordinary course of business;

        (n)  loans to officers and employees in respect to the purchase of
Capital Stock of Borrowers by such officers and employees not prohibited by
Section 9.13 and which amount of loans shall not, when taken together with loans
to officers and employees of the other Credit Parties in respect of the purchase
of Capital Stock of such other Credit Parties, exceed the U.S. Dollar Equivalent
of Three Million Dollars ($3,000,000) in the aggregate at any one time; and

        (o)  extensions of trade credit in the ordinary course of business.

        9.11    Dividends and Redemptions.    Parent shall not, directly or
indirectly, declare or pay any dividends on account of any shares of class of
any of its Capital Stock 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 in accordance with Section 9.12 or except in any
case in the form of shares of Capital Stock consisting of common stock.

        9.12    Further Restriction on Loans, Investments, Dividends and
Redemptions.    Borrowers may (i) make the investments referred to in
Section 9.10(f)(iii)(2) and 9.10(g)(v)(3), (ii) redeem the Subordinated Notes
under Section 9.10(l)(ii), (iii) make the loans to suppliers or licensees
referred to in Section 9.10(m), or (iv) take any action with respect to Capital
Stock referred to in Section 9.11 only to the extent that (A) the U.S. Dollar
Equivalent of the amount expended in connection with or set aside for all such
purposes shall not, when taken together with the amounts expended in connection
with or set aside for all such purposes by the other Credit Parties, exceed in
the aggregate the U.S. Dollar Equivalent of Thirty-Five Million Dollars
($35,000,000) plus twenty-five percent (25%) of the amount of net profits after
tax reported on the consolidated financial statements of Parent prepared in
accordance with GAAP for each fiscal year during the term of this Agreement,
(B) U.S. Excess Availability is at least Twenty Million Dollars ($20,000,000)
and Canadian Compliance Excess Availability is at least the U.S. Dollar
Equivalent of One Million Dollars ($1,000,000) immediately after each such
action and for each of the immediately preceding thirty (30) consecutive days,
and (C) no Default or Availability Compliance Period (related to an Availability
Triggering Event) exists and no Default or Availability Triggering Event would
be caused by the proposed action.

        9.13    Transactions with Affiliates.    No Borrower shall, directly or
indirectly, (a) purchase, acquire or lease any property from, or sell, transfer
or lease any property to, any officer, director, agent or other person
affiliated with any Borrower (other than another Borrower or a Subsidiary of a
Borrower), except in the ordinary course of and pursuant to the reasonable
requirements of Borrowers' business and upon fair and reasonable terms no less
favorable to such Borrower than such Borrower would obtain in a comparable arm's
length transaction with an unaffiliated person, except transactions relating to
Shareholders Agreement to which Parent is a party or (b) make any payments of
management, consulting or other fees for management or similar services, or of
any Indebtedness owing to any officer, employee, shareholder, director or other
Affiliate of any Borrower except any Borrower may (i) pay reasonable
compensation to officers, employees and directors for services rendered to such
Borrower in the ordinary course of business; (ii) pay expenses or make loans and
advances to officers, employees and directors for bona fide business purposes,
including but not limited to indemnification permitted under such Borrower's
Bylaws, relocation, stock option exercises, travel or otherwise consistent with
past practice; and (iii) satisfy obligations of such Borrower under transactions
described in the notes to the consolidated financial statements of Parent for
the year ended December 31, 2001, and continuations, renewals or extensions
thereof in an amount not exceeding one hundred fifty percent (150%) in the
aggregate of the original amount of such obligations without Lender's prior
written consent which consent shall not be unreasonably withheld.

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        9.14    Compliance with ERISA.    Borrowers shall and shall cause each
of Borrowers' ERISA Affiliates to: (a) maintain each Plan (other than a
Multiemployer 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 of such Plans so as to incur any material
liability to the Pension Benefit Guaranty Corporation; (d) not allow or suffer
to exist any prohibited transaction involving any of such Plans or any trust
created thereunder which would subject any Borrower or such ERISA Affiliate to a
material tax or penalty or other material liability on prohibited transactions
imposed under Section 4975 of the Code or ERISA; (e) make all required
contributions to any Plan which it is obligated to pay under Section 302 of
ERISA, Section 412 of the Code or the terms of such Plan; (f) not allow or
suffer to exist any accumulated funding deficiency, whether or not waived, with
respect to any such Plan; or (g) not 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 such Plan
that is a single employer plan, which termination could result in any material
liability to the Pension Benefit Guaranty Corporation.

        9.15    End of Fiscal Years, Fiscal Quarters.    Parent shall, for
financial reporting purposes, cause its, and each of its Subsidiaries'
(a) fiscal years to end on December 31 or the Saturday or Sunday closest to
December 31 of each year and (b) fiscal quarters to end on the Saturday closest
to each calendar quarter end.

        9.16    Change in Business.    Borrowers shall not engage in any
business other than the business of Borrowers on the date hereof and any
business reasonably related, ancillary or complimentary to the business in which
Borrowers are engaged on the date hereof.

        9.17    Limitation of Restrictions Affecting Subsidiaries.    Borrowers
shall not, directly or indirectly, create or otherwise cause or suffer to exist
any encumbrance or restriction which prohibits or limits the ability of any
Domestic Subsidiary of any Borrower to (a) pay dividends or make other
distributions or pay any Indebtedness owed to any Borrower or any Subsidiary of
any Borrower; (b) make loans or advances to any Borrower or any Subsidiary of
any Borrower, (c) transfer any of its properties or assets to any Borrower or
any Subsidiary of any Borrower; 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 any
Borrower or any of its Subsidiaries, (iv) customary restrictions on dispositions
of real property interests found in reciprocal easement agreements of any
Borrower or its Subsidiary, (v) any agreement relating to permitted Indebtedness
incurred by a Subsidiary of any Borrower prior to the date on which such
Subsidiary was acquired by such Borrower and outstanding on such acquisition
date, (vi) any Securitization Documents and (vii) the extension or continuation
of contractual obligations in existence on the date hereof; provided, that any
such encumbrances or restrictions contained in such extension or continuation
are no less favorable to Lender than those encumbrances and restrictions under
or pursuant to the contractual obligations so extended or continued.

