**Exhibit 10.10**

** **

**LOAN AND SECURITY AGREEMENT**

**by and among**

**Bidz.com, Inc.,**a Delaware corporation

**and**

**Bidz.com, Inc.,**a California corporation

**collectively as**Borrower

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** **

**and**

**LASALLE RETAILFINANCE,**

**A DIVISION OF LASALLEBUSINESS CREDIT, LLC,**

**AS AGENT FOR**

**LASALLE BANK MIDWESTNATIONAL ASSOCIATION**

** **

**as Lender**

** **

** **

** **

**Dated as of July 12,2006**

** **

 

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** **
| 1.     | DEFINITIONS AND CONSTRUCTION     | 1                                                                            |
|--------|----------------------------------|------------------------------------------------------------------------------|
|   | 1.1                              | Definitions                                                                  | 1 |
|   | 1.2                              | Accounting Terms                                                             | 24 |
|   | 1.3                              | Code                                                                         | 25 |
|   | 1.4                              | Construction                                                                 | 25 |
|   | 1.5                              | Schedules and Exhibits                                                       | 25 |
| 2.     | LOAN AND TERMS OF  PAYMENT.      | 25                                                                           |
|   | 2.1                              | Revolver Advances.                                                           | 25 |
|   | 2.2                              | Increase of Maximum Revolver Amount.                                         | 26 |
|   | 2.3                              | Borrowing Procedures.                                                        | 26 |
|   | 2.4                              | Payments.                                                                    | 27 |
|   | 2.5                              | Overadvances                                                                 | 28 |
|   | 2.6                              | Interest Rates and Letter of Credit Fee: Rates,  Payments, and Calculations. | 28 |
|   | 2.7                              | Cash Management.                                                             | 30 |
|   | 2.8                              | Sweep; Crediting Payments; Float Charge.                                     | 32 |
|   | 2.9                              | Designated Account                                                           | 32 |
|   | 2.10                             | Maintenance of Loan Account; Statements of  Obligations                      | 33 |
|   | 2.11                             | Fees                                                                         | 33 |
|   | 2.12                             | Letters of Credit.                                                           | 33 |
|   | 2.13                             | LIBOR Option.                                                                | 35 |
|   | 2.14                             | Capital Requirements                                                         | 37 |
|   | 2.15                             | Securitization                                                               | 38 |
| 3.     | CONDITIONS; TERM OF  AGREEMENT.  | 39                                                                           |
|   | 3.1                              | Conditions Precedent to  the Initial Extension of Credit                     | 39 |
|   | 3.2                              | Conditions Subsequent to the Initial Extension of  Credit                    | 41 |
|   | 3.3                              | Conditions Precedent to all Extensions of Credit                             | 41 |
|   | 3.4                              | Term                                                                         | 42 |
|   | 3.5                              | Effect of Termination                                                        | 42 |
|   | 3.6                              | Early Termination by Borrower                                                | 42 |
| 4.     | CREATION OF SECURITY  INTEREST.  | 43                                                                           |
|   | 4.1                              | Grant of Security  Interest                                                  | 43 |
|   | 4.2                              | Control of Collateral                                                        | 43 |
|   | 4.3                              | Negotiable Collateral                                                        | 44 |
|   | 4.4                              | Collection of Accounts, General Intangibles, and  Negotiable Collateral      | 44 |
|   | 4.5                              | Delivery of Additional Documentation Required                                | 44 |
|   | 4.6                              | Power of Attorney                                                            | 45 |
|   | 4.7                              | Control Agreements                                                           | 45 |
|   | 4.8                              | Right to Inspect; Inventories, Appraisals and Audits                         | 45 |
| 5.     | REPRESENTATIONS AND  WARRANTIES. | 46                                                                           |
|   | 5.1                              | No Encumbrances                                                              | 46 |
|   | 5.2                              | Eligible Accounts                                                            | 46 |
|   | 5.3                              | Inventory; Eligible Inventory                                                | 46 |

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|        | 5.4                    | Equipment                                         | 47 |
|--------|------------------------|---------------------------------------------------|----|
|   | 5.5                    | Location of Inventory and Equipment               | 47 |
|   | 5.6                    | Inventory Records                                 | 47 |
|   | 5.7                    | Legal Status                                      | 47 |
|   | 5.8                    | Due Organization and Qualification; Subsidiaries. | 47 |
|   | 5.9                    | Due Authorization; No Conflict.                   | 48 |
|   | 5.10                   | Litigation.                                       | 49 |
|   | 5.11                   | No Material Adverse Change                        | 49 |
|   | 5.12                   | Fraudulent Transfer.                              | 49 |
|   | 5.13                   | Employee Benefits                                 | 49 |
|   | 5.14                   | Environmental Condition                           | 50 |
|   | 5.15                   | Brokerage Fees                                    | 50 |
|   | 5.16                   | Intellectual Property                             | 50 |
|   | 5.17                   | Leases                                            | 51 |
|   | 5.18                   | DDAs                                              | 51 |
|   | 5.19                   | Credit Card/Payment Processing                    | 51 |
|   | 5.20                   | Indebtedness                                      | 51 |
|   | 5.21                   | Payment of Taxes                                  | 51 |
|   | 5.22                   | Complete Disclosure                               | 51 |
|   | 5.23                   | AML Laws and Regulations.                         | 52 |
| 6.     | AFFIRMATIVE COVENANTS. | 52                                                |
|   | 6.1                    | Accounting System                                 | 52 |
|   | 6.2                    | Collateral Reporting                              | 52 |
|   | 6.3                    | Financial Statements, Reports, Certificates       | 52 |
|   | 6.4                    | AML Laws and Regulations.                         | 55 |
|   | 6.5                    | Return                                            | 55 |
|   | 6.6                    | Maintenance of Properties                         | 55 |
|   | 6.7                    | Taxes                                             | 55 |
|   | 6.8                    | Insurance.                                        | 55 |
|   | 6.9                    | Location of Inventory and Equipment               | 56 |
|   | 6.10                   | Compliance with Laws                              | 56 |
|   | 6.11                   | Leases                                            | 57 |
|   | 6.12                   | Brokerage Commissions                             | 57 |
|   | 6.13                   | Existence                                         | 57 |
|   | 6.14                   | Environmental                                     | 57 |
|   | 6.15                   | Investment Proceeds, Etc                          | 57 |
|   | 6.16                   | Foreign Assets Control Regulations, Etc           | 58 |
|   | 6.17                   | Disclosure Updates                                | 58 |
| 7.     | NEGATIVE COVENANTS.    | 58                                                |
|   | 7.1                    | Indebtedness                                      | 58 |
|   | 7.2                    | Liens                                             | 59 |
|   | 7.3                    | Restrictions on Fundamental Changes.              | 59 |
|   | 7.4                    | Disposal of Assets                                | 59 |
|   | 7.5                    | Change of Name or Address                         | 59 |
|   | 7.6                    | Guarantee                                         | 59 |

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|        | 7.7                                     | Nature of Business                         | 60 |
|--------|-----------------------------------------|--------------------------------------------|----|
|   | 7.8                                     | Prepayments and Amendments.                | 60 |
|   | 7.9                                     | Change of Control                          | 60 |
|   | 7.10                                    | Consignments                               | 60 |
|   | 7.11                                    | Restricted Payments                        | 60 |
|   | 7.12                                    | Accounting Methods                         | 60 |
|   | 7.13                                    | Investments                                | 60 |
|   | 7.14                                    | Transactions with Affiliates               | 61 |
|   | 7.15                                    | Location Openings                          | 61 |
|   | 7.16                                    | Suspension.                                | 61 |
|   | 7.17                                    | Compensation                               | 61 |
|   | 7.18                                    | Use of Proceeds                            | 61 |
|   | 7.19                                    | Inventory and Equipment with Bailees       | 61 |
|   | 7.20                                    | Securities Accounts                        | 61 |
|   | 7.21                                    | Financial Covenants                        | 62 |
|   | 7.22                                    | Authentic Inventory                        | 62 |
| 8.     | EVENTS OF DEFAULT.                      | 62                                         |
|   | 8.1                                     | Payment                                    | 62 |
|   | 8.2                                     | Failure to Perform                         | 62 |
|   | 8.3                                     | Seizure of Assets                          | 62 |
|   | 8.4                                     | Insolvency by Borrower                     | 62 |
|   | 8.5                                     | Insolvency Against Borrower                | 62 |
|   | 8.6                                     | Restraint of Business                      | 63 |
|   | 8.7                                     | Liens                                      | 63 |
|   | 8.8                                     | Judgments                                  | 63 |
|   | 8.9                                     | Default of Material Agreement              | 63 |
|   | 8.10                                    | Loss of Business                           | 63 |
|   | 8.11                                    | Payment of Subdebt                         | 63 |
|   | 8.12                                    | Misrepresentation                          | 63 |
|   | 8.13                                    | Rescission                                 | 64 |
|   | 8.14                                    | Failure of Lien                            | 64 |
|   | 8.15                                    | Nullification of Loan Documents            | 64 |
|   | 8.16                                    | Material Adverse Change                    | 64 |
| 9.     | THE LENDER’S RIGHTS AND  REMEDIES. | 64                                         |
|   | 9.1                                     | Rights and Remedies                        | 64 |
|   | 9.2                                     | Remedies Cumulative                        | 67 |
| 10.    | TAXES AND EXPENSES.                     | 67                                         |
| 11.    | WAIVERS;  INDEMNIFICATION.              | 67                                         |
|   | 11.1                                    | Demand; Protest;  Special Damages; etc     | 67 |
|   | 11.2                                    | The Lender’s Liability for Collateral | 67 |
|   | 11.3                                    | Indemnification                            | 67 |
| 12.    | NOTICES.                                | 68                                         |

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| 13.    | CHOICE OF LAW AND  VENUE; JURY TRIAL WAIVER. | 70                                       |
|--------|----------------------------------------------|------------------------------------------|
| 14.    | ASSIGNMENTS AND  PARTICIPATIONS; SUCCESSORS. | 70                                       |
|   | 14.1                                         | Assignments and  Participations.         | 70 |
|   | 14.2                                         | Successors                               | 71 |
| 15.    | AMENDMENTS; WAIVERS.                         | 72                                       |
|   | 15.1                                         | Amendments and Waivers                   | 72 |
|   | 15.2                                         | No Waivers; Cumulative Remedies          | 72 |
| 16.    | GENERAL PROVISIONS.                          | 72                                       |
|   | 16.1                                         | Effectiveness                            | 72 |
|   | 16.2                                         | Section Headings                         | 72 |
|   | 16.3                                         | Interpretation                           | 72 |
|   | 16.4                                         | Severability of Provisions               | 72 |
|   | 16.5                                         | Amendments in Writing                    | 73 |
|   | 16.6                                         | Counterparts; Telefacsimile Execution    | 73 |
|   | 16.7                                         | Revival and Reinstatement of Obligations | 74 |
|   | 16.8                                         | USA Patriot Act                          | 74 |
|   | 16.9                                         | Pledges To Federal Reserve Banks         | 74 |
|   | 16.10                                        | Confidentiality                          | 74 |
|   | 16.11                                        | Right to Publish Notice                  | 74 |
|   | 16.12                                        | Credit Inquiries                         | 75 |
|   | 16.13                                        | Joint Preparation                        | 75 |
|   | 16.14                                        | Right Of Set-Off                         | 75 |
|   | 16.15                                        | Integration                              | 75 |

** **

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** **

**EXHIBITSAND SCHEDULES**

Exhibit A                                Formof Borrowing Base Certificate

Exhibit B                                Formof Compliance Certificate

Exhibit C                                BusinessPlan

Exhibit D                                Formof LIBOR Notice

Schedule D-1                        DesignatedAccount

Schedule E-1                         EligibleInventory Locations

Schedule P-1                         PermittedLiens

Schedule R-1                         RealProperty Collateral

Schedule 2.7                          CashManagement Accounts and Procedures

Schedule 5.5                          Locationsof Inventory and Equipment

Schedule 5.8(b)                     Capitalizationof Borrower

Schedule 5.8(c)                     Subsidiaries

Schedule 5.10(a)                   Litigation

Schedule 5.10(c)                   CommercialTort Claims

Schedule 5.14                        EnvironmentalMatters

Schedule 5.16                        IntellectualProperty

Schedule 5.18                        DemandDeposit Accounts

Schedule 5.19                        CreditCard /Payment Processors

Schedule 5.20                        Indebtedness

Schedule 6.2                          CollateralReporting

Schedule 7.21                        Covenants

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**LOANAND SECURITY AGREEMENT**

**THIS LOAN AND SECURITY AGREEMENT**(this “**Agreement**”), is enteredinto as of July [    ], 2006, by and among, on the onehand, LASALLE RETAIL FINANCE, A DIVISION OF LASALLE BUSINESS CREDIT, LLC asagent for LASALLE BANK MIDWEST NATIONAL ASSOCIATION, together with its  respective successors and assigns (“**Lender**”), and, on the other hand, Bidz.com,Inc., a Delaware corporation (“**Bidz DE**”)and Bidz.com, Inc., a California corporation (“**Bidz CA**” and, together with Bidz DE, collectively, “**Borrower**”).

The parties agree as follows:

# **1.             DEFINITIONSAND CONSTRUCTION.**

## 1.1           Definitions.  As used in this Agreement, the followingterms shall have the following definitions:

“Account Debtor” means any Person who is or whomay become obligated under, with respect to, or on account of, an Account,Chattel Paper, or a General Intangible.

“Accounts” means all of Borrower’s now owned orhereafter acquired right, title, and interest with respect to “accounts” (assuch term is defined from time to time in the Code), and any and all supportingobligations in respect thereof.

“Additional Documents” has the meaning setforth in Section 4.5.

“Advances” has the meaning set forth in Section2.1(a).

“Advance Rates” means the percentages used tocalculate Availability in accordance with Section 2.1(a).

“Affiliate” means, as applied to any Person,any other Person who, directly or indirectly, controls, is controlled by, or isunder common control with, such Person. For purposes of this definition, “control” means the possession,directly or indirectly, of the power to direct the management and policies of aPerson, whether through the ownership of Stock, by contract, or otherwise; provided,however, that, for purposes of the definition of Eligible Accounts and Section7.14 hereof: (a) any Person which owns directly or indirectly 10% ormore of the securities having ordinary voting power for the election ofdirectors or other members of the governing body of a Person or 10% or more ofthe partnership or other ownership interests of a Person (other than as alimited partner of such Person) shall be deemed to control such Person;(b) each director (or comparable manager) of a Person shall be deemed tobe an Affiliate of such Person; and (c) each partnership or joint venturein which a Person is a partner or joint venturer shall be deemed to be anAffiliate of such Person.

“Agreement” has the meaning set forth in thepreamble hereto.

“AML Laws and Regulations” means any federal orstate laws or regulations relating to anti-money laundering programs which areapplicable to Borrower or any of Borrower’s 

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businesses, including, without limitation, Departmentof the Treasury Financial Crimes Enforcement Network and the special provisionsstipulated under USA Patriot Act of 2001 that address requirements foranti-money laundering programs for deals in precious metals, stones, or jewels,including under 31 C.F.R. Part 103.

“ApplicableMargin” means the percentages per annum set forth in the following tablefor Base Rate Loans and LIBOR Rate Loans based upon Net Excess Availability:
| **Level**  | ** ** | **Net Excess Availability**                         | ** ** | **Base Rate  Margin** | ** ** | **LIBOR Rate  Margin** | ** ** |
|------------|------------|---------------------------------------------------------------|------------|----------------------------|------------|-----------------------------|------------|
| ** ** | ** ** | ** **                                                    | ** ** | ** **                 | ** ** | ** **                  | ** ** |
| **I**      |       | Greater than  $3,500,000                                      |       | 0.00                       | %          | 1.50                        | %          |
| **II**     |       | Greater than  $2,000,000 and less than or equal to $3,500,000 |       | 0.25                       | %          | 1.75                        | %          |
| **III**    |       | Less than or equal to  $2,000,000                             |       | 0.50                       | %          | 2.00                        | %          |

 

Any increase or decreasein the Applicable Margin resulting from a change in Net Excess Availabilityshall become effective as of the first Business Day of the calendar quarter forwhich a Borrowing Base Certificate is delivered pursuant to Section6.3(a)(v) (setting forth the average Net Excess Availability for thenimmediately preceding calendar quarter); provided, however, thatif a Borrowing Base Certificate is not delivered within one (1) Business Daysafter the time periods specified in such Section, then Pricing Level III shallapply as of such Business Day and thereafter, subject to prospective adjustmentupon actual receipt of such Borrowing Base Certificate.  The Applicable Margin in effect from theClosing Date through September 30, 2006 shall be Pricing Level II.

 “ApplicablePrepayment Premium” has the meaning set forth in the Fee Letter.

“Assignee” has the meaning set forth in Section14.1.

“Assignmentof Services Contracts” means an agreement, in form and substance acceptableto Lender, pursuant to which Borrower shall collaterally assign the ServicesContract to Lender and the Service Providers shall agree to continue toprovide  the subject services to Borrowerand/or Lender in the event of  anyInsolvency Proceeding or Liquidation.

“Authentic”means merchandise or inventory that is manufactured, distributed, sold, resold,offered for sale, advertised, and otherwise marketed in compliance with (i) allapplicable laws and regulations of the United States and other national orlocal jurisdictions concerning patents, trademarks, trade dress, design rights,copyrights, trade secrets, and/or other intellectual property rights andproprietary rights of any kind (collectively, “**IP Rights**”) and (ii) all licenses, sublicenses, and otheragreements required to be obtained from the owners or licensees of any such IPRights so as not to result in any infringement, dilution, or other violation ofsuch IP Rights.

“Authorized Person” means any officer or other employeeof Borrower designated and authorized by Borrower to undertake any tasksassigned to Authorized Person under this Agreement and acceptable to Lender inLender’s sole discretion.

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“Availability” means, as of any date ofdetermination, if such date is a Business Day, and determined at the close ofbusiness on the immediately preceding Business Day, if such date ofdetermination is not a Business Day, the amount that Borrower is entitled toborrow as Advances under Section 2.1, after giving effect to all thenoutstanding Obligations and all sublimits and Reserves applicable hereunder.

“Availability Reserves” means such reserves asLender from time to time determines in its Permitted Discretion as beingappropriate to reflect the impediments to Lender’s ability to realize upon theCollateral.  Without limiting thegenerality of the foregoing, Availability Reserves may include (but are notlimited to) reserves based on the following: (a) a sum equal to 90 days’ rent for the applicable calendar yearunder that certain Commercial Multi Tenant Lease-Net dated as of April 15,2003, as amended from time to time, between PAS Trust (or its successors and/orassigns) and Borrower; (b) rent for any leased real estate location in aLandlord Lien State for which an acceptable Collateral Access Agreement has notbeen received by Lender (irrespective of whether any rent is currently due);(c) returns, customer credits, gift certificates and frequent shopperprograms; (d) customer deposits; (e) taxes and other governmentalcharges, including tax Liens, ad valorem, personal property, sales, and othertaxes which may have priority over the security interests of the Lender in theCollateral; (f) held or post-dated checks issued by Borrower; (g) anyjudgment lien against Borrower or the Collateral; (h) Borrower’s failureto pay when due and payable indebtedness owing to any trade creditor;(i) sums that Borrower is required to pay (such as taxes, assessments,insurance premiums, or, in the case of leased assets, rents or other amountspayable under such leases), and has failed, to pay under any Section of thisAgreement or any other Loan Document, (j) as determined by Lender in itsPermitted Discretion, based on noncompliance with the covenants set forth inSections 6 and 7, (k) amounts owing by Borrower to any Person to theextent secured by a Lien on, or trust over, any of the Collateral (other thanany existing Permitted Lien set forth on Schedule P-1); (l) unpaid BankProduct Obligations; (l) L/C Landing Costs; and (m) any materially adversedeviation at any time from the Business Plan.

“Bailee Acknowledgment” means a record in formand substance satisfactory to Lender authenticated by any bailee, warehousemanor other third party in possession of any Equipment or Inventory acknowledgingthat it holds possession of the applicable Inventory and/or Equipment for thebenefit of Lender, on behalf of Lender.

“Bank Product Obligations” means everyobligation of Borrower and its subsidiaries under and in respect of any one ormore of the following types of services or facilities extended to such Personby Lender or any Affiliate thereof:  (i)credit and purchase cards, (ii) cash management or related services, and (iii)agreements for treasury management services, including, without limitation,intraday credit, Automated Clearing House (ACH) services, foreign exchangeservices, daylight overdrafts and zero balance arrangements.

“Bankruptcy Code” means the United StatesBankruptcy Code, 11 U.S.C. §101 et seq., as in effect from time to time.

“Base LIBOR Rate” means the rate per annum,determined by Lender (or LaSalle Bank, N.A.) in accordance with its customary procedures, and utilizing suchelectronic or other quotation sources as it considers appropriate (rounded upwards,if necessary, to the next 1/16%), 

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on the basis of the rates at which Dollar deposits areoffered to major banks in the London interbank market on or about 2:00 p.m.(eastern prevailing time) 2 Business Days prior to the commencement of theapplicable Interest Period, for a term and in amounts comparable to theInterest Period and amount of the LIBOR Rate Loan requested by Borrower inaccordance with this Agreement, which determination shall be conclusive in theabsence of manifest error.

“Base Rate” means, the rate of interestannounced within LaSalle Bank N.A. at its principal office in Chicago, Illinoisas its “prime rate”, with the understanding that the “prime rate” is one ofLaSalle Bank N.A.’s base rates (not necessarily the lowest of such rates) andserves as the basis upon which effective rates of interest are calculated forthose loans making reference thereto and is evidenced by the recording thereofafter its announcement in such internal publication or publications as LaSalleBank may designate.

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

“Benefit Plan” means a “defined benefit plan”(as defined in Section 3(35) of ERISA) for which any Borrower or anySubsidiary or ERISA Affiliate of any Borrower has been an “employer” (asdefined in Section 3(5) of ERISA) within the past six years.

“Blocked Account Control Agreement” means aControl Agreement pursuant to which, as of the date of such Control Agreement,the applicable depository bank shall take direction only from Lender and isdirected to send all collected balances to the Concentration Account.

“Board of Directors” means the board ofdirectors (or comparable managers) of Borrower or any committee thereof dulyauthorized to act on behalf thereof.

“Books” means all of Borrower’s and its nowowned or hereafter acquired Subsidiaries’ books and records (including all ofits records indicating, summarizing, or evidencing its assets (including theCollateral) or liabilities, all of Borrower’s or its Subsidiaries’ recordsrelating to its or their business operations or financial condition, and all ofits or their goods or General Intangibles related to such information).

“Borrower” has the meaning set forth in thepreamble to this Agreement.

“Borrowing” means a borrowing hereunderconsisting of Advances made on the same day by the Lender.

“Borrowing Base” has the meaning set forth in Section2.1(a).

“Borrowing Base Certificate” means acertificate in the form of Exhibit A, as such form may be revised fromtime to time by Lender.

“Business Day” means any day that is not aSaturday, Sunday, or other day on which national banks are authorized orrequired to close, except that, if a determination of a Business Day shallrelate to a LIBOR Rate Loan, the term “Business Day” also shall exclude any dayon which banks are closed for dealings in Dollar deposits in the Londoninterbank market.

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“Business Plan” means the set of Projections ofBorrower for the 3-year period following the Closing Date (on a year by yearbasis, and for the 2 year period following the Closing Date, on a month bymonth basis), in form and substance (including as to scope and underlyingassumptions) satisfactory to Lender and attached hereto as Exhibit C,together with any amendment, modification or revision thereto approved byLender, in writing, in its Permitted Discretion.

“Capital Lease” means a lease that is requiredto be capitalized for financial reporting purposes in accordance with GAAP.

“Capitalized Lease Obligation” means anyIndebtedness represented by obligations under Capital Lease.