        9.18    Net Worth.    Borrowers, together with Parent and Parent's
consolidated Subsidiaries, shall, at all times through and including June 30,
2004, maintain Adjusted Tangible Net Worth of not less than the U.S. Dollar
Equivalent of One Hundred Million Dollars ($100,000,000) and shall, at all times
after June 30, 2004 maintain Net Worth of not less than the U.S. Dollar
Equivalent of One Hundred Ten Million Dollars ($110,000,000). Compliance with
the requirements of this section will be tested for each fiscal quarter upon
delivery of the financial statements as of the end of such fiscal quarter;
provided that such compliance will not be tested except during any Availability
Compliance Period (related to an Availability Triggering Event).

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        9.19    License Agreements.    

        (a)  Each Borrower shall (i) promptly and faithfully observe and perform
all of the material terms, covenants, conditions and provisions of the material
License Agreements 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
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 or permit to occur any of the foregoing; except,
that, subject to Section 00 below, such Borrower may cancel, surrender or
release any material License Agreement in the ordinary course of the business of
Borrowers; provided, that Borrowers shall give Lender not less than thirty
(30) days prior written notice of such Borrower's intention to so cancel,
surrender and release any such material License Agreement, (iv) give Lender
prompt written notice of any material License Agreement entered into by any
Borrower after the date hereof, together with a true, correct and complete copy
thereof and such other information with respect thereto as Lender may request,
(v) give Lender prompt written notice of any material breach of any obligation,
or any default, by any party under any material License Agreement, and deliver
to Lender (promptly upon the receipt thereof by any Borrower in the case of a
notice to any Borrower, and concurrently with the sending thereof in the case of
a notice from any Borrower) a copy of each notice of default and every other
notice and other communication received or delivered by any Borrower in
connection with any material License Agreement which relates to the right of any
Borrower to continue to use the property subject to such License Agreement, and
(vi) furnish to Lender, promptly upon the request of Lender, such information
and evidence as Lender may require from time to time concerning the observance,
performance and compliance by any Borrower or the other party or parties thereto
with the terms, covenants or provisions of any material License Agreement.

        (b)  Borrowers will either exercise any option to renew or extend the
term of each material License Agreement 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 Lender
or give Lender prior written notice that a Borrower does not intend to renew or
extend the term of any such material License Agreement or that the term thereof
shall otherwise be expiring, 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
to extend or renew any material License Agreement, Lender shall have, and is
hereby granted, the irrevocable right and authority, at its option, 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 Lender or in the
name and behalf of any Borrower, as Lender shall determine at any time that an
Event of Default shall exist or have occurred and be continuing. Lender may, but
shall not be required to, perform any or all of such obligations of any Borrower
under any of the License Agreements, including, but not limited to, the payment
of any or all sums due from such Borrower thereunder. Any sums so paid by Lender
shall constitute part of the Obligations.

        9.20    Costs and Expenses.    Borrowers shall pay to Lender on demand
all the actual costs and reasonable 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, Lender'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 the actual 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) all the actual costs and expenses and fees for insurance
premiums, environmental audits, surveys, assessments, engineering reports and

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inspections, appraisal fees and search fees, actual costs and expenses of
remitting loan proceeds, collecting checks and other items of payment, and
establishing and maintaining the Blocked Accounts, together with Lender's
customary charges and fees with respect thereto; (c) charges, fees or expenses
charged by any bank or issuer in connection with the Letter of Credit
Accommodations; (d) actual costs and reasonable expenses of preserving and
protecting the Collateral; (e) actual costs and reasonable expenses paid or
incurred in connection with obtaining payment of the Obligations, enforcing the
security interests and liens of Lender, 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
Lender arising out of the transactions contemplated hereby and thereby
(including preparations for and consultations concerning any such matters);
(f) all out-of-pocket expenses and costs heretofore and from time to time
hereafter incurred by Lender during the course of periodic field examinations of
the Collateral and Borrowers' operations, plus a per diem charge at the rate of
Eight Hundred Dollars ($800) per person per day for Lender's examiners in the
field and office, provided that Borrowers shall be required to pay for only two
(2) such field audits in any twelve (12) month period unless an Event of Default
or an Availability Triggering Event occurs; (g) all actual costs and expenses in
connection with background investigations of the principals of Borrowers; and
(h) the reasonable fees and disbursements of counsel (including legal
assistants) to Lender in connection with the preparation of this Agreement and
the other Financing Agreements or any of the foregoing. The amount of any
deposit given by Borrowers to Lender in connection with this Agreement remaining
after payment of all fees, costs and expenses incurred by Lender in connection
with any audit or field examination of Borrowers and their Subsidiaries and
Affiliates or the preparation and negotiation of the Financing Documents shall
be applied against the amounts owing under this Section 9.20.

        9.21    Further Assurances.    At the request of Lender at any time and
from time to time, Borrowers 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. Lender may at any time and from time to time request a certificate
from an officer of any 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 Lender, Lender may, at its
option, cease to make any further Loans or provide any further Letter of Credit
Accommodations until Lender has received such certificate and, in addition,
Lender has determined that such conditions are satisfied.

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) Borrowers fail to pay any of the Obligations within two
(2) Business Days after the same becomes due and payable, or (ii) any Borrower
or any Obligor fails to perform any of the covenants contained in Sections 9.1,
9.7 through 9.18 of this Agreement and such failure shall continue for ten
(10) Business Days, or (iii) Borrowers fail 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 6.3, 6.4,
10.1(a)(i) and 10.1(a)(ii) above and such failure shall continue for thirty
(30) days; provided, that the cure periods specified above shall not apply in
the case of (A) any failure to observe any covenant that is not capable of being
cured at all or within the applicable period or which has been the subject of a
prior failure within the preceding six (6) month period or (B) any failure by
Borrowers to pursue a cure diligently and promptly during the applicable period;

        (b)  any representation, warranty or statement of fact made by any
Borrower to Lender in this Agreement, the other Financing Agreements or any
other agreement, schedule, confirmatory

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assignment or otherwise shall when made or deemed made be false or misleading in
any material respect;

        (c)  any Obligor revokes, terminates or fails to perform any of the
terms, covenants, conditions or provisions of any guaranty, endorsement or other
agreement of such party in favor of Lender;

        (d)  any judgment for the payment of money is rendered against any
Borrower or any Obligor in excess of Five Million Dollars ($5,000,000) in any
one case or in excess of Ten Million Dollars ($10,000,000) in the aggregate, in
each case in excess of applicable insurance coverage 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 their
assets;

        (e)  any Borrower dissolves or suspends or discontinues doing business;