“Cash Equivalents” means (a) marketabledirect obligations issued or unconditionally guaranteed by the United States orissued by any agency thereof and backed by the full faith and credit of theUnited States, in each case maturing within 1 year from the date of acquisitionthereof, (b) marketable direct obligations issued by any state of theUnited States or any political subdivision of any such state or any publicinstrumentality thereof maturing within 1 year from the date of acquisitionthereof and, at the time of acquisition, having the highest rating obtainablefrom either S&P or Moody’s, (c) commercial paper maturing no more than270 days from the date of acquisition thereof and, at the time of acquisition,having a rating of A-1 or P-1, or better, from S&P or Moody’s, and(d) certificates of deposit or bankers’ acceptances maturing within 1 yearfrom the date of acquisition thereof either (i) issued by any bankorganized under the laws of the United States or any state thereof which bankhas a rating of A or A2, or better, from S&P or Moody’s, or(ii) certificates of deposit less than or equal to $100,000 in theaggregate issued by any other bank insured by the Federal Deposit InsuranceCorporation.

“Cash Management Bank” has the meaning setforth in Section 2.7(a).

“Cash Management Account” has the meaning setforth in Section 2.7(a).

“Cash Management Agreement” has the meaning setforth in Section 2.7(a).

“Change of Control” means (a) any “person”or “group” (within the meaning of Sections 13(d) and 14(d) of the ExchangeAct), becomes the beneficial owner (as defined in Rule 13d-3 under the ExchangeAct), directly or indirectly, of 10%, or more, of the Stock of Borrower havingthe right to vote for the election of members of the Board of Directors,(b) a majority of the members of the Board of Directors do not constituteContinuing Directors, or (c)  any Executive Officer shall cease to serveand shall not have been replaced with a Person acceptable to Lender no laterthan sixty (60) days after the date any such Executive Officer ceases to serve.

“Chattel Paper” means all of Borrower’s nowowned or hereafter acquired right, title, and interest with respect to “chattelpaper”, including, without limitation, “tangible chattel paper” and “electronicchattel paper”, as such terms are defined from time to time in the Code, andany and all supporting obligations in respect thereof.

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“Closing Date” means the date of the making ofthe initial Advance (or other extension of credit) hereunder or the date onwhich Lender sends Borrower a written notice that each of the conditionsprecedent set forth in Section 3.1 either have been satisfied or havebeen waived.

“Code” means the Uniform Commercial Code, as ineffect from time to time in the Commonwealth of Massachusetts.

“Collateral” means all of each Borrower’s nowowned or hereafter acquired right, title, and interest in and to “all assets,”including without limitation, each of the following:

### (a)           Accounts,

### (b)           ChattelPaper,

### (c)           DDAs,

### (d)           Documents,

### (e)           GeneralIntangibles,

### (f)            Goods(including, without limitation, Inventory and Equipment),

### (g)           Instruments,

### (h)           InvestmentProperty,

### (i)            Letterof Credit Rights,

### (j)            RealProperty Collateral,

### (k)           theCommercial Tort Claims set forth on Schedule 5.10(b),

### (l)            moneyor other assets of Borrower that now or hereafter come into the possession,custody, or control of any member of the Lender, and

### (m)          anyand all proceeds and products, whether tangible or intangible, of any of theforegoing, including proceeds of insurance covering any or all of theforegoing, and any and all Accounts, Books, General Intangibles, (Goods,including without limitation Equipment and Inventory), Investment Property,Negotiable Collateral, Real Property, money, DDAs, or other tangible orintangible property resulting from the sale, exchange, collection, or otherdisposition of any of the foregoing, or any portion thereof or interesttherein, and the proceeds thereof.

“Collateral Access Agreement” means a waiver orconsent in form and substance satisfactory to Lender executed by any lessor ofReal Property leased by Borrower or any other Person having a Permitted Lienupon, or having rights or interests in, the Equipment or Inventory.

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“Collections” means all cash, checks, creditcard slips or receipts, notes, instruments, and other items of payment(including insurance proceeds, proceeds of cash sales, rental proceeds, and taxrefunds) of Borrower.

“Commitment Fee” means the commitment fee setforth in the Fee Letter.

“Commercial Tort Claim” means any now existingor hereafter arising “commercial tort claim”, as such term is defined from timeto time in the Code.

“Compliance Certificate”  means a certificate substantially in the formof Exhibit B delivered by the chief financial officer of Borrower toLender.

“Concentration Account” means the depositaccount (as such term is defined in the Code) number 5800916651 maintained atall times at LaSalle Bank N.A. in Lender’s name and otherwise subject to Lender’ssole and absolute dominion and control.

“Consentof Assignor” means an agreement, in form and substance acceptable toLender, pursuant to which the Service Provider shall agree to continue toprovide all services under the Service Contracts to Borrower and/or Lender inthe event of  any Insolvency Proceedingor Liquidation.

“Continuing Director” means (a) any memberof the Board of Directors who was a director (or comparable manager) ofBorrower on the Closing Date, and (b) any individual who becomes a memberof the Board of Directors after the Closing Date if such individual wasappointed or nominated for election to the Board of Directors by a majority ofthe Continuing Directors, but excluding any such individual originally proposedfor election in opposition to the Board of Directors in office at the ClosingDate in an actual or threatened election contest relating to the election ofthe directors (or comparable managers) of Borrower (as such terms are used inRule 14a-11 under the Exchange Act) and whose initial assumption of officeresulted from such contest or the settlement thereof.

“Control Agreement” means an agreement, in formand substance satisfactory to Lender, executed and delivered by Borrower,Lender, and the applicable securities intermediary or bank, which agreement issufficient to give Lender “control” over the subject Securities Account or DDAto perfect Lender’s security interest in such Securities Account or DDA asprovided in the Code.

“Cost” means the calculated cost of Inventory,as determined from invoices received by Borrower, Borrower’s purchase journalsor stock ledgers, based upon Borrower’s accounting practices, known to Lender,which practices are in effect on the date on which this Agreement was executed.  “Cost” does not include any inventorycapitalization costs inclusive of advertising, but may include other chargesused in Borrower’s determination of cost of goods sold and bringing goods tomarket, all within Lender’s Permitted Discretion and in accordance with GAAP.

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“Credit Card/Payment Agreements” means thosecertain credit card receipts agreements, each in form and substance reasonablysatisfactory to Lender and each of which is among Lender and Borrower’s CreditCard/Payment Processors.

“Credit Card/Payment Processor” means anyPerson that acts as a credit card clearinghouse or processor of credit cardpayments accepted by Borrower’s and/or other only payment processors.

“Customs BrokerAgency Agreement” means an agreement between and among Lender,  Borrower and a customs broker or othercarrier, in which the customs broker or other carrier acknowledges and agrees,among other things that it has control over and holds the Documents evidencingthe subject Inventory for the benefit of the Lender and agrees, upon noticefrom Lender, to hold and dispose of the subject Inventory solely as directed byLender.

“Daily Balance” means, with respect to each dayduring the term of this Agreement, the amount of an Obligation owed at the endof such day.

“DDA” means any checking, demand deposit orother “deposit account” (as such term is defined from time to time in the Code)maintained by Borrower.

“Default” means an event, condition, or defaultthat, with the giving of notice, the passage of time, or both, would be anEvent of Default.

“Designated Account” means that certain DDA ofBorrower with LaSalle Bank, N.A. identified on Schedule D-1.

“Disbursement Letter” means an instructionalletter executed and delivered by Borrower to Lender regarding the extensions ofcredit to be made on the Closing Date, the form and substance of which issatisfactory to Lender.

“Document” means all of Borrower’s now owned orhereafter acquired right, title, and interest with respect to any “document” assuch term is defined in the Code, and any and all supporting obligations inrespect thereof.

“Dollars” or “$” means United Statesdollars.

“Due Diligence Letter” means the due diligenceletter sent by Lender’s counsel to Borrower, together with Borrower’s certifiedresponses to the inquiries set forth therein, the form and substance of suchresponses to be satisfactory to Lender.

“EBITDA” means, with respect to any fiscalperiod, Borrower’s and its Subsidiaries’ (if any) consolidated net earnings (orloss), minus extraordinary gains, plus interest expense, incometaxes, and depreciation and amortization for such period, as determined inaccordance with GAAP.

“Eligible Credit Card/Payments Accounts” meansBorrower’s Accounts owed by Credit Card/Payment Processors which includeMasterCard, VISA, American Express, Discover, PayPal and Bill Me Later andwhich Accounts are reflected in the most recent Borrowing Base 

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Certificate delivered by Borrower to Lender and onother information known to Lender, Lender shall in its Permitted Discretiondetermine are “eligible” and shall not include, without limitation, Accountsowed by Credit Card/Payment Processors which:

(a)                                  donot arise from the sale of Inventory by Borrower in the ordinary course of itsbusiness;

(b)                                 uponwhich Borrower’s right to receive payment is not absolute or is contingent uponthe fulfillment of any condition whatsoever or as to which Borrower is not ableto bring suit or otherwise enforce its remedies against the through judicialprocess;

(c)                                  withrespect to which any Credit Card Processor has not entered into a CreditCard/Payment Agreement in accordance with Section 2.7(c) hereof;

(d)                                 isthe subject of any defense, counterclaim, setoff or dispute  asserted as to such Account;

(e)                                  thatis not a true and correct statement of bona fide indebtedness incurred in theamount of the Account for merchandise sold to or services rendered and acceptedby the valid holder of the subject credit card;

(f)                                    thatis in default; *provided, that*,without limiting the generality of the foregoing, an Account shall be deemed indefault upon the occurrence of any of the following:

(i)                                     theAccount is not paid within five (5) days past the date payment first becomesdue;

(ii)                                  theCredit Card/Payment Processor obligated upon such Account suspends business,makes a general assignment for the benefit of creditors or fails to pay itsdebts generally as they come due; or

(iii)                               apetition is filed by or against any Credit Card/Payment Processor obligatedupon such Account under any bankruptcy law or any other federal, state orforeign (including any provincial) receivership, insolvency relief or other lawor laws for the relief of debtors.

(g)                                 asto which Lender’s Lien thereon is not a first priority (except to the extentprovided in a Credit Card/Payment Agreement) perfected Lien;

“Eligible In-Transit Inventory” means Inventoryof Borrower that does not qualify as Eligible Inventory solely because it isnot at a location set forth on Schedule E-1:

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### (a)           theInventory is the subject of a Qualified Import Letter of Credit (or was thesubject of a Qualified Import Letter of Credit that was lawfully drawn) andwhich is in transit for a period of no more than 60 days (whether by vessel,air, or land) from a location outside of the continental United States to a locationset forth on Schedule E-1 that, if required hereunder, is the subject of aBailee Acknowledgment or a Collateral Access Agreement,

### (b)           titleto such Inventory has passed to Borrower,

### (c)           suchInventory is fully insured against types of loss, damage, hazards, and risks,naming Lender as the loss payee thereunder and in amounts satisfactory toLender in its Permitted Discretion,

### (d)           suchInventory either:

#### (i)            is the subject of a negotiable billof lading or other Document that (x) is consigned to or controlled byLender (either directly or by means of endorsements), (y) was issued by acarrier, consolidator or other party respecting the subject Inventory, and(z) either is (I) in the possession of Lender, or (II)  isin-transit by air-courier to Lender, or

#### (ii)           is the subject of a negotiable billof lading or other Documents as to which Lender has control satisfactory toLender (such as, by the delivery of a Customs Broker Agency Agreement or aFreight Forwarder Agency Agreement).

### (e)           Borrowerhas provided a certificate to Lender that certifies that such Inventory meetsall of Borrower’s representations and warranties contained in the LoanDocuments concerning Eligible Inventory, that Borrower knows of no reason whysuch Inventory would not be accepted by Borrower and that the shipment asevidenced by the documents conforms to the related order documents; and

### (f)            suchinventory has been expressly valued in the most recent inventory appraisal.

“Eligible Inventory” means Inventory ofBorrower consisting of Authentic first-quality finished goods held for sale inthe ordinary course of Borrower’s business located at one of Borrower’sbusiness locations set forth on Schedule E-1 (or in-transit between anysuch locations for a period not to exceed two (2) Business Days), that complieswith each of the representations and warranties respecting Eligible Inventorymade by Borrower in the Loan Documents, and that is not excluded as ineligibleby virtue of the one or more of the criteria set forth below, which criteriamay be fixed and revised from time to time by Lender in its PermittedDiscretion after the Closing Date.  Indetermining the value of Eligible Inventory, Inventory shall be valued at thelower of Cost or market on a basis consistent with Borrower’s accountingpractices less the aggregate amount of all Inventory Reserves.

Notwithstanding the foregoing, an item of Inventoryshall not be included in Eligible Inventory if:

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### (a)           Borrowerdoes not have good, valid and marketable title thereto (including Inventoryacquired on consignment);

### (b)           itis not located at one of the locations in the United States set forth onSchedule E-1 or in transit from one such location to another such location fora period of more than three (3) Business Days;

### (c)           itis located on real property leased (other than a retail store location) by aBorrower unless it is subject to a Collateral Access Agreement executed by theapplicable lessor;

### (d)           itis located at a retail store location leased by Borrower that is not subject toa Collateral Access Agreement and for which location Lender has  required hereunder  a Collateral Access Agreement;

### (e)           itis located in a contract warehouse or is otherwise stored with a bailee,warehouseman or similar third party unless it is subject to a BaileeAcknowledgment executed by the bailee, warehouseman, or other third party, asthe case may be, and unless it is segregated or otherwise separatelyidentifiable from goods of others, if any, stored on the premises;

### (f)            itis not subject to a valid and perfected first priority Lender’s Lien, or

### (g)           itconsists of goods returned or rejected by Borrower’s customers.

 “EnvironmentalActions” means any complaint, summons, citation, notice, directive, order,claim, litigation, investigation, judicial or administrative proceeding,judgment, letter, or other communication from any Governmental Authority, orany third party involving violations of Environmental Laws or releases ofHazardous Materials from (a) any assets, properties, or businesses ofBorrower or any predecessor in interest, (b) from adjoining properties orbusinesses, or (c) from or onto any facilities which received HazardousMaterials generated by Borrower or any predecessor in interest.

“Environmental Law” means any applicablefederal, state, provincial, foreign or local statute, law, rule, regulation,ordinance, code, binding and enforceable guideline, binding and enforceablewritten policy or rule of common law now or hereafter in effect and in eachcase as amended, or any judicial or administrative interpretation thereof,including any judicial or administrative order, consent decree or judgmentrelating to the environment, employee health and safety, or HazardousMaterials, including CERCLA; RCRA; the Federal Water Pollution Control Act, 33USC § 1251 etseq. the Toxic Substances Control Act, 15 USC, §2601 etseq. the Clean Air Act, 42 USC § 7401 etseq.;the Safe Drinking Water Act, 42 USC. § 3803 etseq.; the OilPollution Act of 1990, 33 USC. § 2701 etseq.; the EmergencyPlanning and the Community Right-to-Know Act of 1986, 42 USC. § 11001 etseq.; the Hazardous Material Transportation Act, 49 USC § 1801 etseq.; and the Occupational Safety and Health Act, 29 USC. §651 etseq. (to the extent it regulates occupational exposure to Hazardous Materials);any state and local or foreign counterparts or equivalents, in each case asamended from time to time.

“Environmental Liabilities and Costs” means allliabilities, monetary obligations, Remedial Actions, losses, damages, punitivedamages, consequential damages, treble damages, costs and expenses (includingall reasonable fees, disbursements and expenses of counsel, 

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experts, or consultants, and costs of investigationand feasibility studies), fines, penalties, sanctions, and interest incurred asa result of any claim or demand by any Governmental Authority or any thirdparty, and which relate to any Environmental Action.

“Environmental Lien” means any Lien in favor ofany Governmental Authority for Environmental Liabilities and Costs.

“Equipment” means all of Borrower’s now ownedor hereafter acquired right, title, and interest with respect to “equipment”(as such term is defined from time to time in the Code), fixtures and vehicles(including motor vehicles), including all attachments, accessories, accessions,replacements, substitutions, additions, and improvements to any of theforegoing.

“ERISA” means the Employee Retirement IncomeSecurity Act of 1974, as amended, and any successor statute thereto.

“ERISA Affiliate” means (a) any Personsubject to ERISA whose employees are treated as employed by the same employeras the employees of Borrower under IRC Section 414(b), (b) any trade orbusiness subject to ERISA whose employees are treated as employed by the sameemployer as the employees of Borrower under IRC Section 414(c), (c) solelyfor purposes of Section 302 of ERISA and Section 412 of the IRC, anyorganization subject to ERISA that is a member of an affiliated service groupof which Borrower is a member under IRC Section 414(m), or (d) solely forpurposes of Section 302 of ERISA and Section 412 of the IRC, any Person subjectto ERISA that is a party to an arrangement with Borrower and whose employeesare aggregated with the employees of Borrower under IRC Section 414(o).

“Event of Default” has the meaning set forth inSection 8.

“Excess Availability” means the amount, as ofthe date any determination thereof is to be made, equal to Availability minusthe aggregate amount, if any, of all trade payables of Borrower aged in excessof their historical levels with respect thereto and all book overdrafts inexcess of their historical practices with respect thereto, in each case asdetermined by Lender in its Permitted Discretion.

“Exchange Act” means the Securities ExchangeAct of 1934, as in effect from time to time.

“Executive Officer” means David Zinberg orLawrence Kong.

“Family Member” means, with respect to anyindividual, any other individual having a relationship by blood (to the seconddegree of consanguinity), marriage, or adoption to such individual.

“Family Trusts” means, with respect to anyindividual, trusts or other estate planning vehicles established for thebenefit of Family Members of such individual and in respect of which suchindividual serves as trustee or in a similar capacity.

“Fee Letter” means that certain fee letter,dated as of even date herewith, between Borrower and Lender, in form andsubstance satisfactory to Lender.

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“FEIN” means Federal Employer IdentificationNumber.

“Freight Forwarder Agency Agreement” means anagreement between Lender, Borrower and a freight forwarder or other carrier, inwhich the freight forwarder or other carrier acknowledges and agrees, amongother things that it has control over and holds the Documents evidencing thesubject Inventory for the benefit of the Lender and agrees, upon notice fromthe Lender, to hold and dispose of the subject Inventory solely as directed bythe Lender.

“Funding Date” means the date on which aBorrowing occurs.

“Funding Losses” has the meaning set forth in Section2.13(b)(ii).

“GAAP” means generally accepted accountingprinciples as in effect from time to time in the United States, consistentlyapplied.

“General Intangibles” means all of Borrower’snow owned or hereafter acquired right, title, and interest with respect to “generalintangibles” (as such term is defined from time to time in the Code), and anyand all supporting obligations in respect thereof.

“Goods” means all of Borrower’s now owned orhereafter acquired right, title, and interest with respect to “goods”, as thatterm is defined from time to time in the Code, including, without limitation,any and all Inventory and Equipment.

“Governing Documents” means, with respect toany Person, the certificate or articles of incorporation, by-laws, or otherorganizational documents of such Person.

“Governmental Authority” means any federal,state, local, or other governmental or administrative body, instrumentality,department, or agency or any court, tribunal, administrative hearing body,arbitration panel, commission, or other similar dispute-resolving panel orbody.

“Hazardous Materials” means (a) substancesthat are defined or listed in, or otherwise classified pursuant to, anyapplicable laws or regulations as “hazardous substances,” “hazardous materials,”“hazardous wastes,” “toxic substances,” or any other formulation intended todefine, list, or classify substances by reason of deleterious properties suchas ignitability, corrosivity, reactivity, carcinogenicity, reproductivetoxicity, or “EP toxicity”, (b) oil, petroleum, or petroleum derivedsubstances, natural gas, natural gas liquids, synthetic gas, drilling fluids,produced waters, and other wastes associated with the exploration, development,or production of crude oil, natural gas, or geothermal resources, (c) anyflammable substances or explosives or any radioactive materials, and(d) asbestos in any form or electrical equipment that contains any oil ordielectric fluid containing levels of polychlorinated biphenyls in excess of 50parts per million.

“Hedge Agreement” means any and alltransactions, agreements, or documents now existing or hereafter entered intobetween Borrower or its Subsidiaries and LaSalle Bank N.A. or its Affiliates,which provide for an interest rate, credit, commodity or equity swap, cap,floor, collar, forward foreign exchange transaction, currency swap, crosscurrency rate swap, currency option, or any combination of, or option withrespect to, these or similar transactions, for the 

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purpose of hedging Borrower’s or its Subsidiaries’exposure to fluctuations in interest or exchange rates, loan, credit exchange,security or currency valuations or commodity prices.

“Indebtedness” means (a) all obligationsfor borrowed money, (b) all obligations evidenced by bonds, debentures,notes, or other similar instruments and all reimbursement or other obligationsin respect of letters of credit, bankers acceptances, interest rate swaps, orother financial products, (c) all obligations under Capital Leases,(d) all obligations or liabilities of others secured by a Lien on anyasset of Borrower or its Subsidiaries, irrespective of whether such obligationor liability is assumed, (e) all obligations for the deferred purchaseprice of assets (other than trade debt incurred in the ordinary course of businessand repayable in accordance with customary trade practices), and (f) anyobligation guaranteeing or intended to guarantee (whether directly orindirectly guaranteed, endorsed, co-made, discounted, or sold with recourse)any obligation of any other Person.

“Indemnified Liabilities” has the meaning setforth in Section 11.3.

“Indemnified Person” has the meaning set forthin Section 11.3.

 “InsolvencyProceeding” means any proceeding commenced by or against any Person underany provision of the Bankruptcy Code or under any other state or federalbankruptcy or insolvency law, assignments for the benefit of creditors, formalor informal moratoria, compositions, extensions generally with creditors, orproceedings seeking reorganization, arrangement, or other similar relief.

“Intangible Assets” means, with respect to anyPerson, that portion of the book value of all of such Person’s assets thatwould be treated as intangibles under GAAP.

“Intellectual Property Security Agreement” means an intellectualproperty security agreement executed and delivered by Borrower and Lender, theform and substance of which is satisfactory to Lender.

“Instruments” means all of Borrower’s now ownedor hereafter acquired right, title, and interest with respect to “instruments”,including, without limitation, any “promissory notes”, as such terms aredefined from time to time in the Code, and any and all supporting obligationsin respect thereof.

“Interest Period” means, with respect to eachLIBOR Rate Loan, a period commencing on the date of the making of such LIBORRate Loan and ending 1, 2, or 3 months thereafter; provided, however,that (a) if any Interest Period would end on a day that is not a BusinessDay, such Interest Period shall be extended (subject to clauses (c)-(e) below)to the next succeeding Business Day, (b) interest shall accrue at theapplicable rate based upon the LIBOR Rate from and including the first day ofeach Interest Period to, but excluding, the day on which any Interest Periodexpires, (c) any Interest Period that would end on a day that is not aBusiness Day shall be extended to the next succeeding Business Day unless suchBusiness Day falls in another calendar month, in which case such InterestPeriod shall end on the next preceding Business Day, (d) with respect toan Interest Period that begins on the last Business Day of a calendar month (oron a day for which there is no numerically corresponding day in the calendarmonth at the end of such Interest Period), the Interest Period shall end on thelast Business Day of the

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calendar month that is 1, 2, or 3 months after thedate on which the Interest Period began, as applicable, and (e) Borrowermay not elect an Interest Period which will end after the Maturity Date.

“Inventory” means all Borrower’s now owned orhereafter acquired right, title, and interest with respect to inventory,including goods held for sale or lease or to be furnished under a contract ofservice, goods that are leased by Borrower as lessor, goods that are furnishedby Borrower under a contract of service, and raw materials, work in process, ormaterials used or consumed in Borrower’s business.

“Inventory Reserves” means such reserves asLender determines from time to time in its Permitted Discretion as beingappropriate to reflect the impediments to Lender’s ability to realize upon theCollateral.  Without limiting thegenerality of the foregoing, Inventory Reserves may include (but are notlimited to) reserves based on the following: (a) the extent to which Inventory consists of goods that(i) are obsolete, slow-moving, restrictive or custom items, bill and holdgoods, defective, damaged, prepared for return to vendor, not first qualitygoods, work-in-process or raw materials or (ii) constitute spare parts,packaging and shipping materials or supplies; (b) seasonality;(c) shrinkage; (d) imbalance or change in Inventory character,composition or mix; (e) markdowns; (f) the estimated costs relatingto unpaid freight charges, warehousing or storage charges, taxes, duties, andother similar unpaid costs associated with the acquisition of EligibleIn-Transit Inventory by Borrower; (g) mark-ons or mark-ups inconsistentwith prior practice, performance, the Business Plan or advertising calendar andplanned events; (h) the estimated reclamation claims of unpaid sellers ofInventory sold to Borrower for the 45-day period prior to any date ofdetermination; (i) Inventory under repair; (j) Inventory paid for by customersbut not yet shipped; (k) Inventory consisting of art and collectibles; (l)Inventory subject to pending litigation against Borrower relating to the “Cartier”tradename and trademark; and (m) Inventory received by Borrower fromthird-party vendors which has not been completely inspected, processed andentered into Borrower’s perpetual inventory system.