        (f)    Borrowers or any Obligor becomes insolvent (however defined or
evidenced), makes an assignment for the benefit of creditors, makes or sends
notice of a bulk transfer or calls a meeting of its creditors or principal
creditors;

        (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,
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 or any Obligor or all or any part of its properties and
such petition or application is not dismissed within sixty (60) days, or if such
case or proceeding is under any receivership, 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; or

        (i)    any default by any Borrower or any Obligor under any agreement,
document or instrument relating to any Indebtedness for borrowed money owing to
any person other than Lender, or any capitalized lease obligations, contingent
Indebtedness in connection with any guaranty, letter of credit, indemnity or
similar type of instrument in favor of any person other than Lender, in any case
in an amount in excess of Five Million Dollars ($5,000,000), which default
continues for more than the applicable cure period, if any, with respect
thereto, or any default by any Borrower or any Obligor under any Material
Contract, which default continues for more than the applicable cure period, if
any, with respect thereto;

        (j)    any bank at which any deposit account of any Borrower is
maintained shall fail to comply with instructions regarding the disposition of
funds in accordance with the terms of any Deposit Account Control Agreement to
which such bank is a party or any securities intermediary, commodity
intermediary or other financial institution at any time in custody, control or
possession of any investment property of any Borrower shall fail to comply with
instructions regarding the disposition of investment property in accordance with
the terms of any Investment Property Control Agreement to which such person is a
party;

        (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 Lender) 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

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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 in an aggregate amount in
excess of Five Million Dollars ($5,000,000);

        (m)  any Change of Control shall occur;

        (n)  the indictment by any Governmental Authority, or as Lender may
reasonably and in good faith determine, the threatened indictment by any
Governmental Authority of any Borrower or any Obligor of which any Borrower, any
Obligor or Lender receives notice, in either case, as to which there is a
reasonable possibility of an adverse determination, in the good faith
determination of Lender, 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 or property
of any Obligor having a value in excess of One Million Dollars ($1,000,000) or
(ii) any other property of any Borrower or any Obligor which is necessary or
material to the conduct of its business;

        (o)  a material impairment of Borrowers' ability to perform their
obligations under the Financing Agreements or of Lender's ability to enforce the
Obligations or realize upon the Collateral, or a material impairment of the
enforceability or priority of Lender's liens or security interests with respect
to the Collateral as a result of an action or failure to act on the part of a
Borrower;

        (p)  there shall be an event of default under any of the other Financing
Agreements;

        (q)  there shall be a default or event of default under the Canadian
Facility; or

        (r)  there shall be a failure of one or more of the conditions set forth
in Section 4.3.

        10.2    Remedies.    

        (a)  At any time an Event of Default exists or has occurred and is
continuing, Lender shall have all rights and remedies provided in this
Agreement, the other Financing Agreements, the UCC and other applicable law, all
of which rights and remedies may be exercised without notice to or consent by
any Borrower or any Obligor, except as such notice or consent is expressly
provided for hereunder or required by applicable law. All rights, remedies and
powers granted to Lender hereunder, under any of the other Financing Agreements,
the UCC or other applicable law, are cumulative, not exclusive and enforceable,
in Lender'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 of this Agreement or any of the other Financing Agreements. Lender
may, at any time or times, proceed directly against Borrowers or any Obligor to
collect the Obligations without prior recourse to any Obligor or any of the
Collateral.

        (b)  Without limiting the foregoing, at any time an Event of Default
exists or has occurred and is continuing, Lender may, in its discretion and
without limitation, (i) accelerate the payment of all Obligations and demand
immediate payment thereof to Lender (provided, that, upon the occurrence of any
Event of Default described in Sections 0 and 0, all Obligations shall
automatically become immediately due and payable), (ii) 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, (iii) require Borrowers, at Borrowers' expense, to assemble and

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make available to Lender any part or all of the Collateral at any place and time
designated by Lender, (iv) collect, foreclose, receive, appropriate, setoff and
realize upon any and all Collateral, (v) 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, (vi) 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 Lender
or elsewhere) at such prices or terms as Lender may deem reasonable, for cash,
upon credit or for future delivery, with the Lender 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 Borrowers, which
right or equity of redemption is hereby expressly waived and released by
Borrowers and/or (vii) terminate this Agreement. If any of the Collateral is
sold or leased by Lender upon credit terms or for future delivery, the
Obligations shall not be reduced as a result thereof until payment therefor is
finally collected by Lender. If notice of disposition of Collateral is required
by law, ten (10) days prior notice by Lender 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
Lender 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 Lender's request, Borrowers will either, as
Lender shall specify, furnish cash collateral to the issuer to be used to secure
and fund Lender's reimbursement obligations to the issuer in connection with any
Letter of Credit Accommodations or furnish cash collateral to Lender 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 reasonable fees and expenses payable in
connection therewith through the end of the expiration of such Letter of Credit
Accommodations.

        (c)  Lender may, at any time or times that an Event of Default exists or
has occurred and is continuing, enforce any Borrower's rights 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,
Lender may at such time or times (i) notify any or all account debtors,
secondary obligors or other obligors in respect thereof that the Receivables
have been assigned to Lender and that Lender has a security interest therein and
Lender may direct any or all accounts debtors, secondary obligors and other
obligors to make payment of Receivables directly to Lender, (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 Lender shall not be liable for
its 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
Lender may deem necessary or desirable for the protection of its interests. At
any time that an Event of Default exists or has occurred and is continuing, at
Lender's request, all invoices and statements sent to any account debtor shall
state that the Accounts and such other obligations have been assigned to Lender
and are payable directly and only to Lender and Borrowers shall deliver to
Lender such originals of documents evidencing the sale and delivery of goods or
the performance of services giving rise to any Accounts as Lender 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 Lender's
request, hold the returned Inventory in trust for Lender, segregate all returned
Inventory from all of its other property, dispose of the returned Inventory
solely according to Lender's instructions, and not issue any credits, discounts
or allowances with respect thereto without Lender's prior written consent.

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        (d)  To the extent that applicable law imposes duties on Lender to
exercise remedies in a commercially reasonable manner (which duties cannot be
waived under such law), Borrowers acknowledge and agree that it is not
commercially unreasonable for Lender (i) to fail to incur expenses reasonably
deemed significant by 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, 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 Lender against risks
of loss, collection or disposition of Collateral or to provide to the Lender a
guaranteed return from the collection or disposition of Collateral, or (xii) to
the extent deemed appropriate by the Lender, to obtain the services of other
brokers, investment bankers, consultants and other professionals to assist the
Lender in the collection or disposition of any of the Collateral. Borrowers
acknowledge that the purpose of this Section is to provide non-exhaustive
indications of what actions or omissions by Lender would not be commercially
unreasonable in Lender's exercise of remedies against the Collateral and that
other actions or omissions by 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 Borrowers or to impose any duties on Lender
that would not have been granted or imposed by this Agreement or by applicable
law in the absence of this Section.