“Investment” means, with respect to any Person,any investment by such Person in any other Person (including Affiliates) in theform of indebtedness, guarantees, advances, or capital contributions (excluding(a) commission, travel, and similar advances to officers and employees ofsuch Person made in the ordinary course of business, and (b) bona fideAccounts arising in the ordinary course of business consistent with pastpractices), purchases or other acquisitions for consideration of Indebtedness orStock, and any other items that are or would be classified as investments on abalance sheet prepared in accordance with GAAP.

“Investment Property” means all of Borrower’snow owned or hereafter acquired right, title, and interest with respect to “investmentproperty”, as such term is defined from time to time in the Code, and any andall supporting obligations in respect thereof.

“IRC” means the Internal Revenue Code of 1986,as in effect from time to time.

“Issuing Lender” means LaSalle Bank for thepurpose of issuing L/Cs or L/C Undertakings pursuant to Section 2.12.

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“LaSalle” means LaSalle Retail Finance, adivision of LaSalle Business Credit, LLC, as agent for LaSalle Bank MidwestNational Association.

“L/C Disbursement” means a payment made by theIssuing Lender pursuant to a Letter of Credit.

“L/C Landing Costs” means, to the extent notincluded in the stated amount of a Letter of Credit relating to the purchase ofInventory, customs, duty, freight, and other out-of-pocket costs and expenses(including, without limitation, taxes) which will be expected to “land” theInventory, the purchase of which is supported by such Letter of Credit.

“Leasehold Interests” means Borrower’sleasehold estate or interest in each of the properties at or upon whichBorrower conducts business or maintains any of the Collateral, together withBorrower’s interest in any of the improvements and fixtures located upon orappurtenant to each leasehold interest, including without limitation, anyrights of Borrower to payments, proceeds of value of any kind or naturerealized upon the sale or transfer of such estate or interest.

“Lender” and “Lenders” have therespective meanings set forth in the preamble to this Agreement, and shallinclude any other Person made a party to this Agreement in accordance with theprovisions of Section 14.1.

 “LenderExpenses” means all (a) costs or expenses (including taxes, andinsurance premiums) required to be paid by Borrower under any of the LoanDocuments that are paid or incurred by Lender, (b) fees or charges paid orincurred by Lender in connection with Lender’s transactions with Borrower,including, fees or charges for photocopying, notarization, couriers andmessengers, telecommunication, public record searches (including tax lien,litigation, and UCC searches and including searches with the patent andtrademark office, the copyright office, or the department of motor vehicles),filing, recording, publication, appraisal (including periodic Collateralappraisals or business valuations to the extent of the fees and chargescontained in this Agreement, real estate surveys, real estate title policiesand endorsements, and environmental audits, (c) costs and expensesincurred by Lender in the disbursement of funds to or for the account of Borrower(by wire transfer or otherwise), (d) charges paid or incurred by Lenderresulting from the dishonor of checks, (e) reasonable costs and expensespaid or incurred by Lender to correct any default or enforce any provision ofthe Loan Documents, or in gaining possession of, maintaining, handling,preserving, storing, shipping, selling, preparing for sale, or advertising tosell the Collateral, or any portion thereof, irrespective of whether a sale isconsummated, (f) audit fees and expenses of Lender related to auditexaminations of the Books to the extent of the fees and charges contained inthis Agreement, (g) reasonable costs and expenses of third party claims orany other suit paid or incurred by Lender in enforcing or defending the LoanDocuments or in connection with the transactions contemplated by the LoanDocuments or Lender’s relationship with any Borrower or any guarantor of theObligations, (h)  Lender’s reasonable fees and expenses (includingattorneys fees) incurred in advising, structuring, drafting, reviewing,administering, or amending the Loan Documents, (i)  Lender’s reasonablefees and expenses (including attorneys fees and expenses) incurred interminating, enforcing (including attorneys fees and expenses incurred inconnection with a “workout,” a “restructuring,” or in connection with anyInsolvency Proceeding (including, without limitation, 

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in connection with defense of any avoidance action oraction for subordination of any of the obligations), or in exercising rights orremedies under the Loan Documents), or defending the Loan Documents,irrespective of whether suit is brought, or in taking any Remedial Actionconcerning the Collateral and (j) costs and expenses of appraisals with respectto any of the Collateral (whether tangible or intangible).

“Lender’s Liens” means the Liens granted byBorrower to Lender for the benefit of the Lender under this Agreement or theother Loan Documents.

“Lender-Related Person” means such Lender,together with its Lender’s Affiliates, and the officers, directors, employees,and agents of Lender.

“Letter of Credit” has the meaning set forth inSection 2.12.

“Letter of Credit Rights” means all of Borrower’snow owned or hereafter acquired right, title, and interest with respect to “letterof credit rights”, as that term is defined from time to time in the Code, andany and all supporting obligations in respect thereof.

“Letter of Credit Usage” means, as of any dateof determination, the aggregate undrawn amount of all outstanding Letters ofCredit.

“LIBOR Deadline” has the meaning set forth in Section2.13(b)(i).

“LIBOR Notice” means a written notice in theform of Exhibit D.

“LIBOR Rate” means, for each Interest Periodfor each LIBOR Rate Loan, the rate per annum determined by Lender (roundedupwards, if necessary, to the next 1/16%) by *dividing*(a) the Base LIBOR Rate for such Interest Period, *by* (b) 100% minus the ReservePercentage.  The LIBOR Rate shall beadjusted on and as of the effective day of any change in the ReservePercentage.

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

“Lien” means any interest in an asset securingan obligation owed to, or a claim by, any Person other than the owner of theasset, whether such interest shall be based on the common law, statute, orcontract, whether such interest shall be recorded or perfected, and whethersuch interest shall be contingent upon the occurrence of some future event orevents or the existence of some future circumstance or circumstances, includingthe lien or security interest arising from a mortgage, deed of trust,encumbrance, pledge, hypothecation, assignment, deposit arrangement, securityagreement, conditional sale or trust receipt, or from a lease, consignment, orbailment for security purposes and also including reservations, exceptions,encroachments, easements, rights-of-way, covenants, conditions, restrictions,leases, and other title exceptions and encumbrances affecting Real Property.

“Liquidation”means: (a) exercise by the Lender of those rights and remedies accorded to theLender under the Loan Documents and applicable law as a creditor of theBorrower following and on account of the occurrence of an Event of Defaultlooking towards the 

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realization on the Collateral or (b) any sale of allor substantially all of Borrower’s assets whether or not in connection with anyInsolvency Proceeding.  Derivations ofthe word “Liquidation” (such as “Liquidate”) are used with like meaning in thisAgreement.

“Loan Account” has the meaning set forth in Section2.10.

“Loan Documents” means this Agreement, the CashManagement Agreements, the Credit Card Agreements, all Control Agreements, theService Contracts, the Intellectual Property Security Agreement, theDisbursement Letter, the Certification of Officers, the Fee Letter, any Lettersof Credit, the Perfection Certificate, the Due Diligence Letter, anycertificates (including without limitation, the Borrowing Base Certificate andthe Compliance Certificate) from time to time delivered by a Borrower pursuantto this Agreement or any other Loan Document, any note or notes executed by aBorrower in connection with this Agreement and payable to a member of theLender, and any other agreement entered into, now or in the future, by Borrowerand the Lender in connection with this Agreement.

“Material Adverse Change” means (a) amaterial adverse change in the business, prospects, operations, results ofoperations, assets, liabilities or condition (financial or otherwise) ofBorrower taken as a whole, of the business, prospects, operations, results ofoperations, assets, liabilities or condition (financial or otherwise)including, without limitation, any material adverse deviation at any time fromthe Business Plan, (b) a material impairment of Borrower’s ability toperform its obligations under the Loan Documents to which it is a party or ofLender’s ability to enforce the Obligations or realize upon the Collateral, or(c) a material impairment of the enforceability or priority of Lender’s Lienswith respect to the Collateral as a result of an action or failure to act onthe part of a Borrower.

“Maturity Date” has the meaning set forth in Section3.4.

“Maximum Revolver Exposure” means the lesser,on any day, of the following, in each instance determined net of the unpaidprincipal balance of the Loan Account on that day: (a) the Borrowing Base,*less* the Letter of Credit Usage, *less* the Aggregate amount of theAvailability Reserves or (b) the Maximum Revolver Amount *less* the Letter of Credit Usage.

“Maximum Revolver Amount” means, at any time,$10,000,000, unless increased in accordance with Section 2.2 hereof,provided it shall at no time exceed $15,000,000.

“Net Excess Availability” means average dailyAvailability for the previous calendar quarter, net of (x) the outstandingamount of Advances and (y) the Letter of Credit Usage measured on the firstBusiness Day of the immediately following calendar quarter.

“Net Liquidation Percentage” means, at any dateof determination, the percentage of the Cost value of Eligible Inventory thatis estimated to be recoverable in an orderly liquidation of such EligibleInventory, net of liquidation expenses, such percentage to be as determinedfrom time to time by Lender in its Permitted Discretion or by a qualifiedappraisal company selected by Lender.

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“Net Retail Liquidation Value” means, at anydate of determination, the result (expressed in Dollars) of the Net LiquidationPercentage *times* the Cost valueof Eligible Inventory as of such date.

“Obligations” means

### (a)           allAdvances, debts, principal, interest (including any interest that, but for theprovisions of the Bankruptcy Code, would have accrued), contingentreimbursement obligations with respect to outstanding Letters of Credit,premiums, liabilities (including all amounts charged to Borrower’s Loan Accountpursuant hereto), obligations, fees (including the fees provided for in the FeeLetter), charges, costs, Lender Expenses (including any fees or expenses that,but for the provisions of the Bankruptcy Code, would have accrued), FundingLosses, lease payments, guaranties, covenants, indemnified liabilities andduties of any kind and description owing by Borrower to Lender pursuant to orevidenced by the Loan Documents and irrespective of whether for the payment ofmoney, whether direct or indirect, absolute or contingent, due or to becomedue, now existing or hereafter arising, and including all interest not paidwhen due and all Lender Expenses that Borrower is required to pay or reimburseby the Loan Documents, by law, or otherwise. Any reference in this Agreement or in the Loan Documents to theObligations shall include all amendments, changes, extensions, modifications,renewals replacements, substitutions, and supplements, thereto and thereof, asapplicable, both prior and subsequent to any Insolvency Proceeding.

### (b)           Allpresent and future indebtedness and obligations, of any nature whatsoever,direct or indirect, absolute or contingent, matured or not, at any time owingor to become owing by Borrower to Lender arising from any contract, agreement,dealings, occurrence, non-occurrence, event and/or operation of law wherebyBorrower becomes indebted and/or obligated to Lender.

### (c)           Alland future indebtedness, obligations and liabilities of Borrower to Lender orto Lender’s Affiliates in respect of any Bank Product Obligations.

“Overadvance” has the meaning set forth in Section2.5.

“Participant” has the meaning set forth in Section14.1(c).

“Perfection Certificate” means thecertification of officers forms submitted by Lender to Borrower, together withBorrower’s completed responses to the inquiries set forth therein, the form andsubstance of such responses to be satisfactory to Lender.

“Permitted Discretion” means a determinationmade in good faith and in the exercise of reasonable (from the perspective of aan asset-based lender) business judgment, including without limitation, anysuch factors as Lender, taking into account information of which Lender thenhas knowledge, reasonably believes:

#### (i)            Will or reasonably could be expectedto materially and adversely affect the value of the Collateral, the priority orenforceability of the Lender’s security and collateral interests therein, orthe amount which the Lender would likely realize 

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#### therefrom (taking into account delays whichmay reasonably be encountered in Lender realizing upon the Collateral andlikely Lender Expenses).

#### (ii)           Indicates that any report orfinancial information delivered to Lender by or on behalf of Borrower isincomplete, inaccurate, or misleading in any material manner or was notprepared in accordance with the requirements of this Agreement in any materialrespect.

#### (iii)          Suggests the likelihood that Borrowerwill become the subject of an Insolvency Proceeding.

#### (iv)          Constitutes a Suspension Event.

### (d)           Inthe exercise of such judgment, the Lender also may take into account any of thefollowing factors:

#### (i)            Those included in, or tested by, thedefinitions of “Eligible Inventory”, “Retail”, and “Cost”.

#### (ii)           The current financial and businessclimate of the industry in which Borrower competes (having regard for theBorrower’s position in that industry).

#### (iii)          General economic conditions which havea material effect on Borrower’s cost structure.

#### (iv)          Material changes in or to the mix ofthe Borrower’s Inventory.

#### (v)           Seasonality with respect to theBorrower’s Inventory and pattern of the Borrower’s retail sales versus thatwhich was projected.

#### (vi)          Material changes in Borrower’sAvailability versus that which was projected.

#### (vii)         Such other factors as the Lenderdetermines as having a material bearing on credit risks associated with theproviding of loans and financial accommodations to Borrower.

The burden of establishing the failure of the Lenderto have acted within such Permitted Discretion shall be the Borrower’s.

“Permitted Dispositions” means (a) salesor other dispositions by Borrower or its Subsidiaries of Equipment that issubstantially worn, damaged, or obsolete in the ordinary course of business,(b) sales by Borrower or its Subsidiaries of Inventory to buyers in theordinary course of business, (c) the use or transfer of money or CashEquivalents by Borrower or its Subsidiaries in a manner that is not prohibitedby the terms of this Agreement or the other Loan Documents, and (d) thelicensing by Borrower or its Subsidiaries, on a non-exclusive basis, ofpatents, trademarks, copyrights, and other intellectual property rights in theordinary course of 

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business.  “PermittedDispositions” shall not include any liquidation, extra ordinary value,strategic or going out of business sale.

“Permitted Investments” means(a) investments in Cash Equivalents, or (b) advances made inconnection with purchases of goods or services in the ordinary course ofbusiness.

“Permitted Liens” means (a) Liens held byLender (including, without limitation, the Lender’s Lien), (b) Liens forunpaid taxes that either (i) are not yet delinquent, or (ii) do notconstitute an Event of Default hereunder and are the subject of PermittedProtests, (c) Liens set forth on Schedule P-1, (d) theinterests of lessors under operating leases, (e) purchase money Liens orthe interests of lessors under Capital Leases to the extent that such Liens orinterests secure Permitted Purchase Money Indebtedness and so long as such Lienattaches only to the asset purchased or acquired and the proceeds thereof,(f) Liens arising by operation of law in favor of warehousemen, landlords,carriers, mechanics, materialmen, laborers, or suppliers, incurred in theordinary course of business and not in connection with the borrowing of money,and which Liens either (i) are for sums not yet delinquent, or(ii) are the subject of Permitted Protests, (g) Liens arising fromdeposits made in connection with obtaining worker’s compensation or otherunemployment insurance, (h) Liens or deposits to secure performance ofbids, tenders, or leases incurred in the ordinary course of business and not inconnection with the borrowing of money, (i) Liens granted as security forsurety or appeal bonds in connection with obtaining such bonds in the ordinarycourse of business, and (j) Liens resulting from any judgment or awardthat is not an Event of Default hereunder.

“Permitted Protest” means the right of Borroweror any of its Subsidiaries, as applicable, to protest any Lien (other than anysuch Lien that secures the Obligations), taxes (other than payroll taxes ortaxes that are the subject of a United States federal tax lien), or rentalpayment, provided that (a) a reserve with respect to such obligation isestablished on the Books in such amount as is required under GAAP, (b) anysuch protest is instituted promptly and prosecuted diligently by Borrower orany of its Subsidiaries, as applicable, in good faith, and (c) Lender issatisfied that, while any such protest is pending, there will be no impairmentof the enforceability, validity, or priority of any of the Lender’s Liens.

“Permitted Purchase Money Indebtedness” means,as of any date of determination, Purchase Money Indebtedness incurred after theClosing Date in an aggregate amount outstanding at any one time not in excessof $1,000,000, and only to the extent reflected in the Business Plan.  In no event shall Permitted Purchase MoneyIndebtedness include Indebtedness incurred for the purpose of financing all orany part of the acquisition cost of any Inventory.

“Permitted Rescission Offer Payments” meanspayments relating to the rescission offer to certain stockholders of Borrowerto repurchase back Borrower’s stock subject to such offer, which offer shall beon terms and conditions acceptable to Lender in its discretion and otherwise incompliance with all applicable laws and regulations.

“Person” means natural persons, corporations,limited liability companies, limited partnerships, general partnerships,limited liability partnerships, joint ventures, trusts, land trusts, businesstrusts, or other organizations, irrespective of whether they are legalentities, and governments and agencies and political subdivisions thereof.

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“Personal Property Collateral” means allCollateral other than Real Property.

“Projections” means Borrower’s forecasted(a) balance sheets, (b) profit and loss statements, and (c) cashflow statements, all prepared on a consistent basis with Borrower’s historicalfinancial statements, together with appropriate supporting details and astatement of underlying assumptions.

“Purchase Money Indebtedness” meansIndebtedness (other than the Obligations, but including Capitalized LeaseObligations) incurred at the time of, or within 20 days after, the acquisitionof any fixed assets (but not Inventory) for the purpose of financing all or anypart of the acquisition cost thereof.

“Qualified Import Letter of Credit” means adocumentary Letter of Credit that is (a) issued to facilitate the purchaseby Borrower of Eligible Inventory, (b) in form and substance acceptable toLender, and (c)  is drawable by the beneficiary thereof by thepresentation of, among other documents, either (i) a negotiable bill oflading that is consigned to or otherwise controlled by Lender (either directlyor by means of endorsements) and that was issued by the carrier respecting thesubject Eligible Inventory, or (ii) a negotiable cargo receipt that isconsigned to or otherwise controlled by Lender (either directly or by means ofendorsements) and that was issued by a consolidator respecting the subjectEligible Inventory; provided, however, that, in the latter case,no bill of lading shall have been issued by the carrier (other than a bill oflading consigned to the consolidator or to Lender).

“Rating Agencies” has the meaning provided in Section2.15.

“Real Property” means any fee, leasehold orother estate or interest in real property now or hereafter owned or leasedhereafter acquired by Borrower and the improvements thereto.

“Real Property Collateral” means any parcel orparcels of Real Property identified on Schedule R-1 and any RealProperty hereafter acquired by Borrower.

“Record” means information that is inscribed ona tangible medium or which is stored in an electronic or other medium and isretrievable in perceivable form.

“Remedial Action” means all actions taken to(a) clean up, remove, remediate, contain, treat, monitor, assess,evaluate, or in any way address Hazardous Materials in the indoor or outdoorenvironment, (b) prevent or minimize a release or threatened release ofHazardous Materials so they do not migrate or endanger or threaten to endangerpublic health or welfare or the indoor or outdoor environment, (c) performany pre-remedial studies, investigations, or post-remedial operation andmaintenance activities, or (d) conduct any other actions authorized by 42USC § 9601.

“Reserve Percentage” means, on any day, forLender (or Lender’s parent bank), the maximum percentage prescribed by theBoard of Governors of the Federal Reserve System (or any successor GovernmentalAuthority) for determining the reserve requirements (including any basic,supplemental, marginal, or emergency reserves) that are in effect on such datewith respect to eurocurrency funding (currently referred to as “eurocurrencyliabilities”) of Lender, but so 

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long as Lender is not required or directed underapplicable regulations to maintain such reserves, the Reserve Percentage shallbe zero.

“Reserves” means collectively, all InventoryReserves, Availability Reserves, and any other reserve created by Lenderhereunder.

“Restricted Payment” means (i) any cashdividend or other cash distribution or payment, direct or indirect, on or onaccount of any shares of any class of Stock of Borrower now or hereafteroutstanding (other than a Permitted Rescission Offer Payment, providedthat a Permitted Rescission Offer Payment shall be a Restricted Payment on andafter the occurrence and during the continuance of a Default or Event ofDefault or if the making of such payment would result in a Default or Event ofDefault); (ii) any dividend or other distribution in respect of, orredemption, purchase or other acquisition, direct or indirect, of any shares ofany class of Stock of Borrower now or hereafter outstanding or of any warrants,options or rights to purchase any such Stock (including, without limitation,the repurchase of any such Stock, warrant, option or right or any refund of thepurchase price thereof in connection with the exercise by the holder thereof ofany right of rescission or similar remedies with respect thereto);(iii) any direct salary, non-salary managerial fees, fee (consulting,management or other), fringe benefit, allowance or other expense directly orindirectly paid or payable by Borrower (as compensation or otherwise) to anyshareholder or Affiliate of Borrower (otherthan to an employee,to the extent of such employee’s ordinary compensation; provided thatthe terms of such compensation are approved by the applicable board ofdirectors or the compensation committee thereof) or any partner, shareholder orAffiliate thereof; and (iv) payment on any Indebtedness except theextent  of Permitted Indebtedness, andthen only to extent permitted under any applicable subordination agreement.

“Revolver Usage” means, as of any date ofdetermination, the sum of (a) the then extant amount of outstandingAdvances, plus (b) the then extant amount of the Letter of Credit Usage.

“Risk Participation Liability” means, as toeach Letter of Credit, all reimbursement obligations of Borrower to the IssuingLender, consisting of (a) the amount available to be drawn or which maybecome available to be drawn, (b) all amounts that have been paid by theIssuing Lender to the extent not reimbursed by Borrower, whether by the makingof an Advance or otherwise, and (c) all accrued and unpaid interest, fees,and expenses payable with respect thereto.

 “SEC”means the United States Securities and Exchange Commission and any successorthereto.

“Securities Account” means a “securitiesaccount” as that term is defined in the Code.

“Securitization” has the meaning provided in Section2.15.

“Securitization Liabilities” has the meaningprovided in Section 2.15.

“Securitization Parties” has the meaningprovided in Section 2.15.

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“ServiceContracts” means those Contracts between Borrower and any Service Providersfor the provision to Borrower of certain financial, reporting, merchandisingand other central services.

“Service Providers” means AlchemyCommunications and any of its Affiliates, agents or subcontractors, pursuant towhich any one of them provides to Borrower website hosting, backupcommunication and related services.

“Signature Authorization” mean writtenauthorization by the chief executive officer of the Borrower authorizing theLender a to accept the signatures of certain employees as authorized forpurposes of requesting Advances and other financial accommodations hereunder.

“Solvent” means, with respect to any Person ona particular date, that such Person is not insolvent (as such term is definedin the Uniform Fraudulent Transfer Act).

“Stock” means all shares, options, warrants,interests, participations, membership interests, or other equivalents(regardless of how designated) of or in a Person, whether voting or nonvoting,including common stock, preferred stock, or any other “equity security” (assuch term is defined in Rule 3a11-1 of the General Rules and Regulationspromulgated by the SEC under the Exchange Act).

“Subsidiary” of a Person means a corporation,partnership, limited liability company, or other entity in which that Persondirectly or indirectly owns or controls the shares of Stock having ordinaryvoting power to elect a majority of the board of directors (or appoint othercomparable managers) of such corporation, partnership, limited liabilitycompany, or other entity.

“Suspension Event” means any occurrence,circumstance, or state of facts which (a) is an Event of Default; or (b) wouldbecome an Event of Default if any requisite notice were given and/or anyrequisite period of time were to run and such occurrence, circumstance, orstate of facts were not absolutely cured within any applicable grace period.

“Unused Line Fee” has the meaning set forth inthe Fee Letter.

“Voidable Transfer” has the meaning set forthin Section 16.7.

“Waiver Letter” means a written waiver ofcertain liabilities of LaSalle Bank, N.A. in form and substance acceptable toLaSalle Bank N.A.

“Wells Fargo Permitted DDA” means that certainDDA of Borrower with Wells Fargo Bank, N.A., account No.                             ,which shall subject to a Blocked Account Control Agreement satisfactory toLender, maintained by Borrower solely for the purpose of physically depositingchecks and money orders received from customers of Borrower.

1.2           Accounting Terms.  All accounting terms not specifically definedherein shall be construed in accordance with GAAP.  When used herein, the term “financialstatements” shall include the notes and schedules thereto.  Whenever the term “Borrower” is used inrespect of a 

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financial covenant or a related definition, it shallbe understood to mean Parent and its Subsidiaries (if any) on a consolidatedbasis unless the context clearly requires otherwise.

1.3           Code. Any terms used in this Agreement that are defined in the Code shall beconstrued and defined as set forth from time to time in the Code unlessotherwise defined herein.

1.4           Construction.  Unless the context of this Agreement or anyother Loan Document clearly requires otherwise, references to the pluralinclude the singular, references to the singular include the plural, the term “including”is not limiting, and the term “or” has, except where otherwise indicated, theinclusive meaning represented by the phrase “and/or.”  The words “hereof,” “herein,” “hereby,” “hereunder,”and similar terms in this Agreement or any other Loan Document refer to thisAgreement or such other Loan Document, as the case may be, as a whole and notto any particular provision of this Agreement or such other Loan Document, asthe case may be.  Section, subsection,clause, schedule, and exhibit references herein are to this Agreement unlessotherwise specified.  Any reference in thisAgreement or in the other Loan Documents to any agreement, instrument, ordocument shall include all alterations, amendments, changes, extensions,modifications, renewals, replacements, substitutions, joinders, andsupplements, thereto and thereof, as applicable (subject to any restrictions onsuch alterations, amendments, changes, extensions, modifications, renewals,replacements, substitutions, joinders, and supplements set forth herein).  Any reference herein to any Person shall beconstrued to include such Person’s successors and assigns.  Any requirement of a writing contained hereinor in the other Loan Documents shall be satisfied by the transmission of aRecord and any Record transmitted shall constitute a representation andwarranty as to the accuracy and completeness of the information containedtherein.

1.5           Schedules and Exhibits.  All of the schedules and exhibits attached tothis Agreement shall be deemed incorporated herein by reference.

# 2.             LOAN AND TERMS OF PAYMENT.

## 2.1           RevolverAdvances.

### (a)           Subjectto the terms and conditions of this Agreement, and during the term of thisAgreement, Lender agrees to make loan advances (“**Advances**”) to Borrower in an amount at any one timeoutstanding not to exceed *the lesser of*the (i) the Maximum Revolver Amount less the Letter of Credit Usage, or(ii) the Borrowing Base minus the sum of (x) Letter of Credit Usage and(y) the aggregate amount of the Availability Reserves.  For purposes of this Agreement, “**Borrowing Base**,” as of any date of determination, shall meanan amount equal to the result of:

##### (A)                              85%of the amount of Eligible Credit Card/Payment Accounts;

plus

##### (B)                                85%of the then extant Net Liquidation Percentage times the Cost of EligibleInventory;

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#####  

plus

##### (C)                                85%of the then extant Net Liquidation Percentage times the Cost of EligibleIn-Transit Inventory.

### (b)           TheLenders shall have no obligation to make additional Advances hereunder to theextent such additional Advances would cause the Revolver Usage to exceed theMaximum Revolver Amount.

### (c)           Amountsborrowed pursuant to this Section may be repaid and, subject to the terms andconditions of this Agreement, reborrowed at any time during the term of thisAgreement.

2.2           Increase of Maximum RevolverAmount.  Provided there exists noDefault or Event of Default, upon notice to Lender and subject to theprovisions of this Section 2.2, the Borrower may request an increase in theMaximum Revolver Amount in the amount of Five Million Dollars($5,000,000).  Upon a request by Borrowerof an increase in the Maximum Revolver Amount in accordance with this Section,Lender and Borrower shall determine the effective date of such increase (anysuch date, the “Increase Closing Date”) which, in no event, shall be no earlierthan three (3) Business Days after such request is made by Borrower.  As a condition precedent to such increase inthe Maximum Revolver Amount, Borrower shall deliver to Lender a certificatedated as of the Increase Closing Date signed by an Authorized Person certifyingthat, before and after giving effect to such increase, the applicableconditions set forth in Section 3.3 will be satisfied.  In addition, the Borrower shall pay to Lenderon the Increase Closing Date in cash an increase fee in the amount of $12,500,which increase fee shall be deemed fully earned by Lender as of such date.

2.3           Borrowing Procedures.  Each Borrowing shall be made by anirrevocable written request by an Authorized Person delivered to Lender, whichnotice must be received by Lender no later than (i) with respect to anyAdvances having interest charged based upon the Base Rate, 1:00 p.m. (Bostontime) on the Business Day that is the requested Funding  Date and (ii) with respect to any Advancehaving interested charged based upon the LIBOR Rate, 3 Business Days prior tothe Business Day that is the requested Funding Date, in each case, specifyingthe amount of such Borrowing (and, with respect to LIBOR Rate Loans, any otherinformation required pursuant to Section 2.13).

## 2.4           Payments.

### (a)           Payments by Borrower.

#### (i)            Borrowerhereby promises to pay the Obligations (including principal, interest, fees,costs, and expenses) in Dollars in full to the Lender as and when due andpayable under the terms of this Agreement and the other Loan Documents.

#### (ii)          Except as otherwise expressly provided herein, all payments by Borrower shallbe made to the Concentration Account for the account of the Lender and shall bemade in immediately available funds, no later than 2:00 p.m. (Boston time) onthe date specified herein.  Any paymentreceived by Lender later than 2:00 p.m. (Boston 

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#### time), shall be deemed to have been receivedon the following Business Day and any applicable interest or fee shall continueto accrue until such following Business Day.

### (b)           Application of Payments.

#### (i)            All payments and all proceeds ofAccounts or other Collateral received by Lender, shall be applied as follows:

##### (A)                              first, to payLender Expenses then due to Lender under the Loan Documents, until paid infull,

##### (B)                                second, to payany fees (including without limitation any Applicable Prepayment Premium) thendue to Lender under the Loan Documents until paid in full,

##### (C)                                third, to payinterest due in respect of all Advances, until paid in full,

##### (D)                               fourth, so longas no Event of Default has occurred and is continuing, to pay the principal ofall Advances and other Obligations until paid in full,

##### (E)                                 fifth, if anEvent of Default has occurred and is continuing, to Lender, to be held byLender, for the benefit of Issuing Lender and Lender, as cash collateral in anamount up to 105% of the then extant Letter of Credit Usage until paid in full,

##### (F)                                 sixth, if anEvent of Default has occurred and is continuing, to the Lender to be held byLender as cash collateral an amount equal to accrued and estimated LenderExpenses,

##### (G)                                seventh, if anEvent of Default has occurred and is continuing to pay the principal of allAdvances and other Obligations until paid in full, and

##### (H)                               eighth, toBorrower (to be wired to the Designated Account) or such other Person entitledthereto under applicable law.

#### (i)            Forpurposes of the foregoing, “paid in full” means payment of all amounts owingunder the Loan Documents according to the terms thereof, including, withoutlimitation, principal, interest, loan fees, service fees, professional fees,interest (and specifically including interest accrued after the commencement ofany Insolvency Proceeding), default interest, interest on interest, expensereimbursements, whether or not the same would be or is allowed or disallowed inwhole or in part in any Insolvency Proceeding.

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####  

#### (ii)           Inthe event of a direct conflict between the priority provisions of this Section2.4 and other provisions contained in any other Loan Document, it is theintention of the parties hereto that such priority provisions in such documentsshall be read together and construed, to the fullest extent possible, to be inconcert with each other.

2.5           Overadvances.  If, at any time or for any reason, the amountof Obligations owed by Borrower to the Lender pursuant to Sections 2.1 and2.12 is greater than either the Dollar or percentage limitations set forthin Sections 2.1 or 2.12, (an “**Overadvance**”),Borrower immediately shall pay to Lender, in cash, the amount of such excess,which amount shall be used by Lender to reduce the Obligations in accordancewith the priorities set forth in Section 2.4(b).

## 2.6           Interest Rates and Letter of Credit Fee:  Rates, Payments, and Calculations.

(a)           Interest Rates.  Except as provided in clause (c) below, allObligations (except for undrawn Letters of Credit and except for Bank ProductObligations) that have been charged to the Loan Account pursuant to the termshereof shall bear interest on the Daily Balance if the relevant Obligation isan Advance that is a LIBOR Rate Loan, at a per annum rate equal to the LIBORRate plus the Applicable Margin for LIBOR Rate Loans and otherwise, at a perannum rate equal to the Base Rate plus the Applicable Margin for Base RateLoans.

(b)           Letter of Credit Fee.  Borrower shall pay Lender a Letter of Creditfee (in addition to the charges, commissions, fees, and costs set forth in Section2.12(e)) at the per annum rate set forth in the following chart based onNet Excess Availability times the Daily Balance of the undrawn amount of alloutstanding standby and documentary Letters of Credit:

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| **Level**  | ** ** | **Net Excess Availability**                         | ** ** | **Standby/Documentary  LC Fees** | ** ** |
|------------|------------|---------------------------------------------------------------|------------|---------------------------------------|------------|
| ** ** | ** ** | ** **                                                    | ** ** | ** **                            | ** ** |
| **I**      |       | Greater than  $3,500,000                                      |       | 1.50                                  | %          |
| **II**     |       | Greater than  $2,000,000 and less than or equal to $3,500,000 |       | 1.75                                  | %          |
| **III**    |       | Less than or equal to  $2,000,000                             |       | 2.00                                  | %          |

###  

Any increase or decreasein the Letter of Credit Fee resulting from a change in Net Excess Availabilityshall become effective as of the first Business Day of the calendar quarter forwhich a Borrowing Base Certificate is delivered pursuant to Section6.3(a)(v) (setting forth the average Net Excess Availability for thenimmediately preceding calendar quarter); provided, however, thatif a Borrowing Base Certificate is not delivered within one (1) Business Daysafter the time period specified in such Section, then Pricing Level III shallapply as of such Business Day and thereafter, subject to prospective adjustmentupon actual receipt of such Borrowing Base Certificate.  The Letter of Credit Fee in effect from theClosing Date through September 30, 2006 shall be Pricing Level II.

(c)           Default Rate.  Upon the occurrence and during thecontinuation of an Event of Default (and at the election of Lender),

#### (i)            allObligations that have been charged to the Loan Account pursuant to the termshereof shall bear interest on the Daily Balance thereof at a per annum rateequal to two (2) percentage points above the per annum rate otherwiseapplicable hereunder, and

#### (ii)           theLetter of Credit fee provided for above shall be increased to two (2)percentage points above the per annum rate otherwise applicable hereunder.

(d)           Payment.  Interest, Letter of Credit fees, and allother fees payable hereunder shall be due and payable, in arrears, on the firstday of each month at any time that Obligations are outstanding.  Borrower hereby authorizes Lender, from timeto time, without prior notice to Borrower, to charge such interest and fees,all Lender Expenses (as and when incurred), the charges, commissions, fees, andcosts provided for in Section 2.12(e) (as and when accrued or incurred),the fees and costs provided for in Section 2.11 (as and when accrued orincurred), and all other payments as and when due and payable under any LoanDocument to Borrower’s Loan Account, which amounts thereafter shall constituteAdvances hereunder and shall accrue interest at the rate then applicable toAdvances hereunder applicable to Base Rate Loans.  Any interest not paid when due shall becompounded by being charged to Borrower’s Loan Account and shall thereafterconstitute Advances hereunder and shall accrue interest at the rate thenapplicable to Advances that are Base Rate Loans hereunder.

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(e)           Computation.  All interest and fees chargeable under theLoan Documents shall be computed on the basis of a 360 day year for the actualnumber of days elapsed.  In the event theBase Rate is changed from time to time hereafter, the rates of interesthereunder based upon the Base Rate automatically and immediately shall beincreased or decreased by an amount equal to such change in the Base Rate.

(f)            Intent to Limit Charges toMaximum Lawful Rate.  In no eventshall the interest rate or rates payable under this Agreement, plus any otheramounts paid in connection herewith, exceed the highest rate permissible underany law that a court of competent jurisdiction shall, in a final determination,deem applicable.  Borrower and theLender, in executing and delivering this Agreement, intend legally to agreeupon the rate or rates of interest and manner of payment stated within it; provided,however, that, anything contained herein to the contrarynotwithstanding, if said rate or rates of interest or manner of payment exceedsthe maximum allowable under applicable law, then, *ipso facto*, as of the date of this Agreement, Borrower areand shall be liable only for the payment of such maximum as allowed by law, andpayment received from Borrower in excess of such legal maximum, wheneverreceived, shall be applied to reduce the principal balance of the Obligationsto the extent of such excess.

## 2.7           Cash Management.

### (a)           Borrower shall (i) establish and/or maintain depositaccounts (each, a “**Cash Management Account**”)and cash management services of a type and on terms satisfactory to Lender atone or more of the banks and in accordance with procedures set forth on Schedule2.7 (each a “**Cash Management Bank**”), and shallrequest in writing and otherwise take such reasonable steps to ensure that allof its Account Debtors forward payment of the amounts owed by them directly tothe Concentration Account, and (ii) deposit or cause to be depositedpromptly, and in any event no later than the first Business Day after the dateof receipt thereof, all Collections (including those sent directly by AccountDebtors to a Cash Management Bank) into the Concentration Account.  If, notwithstanding the provisions of this Section2.7, Borrower receives or otherwise has dominion over or control of anyCollections, Borrower shall hold such Collections in trust for Lender and shallnot commingle such Collections with any of Borrower’s other funds or depositsuch Collections in any account of Borrower except as instructed by Lender.

### (b)           Borrower shall establish and maintain Cash ManagementAgreements with Lender and each Cash Management Bank each, a “**Cash Management Agreement**”. Each such Cash Management Agreement shall be a Control Agreement andprovide, among other things, that (i)  the Cash Management Bank willcomply with instructions of Lender directing the disposition of funds in theCash Management Account without further consent by Borrower, (ii) the CashManagement Bank has no rights of setoff or recoupment or any other claim againstthe applicable Cash Management Account, other than for payment of its servicefees and other charges directly related to the administration of such CashManagement Account and for returned checks or other items of payment which havebeen received by the Lender, and (iii) it immediately will forward bydaily sweep all amounts in the applicable Cash Management Account to theConcentration Account, or as otherwise directed by Lender.

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### (c)           Borrower shall establish and maintain Credit Card/PaymentAgreements with Lender and each Credit Card Processor.  Each such Credit Card/Payment Agreement shallprovide, among other things, that each such Credit Card/Payment Processor shalltransfer all proceeds of credit card charges for sales by Borrower received byit (or other amounts payable by such Credit Card/Payment Processor) directlyinto the Concentration Account on a daily basis.  Borrower shall not change or attempt tochange any direction or designation set forth in the Credit Card Agreementsregarding payment of charges without the prior written consent of Lender.

### (d)           So long as no Default or Event of Default has occurred andis continuing, Borrower may amend Schedule 2.7 to add or replace a CashManagement Account Bank or Cash Management Account  (other than the Concentration Account and theDesignated Account); provided, however, that (i) suchprospective Cash Management Bank shall be satisfactory to Lender and Lendershall have consented in writing in advance to the opening of such CashManagement Account with the prospective Cash Management Bank, and(ii) prior to the time of the opening of such Cash Management Account,Borrower and such prospective Cash Management Bank shall have executed anddelivered to Lender a Control Agreement. Borrower shall close any of its Cash Management Accounts (and establishreplacement cash management accounts in accordance with the foregoing sentence)promptly and in any event within 15 days of notice from Lender that thecreditworthiness of any Cash Management Bank is no longer acceptable in Lender’sreasonable judgment, or as promptly as practicable and in any event within 30days of notice from Lender that the operating performance, funds transfer, oravailability procedures or performance of the Cash Management Bank with respectto Cash Management Accounts or Lender’s liability under any Cash ManagementAgreement with such Cash Management Bank is no longer acceptable in Lender’sreasonable judgment.

### (e)           TheCash Management Accounts shall be cash collateral accounts, with all cash,checks and similar items of payment in such accounts securing payment of theObligations, and in which Borrower is hereby deemed to have granted a Lien oneach Cash Management Account.

## 2.8           Sweep;Crediting Payments; Float Charge.

### (a)           Whetheror not any Obligations are then outstanding, Borrower shall cause not less thanonce every week wire transfer of  thecollected balance of each Cash Management Account in excess of any minimumbalance, such minimum balance not to exceed Two Thousand Dollars ($2,000), tobe made to the Concentration Account. Telephone or electronic mail advice shall be provided to Lender on eachBusiness Day on which any such transfer is made and, if requested by Lender,confirmed by written notice, including detail of all remittances and a copy ofeach deposit slip.

### (b)           Whetheror not any Obligations are then outstanding, Borrower shall not have the rightor ability to draw upon, withdraw from or otherwise access any funds in theConcentration Account.  Any cash in theConcentration Account in excess of the Loan Account balance shall betransferred by Lender to the Designated Account and, provided no Default orEvent of Default has occurred and is continuing, such surplus may be applied inBorrower’s 

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discretion to payment of any subsequently accruedObligations or other purposes not inconsistent with the terms of thisAgreement.

### (c)           Thereceipt of any payment item by Lender (whether from transfers to Lender by theCash Management Banks pursuant to the Cash Management Agreements, the CreditCard/Payment Processors pursuant to the Credit Card/Payment Agreements  or otherwise) shall not be considered apayment on account of any Obligations unless such payment item is a wiretransfer of immediately available federal funds made to the ConcentrationAccount or unless and until such payment item is honored when presented forpayment.  Should any payment item not behonored when presented for payment, then Borrower shall be deemed not to havemade such payment and interest shall be calculated accordingly.  Anything to the contrary contained hereinnotwithstanding, any payment item shall be deemed received by Lender only if itis received into the Concentration Account on a Business Day on or before 2:00 p.m.(Boston time).  If any payment item isreceived into the Concentration Account on a non-Business Day or after 2:00p.m. (Boston time) on a Business Day, it shall be deemed to have been receivedby Lender as of the opening of business on the immediately following BusinessDay.  From and after the Closing Date,Lender shall be entitled to charge Borrower for two (2) Business Days of ‘clearance’or ‘float’ at the rate applicable to Base Rate Loans under Section 2.6 on allCollections that are received by Borrower (regardless of whether forwarded bythe Cash Management Banks to Lender). This across-the-board two (2) Business Days clearance or float charge onall Collections is acknowledged by the parties to constitute an integral aspectof the pricing of the financing of Borrower; the effect of such clearance orfloat charge being the equivalent of charging two (2) Business Days of intereston such Collections.  The partiesacknowledge and agree that the economic benefit of the foregoing provisions ofthis Section 2.8 shall be for the exclusive benefit of Lender.

2.9           Designated Account.  Lender is authorized to make the Advances,and Issuing Lender is authorized to issue the Letters of Credit, under thisAgreement based upon telephonic or other instructions received from anyonepurporting to be an Authorized Person, or without instructions if pursuant to Section2.6(d).  Borrower agrees to establishand maintain the Designated Account for the purpose of receiving the proceedsof the Advances requested by Borrower and made by Lender hereunder and whichshall be subject to a Control Agreement.

2.10         Maintenance of Loan Account;Statements of Obligations.  Lendershall maintain an account on its books in the name of Borrower (the “**Loan Account**”) on which Borrower will becharged with all Advances made by Lender to Borrower or for Borrower’s account,the Letters of Credit issued by Issuing Lender for Borrower’s account, and withall other payment Obligations hereunder or under the other Loan Documents,including, accrued interest, fees and expenses, and Lender Expenses.  In accordance with Section 2.8, theLoan Account will be credited with all payments received by Lender fromBorrower or for Borrower’s account, including all amounts received in theConcentration Account from any Cash Management Bank.  Lender shall render statements regarding theLoan Account to Borrower, including principal, interest, fees, and including anitemization of all charges and expenses constituting Lender Expenses owing, andsuch statements shall be conclusively presumed to be correct and accurate andconstitute an account stated between Borrower and the Lender unless, within 30days after receipt thereof by Borrower, Borrower shall deliver to Lenderwritten objection thereto describing the error or errors contained in any suchstatements.

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2.11         Fees.  In addition to any other fees payable underthis Agreement, Borrower shall pay to Lender the following fees and charges,which fees and charges shall be non-refundable when paid:

(a)           Fee Letter Fees.  As and when due and payable under the termsof the Fee Letter, Borrower shall pay to Lender the fees set forth in the FeeLetter, including, without limitation, the Commitment Fee, the Unused Line Feeand the Applicable Prepayment Premium, and

(b)           Audit, Appraisal, and ValuationCharges.  For the separate account ofLender, audit, appraisal, and valuation fees and charges including, withoutlimitation, charges paid or incurred by Lender if it elects to employ theservices of one or more third Persons to perform financial audits of Borrower,to appraise the Collateral, or any portion thereof, or to assess Borrower’sbusiness valuation.

## 2.12         Lettersof Credit.

### (a)           Subjectto the terms and conditions of this Agreement, the Issuing Lender agrees toissue letters of credit for the account of Borrower (each, a “Letter of Credit”).  To request the issuance of a Letter of Credit(or the amendment, renewal, or extension of an outstanding Letter of Credit),Borrower shall hand deliver or telecopy (or transmit by electroniccommunication, if arrangements for doing so have been approved by the IssuingLender) to the Issuing Lender and Lender at least three (3) Business Days inadvance of the requested date of issuance, amendment, renewal, or extension anotice requesting the issuance of a Letter of Credit or identifying the Letterof Credit to be amended, renewed, or extended, the date of issuance, amendment,renewal, or extension, the date on which such Letter of Credit is to expire,the amount of such Letter of Credit, the name and address of the beneficiarythereof, and such other information as shall be necessary to prepare, amend,renew, or extend such Letter of Credit. The Issuing Lender shall have no obligation to issue a Letter of Creditif any of the following would result after giving effect to the requestedLetter of Credit:

#### (i)            the Letter of Credit Usage wouldexceed $2,000,000, or

#### (ii)           the Letter of Credit Usage wouldexceed the Borrowing Base less the Availability Reserves less the then extantamount of outstanding Advances, or

#### (iii)          the Letter of Credit Usage wouldexceed the Maximum Revolver Amount less the then extant amount of outstandingAdvances, and

#### (iv)          the expiration of any

#### (A)                              standbyLetter of Credit would be later than the *earlierof* (x) thirty (30) days prior to the Maturity Date, or (y) one (1)year from date of its original issue; and

#### (B)**                               **QualifiedImport Letter of Credit, would be later than the *earlier of* (x) thirty (30) days prior to the Maturity Date,or (y) sixty (60) days after its original issue.

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Each Letter of Credit shall be in form and substanceacceptable to the Issuing Lender (in the exercise of its Permitted Discretion),including the requirement that the amounts payable thereunder must be payablein Dollars.  If Issuing Lender isobligated to advance funds under a Letter of Credit, Borrower immediately shallreimburse such L/C Disbursement to Issuing Lender by paying to Lender an amountequal to such L/C Disbursement not later than 2:00 p.m., Boston time, on thedate that such L/C Disbursement is made, if Borrower shall have receivedwritten or telephonic notice of such L/C Disbursement prior to 1:00 p.m.(Boston time) on such date, or, if such notice has not been received byBorrower prior to such time on such date, then not later than 2:00 p.m. (Bostontime) on (i) the Business Day that Borrower receives such notice, if suchnotice is received prior to 1:00 p.m. (Boston time) on the date of receipt,and, in the absence of such reimbursement, the L/C Disbursement immediately andautomatically shall be deemed to be an Advance hereunder and, thereafter, shallbear interest at the rate then applicable to Advances that are Base Rate Loansunder Section 2.6.  To the extentan L/C Disbursement is deemed to be an Advance hereunder, Borrower’s obligationto reimburse such L/C Disbursement shall be discharged and replaced by theresulting Advance.  Promptly followingreceipt by Lender of any payment from Borrower pursuant to this paragraph,Lender shall distribute such payment to the Issuing Lender.

### (b)           EachBorrower hereby agrees to indemnify, save, defend, and hold Lender and IssuingLender harmless from any loss, cost, expense, or liability, and reasonableattorneys fees incurred by Lender and Issuing Lender arising out of or inconnection with any Letter of Credit; provided, however, thatBorrower shall not be obligated hereunder to indemnify for any loss, cost,expense, or liability that is caused by the gross negligence or willfulmisconduct of Lender or the Issuing Lender. Borrower agrees to be bound by Issuing Lender’s interpretations of anyLetter of Credit issued by Issuing Lender to or for Borrower’s account, eventhough this interpretation may be different from Borrower’s own, and Borrowerunderstands and agrees that Issuing Lender shall not be liable for any error,negligence, or mistake, whether of omission or commission, in followingBorrower’s instructions or those contained in the Letter of Credit or anymodifications, amendments, or supplements thereto.