        (e)  For the purpose of enabling Lender to exercise the rights and
remedies hereunder, Borrowers hereby grant to Lender, to the extent assignable,
an irrevocable, non-exclusive license (exercisable without payment of royalty or
other compensation to Borrowers) 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 any
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.

        (f)    Lender may apply the cash proceeds of Collateral actually
received by Lender 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 Lender may elect, whether or not then due. Borrowers shall remain liable to
Lender for the payment of any deficiency with interest at the highest rate
provided for herein and all reasonable costs and expenses of collection or
enforcement, including reasonable attorneys' fees and legal expenses.

        (g)  Without limiting the foregoing, upon the occurrence of a Default or
Event of Default, Lender may, at its option, without notice, (i) cease making
Loans or arranging for Letter of Credit

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Accommodations or reduce the lending formulas or amounts of Loans and Letter of
Credit Accommodations available to Borrowers and/or (ii) terminate any provision
of this Agreement providing for any future Loans or Letter of Credit
Accommodations to be made by Lender to Borrowers.

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 California (applicable to
contracts made and performed in such State).

        (b)  Borrowers and Lender irrevocably consent and submit to the
non-exclusive jurisdiction of the state and federal courts located in Los
Angeles County, California, whichever Lender 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 Lender shall have the
right to bring any action or proceeding against any Borrower or its property in
the courts of any other jurisdiction which Lender deems necessary or appropriate
in order to realize on the Collateral or to otherwise enforce its rights against
such Borrower or its property).

        (c)  Borrowers hereby waive personal service of any and all process upon
it and consent that all such service of process may be made by certified mail
(return receipt requested) directed to their 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 Lender's option, by
service upon Borrowers in any other manner provided under the rules of any such
courts. Within thirty (30) days after such service, Borrowers shall appear in
answer to such process, failing which Borrowers shall be deemed in default and
judgment may be entered by Lender against Borrowers for the amount of the claim
and other relief requested.

        (d)  BORROWERS AND LENDER EACH HEREBY WAIVES 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 AND LENDER EACH HEREBY
AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL
BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT BORROWERS OR 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)  Lender shall not have any liability to Borrowers (whether in tort,
contract, equity or otherwise) for losses suffered by Borrowers in connection
with, arising out of, or in any way related to the transactions or relationships
contemplated by this Agreement, or any act, omission

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or event occurring in connection herewith, unless it is determined by a final
and non-appealable judgment or court order binding on Lender, that the losses
were the result of acts or omissions constituting gross negligence or willful
misconduct of Lender. In any such litigation, Lender 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. Except as prohibited by law, Borrowers waive any right which any of
them may have to claim or recover in any litigation with Lender any special,
exemplary, punitive or consequential damages or any damages other than, or in
addition to, actual damages. Borrowers: (i) certify that neither Lender nor any
representative, agent or attorney acting for or on behalf of Lender has
represented, expressly or otherwise, that Lender 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) acknowledge that in entering into
this Agreement and the other Financing Agreements, Lender is 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.    Borrowers hereby expressly waive 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 Borrowers which Lender may elect to give shall entitle Borrowers
to any other or further notice or demand in the same, similar or other
circumstances.

        11.3    Amendments and Waivers.    Neither this Agreement nor any
provision hereof shall be amended, modified, waived or discharged orally or by
course of conduct, but only by a written agreement signed by an authorized
officer of Lender, and as to amendments, as also signed by an authorized
officers of Borrowers. Lender shall not, by any act, delay, omission or
otherwise be deemed to have expressly or impliedly waived any of its rights,
powers and/or remedies unless such waiver shall be in writing and signed by an
authorized officer of Lender. Any such waiver shall be enforceable only to the
extent specifically set forth therein. A waiver by 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 Lender would otherwise have on any
future occasion, whether similar in kind or otherwise.

        11.4    Waiver of Counterclaims.    Borrowers waive 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.    Borrowers shall indemnify and hold Lender,
and its directors, agents, employees and counsel, harmless from and against any
and all losses, claims, damages, liabilities, costs or 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 for losses, claims, damages, liabilities, costs and expenses
arising from the gross negligence or willful misconduct of any such indemnified
party as determined pursuant to a final, non-appealable order of a court of
competent jurisdiction. 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 shall pay the maximum portion which it is
permitted to pay under applicable law to Lender in satisfaction of indemnified
matters under this Section. The foregoing indemnity shall survive the payment of
the Obligations and the termination of this Agreement.

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SECTION 12.    TERM OF AGREEMENT; MISCELLANEOUS    

        12.1    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 September 26, 2006 (the "Renewal
Date"), and from year to year thereafter, unless sooner terminated pursuant to
the terms hereof; provided that in any event this Agreement will terminate upon
termination of the Canadian Facility. Lender or Borrowers may terminate this
Agreement and the other Financing Agreements effective on the Renewal Date or on
the anniversary of the Renewal 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 must be terminated simultaneously. In addition,
Borrowers may terminate this Agreement at any time upon ten (10) days prior
written notice to Lender (which notice shall be irrevocable) and Lender may
terminate this Agreement at any time on or after an Event of Default. Upon the
effective date of termination or non-renewal of this Agreement, Borrowers shall
pay to Lender, in full, all outstanding and unpaid Obligations and shall furnish
cash collateral to Lender (or at Lender's option, a letter of credit issued for
the account of Borrowers and at Borrowers' expense, in form and substance
satisfactory to Lender, by an issuer acceptable to Lender and payable to Lender
as beneficiary) in such amounts as Lender determines are reasonably necessary to
secure (or reimburse) Lender from loss, cost, damage or expense, including
attorneys' fees and legal expenses, in connection with any contingent
Obligations, including issued and outstanding Letter of Credit Accommodations
and checks or other payments provisionally credited to the Obligations and/or as
to which Lender has not yet received final and indefeasible payment. Such
payments in respect of the Obligations and cash collateral shall be remitted by
wire transfer in Federal funds to such bank account of Lender, as Lender may, in
its discretion, designate in writing to Borrowers for such purpose. Interest
shall be due until and including the next business day, if the amounts so paid
by Borrowers to the bank account designated by Lender are received in such bank
account later than 12:00 noon, Los Angeles time.