### (c)           Ifby reason of (i) any change in any applicable law, treaty, rule, orregulation or any change in the interpretation or application thereof by anyGovernmental Authority, or (ii) compliance by the Issuing Issuer or Lenderwith any direction, request, or requirement (irrespective of whether having theforce of law) of any Governmental Authority or monetary authority including,Regulation D of the Federal Reserve Board as from time to time in effect (andany successor thereto):

#### (i)            any reserve, deposit, or similarrequirement is or shall be imposed or modified in respect of any Letter ofCredit issued hereunder, or

#### (ii)           there shall be imposed on the IssuingLender or the Lender any other condition regarding any Letter of Credit issuedpursuant hereto;

and the result of the foregoing is to increase,directly or indirectly, the cost to the Issuing Lender of issuing, making ormaintaining any Letter of Credit or to reduce the amount receivable in respectthereof by the Issuing Lender, then, and in any such case, Issuing Lender may,at any time within a reasonable period after the additional cost is incurred orthe amount received is

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reduced, notify Borrower, and Borrower shall pay ondemand such amounts as Issuing Lender may specify to be necessary to compensateIssuing Lender for such additional cost or reduced receipt, together withinterest on such amount from the date of such demand until payment in fullthereof at the rate then applicable to Base Rate Loans hereunder.  The determination by Issuing Lender of anyamount due pursuant to this Section, as set forth in a certificate settingforth the calculation thereof in reasonable detail, shall, in the absence ofmanifest or demonstrable error, be final and conclusive and binding on all ofthe parties hereto.

## 2.13         LIBOROption.

(a)           Interest and Interest PaymentDates.  In lieu of having interestcharged at the rate based upon the Base Rate, Borrower shall have the option(the “**LIBOR Option**”) to haveinterest on all or a portion of the Advances be charged at a rate of interestbased upon the LIBOR Rate.  Interest onLIBOR Rate Loans shall be payable on the earliest of (i) the last day ofthe Interest Period applicable thereto, (ii) the occurrence of an Event ofDefault in consequence of which Lender elects to accelerate the maturity of allor any portion of the Obligations, or (iii) termination of this Agreementpursuant to the terms hereof.  On thelast day of each applicable Interest Period, unless Borrower properly hasexercised the LIBOR Option with respect thereto, the interest rate applicableto such LIBOR Rate Loan automatically shall convert to the rate of interestthen applicable to Base Rate Loans of the same type hereunder.  At any time that Default has occurred and iscontinuing, Borrower no longer shall have the option to request that Advancesbear interest at the LIBOR Rate and Lender shall have the right, at its option,to convert the interest rate on all outstanding LIBOR Rate Loans to the ratethen applicable to Base Rate Loans hereunder and Borrower shall be responsiblefor all Funding Losses arising in connection thereof.  Any LIBOR Rate Loan which matures while aDefault or Event of Default has occurred and is continuing shall be converted,at the option of Lender, to a Base Rate Loan notwithstanding Borrower’sexercise of LIBOR Rate Option in connection thereto that such Loan be continuedas a LIBOR Rate Loan.

### (b)           LIBORElection.

#### (i)            Borrower may, at any time and fromtime to time and in addition to any Borrowing made initially as an Advancehaving interest charged based upon the LIBOR Rate, so long as no Default hasoccurred and is continuing, elect to exercise the LIBOR Option by notifyingLender prior to 2:00 p.m. (Boston time) at least 3 Business Days prior to thecommencement of the proposed Interest Period (the “**LIBOR Deadline**”). Notice of Borrower’s election of the LIBOR Option for a permittedportion of the Advances and an Interest Period pursuant to this Section shallbe made by delivery to Lender of a LIBOR Notice received by Lender before theLIBOR Deadline, or by telephonic notice received by Lender before the LIBORDeadline (to be confirmed by delivery to Lender of a LIBOR Notice received byLender prior to 5:00 p.m. (Boston time) on the same day).

#### (ii)           Each LIBOR Notice shall beirrevocable and binding on Borrower.  Inconnection with each LIBOR Rate Loan, Borrower shall indemnify, defend, andhold Lender harmless against any loss, cost, or expense incurred by Lender as aresult of (a) the payment of any principal of any LIBOR Rate Loan otherthan on the last day of an 

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#### Interest Period applicable thereto (includingas a result of an Event of Default), (b) the conversion of any LIBOR RateLoan other than on the last day of the Interest Period applicable thereto, or(c) the failure to borrow, convert, continue or prepay any LIBOR Rate Loanon the date specified in any LIBOR Notice delivered pursuant hereto (suchlosses, costs, and expenses, collectively, “Funding Losses”).  Funding Losses shall, with respect to Lender,be deemed to equal the amount determined by Lender to be the excess, if any, of(i) the amount of interest that would have accrued on the principal amountof such LIBOR Rate Loan had such event not occurred, at the LIBOR Rate thatwould have been applicable thereto, for the period from the date of such eventto the last day of the then current Interest Period therefor (or, in the caseof a failure to borrow, convert or continue, for the period that would havebeen the Interest Period therefor), minus (ii) the amount of interest thatwould accrue on such principal amount for such period at the interest ratewhich Lender would be offered were it to be offered, at the commencement ofsuch period, Dollar deposits of a comparable amount and period in the Londoninterbank market.  A certificate ofLender delivered to Borrower setting forth any amount or amounts that Lender isentitled to receive pursuant to this Section shall be conclusive absentmanifest error.

#### (iii)          Borrower shall have not more than four(4)  LIBOR Rate Loans in effect at anygiven time.  Borrower only may exercisethe LIBOR Option for LIBOR Rate Loans of at least $1,000,000 and integral multiplesof $100,000 in excess thereof.

### (c)           Prepayments.  Borrower may prepay LIBOR Rate Loans at anytime; provided, however, that in the event that LIBOR Rate Loans areprepaid on any date that is not the last day of the Interest Period applicablethereto, including as a result of any automatic prepayment through the requiredapplication by Lender of proceeds of Collections in accordance with Section2.4(b) or for any other reason, including early termination of the term ofthis Agreement or acceleration of all or any portion of the Obligationspursuant to the terms hereof, Borrower shall indemnify, defend, and hold Lenderharmless against any and all Funding Losses in accordance with clause (b)above.

### (d)           SpecialProvisions Applicable to LIBOR Rate.

#### (i)            The LIBOR Rate may be adjusted byLender on a prospective basis to take into account any additional or increasedcosts to Lender of maintaining or obtaining any Eurodollar deposits orincreased costs due to changes in applicable law occurring subsequent to thecommencement of the then applicable Interest Period, including changes in taxlaws (except changes of general applicability in corporate income tax laws) andchanges in the reserve requirements imposed by the Board of Governors of theFederal Reserve System (or any successor), excluding the Reserve Percentage,which additional or increased costs would increase the cost of funding loansbearing interest at the LIBOR Rate.  Inany such event, Lender shall give Borrower notice of such a determination and adjustmentand, upon its receipt of the notice from Lender, setting forth the basis foradjusting such LIBOR Rate and the method for determining the amount of suchadjustment, Borrower shall  repay the LIBOR Rate Loans with respect towhich such adjustment is made (together with any amounts due under clause(b)(ii) above).

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#### (ii)           In the event that any change inmarket conditions or any law, regulation, treaty, or directive, or any changetherein or in the interpretation of application thereof, shall at any timeafter the date hereof, in the reasonable opinion of Lender, make it unlawful orimpractical for Lender to fund or maintain LIBOR Rate Loans or to continue suchfunding or maintaining, or to determine or charge interest rates at the LIBORRate, Lender shall give notice of such changed circumstances to Borrower and(y) in the case of any LIBOR Rate Loans of Lender that are outstanding,the date specified in such Lender’s notice shall be deemed to be the last dayof the Interest Period of such LIBOR Rate Loans, and interest upon the LIBORRate Loans of Lender thereafter shall accrue interest at the rate thenapplicable to Base Rate Loans, and (z) Borrower shall not be entitled toelect the LIBOR Option until Lender determines that it would no longer be unlawfulor impractical to do so.

### (e)           NoRequirement of Matched Funding. Anything to the contrary contained herein notwithstanding, Lender is notrequired actually to acquire Eurodollar deposits to fund or otherwise matchfund any Obligation as to which interest accrues at the LIBOR Rate.  The provisions of this Section shall apply asif Lender had match funded any Obligation as to which interest is accruing atthe LIBOR Rate by acquiring Eurodollar deposits for each Interest Period in theamount of the LIBOR Rate Loans.

2.14         Capital Requirements.  If, after the date hereof, Lender determinesthat (i) the adoption of or change in any law, rule, regulation orguideline regarding capital requirements for banks or bank holding companies,or any change in the interpretation or application thereof by any GovernmentalAuthority charged with the administration thereof, or (ii) compliance byLender or its parent bank holding company with any guideline, request ordirective of any such entity regarding capital adequacy (whether or not havingthe force of law), will have the effect of reducing the return on Lender’s orsuch holding company’s capital as a consequence of Lender’s commitmenthereunder to a level below that which Lender or such holding company could haveachieved but for such adoption, change, or compliance (taking intoconsideration Lender’s or such holding company’s then existing policies withrespect to capital adequacy and assuming the full utilization of such entity’scapital) by any amount deemed by Lender to be material, then Lender may notifyBorrower.  Following receipt of suchnotice, Borrower agrees to pay Lender on demand the amount of such reduction ofreturn of capital as and when such reduction is determined, payable within 60days after presentation by Lender of a statement in the amount and settingforth in reasonable detail Lender’s calculation thereof and the assumptionsupon which such calculation was based (which statement shall be deemed true andcorrect absent manifest error).  Indetermining such amount, Lender may use any reasonable averaging andattribution methods.

2.15         Securitization.  Borrower hereby acknowledges that Lender andits Affiliates may sell or securitize the Loans (a**“Securitization”**) through the pledge of the Loans as collateralsecurity for loans to Lender or its Affiliates or through the sale of the Loansor the issuance of direct or indirect interests in the Loans, which loans toLenders or its Affiliates or direct or indirect interests will be rated byMoody’s, Standard & Poor’s or one or more other rating agencies (the**“Rating Agencies”**).  Borrower shall cooperate with Lender and itsAffiliates to effect the Securitization including, without limitation, by(a) amending this Agreement and the other Loan Documents, and executingsuch additional documents, as reasonably requested by 

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such Lenders in connection with the Securitization,provided that (i) any such amendment or additional documentation does notimpose material additional costs on the Borrower, and (ii) any suchamendment or additional documentation does not materially adversely affect therights, or materially increase the obligations, of Borrower under the LoanDocuments or change or affect in a manner adverse to Borrower the financialterms of the Loans, (b) providing such information as may be reasonablyrequested by Lender in connection with the rating of the Loans or theSecuritization, and (c) providing in connection with any rating of theLoans a certificate (i) agreeing to indemnify Lender and any of itsAffiliates, any of the Rating Agencies, or any party providing credit supportor otherwise participating in the Securitization (collectively, the**“Securitization Parties”**) for any losses,claims, damages or liabilities (the**“SecuritizationLiabilities”**) to which Lender, its Affiliates or such SecuritizationParties may become subject insofar as the Securitization Liabilities arise outof or are based upon any untrue statement or alleged untrue statement of anymaterial fact contained in any Loan Document or in any writing delivered by oron behalf of the Borrower or any Affiliates to Lender in connection with anyLoan Document or arise out of or are based upon the omission or allegedomission to state therein a material fact required to be stated therein, ornecessary in order to make the statements therein, in light of thecircumstances under which they were made not misleading, and such indemnityshall survive any transfer by Lender or its successors or assigns of the Loans,and (ii) agreeing to reimburse Lenders and any of its Affiliates for anylegal or other expenses reasonably incurred by such Persons in connection withdefending the Securitization Liabilities.

# **3.             CONDITIONS; TERM OF AGREEMENT.**

3.1           Conditions Precedent to theInitial Extension of Credit.  Theobligation of Lender to make the initial Advance (or otherwise to extend anycredit provided for hereunder), is subject to the fulfillment, to thesatisfaction of Lender, of each of the conditions precedent set forth below:

### (a)           Allfinancing statements required by Lender, shall have been filed;

### (b)           Lendershall have received each of the following documents, in form and substancesatisfactory to Lender, duly executed, and each such document shall be in fullforce and effect:

#### (i)            the Intellectual Property SecurityAgreement;

#### (ii)           All Control Agreements and/or CashManagement Agreements;

#### (iii)          the Credit Card/Payment Agreement withTransFirst, Inc.;

#### (iv)          the Fee Letter;

#### (v)           the Disbursement Letter,

#### (vi)          the Perfection Certificate of eachBorrower;

#### (vii)         the Certificate of Officers of eachBorrower;

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#### (viii)        Signature Authorization;

#### (ix)           Waiver Letter; and

#### (x)            Assignment of Services Contracts andConsent of Assignor.

### (c)           Lendershall have received evidence of delivery of all required transfer forms and/ornotices to American Express, Chase Paymentech, Discover Network and PayPalrelating to payment of proceeds of Inventory sales directly to theConcentration Account;

### (d)           Lendershall have received evidence that any and all of Borrower’s deposit accounts withBank of the West have been closed and terminated;

### (e)           Lendershall have received Collateral Access Agreements with respect to any of theleased Borrower’s distribution center locations;

### (f)            Lendershall have received Bailee Acknowledgments with respect to any of the Borrower’sthird party warehouse locations;

### (g)           Lendershall have received a certificate from the Secretary of Borrower attesting tothe resolutions of Borrower’s board of directors authorizing its execution,delivery, and performance of this Agreement and the other Loan Documents towhich Borrower is a party and authorizing specific officers of such Borrower toexecute the same;

### (h)           Lendershall have received copies of Borrower’s Governing Documents, as amended,modified, or supplemented to the Closing Date, certified by the Secretary ofBorrower;

### (i)            Lendershall have received a certificate of status with respect to Borrower, datedwithin 10 days of the Closing Date, such certificate to be issued by theappropriate officer of the jurisdiction of organization of Borrower, whichcertificate shall indicate that Borrower is in good standing in suchjurisdiction;

### (j)            Lendershall have received certificates of status with respect to Borrower, each datedwithin 30 days of the Closing Date, such certificates to be issued by theappropriate officer of the jurisdictions (other than the jurisdiction oforganization of Borrower) in which its failure to be duly qualified or licensedwould constitute a Material Adverse Change, which certificates shall indicatethat Borrower is in good standing in such jurisdictions;

### (k)           Lendershall have received certificates of insurance, as are required by Section6.8, the form and substance of which shall be satisfactory to Lender;

### (l)            Lendershall have received opinions of Borrower’s counsel in form and substancesatisfactory to Lender;

### (m)          Lendershall have received satisfactory evidence (including a certificate of the chieffinancial officer of Parent) that all tax returns required to be filed byBorrower have been timely filed and all taxes upon Borrower or its properties,assets, income, and franchises 

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(including Real Property taxes and payroll taxes) havebeen paid prior to delinquency, except such taxes that are the subject ofPermitted Protests;

### (n)           Lendershall have completed its business, legal, and collateral due diligence,including (i) a collateral audit and review of Borrower’s books andrecords and verification of Borrower’s representations and warranties to theLender, the results of which shall be satisfactory to Lender, and (ii) aninspection of each of the locations where Inventory is located, the results ofwhich shall be satisfactory to Lender;

### (o)           Lendershall have received completed reference checks with respect to Borrower’smanagement and the holders of any Stock of the Borrower, the results of whichare satisfactory to Lender in its sole discretion;

### (p)           Lendershall have received an appraisal of the Net Retail Liquidation Value and NetLiquidation Percentage applicable to Borrower’s Inventory, the results of whichshall be satisfactory to Lender;

### (q)           Lendershall have received the Closing Date Business Plan;

### (r)            Borrowershall have paid all Lender Expenses incurred in connection with thetransactions evidenced by this Agreement;

### (s)           Lendershall have received copies of each of the Service Contracts, together with acertificate of the Secretary of the applicable Borrower certifying each suchdocument as being a true, correct, and complete copy thereof;

### (t)            Borrowershall have received all licenses, approvals or evidence of other actionsrequired by any Governmental Authority in connection with the execution anddelivery by Borrower of this Agreement or any other Loan Document or with theconsummation of the transactions contemplated hereby and thereby;

### (u)           allother documents and legal matters in connection with the transactionscontemplated by this Agreement shall have been delivered, executed, or recordedand shall be in form and substance satisfactory to Lender; and

### (v)           Lendershall have received, reviewed and approved Borrower’s plan to resolve pendinglitigation regarding the authenticity of Inventory bearing the “Cartier” tradename and trademark.

3.2           Conditions Subsequent to theInitial Extension of Credit.  Theobligation of Lender (or any member thereof) to continue to make Advances (orotherwise extend credit hereunder) is subject to the fulfillment, on or beforethe date applicable thereto, of each of the conditions subsequent set forthbelow (the failure by Borrower to so perform or cause to be performedconstituting an Event of Default):

### (a)           Onor before 60 days after the Closing Date, (i) any and all proceeds of sales(other than payments made with written checks or money orders which aredelivered directly to Borrower) shall be directly deposited by the applicableCredit Card/Payment 

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Processor into the Concentration Account, (ii) any andall cash management operations with Wells Fargo (other than with respect to theWells Fargo Permitted DDA), shall have been closed and terminated (and moved toLaSalle Bank, N.A.); and (iii) the Control Agreement relating to the WellsFargo Permitted DDA shall have been amended to provide for automatic sweeps ofany balances thereof in excess of $2,000 to be deposited into the ConcentrationAccount no less than once weekly;

### (b)           Onor before 30 days after the Closing Date, Lender shall have received the CreditCard/Payment Agreement with Discover Network and I4 Commerce, Inc. in form andsubstance reasonably satisfactory to Lender; and

### (c)           Onor before 30 days after the Closing Date, Lender shall have received anexecuted loss payee endorsement from Borrower’s insurer in form and substancereasonably acceptable to Lender.

3.3           Conditions Precedent to allExtensions of Credit.  The obligationof the Lender to make any Advances (or to extend any other credit hereunder)shall be subject to the following conditions precedent:

### (a)           therepresentations and warranties contained in this Agreement and the other LoanDocuments shall be true and correct in all material respects on and as of thedate of such extension of credit, as though made on and as of such date (exceptto the extent that such representations and warranties expressly relate solelyto an earlier date);

### (b)           noDefault or Event of Default shall have occurred and be continuing on the dateof such extension of credit, nor shall either result from the making thereof;

### (c)           noinjunction, writ, restraining order, or other order of any nature prohibiting,directly or indirectly, the extending of such credit shall have been issued andremain in force by any Governmental Authority against Borrower, Lender, or anyof its Affiliates; and

### (d)           noMaterial Adverse Change shall have occurred.

3.4           Term.  This Agreement shall become effective uponthe execution and delivery hereof by Borrower and the Lender and shall continuein full force and effect for a term ending on [July     ,2010] (the “**Maturity Date**”).  The foregoing notwithstanding, the Lendershall have the right to terminate its obligations under this Agreement immediatelyand without notice upon the occurrence and during the continuation of an Eventof Default.

3.5           Effect of Termination.  On the date of termination of this Agreement,all Obligations (including any Applicable Prepayment Premium and any contingentreimbursement obligations of Borrower with respect to any outstanding Lettersof Credit) immediately shall become due and payable without notice or demand(including (a) either (i) providing cash collateral to be held byLender in an amount equal to 105% of the then extant Letter of Credit Usage, or(ii) causing the original Letters of Credit to be returned to the IssuingLender, and (b) providing cash collateral for Bank Product Obligations andLender Expenses.  No termination of thisAgreement, however, shall relieve or discharge Borrower of its duties,Obligations, or covenants hereunder and the Lender’s Liens in the Collateralshall remain in effect until all

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Obligations have been fully and finally discharged andthe Lender’s obligations to provide additional credit hereunder have beenterminated and Lender shall have affirmatively released such liens.  When this Agreement has been terminated andall of the Obligations have been fully and finally discharged and the Lender’sobligations to provide additional credit under the Loan Documents have beenterminated irrevocably, Lender will, at Borrower’s sole expense, execute anddeliver any UCC termination statements, lien releases, mortgage releases,re-assignments of trademarks, discharges of security interests, and othersimilar discharge or release documents (and, if applicable, in recordable form)as are reasonably necessary to release, as of record, the Lender’s Liens andall notices of security interests and liens previously filed by Lender withrespect to the Obligations.

## 3.6           EarlyTermination by Borrower.  Borrower hasthe option, at any time upon 90 days prior written notice by Borrower toLender, to terminate this Agreement by paying to Lender in cash, theObligations in full (including either (i) providing cash collateral to beheld by Lender in an amount equal to 105% of the then extant Letter of CreditUsage, or (ii) causing the original Letters of Credit to be returned tothe Issuing Lender), together with the Applicable Prepayment Premium.  If Borrower has sent a notice of terminationpursuant to the provisions of this Section, then Lender’s commitment hereundershall immediately terminate and Borrower shall be obligated to repay theObligations, including (a) either (i) providing cash collateral to beheld by Lender in an amount equal to 105% of the then extant Letter of CreditUsage, or (ii) causing the original Letters of Credit to be returned tothe Issuing Lender, and (b) providing cash collateral for Bank ProductObligations and Lender Expenses together with the Applicable PrepaymentPremium, on the date set forth as the date of termination of this Agreement insuch notice.  In the event of thetermination of this Agreement at any time prior to the Maturity Date, for anyother reason, including (a) termination upon the election of the Lender toterminate after the occurrence of an Event of Default, (b) foreclosure andsale of Collateral, (c) sale of the Collateral in any InsolvencyProceeding, or (d) restructure, reorganization or compromise of theObligations by the confirmation of a plan of reorganization, or any other planof compromise, restructure, or arrangement in any Insolvency Proceeding, then,in view of the impracticability and extreme difficulty of ascertaining theactual amount of damages to the Lender or profits lost by the Lender as aresult of such early termination, and by mutual agreement of the parties as toa reasonable estimation and calculation of the lost profits or damages of theLender, Borrower shall pay and the Obligations shall include the ApplicablePrepayment Premium.

# **4.             CREATION OF SECURITY INTEREST.**

4.1           Grant of Security Interest.  Borrower hereby grants to Lender and anyother holder of Obligations, a continuing security interest in any and all ofits personal property including, without limitation, all of its right, title,and interest in all currently existing and hereafter acquired or arisingPersonal Property Collateral and all proceeds and products thereof in order tosecure prompt repayment of any and all of the Obligations in accordance withthe terms and conditions of the Loan Documents and in order to secure promptperformance by Borrower of its covenants and duties under the Loan Documents,including without limitation the Obligations and the Indemnified Liabilities.  The Lender’s Liens granted herein in and tothe Personal Property Collateral shall attach to all Personal PropertyCollateral without further act on the part of Lender or Borrower.  Anything contained in this Agreement or any otherLoan Document to the contrary notwithstanding, except for PermittedDispositions, Borrower has no 

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authority, express or implied, to dispose of any itemor portion of the Collateral.  Borrowerhereby agrees, upon the request of Lender, to deliver, as promptly as practicable,but in any event within sixty (60) days, titles to motor vehicles and mortgageswith respect to Real Property Collateral and take such other steps as may bereasonably requested (including, without limitation, the delivery of legalopinions, consulting engineer’s reports and title insurance) so as to provideLender a perfected first-priority security interest in such assets.

4.2           Control of Collateral.  If from time to time any Collateral,including any proceeds or supporting obligations, consists of property orrights of Borrower in which the perfection or priority of Lender’s securityinterest is dependent upon or enhanced by Lender’s gaining control of suchCollateral, Borrower shall immediately notify Lender and, at Lender’s request,deliver the appropriate Control Agreements or take such actions as may benecessary to give Lender control over such Collateral as provided in the Code.

4.3           Negotiable Collateral.  If from time to time any Collateral,including any proceeds thereof, is evidenced by or consists of letters ofcredit, Instruments, Documents, Goods covered by Documents, Investment Propertyor Chattel Paper, and if perfection or priority of Lender’s security interestin such Collateral is dependent on or enhanced by possession, immediately uponthe request of Lender, shall endorse and deliver physical possession of suchCollateral to Lender.

4.4           Collection of Accounts, GeneralIntangibles, and Negotiable Collateral. At any time after the occurrence and during the continuation of an Eventof Default, Lender or Lender’s designee may (a) notify Account Debtors ofBorrower that the Accounts, Chattel Paper, or General Intangibles have beenassigned to Lender or that Lender has a security interest therein, or(b) collect the Accounts, Chattel Paper, or General Intangibles directlyand charge the collection costs and expenses to the Loan Account.  Borrower shall hold in trust for the Lender,as the Lender’s trustee, any Collections that it receives and immediately willdeliver said Collections to Lender or a Cash Management Bank in their originalform as received by Borrower.

4.5           Delivery of AdditionalDocumentation Required.  At any timeupon the request of Lender, Borrower shall execute and deliver to Lender, anyand all security agreements, pledges, assignments, endorsements of certificatesof title, bailee acknowledgments and all other instruments or documents (the “**Additional Documents**”) that Lender mayrequest in its Permitted Discretion, each in form and substance satisfactory toLender, to perfect and continue perfected or to better perfect the Lender’sLiens in the Collateral (whether now owned or hereafter arising or acquired),in order to fully consummate all of the transactions contemplated hereby andunder the other Loan Documents.  To the maximumextent permitted by applicable law, Borrower authorizes Lender to execute anysuch Additional Documents in Borrower’s name and authorizes Lender to file suchexecuted Additional Documents in any appropriate filing office, including,without limitation, financing statements designating collateral as “all assets.”  Without limiting the foregoing, Borrowershall (a) give the Lender prompt written notice of any Commercial TortClaim of Borrower not specifically identified herein and any Letter of Credit Rightof Borrower.  Borrower shall grant to theLender, for the benefit of the Lender, a security interest in any suchCommercial Tort Claim or Letter of Credit Right and the proceeds thereof, and(b) on such periodic basis as Lender shall require, (i) provideLender with a report of all new patentable, copyrightable or trademarkablematerials acquired or generated by Borrower during 

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the prior period, (ii) cause all patents,copyrights, and trademarks acquired or generated by Borrower that are notalready the subject of a registration with the appropriate filing office (or anapplication therefor diligently prosecuted) to be registered with suchappropriate filing office in a manner sufficient to impart constructive noticeof Borrower’s ownership thereof, (iii) cause to be prepared, executed, anddelivered to Lender supplemental schedules to the applicable Loan Documents toidentify such patents, copyrights and trademarks as being subject to thesecurity interests created thereunder, and (iv) execute and deliver toLender at Lender’s request Patent, Trademark or Copyright Security Agreementswith respect to such patents, trademarks or copyrights for filing with theappropriate filing office.

4.6           Power of Attorney.  Borrower hereby irrevocably makes, constitutes,and appoints Lender (and any of Lender’s officers, employees, or agentsdesignated by Lender) as Borrower’s true and lawful attorney, with power to(a) if Borrower refuses to, or fails timely to execute and deliver any ofthe documents described in Section 4.4 or 4.5, sign the name of Borroweron any of the documents described in Section 4.4 or 4.5, (b) at anytime that an Event of Default has occurred and is continuing, sign Borrower’sname on any invoice or bill of lading relating to the Collateral, draftsagainst Account Debtors, or notices to Account Debtors, (c) send requestsfor verification of Accounts, (d) endorse Borrower’s name on anyCollection item that may come into the Lender’s possession, (e) at anytime that an Event of Default has occurred and is continuing, make, settle, andadjust all claims under Borrower’s policies of insurance and make alldeterminations and decisions with respect to such policies of insurance, and(f) at any time that an Event of Default has occurred and is continuing,settle and adjust disputes and claims respecting the Accounts, Chattel Paper,or General Intangibles directly with Account Debtors, for amounts and uponterms that Lender determines to be reasonable, and Lender may cause to beexecuted and delivered any documents and releases that Lender determines to benecessary.  The appointment of Lender asBorrower’s attorney, and each and every one of its rights and powers, beingcoupled with an interest, is irrevocable until all of the Obligations have beenfully and finally repaid and performed and the Lender’s obligations to extendcredit hereunder are terminated.

4.7           Control Agreements.  No arrangement contemplated hereby or by anyControl Agreement in respect of any DDA or any Securities Accounts or other InvestmentProperty shall be modified by Borrower without the prior written consent ofLender.

4.8           Right to Inspect; Inventories,Appraisals and Audits.  Lender(through any of their respective officers, employees, or agents) shall have theright, from time to time hereafter to inspect the Books and to check, test, andappraise the Collateral in order to verify Borrower’s financial condition orthe amount, quality, value, condition of, or any other matter relating to, theCollateral.  Without limiting the generalityof the foregoing:

### (a)           AtBorrower’s expense, third parties acceptable to Lender shall conduct physicalinventories at all of Borrower’s locations at least 2 times per fiscalyear.  Lender, at the expense ofBorrower, may participate in and/or observe each physical count and/orinventory of so much of the Collateral as consists of Inventory which isundertaken on behalf of Borrower. Without limiting any provision of this Agreement, Lender may establishor amend Availability Reserves and Inventory Reserves based on the results ofsuch physical inventories.

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### (b)           Lender,from time to time, may obtain or conduct appraisals conducted by suchappraisers as are satisfactory to Lender, the first such appraisal and allrelated reports to be completed prior to the Closing Date and, thereafter,Lender anticipates conducting two (2) appraisals per twelve-month period,  but (ii) if an Event of Default has occurred and is continuing, at Borrower’sexpense, Lender may obtain or conduct appraisals more frequently.  In addition to the foregoing, the Lender mayfrom time to time obtain desktop appraisals at Borrower’s expense.

### (c)           Lender,from time to time, may obtain or conduct commercial finance audits of theBorrower’s operations, provided, however: absent the existence ofany Event of Default, Borrower shall not be required to pay for more than two(2) commercial finance audits per calendar year, but, if an Event of Defaulthas occurred and is continuing, at Borrower’s expense, Lender may obtain orconduct commercial finance audits more frequently, and shall not be subjectto  the limit set forth above on theamount payable by Borrower in connection with the same.

# **5.             REPRESENTATIONS AND WARRANTIES.**

In order to induce Lender to enter into thisAgreement, Borrower makes the following representations and warranties toLender which shall be true, correct, and complete, in all material respects, asof the date hereof, and shall be true, correct, and complete, in all materialrespects, as of the Closing Date, and at and as of the date of the making ofeach Advance (or other extension of credit) made thereafter, as though made onand as of the date of such Advance (or other extension of credit) (except tothe extent that such representations and warranties relate solely to an earlierdate) and such representations and warranties shall survive the execution anddelivery of this Agreement:

5.1           No Encumbrances.  Borrower has good and indefeasible title toits Collateral and its Real Property, free and clear of Liens except for PermittedLiens.

5.2           Eligible Accounts.  The Eligible Accounts are bona fide existingpayment obligations of Account Debtors created by the sale and delivery ofInventory or the rendition of services to such Account Debtors in the ordinarycourse of Borrower’s business, owed to Borrower without defenses, disputes,offsets, counterclaims, or rights of return or cancellation.  As to each Account that is identified byBorrower as an Eligible Account in a borrowing base report submitted to Lender,such Account is not excluded as ineligible by virtue of one or more of theexcluding criteria set forth in the definition of eligible Accounts.

5.3           Inventory; Eligible Inventory.  All Inventory is Authentic and all EligibleInventory is of good and merchantable quality, free from defects.  As to each item of Inventory that isidentified by Borrower as Eligible Inventory in a borrowing base reportsubmitted to Lender, such inventory is located at one of the locations setforth on Schedule E-1 or is in transit from one such location to anothersuch location and is not otherwise excluded as ineligible by virtue of one ormore of the excluding criteria set forth in the definition of EligibleInventory.

5.4           Equipment.  All of the Equipment is used or held for usein Borrower’s business and is fit for such purposes.

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5.5           Location of Inventory andEquipment.  Except as set forth on Schedule5.5, the Inventory and Equipment are not stored with a bailee,warehouseman, or similar party.  TheInventory and Equipment are located only at the locations identified on Schedule5.5.

5.6           Inventory Records.  Borrower keeps correct and accurate recordsitemizing and describing the type, quality, and quantity of its Inventory andthe book value thereof.

5.7           Legal Status.  Borrower represents and warrants that(a)  Borrower’s exact legal name is that indicated on the PerfectionCertificate and on the signature page hereof; (b)  Borrower is anorganization of the type, and is organized in the jurisdiction, set forth inthe applicable Perfection Certificate; (c) the applicable PerfectionCertificate accurately sets forth Borrower’s organizational identificationnumber or accurately states that Borrower has none; (d) the applicablePerfection Certificate accurately sets forth Borrower’s place of business or,if more than one, its chief executive office, as well as Borrower’s mailingaddress, if different; (e) all other information set forth on theapplicable Perfection Certificate pertaining to Borrower is accurate andcomplete as of the date hereof and (f) there has been no change in any ofsuch information since the date on which the applicable Perfection Certificatewas signed by Borrower.

## 5.8           DueOrganization and Qualification; Subsidiaries.

### (a)           Borroweris duly organized and existing and in good standing under the laws of thejurisdiction of its organization and qualified to do business in any statewhere the failure to be so qualified reasonably could be expected to have aMaterial Adverse Change.

### (b)           Setforth on Schedule 5.8(b), is a complete and accurate description of theauthorized capital Stock of Borrower, by class, and, as of the Closing Date, adescription of the number of shares of each such class that are issued andoutstanding.  Other than as described on Schedule5.8(b), there are no subscriptions, options, warrants, or calls relating toany shares of Borrower’s capital Stock, including any right of conversion orexchange under any outstanding security or other instrument.  Except as set forth on Schedule 5.8(b),Borrower is not subject to any obligation (contingent or otherwise) torepurchase or otherwise acquire or retire any shares of its capital Stock orany security convertible into or exchangeable for any of its capital Stock.

### (c)           Setforth on Schedule 5.8(c), is a complete and accurate list of eachBorrower’s direct and indirect Subsidiaries, showing: (i) the jurisdictionof their organization; (ii) the number of shares of each class of commonand preferred Stock authorized for each of such Subsidiaries; and(iii) the number and the percentage of the outstanding shares of each suchclass owned directly or indirectly by Borrower. All of the outstanding capital Stock of each such Subsidiary has beenvalidly issued and is fully paid and non-assessable.

### (d)           Exceptas set forth on Schedule 5.8(c), there are no subscriptions, options,warrants, or calls relating to any shares of any Borrower’s Subsidiaries’capital Stock, including any right of conversion or exchange under anyoutstanding security or other instrument. Neither Borrower nor any of its Subsidiaries is subject to anyobligation (contingent or otherwise) to repurchase or otherwise  acquire or retire any shares of Borrower’sSubsidiaries’ capital Stock or any security convertible into or exchangeablefor any such capital Stock.

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## 5.9           DueAuthorization; No Conflict.

### (a)           Theexecution, delivery, and performance by Borrower of this Agreement and the LoanDocuments to which it is a party have been duly authorized by all necessaryaction on the part of Borrower.

### (b)           Theexecution, delivery, and performance by Borrower of this Agreement and the LoanDocuments to which it is a party do not and will not (i) violate anyprovision of federal, state, or local law or regulation applicable to Borrower,the Governing Documents of Borrower, or any order, judgment, or decree of anycourt or other Governmental Authority binding on Borrower, (ii) conflictwith, result in a breach of, or constitute (with due notice or lapse of time orboth) a default under any material contractual obligation of Borrower,(iii) result in or require the creation or imposition of any Lien of anynature whatsoever upon any properties or assets of Borrower, other thanPermitted Liens, or (iv) require any approval of Borrower’s interestholders or any approval or consent of any Person under any material contractualobligation of Borrower.

### (c)           Otherthan the filing of financing statements, the execution, delivery, andperformance by Borrower of this Agreement and the Loan Documents to which suchBorrower is a party do not and will not require any registration with, consent,or approval of, or notice to, or other action with or by, any GovernmentalAuthority or other Person.

### (d)           ThisAgreement and the other Loan Documents to which Borrower is a party, and allother documents contemplated hereby and thereby, when executed and delivered byBorrower will be the legally valid and binding obligations of Borrower,enforceable against Borrower in accordance with their respective terms, exceptas enforcement may be limited by equitable principles or by bankruptcy,insolvency, reorganization, moratorium, or similar laws relating to or limitingcreditors’ rights generally.

### (e)           TheLender’s Liens are validly created, perfected, and first priority Liens,subject only to Permitted Liens

## 5.10         Litigation.

### (a)           Otherthan those matters disclosed on Schedule 5.10(a) and immaterial matterswhere the amount in controversy is less than $10,000, there are no actions,suits, or proceedings pending or, to the best knowledge of Borrower, threatenedagainst Borrower.  Schedule 5.10(a)includes, as applicable, for each matter set forth thereon (i) the name,docket number and jurisdiction for such matter, (ii) the status of suchproceeding, and (iii) whether such matter is covered by an insurancepolicy and, if so, the insurance carrier, the policy number and the deductibleamount associated with such insurance policy.

### (b)           Thereare no actions, suits or proceedings pending or, to the best knowledge ofBorrower, threatened against Borrower that question the validity orenforceability of this Agreement or any other Loan Document or any action takenby Borrower in connection therewith.

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### (c)           Schedule5.10(c) lists all Borrower’s Commercial Tort Claims existing as of the datehereof.

5.11         No Material Adverse Change.  All financial statements relating to Borrowerthat have been delivered by Borrower to the Lender have been prepared inaccordance with GAAP (except, in the case of unaudited financial statements,for the lack of footnotes and being subject to year-end audit adjustments) andpresent fairly in all material respects, Borrower’s financial condition as ofthe date thereof and results of operations for the period then ended.  There has not been a Material Adverse Changewith respect to Borrower since the date of the latest financial statementssubmitted to the Lender on or before the Closing Date.

## 5.12         FraudulentTransfer.

### (a)           Borroweris Solvent before and after taking into account the transactions contemplatedby this Agreement and the other Loan Documents.

### (b)           Notransfer of property is being made by Borrower and no obligation is beingincurred by Borrower in connection with the transactions contemplated by thisAgreement or the other Loan Documents with the intent to hinder, delay, ordefraud either present or future creditors of Borrower.

5.13         Employee Benefits.  None of Borrower, any of its Subsidiaries, orany of their ERISA Affiliates maintains or contributes to any Benefit Plan.

### (a)           NeitherBorrower nor any ERISA Affiliate has ever taken any of the following actionsthat would have a material adverse effect on the business or assets of theBorrower taken as a whole:

#### (i)            Violated or failed to be incompliance with any Borrower’s Benefit Plan.

#### (ii)           Failed timely to file all reports andfilings required by ERISA to be filed by Borrower.

#### (iii)          Engaged in any nonexempt “prohibitedtransactions” or “reportable events” (respectively as described in ERISA).

#### (iv)          Engaged in, or committed, any act suchthat a tax or penalty reasonably could be imposed upon Borrower on accountthereof pursuant to ERISA.

#### (v)           Accumulated any material cumulativefunding deficiency within the meaning of ERISA.

#### (vi)          Terminated any Benefit Plan such thata lien could be asserted against any assets of Borrower on account thereofpursuant to ERISA.

#### (vii)         Have any obligation under any BenefitPlan which is a multi-employer plan within the meaning of Section 4001(a) ofERISA for withdrawal liability.

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### (b)           Neitherany Borrower nor any ERISA Affiliate shall ever engage in any action of thetype described in Section 5.13(a) to the extent that any of the foregoing wouldhave a material adverse effect on the Borrower taken as a whole.

5.14         Environmental Condition.  Except as set forth on Schedule 5.14,(a) none of Borrower’s properties or assets have ever been used byBorrower or by previous owners or operators in the disposal of, or to produce,store, handle, treat, release, or transport, any Hazardous Materials, wheresuch production, storage, handling, treatment, release or transport was in violation,in any material respect, of applicable Environmental Law, (b)  none ofBorrower’s properties or assets has ever been designated or identified in anymanner pursuant to any environmental protection statute as a HazardousMaterials disposal site, (c)  Borrower has not received notice that a Lienarising under any Environmental Law has attached to any revenues or to any RealProperty owned or operated by Borrower, and (d)  Borrower has not receiveda summons, citation, notice, or directive from the Environmental ProtectionAgency or any other federal or state governmental agency concerning any actionor omission by Borrower resulting in the releasing or disposing of HazardousMaterials into the environment.

5.15         Brokerage Fees.  Borrower has not utilized the services of anybroker or finder in connection with Borrower’s obtaining financing from Lenderunder this Agreement and no brokerage commission or finders fee is payable byBorrower in connection herewith.

5.16         Intellectual Property.  Borrower owns, or holds licenses in, alltrademarks, trade names, copyrights, patents, patent rights, and licenses thatare necessary to the conduct of its business as currently conducted.  Attached hereto as Schedule 5.16 is atrue, correct, and complete listing of all material patents, patentapplications, trademarks, trademark applications, copyrights, and copyrightregistrations as to which Borrower is the owner or is an exclusive licensee.

5.17         Leases.  Borrower enjoys peaceful and undisturbedpossession under all leases material to the business of Borrower and to whichBorrower is a party or under which Borrower is operating.  All of such leases are valid and subsistingand no material default by Borrower exists under any of them.

5.18         DDAs.  Set forth on Schedule 5.18 are all ofthe DDAs of Borrower, including, with respect to each depositary (i) thename and address of that depositary, and (ii) the account numbers of theaccounts maintained with such depositary.

5.19         Credit Card/Payment Processing.  Set forth on Schedule 5.19 are all ofBorrower’s Credit Card/Payment Processors and all arrangements to whichBorrower is a party with respect to the payment to Borrower of the proceeds ofall credit card charges for sales by Borrower, and including with respect toeach such Credit Card Processor (i) the name and address of that processorand (ii) the account number assigned to Borrower by such Processor.

5.20         Indebtedness.  Set forth on Schedule 5.20 is a trueand complete list of all Indebtedness of Borrower outstanding immediately priorto the Closing Date that is to remain outstanding after the Closing Date.  Such Schedule accurately reflects theaggregate principal amount of such Indebtedness and the principal termsthereof.

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5.21         Payment of Taxes.  (a) all tax returns required to be filedby Borrower have been timely filed and (b) all taxes upon Borrower or itsproperties, assets, income and franchises (including real property taxes andpayroll taxes) but not subject of a Permitted Protest have been paid prior todelinquency.

5.22         Complete Disclosure.  All factual information (taken as a whole)furnished by or on behalf of Borrower in writing to Lender (including allinformation contained in the Schedules hereto or in the other Loan Documents)for purposes of or in connection with this Agreement, the other Loan Documentsor any transaction contemplated herein or therein is, and all other suchfactual information (taken as a whole) hereafter furnished by or on behalf ofBorrower in writing to the Lender or Lender will be, true and accurate in allmaterial respects on the date as of which such information is dated orcertified and not incomplete by omitting to state any fact necessary to makesuch information (taken as a whole) not misleading in any material respect atsuch time in light of the circumstances under which such information wasprovided.  On the Closing Date, theBusiness Plan represents, and as of the date on which any other Business Planis delivered to Lender, such additional Business Plans represent Borrower’sgood faith best estimate of its future performance for the periods coveredthereby.

5.23         AML Laws and Regulations.  The Borrower has implemented polices,procedures and controls that are reasonably designed to comply with AML Lawsand Regulations.

# **6.             AFFIRMATIVE COVENANTS.**

Borrower covenants and agrees that, so long as anycredit hereunder shall be available and until full and final payment of theObligations, Borrower shall do all of the following:

6.1           Accounting System.  Maintain a system of accounting that enablesBorrower to produce financial statements in accordance with GAAP and maintainrecords pertaining to the Collateral that contain information as from time totime reasonably may be requested by Lender. Borrower also shall keep an inventory reporting system that shows alladditions, sales, claims, returns, and allowances with respect to theInventory.

6.2           Collateral Reporting.  Provide Lender with the documents set forthon Schedule 6.2 in accordance with the delivery schedule set forththereon, by electronic transmission in a format to be designated by Lender.

6.3           Financial Statements, Reports,Certificates.  Deliver to Lender:

### (a)           assoon as available, but in any event within 30 days (unless otherwise noted )after the end of each month during each of Borrower’s fiscal years,

#### (i)            a company prepared consolidatedbalance sheet, income statement, and statement of cash flow covering Borrower’soperations during such period,

#### (ii)           on a monthly basis and no later thanfifteen (15) days after the end of the applicable month, the Borrower’s stockledger and accounts payable aging and a stock ledger to general ledgerreconciliation of inventory and any related documentation requested by Lender.

 

#### (iii)          a certificate signed by the chieffinancial officer of Borrower to the effect that:

##### (A)                              thefinancial statements delivered hereunder have been prepared in accordance withGAAP (except for the lack of footnotes and being subject to year-end auditadjustments) and fairly present in all material respects the financialcondition of Borrower,

##### (B)                                therepresentations and warranties of Borrower contained in this Agreement and theother Loan Documents are true and correct in all material respects on and as ofthe date of such certificate, as though made on and as of such date (except tothe extent that such representations and warranties relate solely to an earlierdate), and

##### (C)                                theredoes not exist any condition or event that constitutes a Default or Event ofDefault (or, to the extent of any non-compliance, describing suchnon-compliance and what action Borrower has taken, are taking, or propose totake with respect thereto), and

#### (iv)          for each month that is the date onwhich a financial covenant in Section 7.21 is to be tested, a ComplianceCertificate demonstrating, in reasonable detail, compliance at the end of suchperiod with the applicable financial covenants contained in Section 7.21,and

#### (v)           by 1:00 p.m. on the date of eachproposed Borrowing and updated on a weekly basis every Thursday, a BorrowingBase Certificate accompanied by a schedule evidencing Net Excess Availabilityon a rolling 90-day basis (or such lesser number of days as this Agreement hasbeen in effect), which schedule shall be used to determine Net ExcessAvailability and such other information and backup as requested by Lender.  Such Borrowing Base Certificate may be sentto Lender by facsimile or electronic mail means but the original thereof mustbe forwarded to Lender on the date of such transmission.

### (b)           assoon as available, but in any event within 90 days after the end of each ofBorrower’s fiscal years,

#### (i)            financial statements of Borrower foreach such fiscal year, audited by independent certified public accountantsreasonably acceptable to Lender and certified, without any qualifications, bysuch accountants to have been prepared in accordance with GAAP (such auditedfinancial statements to include a balance sheet, income statement, andstatement of cash flow and, if prepared, such accountants’ letter tomanagement), and

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#### (ii)           a certificate of such accountantsaddressed to Lender and the Lenders stating that such accountants do not haveknowledge of the existence of any Default or Event of Default under Section7.21,

### (c)           assoon as available, but in any event no later than 30 days prior to the start ofeach of Borrower’s fiscal years, a proposed revised Business Plan for theforthcoming three (3) years, year by year, and for the two (2) forthcomingfiscal years, month by month, which proposed revised Business Plan shall be acceptable to Lender and certified by thechief financial officer of Borrower as being such officer’s good faith bestestimate of the financial performance of Borrower during the period coveredthereby.  Lender may in its PermittedDiscretion accept or reject such revised proposed Business Plan in substitutionfor Exhibit C hereto.  As a result of itsreview of such proposed revised Business Plan, Lender may, but shall not beunder any obligation to amend, modify or expand Reserves and/or any of thecovenants set forth in Section 7.21. In the event that an acceptable proposed revised Business Plan is nottimely delivered as required under this section, in addition to, and not inlimitation of, Lender’s rights hereunder, then, in Lender’s PermittedDiscretion, existing Reserves and covenants may continue to apply and bebinding hereunder, or such Reserves and covenants may be amended, modified orexpanded.