        (b)  No termination of this Agreement or the other Financing Agreements
shall relieve or discharge Borrowers of their respective duties, obligations and
covenants under this Agreement or the other Financing Agreements until all
Obligations have been fully and finally discharged and paid, and Lender's
continuing security interest in the Collateral and the rights and remedies of
Lender hereunder, under the other Financing Agreements and applicable law, shall
remain in effect until all such Obligations have been fully and finally
discharged and paid. Accordingly, Borrowers waive any rights which they may have
under the UCC to demand the filing of termination statements with respect to the
Collateral, and Lender shall not be required to send such termination statements
to any Borrower, or to file them with any filing office, unless and until this
Agreement is terminated in accordance with its terms and all of the Obligations
are paid and satisfied in full in immediately available funds.

        (c)  If for any reason this Agreement is terminated prior to the end of
the then current term or renewal term of this Agreement, in view of the
impracticality and extreme difficulty of ascertaining actual damages and by
mutual agreement of the parties as to a reasonable calculation of Lender's lost
profits as a result thereof, Borrowers agree to pay to Lender, upon the
effective

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date of such termination, an early termination fee in the amount set forth below
if such termination is effective in the period indicated:

 
   
  Amount

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

   
  Period

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(i)   •   one percent (1.00%) of the Maximum Credit   •   From the date hereof
to and including September 26, 2003 (ii)   •   one-fourth percent (0.25%) of the
Maximum Credit   •   From the date hereof to and including September 26, 2005

•Such early termination fee shall be presumed to be the amount of damages
sustained by Lender as a result of such early termination and Borrowers agree
that it is reasonable under the circumstances currently existing. In addition,
Lender shall be entitled to such early termination fee upon the occurrence of
any Event of Default described in Sections 10.1(g) and 10.1(h) hereof, even if
Lender does not exercise its right to terminate this Agreement, but elects, at
its 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 0 shall be deemed included in the Obligations.

        (d)  Notwithstanding the provisions of Section 12.1(c) and provided
there is no Default or Event of Default, the Borrowers may elect to reduce the
Maximum Credit by an amount of up to Fifteen Million Dollars ($15,000,000)
without becoming liable for any early termination fee in respect of such
reduction. Such election may be made only once and may be made at any time
during the original term of this Agreement, but not during any renewal term. In
addition, Borrowers will not be liable for an early termination fee under
Section 12.1(c) if the termination of this Agreement results from repayment with
the proceeds of a credit facility provided by Wachovia Bank, National
Association or using the proceeds of a sale of one or more of the Borrowers.

        12.2    Interpretive Provisions.    

        (a)  All terms used herein which are defined in Division 1 or Division 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 Borrower, Borrowers and 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 shall refer to this
Agreement as a whole and not any particular provision of this Agreement and as
this Agreement now exists 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)    All references to the term "good faith" used herein when
applicable to 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 Lender alleged by Borrowers at any time.

        (g)  An Event of Default shall exist or continue or be continuing until
such Event of Default is waived in accordance with Section 11.3 or is cured in a
manner satisfactory to Lender, if such Event of Default is capable of being
cured as determined by Lender.

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        (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 most recently
received by Lender 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 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.

        (m)  This Agreement and the other Financing Agreements are the result of
negotiations among and have been reviewed by counsel to Lender and the other
parties, and are the products of all parties. Accordingly, this Agreement and
the other Financing Agreements shall not be construed against Lender merely
because of Lender's involvement in their preparation.

        12.3    Notices.    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 addresses designated on the
signature page hereto or to such other address as any party may designate by
notice in accordance with this Section.

        12.4    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.

        12.5    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 Lender, Borrowers and their
respective successors and assigns, except that Borrowers may not assign their
rights under this Agreement, the other Financing Agreements and any other
document referred to herein or therein without the prior written consent of
Lender. Lender may, after notice to Borrowers, assign its rights and delegate
its obligations under this Agreement and the other Financing Agreements and
further may assign, or sell participations in, all or any part of the Loans, the
Letter of Credit Accommodations or any other interest herein to another
financial institution or other person, in which event, the assignee or
participant shall have, to the extent of such assignment or participation, the
same

66

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rights and benefits as it would have if it were the Lender hereunder, except as
otherwise provided by the terms of such assignment or participation; provided,
however, that if such financial institution is not domiciled in the United
States or such financial institution and its Affiliates have assets of less than
One Billion Dollars ($1,000,000,000) on a consolidated basis, Lender shall
obtain a Borrower's prior written consent.

        12.6    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.

        12.7    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.

        12.8    Confidentiality.    

        (a)  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 Borrowers pursuant to this Agreement, 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, (iii) in connection
with any litigation to which Lender is a party, (iv) to any assignee or
participant (or prospective assignee or participant) so long as such assignee or
participant (or prospective assignee or participant) shall have first agreed in
writing to treat such information as confidential in accordance with this
Section 12.8, or (v) to counsel for Lender or any participant or assignee (or
prospective participant or assignee).

        (b)  In no event shall this Section 12.8 or any other provision of this
Agreement 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 any third party
without breach of this Section 12.8 or otherwise become 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
Lender on a non-confidential basis from a person other than Borrowers,
(iii) require Lender to return any materials furnished by any Borrower to Lender
or (iv) prevent 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
Lender under this Section 12.8 shall supersede and replace the obligations of
Lender under any confidentiality letter signed prior to the date hereof.

SECTION 13.    JOINT AND SEVERAL LIABILITY AND SURETYSHIP WAIVERS    

        13.1    Independent Obligations; Subrogation.    The Obligations of each
Borrower hereunder are joint and several. To the maximum extent permitted by
law, each Borrower hereby waives any claim, right or

67

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

remedy which either may now have or hereafter acquire against any other Borrower
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 Lender against any Borrower or
any Collateral which 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 hereby waives any right to proceed
against the other Borrowers, 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 may now have or hereafter
have as against the other Borrowers with respect to the Obligations until the
Obligations are fully paid and finally discharged. Each Borrower also hereby
waives any rights of recourse to or with respect to any asset of the other
Borrowers until the Obligations are fully paid and finally discharged.

        13.2    Authority to Modify Obligations and Security.    Each Borrower
authorizes Lender, without notice or demand and without affecting any Borrower's
liability hereunder, from time to time, whether before or after any notice of
termination hereof or before or after any default in respect of the Obligations,
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, 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
other Borrowers' Obligations; (c) apply any and all such Collateral and direct
the order or manner of sale thereof as Lender, in its sole discretion, may
determine; (d) deal with the other Borrowers as Lender may elect; (e) in
Lender's sole discretion, settle, release on terms satisfactory to Lender, or by
operation of law or otherwise, compound, compromise, collect or otherwise
liquidate any of the other Borrowers' Obligations 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 as Lender,
in its 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 upon any of its indebtedness or
obligations to Lender as it in its sole discretion may determine, whether or not
such indebtedness relates to the Obligations; all without in any way
diminishing, releasing or discharging the liability of any Borrower hereunder.

        13.3    Waiver of Defenses.    Upon an Event of Default by any Borrower
in respect of any Obligations, and except as required in Section 726 of the
California Code of Civil Procedure, Lender may, at its option and without
additional notice to any Borrower, proceed directly against any Borrower to
collect and recover the full amount of the liability hereunder, or any portion
thereof, and each Borrower waives any right to require Lender to: (a) proceed
against the other Borrowers or any other person whomsoever; (b) proceed against
or exhaust any Collateral given to or held by 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 Lender's power whatsoever. A separate action or
actions may be brought and prosecuted against any Borrower whether or not action
is brought against the other Borrowers and whether the other Borrowers be joined
in any such action or actions; and each Borrower 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 Lender's Rights.    Each Borrower hereby authorizes
and empowers Lender in its sole discretion, without any notice or demand to such
Borrower whatsoever and without affecting the

68

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liability of such Borrower hereunder, to exercise any right or remedy which
Lender may have available to it against the other Borrowers.

        13.5    Additional Waivers.    Each Borrower waives any defense arising
by reason of any disability or other defense of the other Borrowers or by reason
of the cessation from any cause whatsoever of the liability of the other
Borrowers or by reason of any act or omission of Lender or others which directly
or indirectly results in or aids the discharge or release of the other Borrowers
or any Obligations or any Collateral by operation of law or otherwise. The
Obligations shall be enforceable against each Borrower without regard to the
validity, regularity or enforceability of any of the Obligations with respect to
any of the other Borrowers or any of the documents related thereto or any
collateral security documents securing any of the Obligations. No exercise by
Lender of, and no omission of Lender to exercise, any power or authority
recognized herein and no impairment or suspension of any right or remedy of
Lender against any Borrower or any Collateral shall in any way suspend,
discharge, release, exonerate or otherwise affect any of the Obligations or any
Collateral furnished by the Borrowers or give to the Borrowers any right of
recourse against Lender. Each Borrower specifically agrees that the failure of
Lender (a) to perfect any lien on or security interest in any property
heretofore or hereafter given any Borrower 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, shall not in any manner whatsoever terminate,
diminish, exonerate or otherwise affect the liability of any Borrower hereunder.

        13.6    Additional Indebtedness.    Additional Obligations may be
created from time to time at the request of any Borrower and without further
authorization from or notice to any other Borrowers even though the borrowing
Borrowers' financial condition may deteriorate since the date hereof. Each
Borrower waives the right, if any, to require Lender to disclose to such
Borrower any information it may now have or hereafter acquire concerning the
other Borrowers' character, credit, Collateral, financial condition or other
matters. Each Borrower has established adequate means to obtain from the other
Borrowers on a continuing basis financial and other information pertaining to
such Borrower's business and affairs, and assumes the responsibility for being
and keeping informed of the financial and other conditions of the other
Borrowers and of all circumstances bearing upon the risk of nonpayment of the
Obligations which diligent inquiry would reveal. Lender need not inquire into
the powers of any Borrower or the authority of any of its officers, directors,
partners or agents acting or purporting to act in its behalf, and any
obligations created in reliance upon the purported exercise of such power or
authority is hereby guaranteed. All obligations of each Borrower to Lender
heretofore, now or hereafter created shall be deemed to have been granted at
each Borrower's special insistence and request and in consideration of and in
reliance upon this Agreement.

        13.7    Subordination.    Except as otherwise provided in this
Section 13.7, any indebtedness of any Borrower now or hereafter owing to any
other Borrowers is hereby subordinated to the Obligations, whether heretofore,
now or hereafter created, and whether before or after notice of termination
hereof, and, following the occurrence and during the continuation of an Event of
Default, no Borrower shall, without the prior consent of Lender, pay in whole or
in part any of such indebtedness nor will any such Borrower accept any payment
of or on account of any such indebtedness at any time while such Borrower
remains liable hereunder. At the request of Lender, after the occurrence and
during the continuance of an Event of Default, each Borrower shall pay to Lender
all or any part of such subordinated indebtedness and any amount so paid to
Lender at its request shall be applied to payment of the Obligations. Each
payment on the indebtedness of any Borrower to the other Borrowers received in
violation of any of the provisions hereof shall be deemed to have been received
by any other Borrowers as trustee for Lender and shall be paid over to Lender
immediately on account of the Obligations, but without otherwise affecting in
any manner any such Borrower's liability under any of the provisions of this
Agreement. Each Borrower agrees to file all claims against the other Borrowers
in any bankruptcy or other proceeding in which the filing of claims is required
by law in

69

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

respect of any indebtedness of the other Borrowers to such Borrower, and Lender
shall be entitled to all of any such Borrower's rights thereunder. If for any
reason any such Borrower fails to file such claim at least thirty (30) days
prior to the last date on which such claim should be filed, Lender, as such
Borrower's attorney-in-fact, is hereby authorized to do so in Borrowers' name
or, in Lender's discretion, to assign such claim to, and cause a proof of claim
to be filed in the name of, Lender's nominee. In all such cases, whether in
administration, bankruptcy or otherwise, the person or persons authorized to pay
such claim shall pay to Lender the full amount payable on the claim in the
proceeding, and to the full extent necessary for that purpose any such Borrower
hereby assigns to Lender all such Borrower's rights to any payments or
distributions to which such Borrower otherwise would be entitled. If the amount
so paid is greater than any such Borrower's liability hereunder, Lender will pay
the excess amount to the party entitled thereto.

        13.8    Revival.    If any payments of money or transfers of property
made to Lender by any Borrower should for any reason subsequently be declared to
be, or in Lender'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 Lender is required to
repay or restore, or in Lender's counsel's 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 Lender
related thereto, such Borrower's liability hereunder shall automatically be
revived, reinstated and restored and shall exist as though such voidable
transfer had never been made to Lender.