### (d)           ifand when filed by Borrower,

#### (i)            10-Q quarterly reports, Form 10-Kannual reports, and Form 8-K current reports,

#### (ii)           any other filings made by Borrowerwith the SEC,

#### (iii)          copies of Borrower’s federal incometax returns, and any amendments thereto, filed with the Internal RevenueService, and

#### (iv)          any other information that is providedby Borrower to its shareholders generally,

### (e)           ifand when filed by Borrower and as requested by Lender, satisfactory evidence ofpayment of applicable excise taxes in each jurisdiction in which (i) Borrower conducts business or is required to pay any such excise tax, and(ii) where any Borrower’s failure to pay any such applicable excise taxwould result in a Lien on the properties or assets of such Borrower,

### (f)            assoon as Borrower has knowledge of any event or condition that constitutes aDefault or an Event of Default, notice thereof and a statement of the curativeaction that Borrower proposes to take with respect thereto, and

### (g)           uponthe request of Lender, any other report reasonably requested relating to thefinancial condition of Borrower.

In addition to the financial statements referred toabove, Borrower agrees to deliver financial statements prepared on both aconsolidated and consolidating basis and Borrower agrees that its independentcertified public accountants are authorized to communicate with 

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Lender and to release to Lender whatever financialinformation concerning Borrower that Lender reasonably may request.  Borrower waives the right to assert aconfidential relationship, if any, it may have with any accounting firm orservice bureau in connection with any information requested by Lender pursuantto or in accordance with this Agreement, and agrees that Lender may contactdirectly any such accounting firm or service bureau in order to obtain suchinformation.

6.4           AML Laws and Regulations.  Comply with all applicable AML Laws andRegulations.

6.5           Return.  Cause returns and allowances as betweenBorrower and their Account Debtors, to be on the same basis and in accordancewith the usual customary practices of Borrower, as they exist at the time ofthe execution and delivery of this Agreement. If, at a time when no Event of Default has occurred and is continuing,any Account Debtor returns any Inventory to Borrower, Borrower promptly shalldetermine the reason for such return and, if Borrower accepts such return,issue a credit memorandum (with a copy to be sent to Lender) in the appropriateamount to such Account Debtor.  If, at atime when an Event of Default has occurred and is continuing, any AccountDebtor returns any Inventory to Borrower, Borrower promptly shall determine thereason for such return and, if Lender consents (which consent shall not beunreasonably withheld), issue a credit memorandum (with a copy to be sent toLender) in the appropriate amount to such Account Debtor.

6.6           Maintenance of Properties.  Maintain and preserve all of its propertieswhich are necessary or useful in the proper conduct of its business in goodworking order and condition, ordinary wear and tear excepted, and comply at alltimes with the provisions of all leases to which it is a party as lessee, so asto prevent any loss or forfeiture thereof or thereunder.

6.7           Taxes.  Cause all assessments and taxes, whetherreal, personal, or otherwise, due or payable by, or imposed, levied, orassessed against Borrower or any of its assets to be paid in full, beforedelinquency or before the expiration of any extension period, except to theextent that the validity of such assessment or tax shall be the subject of aPermitted Protest.  Borrower will maketimely payment or deposit of all tax payments and withholding taxes required ofit by applicable laws, including those laws concerning F.I.C.A., F.U.T.A.,state disability, and local, state, and federal income taxes, and will, uponrequest, furnish Lender with proof satisfactory to Lender indicating thatBorrower has made such payments or deposits. Borrower shall deliver satisfactory evidence of payment of applicableexcise taxes in each jurisdictions in which Borrower is required to pay anysuch excise tax.

## 6.8           Insurance.

### (a)           AtBorrower’s expense, maintain insurance respecting its property and assetswherever located, covering loss or damage by fire, theft, explosion, and allother hazards and risks as ordinarily are insured against by other Personsengaged in the same or similar businesses. Borrower also shall maintain business interruption, public liability,and product liability insurance, as well as insurance against larceny,embezzlement, and criminal misappropriation. All such policies of insurance shall be in such amounts and with suchinsurance companies as are reasonably satisfactory to Lender.  Borrower shall deliver copies of 

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###  

all such policies to Lender with a satisfactory lender’sloss payable endorsement naming Lender as sole loss payee or additionalinsured, as appropriate.  Each policy ofinsurance or endorsement shall contain a clause requiring the insurer to givenot less than 30 days prior written notice to Lender in the event ofcancellation of the policy for any reason whatsoever.

### (b)           Borrowershall give Lender prompt notice of any loss covered by such insurance.  Lender shall have the exclusive right toadjust any losses payable under any such insurance policies in excess of$50,000, without any liability to Borrower whatsoever in respect of suchadjustments.  Any monies received aspayment for any loss under any insurance policy mentioned above (other thanliability insurance policies) or as payment of any award or compensation forcondemnation or taking by eminent domain, shall be paid over to Lender to beapplied at the option of Lender either to the prepayment of the Obligations orshall be disbursed to Borrower under staged payment terms reasonablysatisfactory to Lender for application to the cost of repairs, replacements, orrestorations. Any such repairs, replacements, or restorations shall be effectedwith reasonable promptness and shall be of a value at least equal to the valueof the items or property destroyed prior to such damage or destruction.

### (c)           Borrowershall not take out separate insurance concurrent in form or contributing in theevent of loss with that required to be maintained under this Section 6.8,unless Lender is included thereon as named insured with the loss payable toLender under a lender’s loss payable endorsement or its equivalent.  Borrower immediately shall notify Lenderwhenever such separate insurance is taken out, specifying the insurerthereunder and full particulars as to the policies evidencing the same, andcopies of such policies promptly shall be provided to Lender.

6.9           Location of Inventory andEquipment.  Keep the Inventory andEquipment only at the locations identified on Schedule 5.5; provided,however, that Borrower may amend Schedule 5.5 so long as suchamendment occurs by written notice to Lender not less than 30 days prior to thedate on which the Inventory or Equipment is moved to such new location, so longas such new location is within the continental United States, and so long as,at the time of such written notification, Borrower provides any financingstatements, fixture filings or other documents necessary to perfect andcontinue perfected the Lender’s Liens on such assets and also provides toLender a Bailee Acknowledgment or Collateral Access Agreement, if and asapplicable.

6.10         Compliance with Laws.  Comply with the requirements of allapplicable laws, rules, regulations, and orders of any Governmental Authority,including, without limitation, the Fair Labor Standards Act and the AmericansWith Disabilities Act, and all laws pertaining to the authenticity ofInventory.

6.11         Leases.  Pay when due all rents and other amountspayable under any leases to which Borrower is a party or by which Borrower’sproperties and assets are bound, unless such payments are the subject of aPermitted Protest.

6.12         Brokerage Commissions.  Pay any and all brokerage commission orfinders fees incurred in connection with or as a result of Borrower’s obtainingfinancing from the Lender under this Agreement. Borrower agrees and acknowledges that payment of all such brokeragecommissions or finders fees shall be the sole responsibility of Borrower, andBorrower agrees to

 

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indemnify, defend, and hold the Lender harmless fromand against any claim of any broker or finder arising out of Borrower’sobtaining financing from the Lender under this Agreement.

6.13         Existence.  At all times preserve and keep in full forceand effect Borrower’s valid existence and good standing and any rights andfranchises material to Borrower’s businesses.

6.14         Environmental.  Keep any property either owned or operated byBorrower free of any Environmental Liens or post bonds or other financial assurancessufficient to satisfy the obligations or liability evidenced by suchEnvironmental Liens, (b) comply, in all material respects, withEnvironmental Laws and provide to Lender documentation of such compliance whichLender reasonably requests, (c) promptly notify Lender of any release of aHazardous Material of any reportable quantity from or onto property owned oroperated by Borrower and take any Remedial Actions required to abate saidrelease or otherwise to come into compliance with applicable Environmental Law,and (d) promptly provide Lender with written notice within 10 days of thereceipt of any of the following: (i) notice that an Environmental Lien has been filed against any ofthe real or personal property of Borrower, (ii) commencement of anyEnvironmental Action or notice that an Environmental Action will be filedagainst Borrower, and (iii) notice of a violation, citation, or otheradministrative order.

6.15         Investment Proceeds, Etc.  The proceeds of any Investment from anysource in Borrower or any Subsidiary of Borrower and any other funds receivedby Borrower other than from ordinary course business operations (including,without limitation, proceeds of loans, issuance of debt, capital contributions,sale of stock, tax refunds, damage awards, or insurance or condemnationproceeds) shall be deposited directly into the Concentration Account to beapplied on account of the Obligations in accordance with Section 2.4(b).

6.16         Foreign Assets Control Regulations,Etc.  None of the requesting or borrowingof the Loans or the requesting or issuance, extension or renewal of any Letterof Credit or the use of the proceeds of any thereof will violate the TradingWith the Enemy Act (50 US §1 et seq., as amended) (the “Trading With the EnemyAct”) or any of the foreign assets control regulations of the United StatesTreasury Department (31 I.E., Subtitle B, Chapter V, as amended) (the “ForeignAssets Control Regulations”) or any enabling legislation or executive orderrelating thereto (including, but not limited to (a) Executive order 13224of September 21, 2001 Blocking Property and Prohibiting Transactions WithPersons Who Commit, Threaten to Commit, or Support Terrorism (66 Fed. Reg.49079 (2001)) (the “Executive Order”) and (b) the Uniting and StrengtheningAmerica by Providing Appropriate Tools Required to Intercept and ObstructTerrorism Act of 2001 (Public Law 107-56). No Borrower nor any of their Affiliates is or will become a “blockedperson” as described in the Executive Order, the Trading with the Enemy Act orthe Foreign Assets Control Regulations or engages or will engage in anydealings or transactions, or be otherwise associated, with any such “blockedperson”.

6.17         Disclosure Updates.  Promptly and in no event later than 3Business Days after obtaining knowledge thereof, (a) notify Lender if anywritten information, exhibit, or report furnished to the Lender contained anyuntrue statement of a material fact or omitted to state any material factnecessary to make the statements contained therein not misleading in light ofthe 

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circumstances in which made, and (b) correct anydefect or error that may be discovered therein or in any Loan Document or inthe execution, acknowledgement, filing, or recordation thereof.

# **7.             NEGATIVE COVENANTS.**

Borrower covenants and agrees that, so long as anycredit hereunder shall be available and until full and final payment of theObligations, Borrower shall not do any of the following:

7.1           Indebtedness.  Create, incur, assume, permit, guarantee, orotherwise become or remain, directly or indirectly, liable with respect to anyIndebtedness, except:

### (a)           Indebtednessevidenced by this Agreement and the other Loan Documents;

### (b)           Indebtednessset forth on Schedule 5.20;

### (c)           PermittedPurchase Money Indebtedness; and

### (d)           refinancings,renewals, or extensions of Indebtedness permitted under clauses (b) and (c) ofthis Section 7.1 (and continuance or renewal of any Permitted Liensassociated therewith) so long as: (i) the terms and conditions of suchrefinancings, renewals, or extensions do not, in Lender’s reasonable judgment,materially impair the prospects of repayment of the Obligations by Borrower ormaterially impair Borrower’s creditworthiness, (ii) such refinancings,renewals, or extensions do not result in an increase in the principal amount ofthe Indebtedness so refinanced, renewed, or extended, (iii) suchrefinancings, renewals, or extensions do not result in a shortening of theaverage weighted maturity of the Indebtedness so refinanced, renewed, or extended,nor are they on terms or conditions, that, taken as a whole, are materiallymore burdensome or restrictive to Borrower, and (iv) if the Indebtednessthat is refinanced, renewed, or extended was subordinated in right of paymentto the Obligations, then the terms and conditions of the refinancing, renewal,or extension Indebtedness must be include subordination terms and conditionsthat are at least as favorable to the Lender as those that were applicable tothe refinanced, renewed, or extended Indebtedness.

7.2           Liens.  Create, incur, assume, or permit to exist,directly or indirectly, any Lien on or with respect to any of its assets, ofany kind, whether now owned or hereafter acquired, or any income or profitstherefrom, except for Permitted Liens (including Liens that are replacements ofPermitted Liens to the extent that the original Indebtedness is refinanced,renewed, or extended under Section 7.1(d) and so long as the replacementLiens only encumber those assets that secured the refinanced, renewed, or extendedIndebtedness).

## 7.3           Restrictionson Fundamental Changes.

### (a)           Enterinto any merger, consolidation, reorganization, or recapitalization, orreclassify its Stock or otherwise change Borrower’s type of organization,jurisdiction of organization or other legal or corporate structure, except withthe prior written consent of Lender.

### (b)           Liquidate,wind up, or dissolve itself (or suffer any liquidation or dissolution).

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### (c)           Convey,sell, lease, license, assign, transfer, or otherwise dispose of, in one transactionor a series of transactions, all or any substantial part of its assets.

7.4           Disposal of Assets.  Other than Permitted Dispositions, convey,sell, lease, license, assign, transfer, or otherwise dispose of its of theassets.

7.5           Change of Name or Address.  Change Borrower’s name or organizationalidentification number or relocate its chief executive office to a new location;provided, however, that Borrower may change its name or chiefexecutive office location upon at least 30 days prior written notice byBorrower to Lender of such change and so long as, at the time of such writtennotification, Borrower provides (i) any financing statements, fixturefilings or other agreements or documents necessary to perfect and continueperfected Lender’s Liens and (ii) in the case of such a relocation, if thenew chief executive office location is leased by Borrower, a Collateral AccessAgreement with respect thereto.

7.6           Guarantee.  Guarantee or otherwise become in any wayliable with respect to the obligations of any third Person except byendorsement of instruments or items of payment for deposit to the account ofBorrower or which are transmitted or turned over to Lender.

7.7           Nature of Business.  Make any change in the principal nature ofBorrower’s business.

7.8           Prepayments and Amendments.  Except in connection with a refinancingpermitted by Section 7.1(d), directly or indirectly, amend, modify, alter,increase, or change any of the terms or conditions of any agreement,instrument, document, indenture, or other writing evidencing or concerningIndebtedness permitted under Sections 7.1(b) or (c).

7.9           Change of Control.  Cause, permit, or suffer, directly orindirectly, any Change of Control.

7.10         Consignments.  Consign any Inventory or sell any Inventoryon bill and hold, sale or return, sale on approval, or other conditional termsof sale.

7.11         Restricted Payments.  Declare, order, pay or make any RestrictedPayment or set aside any sum or property therefor or exercise any set-off orsimilar rights of Borrower, if any, with respect to any indebtedness that isthe subject of an intercreditor and subordination agreement.

7.12         Accounting Methods.  Modify or change its method of accounting(other than as may be required to conform to GAAP) or enter into, modify, or terminateany agreement currently existing, or at any time hereafter entered into withany third party accounting firm or service bureau for the preparation orstorage of Borrower’s accounting records without said accounting firm orservice bureau agreeing to provide Lender information regarding the Collateralor Borrower’s financial condition.

7.13         Investments.  Except for Permitted Investments, directly orindirectly, make or acquire any Investment, or incur any liabilities (includingcontingent obligations) for or in connection with any Investment; provided,however, that Borrower shall not have Permitted 

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Investments in Cash Equivalents, deposit accounts orSecurities Accounts outstanding at any one time unless Borrower, and theapplicable securities intermediary, bank or other entity have entered into aControl Agreement or similar arrangements governing such Permitted Investments,as Lender shall determine in its Permitted Discretion, to perfect (and furtherestablish) the Lender’s Liens in such Permitted Investments.

7.14         Transactions with Affiliates.  Directly or indirectly enter into or permitto exist any transaction with any Affiliate of Borrower except for the ServiceContracts on transactions that are in the ordinary course of Borrower’sbusiness, upon fair and reasonable terms, that are fully disclosed to Lender,and that are no less favorable to Borrower than would be obtained in an arm’slength transaction with a non-Affiliate.

7.15         Location Openings.  Commit to open any location at which Borrowerwould maintain, offer for sale or store any Personal Property Collateral orintend to offer for sale or store any Personal Property of the Collateralwithout Lender’s prior written consent.

7.16         Suspension.  Suspend or go out of a substantial portion ofits business.

7.17         Compensation.  Increase the annual fee or per-meeting feespaid to the members of its Board of Directors during any year by more than 15%over the prior year; pay or accrue total cash compensation, during any year, toits officers and senior management employees in an aggregate amount in excessof 115% of that paid or accrued in the prior year.

7.18         Use of Proceeds.  Use the proceeds of the Advances for anypurpose other than (a) on the Closing Date, (i) to repay in full theoutstanding principal, accrued interest, and accrued fees and expenses owing toany existing lender, and (ii) to pay transactional fees, costs, andexpenses incurred in connection with this Agreement, the other Loan Documents,and the transactions contemplated hereby and thereby, and (b) thereafter,consistent with the terms and conditions hereof, for its lawful and permittedpurposes.

7.19         Inventory and Equipment with Bailees.  The Inventory and Equipment shall not at anytime now or hereafter be stored with a bailee, warehouseman, or similar partyunless Lender has granted its prior written consent and Borrower has deliveredto Lender a Bailee Acknowledgment with respect to the applicable Inventoryand/or Equipment.

7.20         Securities Accounts .  Establish or maintain any Securities Accountunless Lender shall have received a Control Agreement in respect of suchSecurities Account.  Borrower shall nottransfer assets out of any Securities Account.

7.21         Financial Covenants.  Fail to maintain, observe or comply any ofthe covenants set forth on Schedule 7.21.

7.22         Authentic Inventory.  Sell or offer to sell any Inventory or othergoods which are not Authentic.

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# **8.             EVENTS OF DEFAULT.**

Any one or more of the following events shallconstitute an event of default (each, an “Event of Default”) under thisAgreement:

8.1           Payment.  If Borrower fails topay when due and payable or when declared due and payable, all or anyportion of the Obligations (whether of principal, interest (including anyinterest which, but for the provisions of the Bankruptcy Code, would haveaccrued on such amounts), fees and charges due the Lender, reimbursement ofLender Expenses, or other amounts constituting Obligations);

8.2           Failure to Perform.  If Borrower fails to perform, keep, orobserve any term, provision, condition, covenant, or agreement contained inthis Agreement or in any of the other Loan Documents;

8.3           Seizure of Assets.  If any material portion of Borrower’s assetsis attached, seized, subjected to a writ or distress warrant, levied upon, orcomes into the possession of any third Person;

8.4           Insolvency byBorrower.  If (a) in Lender’s reasonable judgment,Borrower becomes insolvent, or (b) an Insolvency Proceeding is commenced byBorrower;

8.5           Insolvency Against Borrower.  If an Insolvency Proceeding is commencedagainst Borrower, and any of the following events occur:  (a) Borrower consents to the institutionof the Insolvency Proceeding against it, (b) the petition commencing theInsolvency Proceeding is not timely controverted, (c) the petitioncommencing the Insolvency Proceeding is not dismissed within 45 calendar daysof the date of the filing thereof; provided, however, that,during the pendency of such period, Lender (including any successor agent) andeach other member of the Lender shall be relieved of any obligation to extendcredit or make any other financial accommodation hereunder, (d) an interimtrustee is appointed to take possession of all or any substantial portion ofthe properties or assets of, or to operate all or any substantial portion ofthe business of, Borrower, (e) an order for relief shall have been enteredtherein;

8.6           Restraint of Business.  If Borrower is enjoined, restrained, or inany way prevented by court order from continuing to conduct all or any materialpart of its business affairs;

8.7           Liens.  If a notice of Lien, levy, or assessment isfiled of record with respect to Borrower’s assets by the United States, or anydepartment, agency, or instrumentality thereof, or by any state, county,municipal, or governmental agency, or if any taxes or debts owing at any timehereafter to any one or more of such entities becomes a Lien, whether choate orotherwise, upon Borrower’s assets and the same is not paid on the payment datethereof;

8.8           Judgments.  If a judgment or other claim becomes a Lienor encumbrance upon any material portion of Borrower’s properties or assets;

8.9           Default of Material Agreement.  If there is a default in any materialagreement to which Borrower is a party and such default (a) occurs at thefinal maturity of the obligations 

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thereunder or (b) results in a right by the otherparty thereto, irrespective of whether exercised, to accelerate the maturity ofBorrower’s obligations thereunder, to terminate such agreement, or to refuse torenew such agreement pursuant to an automatic renewal right therein;

8.10         Loss of Business.  Any event occurs, whether or not insured orinsurable, as a result of which revenue-producing activities cease or aresubstantially curtailed at any facility of Borrower generating more than 10% ofBorrowers consolidated revenues for Borrowers fiscal year preceding such eventand such cessation or curtailment continues for more than 20 days.

8.11         Payment of Subdebt.  If Borrower makes any payment on account ofIndebtedness that has been contractually subordinated in right of payment tothe payment of the Obligations, except to the extent such payment is permittedby the terms of the subordination provisions applicable to such Indebtedness;

8.12         Misrepresentation.  If any material misstatement ormisrepresentation exists now or hereafter in any warranty, representation,statement, or Record made to the Lender by Borrower, or any officer, employee,agent, or director of Borrower;

8.13         Rescission Offer. If theBorrower is required by any Governmental Authority to make or otherwise makesor is required to make any rescission offer payment or any other RestrictedPayment (other than a Permitted Rescission Offer Payment) or is subject to anymaterial penalty for failure to make such rescission offer payment or otherRestricted Payment;

8.14         Failure of Lien.  If this Agreement or any other Loan Documentthat purports to create a Lien, shall, for any reason, fail or cease to createa valid and perfected and, except to the extent permitted by the terms hereofor thereof, first priority Lien on or security interest in the Collateralcovered hereby or thereby;

8.15         Nullification of Loan Documents.  Any provision of any Loan Document shall atany time for any reason be declared to be null and void, or the validity orenforceability thereof shall be contested by Borrower, or a proceeding shall becommenced by Borrower, or by any Governmental Authority having jurisdictionover Borrower, seeking to establish the invalidity or unenforceability thereof,or  Borrower shall deny that Borrower hasany liability or obligation purported to be created under any Loan Document.

8.16         Material Adverse Change.  If there shall occur a Material AdverseChange.

# **9.             THE LENDER’S RIGHTS ANDREMEDIES.**

9.1           Rights and Remedies.  Upon the occurrence, and during thecontinuation, of an Event of Default, the Lender (at its election but withoutnotice of its election and without demand) may do any one or more of thefollowing, all of which are hereby authorized and consented to by Borrower:

### (a)           Declare all Obligations, whether evidenced by thisAgreement, by any of the other Loan Documents, or otherwise, immediately dueand payable provided, however, in the event of the occurrence ofan Event of Default pursuant to Sections 8.4 or 8.5, all of theobligations shall be immediately due and payable;

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###  

### (b)           Cease advancing money or extending credit to or for thebenefit of Borrower under this Agreement, under any of the Loan Documents, orunder any other agreement between Borrower and the Lender;

### (c)           Terminate this Agreement and any of the other LoanDocuments as to any future liability or obligation of the Lender, but withoutaffecting any of the Lender’s Liens in the Collateral and without affecting theObligations;

### (d)           Settle or adjust disputes and claims directly with AccountDebtors for amounts and upon terms which Lender considers advisable, and insuch cases, Lender will credit the Loan Account with only the net amountsreceived by Lender in payment of such disputed Accounts after deducting allLender Expenses incurred or expended in connection therewith;

### (e)           Cause Borrower to hold all returned Inventory in trust forthe Lender, segregate all returned Inventory from all other assets of Borroweror in Borrowers possession and conspicuously label said returned Inventory asthe property of the Lender;

### (f)            Without notice to or demand upon Borrower, make suchpayments and do such acts as Lender considers necessary or reasonable toprotect its security interests in the Collateral.  Borrower agrees to assemble the PersonalProperty Collateral if Lender so requires, and to make the Personal PropertyCollateral available to Lender at a place that Lender may designate which isreasonably convenient to both parties. Borrower authorizes Lender to enter the premises where the PersonalProperty Collateral is located, to take and maintain possession of the PersonalProperty Collateral, or any part of it, and to pay, purchase, contest, orcompromise any Lien that in Lender’s determination appears to conflict with theLender’s Liens and to pay all expenses incurred in connection therewith and tocharge Borrowers Loan Account therefor. With respect Borrower’s owned or leased premises, Borrower hereby grantsLender a license to enter into possession of such premises and to occupy thesame, without charge, in order to exercise any of the Lender’s rights orremedies provided herein, at law, in equity, or otherwise;

### (g)           Without notice to Borrower (such notice being expresslywaived), and without constituting a retention of any collateral in satisfactionof an obligation (within the meaning of the Code), set off and apply to theObligations any and all (i) balances and deposits of Borrower held by theLender (including any amounts received in the Cash Management Accounts), or(ii) Indebtedness at any time owing to or for the credit or the account ofBorrower held by the Lender;

### (h)           Hold, as cash collateral, any and all balances anddeposits of Borrower held by the Lender, and any amounts received in the CashManagement Accounts, to secure the full and final repayment of all of theObligations;

### (i)            Notify any securities intermediary to liquidate theapplicable Securities Account or any related Investment Property maintained orheld thereby and remit the proceeds thereof to the Concentration Account;

### (j)            Ship, reclaim, recover, store, finish, maintain, repair,prepare for sale, advertise for sale, and sell (in the manner provided forherein) the Personal Property Collateral. 