        13.9    Understanding of Waivers.    Each Borrower 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.

70

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        IN WITNESS WHEREOF, Lender, the Arranger and Administrative Agent and
Borrowers have caused these presents to be duly executed as of the day and year
first above written.

LENDER   BORROWERS
CONGRESS FINANCIAL CORPORATION (WESTERN)
 
GUESS ?, INC.
By:
 
 
By:
   

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

   

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

Name: Vicky Balmot
Title: Executive Vice President   Name:     

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

      Title:          

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

Address For Notices:
 
Address for Notices:
251 South Lake Avenue, Suite 900
Pasadena, California 91101
Attn: Portfolio Manager
Telephone: (626) 304-4900
Facsimile:(626) 304-4949
 
1444 South Alameda Street
Los Angeles, California 90021
Attn: Ralph W. Flick
Telephone: (213) 765-3210
Facsimile: (213) 765- 0911
 
 
 
1444 South Alameda Street
Los Angeles, California 90021
Attn: Frederick G. Silny
Telephone: (213) 765-3504
Facsimile: (213) 765-5927
THE ARRANGER AND ADMINISTRATIVE AGENT
 
 
 
WACHOVIA SECURITIES, INC.
 
GUESS? RETAIL, INC.
By:
 
 
By:
   

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

   

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

Name: A. Forrest Steele, Jr.
Title: Managing Director   Name:     

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

    Title:          

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

Address For Notices:
 
Address for Notices:
301 South College Street
Charlotte, North Carolina 28270-0658
Attn: A. Forrest Steel, Jr.
Telephone: (704) 374-2611
Facsimile: (704) 374-4881
 
1444 South Alameda Street
Los Angeles, California 90021
Attn: Ralph W. Flick
Telephone: (213) 765-3210
Facsimile: (213) 765-0911

71

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1444 South Alameda Street
Los Angeles, California 90021
Attn: Frederick G. Silny
Telephone: (213) 765-3504
Facsimile: (213) 765-5927
 
 
 
GUESS.COM, INC.
 
 
 
By:
         

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

      Name:          

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

      Title:          

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

 
 
 
Address for Notices:
 
 
 
1444 South Alameda Street
Los Angeles, California 90021
Attn: Ralph W. Flick
Telephone: (213) 765-3210
Facsimile: (213) 765-0911
 
 
 
1444 South Alameda Street
Los Angeles, California 90021
Attn: Frederick G. Silny
Telephone: (213) 765-3504
Facsimile: (213) 765-5927

72

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EXHIBIT A

Information Certificate

        See Attached.

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

EXHIBIT B

Form of Compliance Certificate

[COMPANY LETTERHEAD]

COMPLIANCE CERTIFICATE
                        , 200      

        Pursuant to the terms of the Amended and Restated Loan and Security
Agreement dated as of December 20, 2002 by and among CONGRESS FINANCIAL
CORPORATION (WESTERN), a California corporation ("Lender"), WACHOVIA
SECURITIES, INC. (as the "Arranger and Administrative Agent"), and GUESS
?, INC., GUESS? RETAIL, INC., a Delaware corporation, and GUESS.COM, INC. (as
amended from time to time, the "Loan Agreement"; all terms used herein without
definition shall have the meanings given in the Loan Agreement), except as
explained in detail in this Compliance Certificate, the Borrowers are in
compliance with the terms and conditions of the Loan Agreement including, but
not limited to, the Sections scheduled below:

        For the financial statement dated                         .

Section 9.18

  Net Worth

  (Attached additional schedule as necessary)

  Total Assets   $                        Goodwill                           
Capitalized Financing Costs                            Other Intangibles    
                       Total Intangibles     (                     )
Subordinated Debt                            Calculated TNW   $
                       Minimum Amount   $                       
Exceptions:    [None]
 
 
 
 

            GUESS ?, INC.             By:        

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

    Title:        

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

                    GUESS? RETAIL, INC.             By:        

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

    Title:        

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

                    GUESS.COM, INC.             By:        

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

    Title:        

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

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

SCHEDULE 4.1

Collateral Access Agreements; Lien Searches

Section 4.1(e)
(Collateral Access Agreements with owners and lessors of leased premises of
Borrowers and by warehouses at which Collateral is located.)

        Landlord Agreement with 2010 15th Street Ltd. (1444 S. Alameda Street,
LA, CA)

        Landlord Agreement with 1444 Partners, Ltd. (1444 S. Alameda Street, LA,
CA)

        Landlord Waiver with Riverport Park I, Inc. (10610 Freeport Dr.,
Louisville, KY)

Section 4.1(g)
(Deposit Control Agreements by and among Lender, Borrowers and each bank where
any Borrower has the Central Collection Deposit Accounts.)

Bank

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

  Acct Number

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

Bank of America   Illinois Lockbox #96621 - Guess ?, Inc. Acct linked to above
lockbox#71887-01156 - Guess ?, Inc.     Chicago Lockbox #12317 - Guess ?, Inc.  
  West Coast Lockbox #53658 - Guess ?, Inc.     Depository Retail Acct
#12576-00302 - Guess ?, Inc.     Concentration Acct #12574-00303 - Guess ?, Inc.
    Deposit Account for Store #35, 89 and 132 - 1235880202
Bank of the West
 
Concentration Acct #751004052 - Guess ?, Inc.

Section 4.1(i)
(Lien search jurisdictions other than jurisdiction of headquarter or
incorporation)

        For all Borrowers except Dot Com (Kentucky only):

Kentucky
New York
Florida
Illinois

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

SCHEDULE 5.2(b)

Chattel Paper

None.

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

SCHEDULE 5.2(f)

Letters of Credit, etc.

Letter of Credit, etc.

Issuer

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

  Expiration

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

  Amount

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

  Focus Europe   2/28/2003   761,600   Euro TMC   12/31/2002   350,000   US

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

SCHEDULE 5.2(g)

Commercial Tort Claims

None.