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###  

Borrower hereby grants to Lender a license or otherright to use, without charge, such Borrower’s labels, patents, copyrights,trade secrets, trade names, trademarks, service marks, and advertising matter,or any property of a similar nature, as it pertains to the Personal PropertyCollateral, in completing production of, advertising for sale, and selling anyPersonal Property Collateral and Borrowers rights under all licenses and allfranchise agreements shall inure to the Lender’s benefit;

### (k)           Sell, or cause to be sold, the Collateral at either apublic or private sale, or both, by way of one or more contracts ortransactions, for cash or on terms, in such manner and at such places(including Borrowers premises) as Lender determines is commercially reasonable,including, conduct one or more going out of business sales, in the Lender’s ownright or by one or more agents and contractors which may be conducted upon anypremises owned, leased, or occupied by Borrower.  To the extent permitted by law, Lender andany such agent or contractor, in conjunction with any such sale, may augmentthe Inventory with other goods (all of which other goods shall remain the soleproperty of Lender or such agent or contractor); and any amounts realized fromthe sale of such goods which constitute augmentations to the Inventory (net ofan allocable share of the costs and expenses incurred in their disposition)shall be the sole property of the Lender or such agent or contractor andneither Borrower nor any Person claiming under or in right of Borrower shall haveany interest therein..  It is notnecessary that the Collateral be present at any such sale;

### (l)            Lender shall give notice of the disposition of theCollateral as follows:

#### (i)            Lendershall give Borrower  a notice in writingof the time and place of public sale, or, if the sale is a private sale or someother disposition other than a public sale is to be made of the Collateral, thetime on or after which the private sale or other disposition is to be made andBorrower agrees that such written notice shall satisfy all requirements fornotice to Borrower which are imposed under the UCC or other applicable law withrespect to the exercise of the Lender’s rights and remedies upon default.Lender may purchase the Collateral, or any portion of it at any sale held underthis Article.

#### (ii)           Thenotice shall be personally delivered or mailed, postage prepaid, to Borrower asprovided in Section 12, at least 10 days before the earliest time ofdisposition set forth in the notice; no notice needs to be given prior to the dispositionof any portion of the Collateral that is perishable or threatens to declinespeedily in value or that is of a type customarily sold on a recognized market;

### (m)          Lender may credit bid and purchase at any public sale;

### (n)           Lender may seek the appointment of a receiver or keeper totake possession of all or any portion of the Collateral or to operate same and,to the maximum extent permitted by law, may seek the appointment of such areceiver without the requirement of prior notice or a hearing;

### (o)           Lender shall have all other rights and remedies availableto it at law or in equity pursuant to any other Loan Documents; and

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### (p)           Any deficiency that exists after disposition of thePersonal Property Collateral as provided above will be paid immediately byBorrower.  Any excess will be returned,without interest and subject to the rights of third Persons, by Lender toBorrower.

9.2           Remedies Cumulative.  The rights and remedies of the Lender underthis Agreement, the other Loan Documents, and all other agreements shall becumulative.  Lender shall have all otherrights and remedies not inconsistent herewith as provided under the Code, bylaw, or in equity.  No exercise by theLender of one right or remedy shall be deemed an election, and no waiver by theLender of any Event of Default shall be deemed a continuing waiver.  No delay by the Lender shall constitute awaiver, election, or acquiescence by it.

# **10.          TAXESAND EXPENSES.**

If Borrower fails to pay any monies (whether taxes,assessments, insurance premiums, or, in the case of leased properties orassets, rents or other amounts payable under such leases) due to third Persons,or fails to make any deposits or furnish any required proof of payment ordeposit, all as required under the terms of this Agreement, then, Lender, inits sole discretion and without prior notice to Borrower, may do any or all ofthe following:  (a) make payment ofthe same or any part thereof, (b) set up such reserves in Borrowers Loan Accountas Lender deems necessary to protect the Lender from the exposure created bysuch failure, or (c) in the case of the failure to comply with Section6.8 hereof, obtain and maintain insurance policies of the type described inSection 6.8 and take any action with respect to such policies as Lenderdeems prudent.  Any such amounts paid byLender shall constitute Lender Expenses and any such payments shall notconstitute an agreement by the Lender to make similar payments in the future ora waiver by the Lender of any Event of Default under this Agreement.  Lender need not inquire as to, or contest thevalidity of, any such expense, tax, or Lien and the receipt of the usualofficial notice for the payment thereof shall be conclusive evidence that thesame was validly due and owing.

# **11.          WAIVERS;INDEMNIFICATION.**

11.1         Demand; Protest; Special Damages;etc.  Borrower waives (a) demand,protest, notice of protest, notice of default or dishonor, notice of paymentand nonpayment, nonpayment at maturity, release, compromise, settlement,extension, or renewal of documents, instruments, chattel paper, and guaranteesat any time held by the Lender on which Borrower may in any way be liable; and(b) any claim to consequential, special or punitive damages.

11.2         The Lender’s Liability forCollateral.  Borrower hereby agreesthat:  (a) so long as the Lendercomplies with its obligations, if any, under the Code, Lender shall not in anyway or manner be liable or responsible for: (i) the safekeeping of the Collateral, (ii) any loss or damagethereto occurring or arising in any manner or fashion from any cause,(iii) any diminution in the value thereof, or (iv) any act or defaultof any carrier, warehouseman, bailee, forwarding agency, or other Person, and(b) all risk of loss, damage, or destruction of the Collateral shall beborne by Borrower.

11.3         Indemnification.  Borrower shall pay, indemnify, defend, andhold the Lender-Related Persons, each Participant, and each of their respectiveofficers, directors, employees, 

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agents, and attorneys-in-fact (each, an “*Indemnified Person*”) harmless (to the fullest extentpermitted by law) from and against any and all claims, demands, suits, actions,investigations, proceedings, and damages, and all reasonable attorneys fees anddisbursements and other costs and expenses actually incurred in connectiontherewith (as and when they are incurred and irrespective of whether suit isbrought), at any time asserted against, imposed upon, or incurred by any ofthem (a) in connection with or as a result of or related to the execution,delivery, enforcement, performance, or administration of this Agreement, any ofthe other Loan Documents, or the transactions contemplated hereby or thereby,and (b) with respect to any investigation, litigation, or proceedingrelated to this Agreement, any other Loan Document, or the use of the proceedsof the credit provided hereunder (irrespective of whether any IndemnifiedPerson is a party thereto), or any act, omission, event, or circumstance in anymanner related thereto (all the foregoing, collectively, the “*Indemnified Liabilities*”). The foregoing to the contrary notwithstanding, Borrower shall have noobligation to any Indemnified Person under this *Section 11.3*with respect to any Indemnified Liability that a court of competentjurisdiction finally determines to have resulted from the gross negligence orwillful misconduct of such Indemnified Person. This provision shall survive the termination of this Agreement and anyrepayment of the Obligations.  If anyIndemnified Person makes any payment to any other Indemnified Person withrespect to an Indemnified Liability as to which Borrower was required toindemnify the Indemnified Person receiving such payment, the Indemnified Personmaking such payment is entitled to be indemnified and reimbursed by Borrowerwith respect thereto.  **WITHOUT LIMITATION, THE FOREGOING INDEMNITY SHALLAPPLY TO EACH INDEMNIFIED PERSON WITH RESPECT TO INDEMNIFIED LIABILITIES WHICHIN WHOLE OR IN PART CAUSED BY OR ARISE OUT OF ANY NEGLIGENT ACT OR OMISSION OFSUCH INDEMNIFIED PERSON OR OF ANY OTHER PERSON.**

# **12.          NOTICES.**

Unless otherwise provided in this Agreement, allnotices or demands by Borrower or Lender to the other relating to thisAgreement or any other Loan Document shall be in writing and (except forfinancial statements and other informational documents which may be sent byfirst-class mail, postage prepaid) shall be personally delivered or sent byregistered or certified mail (postage prepaid, return receipt requested),overnight courier, electronic mail (at such email addresses as Borrower orLender, as applicable, may designate to each other in accordance herewith), ortelefacsimile to Borrower or to Lender, as the case may be, at its address setforth below:

 

| If to Borrower: | Bidz.com, Inc.

3562 Eastham Drive

Culver City, CA 90232

Attention: Lawrence Kong,

Chief Financial Officer

Fax No.: (310) 280-7382

Email: lawrence@bidz.com

  |
|-----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

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| With copies to: | Petillon and Hiraide

Del Amo Financial Center

Suite 1260

21515 Hawthorne Boulevard

Torrance, CA 90505

Attention: Mark T. Hirade, Esq.

Fax No.: (310) 543-0500

Email: mhiraide@corplawp-h.com

                                   |
|-----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| If to Lender    | LaSalle Retail Finance

25 Braintree Hill Office Park

Suite 205

Braintree, MA   02169

Attention: Robert A. Barnhard, Senior Vice President  and Group Head

Fax No.: (781) 353-6101

Email: robert.barnhard@abnamro.com

 

and |
|            | LaSalle Retail  Finance  11921 Freedom Drive, Suite 550  Reston, VA 20190  Attention: Barbara Anderson, Senior Vice President  Fax No.: (703) 925-5909  Email: barbara.anderson@abnamro.com                                                  |
| With copies to: | Goulston & Storrs, P.C.

400 Atlantic Avenue

Boston, MA 02110

Attention: Mary Ellen Welch Rogers, Esq.

Fax No.: (617) 574-4112

Email: mrogers@goulstonstorrs.com                                                                     |

 

Lender and Borrower may change the address at whichthey are to receive notices hereunder, by notice in writing in the foregoingmanner given to the other party.  Allnotices or demands sent in accordance with this Section 12, other thannotices by Lender in connection with enforcement rights against the Collateralunder the provisions of the Code, shall be deemed received on the earlier ofthe date of actual receipt or 3 Business Days after the deposit thereof in themail.  Borrower acknowledges and agreesthat notices sent by the Lender in connection with the exercise of enforcementrights against Collateral under the provisions of the Code shall be deemed sentwhen deposited in the mail or personally delivered, or, where permitted by law,transmitted by telefacsimile or any other method set forth above.

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# **13.          CHOICE OF LAW AND VENUE; JURY TRIALWAIVER.**

### (a)           **THE VALIDITY OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS (UNLESSEXPRESSLY PROVIDED TO THE CONTRARY IN ANOTHER LOAN DOCUMENT IN RESPECT OF SUCHOTHER LOAN DOCUMENT), THE CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT HEREOFAND THEREOF, AND THE RIGHTS OF THE PARTIES HERETO AND THERETO WITH RESPECT TOALL MATTERS ARISING HEREUNDER OR THEREUNDER OR RELATED HERETO OR THERETO SHALLBE DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE LAWS OFTHE COMMONWEALTH OF MASSACHUSETTS.**

### (b)           **THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTIONWITH THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE TRIED AND LITIGATEDONLY IN THE STATE AND FEDERAL COURTS LOCATED IN THE COUNTY OF SUFFOLK,COMMONWEALTH OF MASSACHUSETTS, PROVIDED, HOWEVER, THAT ANY SUITSEEKING ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, ATLENDER’S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE LENDER ELECTS TO BRINGSUCH ACTION OR WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE FOUND.  BORROWER WAIVES, TO THE EXTENT PERMITTEDUNDER APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO ASSERT THE DOCTRINE OF FORUMNONCONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDINGIS BROUGHT IN ACCORDANCE WITH THIS SECTION 13(b).**

### (c)           **BORROWER HEREBY WAIVES ITS RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSEOF ACTION BASED UPON OR ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY OF THETRANSACTIONS CONTEMPLATED THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS,BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS.  BORROWER REPRESENTS THAT IT HAS REVIEWED THISWAIVER AND  KNOWINGLY AND VOLUNTARILYWAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL.  IN THE EVENT OF LITIGATION, A COPY OF THISAGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.**

# **14.          ASSIGNMENTS AND PARTICIPATIONS;SUCCESSORS.**

## 14.1         Assignmentsand Participations.

### (a)           Lendermay assign and delegate to one or more assignees (each an “**Assignee**”) all, or any ratable part of all, of theObligations and the other rights and obligations of Lender hereunder and underthe other Loan Documents, provided, however, that Borrower maycontinue to deal solely and directly with Lender in connection with theinterest so assigned to an Assignee until (i) written notice of suchassignment, together with payment instructions, addresses, and relatedinformation with respect to the Assignee, have been given to Borrower, 

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and (ii)  Lender and its Assignee have deliveredto Borrower an executed Assignment and Acceptance.

### (b)           Fromand after the date that Lender notifies Borrower that it has received anexecuted assignment (i) the Assignee thereunder shall be a party heretoand, to the extent that rights and obligations hereunder have been assigned toit pursuant to such Assignment and Acceptance, shall have the rights andobligations of the Lender under the Loan Documents, and (ii) the assignorLender shall relinquish its rights (except with respect to Section 11.3hereof) and be released from its obligations under this Agreement and Lendershall cease to be a party hereto and thereto), and such assignment shall affecta novation between Borrower and the Assignee.

### (c)           Lendermay at any time sell to one or more commercial banks, financial institutions,or other Persons not Affiliates of such Lender (a “**Participant**”) participating interests in its Obligationshereunder and under the other Loan Documents; provided, however, that(i) the Lender shall remain a “Lender” for all purposes of this Agreementand the other Loan Documents and the Participant receiving the participatinginterest in the Obligations and the other rights and interests of the Lenderhereunder shall not constitute a “Lender” hereunder or under the other LoanDocuments and the Lender’s obligations under this Agreement shall remainunchanged, (ii) the Lender shall remain solely responsible for theperformance of such obligations, and (iii) Borrower shall continue to dealsolely and directly with the original Lender in connection with the Lender’srights and obligations under this Agreement and the other Loan Documents.

### (d)           Inconnection with any such assignment or participation or proposed assignment orparticipation, Lender may disclose all documents and information which it nowor hereafter may have relating to Borrower or Borrowers business.

### (e)           Anyother provision in this Agreement notwithstanding, Lender may at any timecreate a security interest in, or pledge, all or any portion of its rightsunder and interest in this Agreement in favor of any Federal Reserve Bank inaccordance with Regulation A of the Federal Reserve Bank or U.S. TreasuryRegulation 31 CFR §203.14, and such Federal Reserve Bank may enforce suchpledge or security interest in any manner permitted under applicable law.

14.2         Successors.  This Agreement shall bind and inure to thebenefit of the respective successors and assigns of each of the parties; provided,however, that Borrower may not assign this Agreement or any rights orduties hereunder without the Lender’s prior written consent and any prohibitedassignment shall be absolutely void ab initio. No consent to assignment by the Lender shall release Borrower from itsobligation to fully pay and perform the Obligations.   Lender may assign this Agreement and theother Loan Documents and its rights and duties hereunder and thereunderpursuant to Section 14.1 hereof and, except as expressly requiredpursuant to Section 14.1 hereof, no consent or approval by Borrower isrequired in connection with any such assignment.

# **15.          AMENDMENTS; WAIVERS.**

15.1         Amendmentsand Waivers.  No amendment or waiverof any provision of this Agreement or any other Loan Document, and no consentwith respect to any departure by 

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Borrower therefrom, shall be effective unless the sameshall be in writing and signed by the Lender and Borrower  and then any such waiver or consent shall beeffective only in the specific instance and for the specific purpose for whichgiven

15.2         No Waivers; Cumulative Remedies.  No failure of Lender to exercise any right,remedy, or option under this Agreement or, any other Loan Document, or delayLender in exercising the same, will operate as a waiver thereof.  No waiver will be effective unless it is inwriting, and then only to the extent specifically stated.  No waiver by Lender on any occasion shallaffect or diminish Lender’s and each Lender’s rights thereafter to requirestrict performance by Borrower of any provision of this Agreement.  Lender’s rights under this Agreement and theother Loan Documents will be cumulative and not exclusive of any other right orremedy that Lender may have.

# **16.          GENERAL PROVISIONS.**

16.1         Effectiveness.  This Agreement shall be binding and deemedeffective when executed by Borrower and Lender whose signature is provided foron the signature pages hereof.

16.2         Section Headings.  Headings and numbers have been set forthherein for convenience only.  Unless thecontrary is compelled by the context, everything contained in each Sectionapplies equally to this entire Agreement.

16.3         Interpretation.  Neither this Agreement nor any uncertainty orambiguity herein shall be construed or resolved against the Lender or Borrower,whether under any rule of construction or otherwise.  On the contrary, this Agreement has beenreviewed by all parties and shall be construed and interpreted according to theordinary meaning of the words used so as to accomplish fairly the purposes andintentions of all parties hereto.

16.4         Severability of Provisions.  Each provision of this Agreement shall beseverable from every other provision of this Agreement for the purpose ofdetermining the legal enforceability of any specific provision.

16.5         Amendments in Writing.  This Agreement can only be amended by a writingin accordance with Section 15.1.

16.6         Counterparts; TelefacsimileExecution.  This Agreement may beexecuted in any number of counterparts and by different parties on separatecounterparts, each of which, when executed and delivered, shall be deemed to bean original, and all of which, when taken together, shall constitute but oneand the same Agreement.  Delivery of anexecuted counterpart of this Agreement by telefacsimile or by electronic mailin “pdf” or similar format shall be equally as effective as delivery of anoriginal executed counterpart of this Agreement.  Any party delivering an executed counterpartof this Agreement by telefacsimile or by electronic mail in “pdf” or similarformat also shall deliver an original executed counterpart of this Agreementbut the failure to deliver an original executed counterpart shall not affectthe validity, enforceability, and binding effect of this Agreement.  The foregoing shall apply to each other LoanDocument mutatismutandis, except as otherwise specificallyprovided therein or therefor.

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16.7         Revival and Reinstatement ofObligations.  If the incurrence orpayment of the Obligations by Borrower or the transfer to the Lender of anyproperty should for any reason subsequently be declared to be void or voidableunder any state or federal law relating to creditors’ rights, includingprovisions of the Bankruptcy Code relating to fraudulent conveyances,preferences, or other voidable or recoverable payments of money or transfers ofproperty (collectively, a “**Voidable Transfer**”),and if Lender is required to repay or restore, in whole or in part, any suchVoidable Transfer, or elects to do so upon the reasonable advice of itscounsel, then, as to any such Voidable Transfer, or the amount thereof that theLender is required or elects to repay or restore, and as to all reasonablecosts, expenses, and attorneys fees of the Lender related thereto, theliability of Borrower and Lender’s liens automatically shall be revived,reinstated, and restored and shall exist as though such Voidable Transfer hadnever been made.

16.8         USA Patriot Act.  Lender pursuant to the USA PATRIOT Act (TitleIII of Pub.L. 107-56 (signed into law October 26, 2001) (the “Act”), herebynotifies Borrower that pursuant to the requirements of the Act, it is requiredto obtain, verify and record information that identifies each person orcorporation who opens an account and/or enters into a business relationshipwith it, which information includes the name and address of Borrower and otherinformation that will allow Lender to identify such person in accordance withthe Act  and any other applicablelaw.  Borrower is hereby advised that anyLoans or Letters of Credit hereunder are subject to satisfactory results ofsuch verification.

16.9         Pledges To Federal Reserve Banks.  Nothingincluded in this Agreement shall prevent or limit Lender, to the extent thatLender is subject to any of the twelve Federal Reserve Banks organized under §4of the Federal Reserve Act (12 U.S.C. §341) from pledging all or any portion of Lender’s interest and rightsunder this Agreement, provided, however*,* neither such pledge nor the enforcement thereof shallrelease the Lender from any of its obligations hereunder or under any of theLoan Documents.

16.10       Confidentiality.  This Agreement and the terms hereof areconfidential, and neither the contents of this Agreement or the details of thisAgreement may be shown or disclosed by Borrower to any bank, finance company orother lender without the prior written consent of Lender.

16.11       Right to Publish Notice.  Lender may, at its discretion and expense,publicize or otherwise advertise by so-called “tombstone” advertising orotherwise Lender’s and Lender’s financing transaction with Borrower.

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16.12       Credit Inquiries.  Borrower hereby authorizes Lender to(provided, however, Lender shall incur no liability for the failure to) respondto credit inquiries concerning Borrower in accordance with Lender’s normal andcustomary practices.  Borrower herebyindemnifies and holds Lender harmless for any action taken by Lender inreliance upon the foregoing authorization.

16.13       Joint Preparation.  This Agreement has been prepared through thejoint efforts of all the parties. Neither its provisions nor any allegedambiguity shall be interpreted or resolved against any party on the ground thatsuch party’s counsel was the draftsman of this Agreement.  Each of the parties declares that such partyhas carefully read this Agreement and the agreements, documents and instrumentsbeing entered into in connection herewith and that such party knows thecontents thereof and signs the same freely and voluntarily.  The parties hereto acknowledge that they havebeen represented in negotiations for and preparation of this Agreement and theagreements, documents and instrument being entered into in connection herewithby legal counsel of their own choosing, and that each of them has read the sameand had their contents fully explained by such counsel and is fully aware oftheir contents and legal effect.

16.14       Right Of Set-Off.  Anyand all deposits or other sums at any time credited by or due to Borrower fromLender or any Participant or from any Affiliate of any of the foregoing, andany cash, securities, instruments or other property of Borrower in the possessionof any of the foregoing, whether for safekeeping or otherwise (regardless ofthe reason such Person had received the same) shall at all times constitutesecurity for all Obligations and for any and all obligations of Borrower toLender or any Participant or such Affiliate and may be applied or set offagainst the Obligations and against such Obligations at any time, whether ornot such are then due and whether or not other collateral is then available toLender.

16.15       Integration.  This Agreement, together with the other LoanDocuments, reflects the entire understanding of the parties with respect to thetransactions contemplated hereby and shall not be contradicted or qualified byany other agreement, oral or written, before the date hereof.

[Remainder of page leftblank intentionally.]

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**IN WITNESS WHEREOF**,the parties hereto have caused this Agreement to be executed and delivered asof the date first above written.
|        | **BIDZ.COM,  INC.  a California corporation**

** **

** ** |
|--------|-----------------------------------------------------------------------|
|   | By:                                                                   | /s/ Lawrence Y.  Kong |
|   | Lawrence Y. Kong                                                      |
|   | CFO and  Treasurer                                                    |
|   |                                                                  |
|   |                                                                  |
|   |                                                                  |
|        | **BIDZ.COM,  INC.  a Delaware corporation**

** **

** **   |
|   | By:                                                                   | /s/ Lawrence Y.  Kong |
|   | Lawrence Y. Kong                                                      |
|   | CFO and  Treasurer                                                    |

 

*Signature Page to Loan andSecurity Agreementby and between Bidz.com, Inc. and LaSalle Retail Finance*

* *

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* *

*Signature of Lender to Loan andSecurity Agreement*

 

 
|            | **LASALLE  RETAIL FINANCE,**                                                                                                     |
|------------|----------------------------------------------------------------------------------------------------------------------------------|
| ** ** | **A  DIVISION OF LASALLE BUSINESS CREDIT, LLC, AS AGENT FOR LASALLE MIDWEST BANK  NATIONAL ASSOCIATION**

** **

** ** |
|       | By:                                                                                                                              | /s/ Barbara  Anderson |
|       | Barbara Anderson                                                                                                                 |
|       | Senior Vice  President                                                                                                           |
|       |                                                                                                                             |

 

*Signature Page to Loan andSecurity Agreementby and between Bidz.com, Inc. and LaSalle Retail Finance*

 

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