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

SCHEDULE 8.4

Liens

Insurance Policies:

Effective Dates

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

  Coverage Type

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

  Ins. Carrier

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

  Policy Number

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

  Loan Number

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

  Total Premiums

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

  Amount Financed

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

  Balance Remaining

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

01/31/02-03   Foreign   St. Paul   GB06100077   04-010-535149-8   $ 643,844.30  
$ 573,679.89   $ 129,722.12 05/01/02-03   WC   Crum and Foster   4060322154  
04-010-566866-6     428,006.00     385,205.40     217,810.90 06/01/02-03   PROP
  Affiliated FM Inc Co   TE020   04-010-535149-8     981,889.00     882,201.10  
  598,127.40 08/31/02-03   D&O   Natl Union Fire Inc   5696742   TDB    
980,000.00     784,000.00     709,639.12                    

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

 

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

 

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

                TOTALS   $ 3,033,739.30   $ 2,625,086.39   $ 1,655,299.54      
             

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

 

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

 

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

Guess ?, Inc.

JURISDICTION

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

  FILING NUMBER

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

  FILING DATE

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

  SECURED PARTY

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

  COLLATERAL

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

California Secretary of State   9530660916   10/30/95 Continuation filed 5/18/00
  Yale/Chase Materials Handling, Inc.   Specific Equipment: forklift
California Secretary of State
 
0006760346
 
3/3/00
 
Canon Financial Services, Inc.
 
Specific Equipment: colorpass
California Secretary of State
 
0102360631
 
1/16/01
 
Canon Financial Services, Inc.
 
Specific Equipment: printer
California Secretary of State
 
0102360647
 
1/16/01
 
Canon Financial Services, Inc.
 
Specific Equipment: Graphics
California Secretary of State
 
9806960346
 
3/6/98
 
Canon Financial Services, Inc.
 
Specific Equipment: various copiers and fax machines
California Secretary of State
 
9818160473
 
6/26/98
 
Yale/Chase Materials Handling, Inc.
 
Specific Equipment: forklift
California Secretary of State
 
0030860836
 
10/24/00
 
Crown Credit Company
 
Specific Equipment: forklift
California Secretary of State
 
0006360964
 
3/1/00
 
Yale/Chase Materials Handling, Inc.
 
Specific Equipment: forklift
California Secretary of State
 
0006360965
 
3/1/00
 
Yale/Chase Materials Handling, Inc.
 
Specific Equipment: forklift
California Secretary of State
 
9819060540
 
7/6/98
 
Yale/Chase Materials Handling, Inc.
 
Specific Equipment: forklift
California Secretary of State
 
9728761067
 
10/10/97
 
Sensormatic Electronics Corp.
 
Leased Equipment
California Secretary of State
 
0101061071
 
1/5/01
 
Cisco Systems Capital Corporation
 
Leased Equipment

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

Delaware Secretary of State
 
10006432
 
12/28/00
 
Cisco Systems Capital Corporation
 
Leased Equipment
Delaware Secretary of State
 
20598049
 
2/12/02
 
Canon Financial Services, Inc.
 
Specific Equipment: Graphics/Colorpass
Delaware Secretary of State
 
22012841
 
7/31/02
 
De Lage Landen Financial Services, Inc.
 
Specific Equipment
Delaware Secretary of State
 
22012866
 
7/31/02
 
De Lage Landen Financial Services, Inc.
 
Specific Equipment
Delaware Secretary of State
 
22229171
 
8/29/02
 
Canon Financial Services, Inc.
 
Specific Equipment: various copiers and fax machines
Indiana Secretary of State
 
200100008505910
 
11/01/01
 
American Equipment Leasing, a division of EAB Leasing Corp.
 
Leased Equipment
Indiana Secretary of State
 
2179062
 
3/17/98
 
AEL Leasing Co. Inc. dba American Equipment Leasing
 
Leased Equipment
Indiana Secretary of State
 
2182389
 
4/2/98
 
Cascade Leasing Company
 
Specific Equipment
Texas Secretary of Staet
 
9900244766
 
8/29/00
 
Canon Financial Services, Inc.
 
Specific Equipment: Copier

        Deposit against operating agreement with NetJets

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

SCHEDULE 8.8

Environmental Compliance

None.

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

SCHEDULE 8.12

Labor Relations

None.

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

SCHEDULE 8.14

Material Contracts

1.The Indenture, dated as of August 23, 1993, between the Company and the First
National Trust Association.

2.Intercompany loan to Guess? Canada, Inc. (see Schedule 9.9)

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

SCHEDULE 9.9

Indebtedness

Indebtedness

Description

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

  Holder

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

  Amount

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

Senior Subordinate Notes   US Bank Trust   $ 79,562,000.00
Insurance Premiums
 
 
 
 
    Breakdown by Ins Carrier:               St. Paul LN# 04-010-535149-8  
Imperial Finance   $ 129,722.12     Crum & Foster LN# 04-010-566866-6   Imperial
Finance     217,810.90     Affiliated FM Ins. Co LN# 04-010-535149-8   Imperial
Finance     598,127.40     Natl Union Fire Ins LN# TBD   Imperial Finance    
709,639.12        

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

        $ 1,655,299.54 Standby Letter of Credit          
LC No. T-991977—Y2K Apparel S.A. (exp. 10/26/02)
 
Chase Manhattan Bank
 
$
500,000.00 LC No. T-883704—Italia (exp. 10/28/02)   Chase Manhattan Bank    
1,000,000.00 LC No. T-214404—U S Fire Insurance (exp. 10/26/02)   Chase
Manhattan Bank     783,000.00 LC No. T-897507—GMC Strandel (exp. 10/25/02)  
Chase Manhattan Bank     2,000,000.00 LC No. T-883697—Fireman Fund Insurance  
Chase Manhattan Bank     1,000,000.00        

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

        $ 5,283,000.00

        Operating Agreement with NetJets

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SCHEDULE 9.10

Loans and Advances

Loans And Investments

Description

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  Amount

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Intercompany       Guess? Canada—Long term debt financing to Guess? Canada Corp
  13,400,000.00     Terms: Interest—US prime rate as published in the latest
edition of the Wall Street Journal           Repayment—Monthly installments due
and payable on the 15th day of each month    
Investments In Licensees
 
    Maco (10% Ownership)   103,514.00   FJ Benjamine Holdings LTD (300,000
Shares)   65,957.00  
Note: Employee loans not inculded in this schedule
 
 

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Exhibit 10.48
AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT by and among CONGRESS FINANCIAL
CORPORATION (WESTERN) as Lender and WACHOVIA SECURITIES, INC. as the Arranger
and Administrative Agent and GUESS ?, INC., GUESS ? RETAIL, INC. and GUESS.COM,
INC. as Borrowers Dated: December 20, 2002
Letter of Credit, etc.