EXHIBIT
10.2


SECOND AMENDED AND RESTATED LOAN AND SECURITY
AGREEMENT


BANK OF AMERICA, N.A.,


THE ADMINISTRATIVE AND COLLATERAL
AGENT


FOR THE LENDERS REFERENCED HEREIN


MOTHERS WORK, INC.


THE LEAD BORROWER


FOR THE BORROWERS REFERENCED
HEREIN


AND


THE GUARANTORS PARTY HERETO


March 13,
2007


















TABLE OF CONTENTS


	
  ARTICLE I. - DEFINITIONS:

  	
   

  	
  2

  
	
  ARTICLE II. - THE REVOLVING CREDIT

  	
   

  	
  41

  
	
  2.1

  	
   

  	
  Establishment of Revolving
  Credit

  	
   

  	
  41

  
	
  2.2

  	
   

  	
  Advances in Excess of
  Borrowing Base (Overloans)

  	
   

  	
  42

  
	
  2.3

  	
   

  	
  Risks of Value of
  Collateral

  	
   

  	
  42

  
	
  2.4

  	
   

  	
  Commitment to Make
  Revolving Credit Loans and Support Letters of Credit

  	
   

  	
  43

  
	
  2.5

  	
   

  	
  Revolving Credit Loan
  Requests

  	
   

  	
  43

  
	
  2.6

  	
   

  	
  Making Of Revolving Credit
  Loans

  	
   

  	
  45

  
	
  2.7

  	
   

  	
  SwingLine Loans

  	
   

  	
  46

  
	
  2.8

  	
   

  	
  The Loan Account

  	
   

  	
  46

  
	
  2.9

  	
   

  	
  The Revolving Credit Note

  	
   

  	
  47

  
	
  2.10

  	
   

  	
  Payment of the Loan Account

  	
   

  	
  48

  
	
  2.11

  	
   

  	
  Interest On Revolving
  Credit Loans

  	
   

  	
  49

  
	
  2.12

  	
   

  	
  Revolving Credit Commitment
  Fee

  	
   

  	
  50

  
	
  2.13

  	
   

  	
  Intentionally Omitted

  	
   

  	
  50

  
	
  2.14

  	
   

  	
  Unused Line Fee

  	
   

  	
  50

  
	
  2.15

  	
   

  	
  Early Termination Fee

  	
   

  	
  50

  
	
  2.16

  	
   

  	
  Concerning Fees

  	
   

  	
  51

  
	
  2.17

  	
   

  	
  Intentionally Omitted

  	
   

  	
  51

  
	
  2.18

  	
   

  	
  Procedures For Issuance Of
  L/C’s

  	
   

  	
  51

  
	
  2.19

  	
   

  	
  Fees For L/C’s

  	
   

  	
  52

  
	
  2.20

  	
   

  	
  Concerning L/C’s

  	
   

  	
  54

  
	
  2.21

  	
   

  	
  Changed Circumstances

  	
   

  	
  55

  
	
  2.22

  	
   

  	
  Lenders’ Commitments

  	
   

  	
  57

  
	
  2.23

  	
   

  	
  Designation of Lead
  Borrower as Borrowers’ Agent

  	
   

  	
  58

  
	
  ARTICLE III. —
  CONDITIONS PRECEDENT:

  	
   

  	
  59

  
	
  3.1

  	
   

  	
  Corporate Due Diligence

  	
   

  	
  59

  
	
  3.2

  	
   

  	
  Opinion

  	
   

  	
  59

  
	
  3.3

  	
   

  	
  Officers’ Certificates

  	
   

  	
  59

  
	
  3.4

  	
   

  	
  Additional Documents

  	
   

  	
  60

  
	
  3.5

  	
   

  	
  Representations and
  Warranties

  	
   

  	
  62

  
	
  3.6

  	
   

  	
  Minimum Day One Excess
  Availability

  	
   

  	
  62

  
	
  3.7

  	
   

  	
  All Fees and Expenses Paid

  	
   

  	
  62

  
	
  3.8

  	
   

  	
  No Borrower Default

  	
   

  	
  63

  
	
  3.9

  	
   

  	
  No Adverse Change

  	
   

  	
  63

  
	
  3.10

  	
   

  	
  Finalization of term loan
  facility

  	
   

  	
  63

  
	
  3.11

  	
   

  	
  Validity of Liens

  	
   

  	
  63

  
	
  3.12

  	
   

  	
  Documents

  	
   

  	
  63

  
	
  ARTICLE IV. - GENERAL
  REPRESENTATIONS, COVENANTS

  	
   

  	
   

  
	
  AND WARRANTIES:

  	
   

  	
  63

  
	
  4.1

  	
   

  	
  Payment and Performance of
  Liabilities

  	
   

  	
  63

  
	
  4.2

  	
   

  	
  Due Organization. Corporate
  Authorization. No Conflicts

  	
   

  	
  64

  



 



 i
 









 


	
  4.3

  	
   

  	
  Trade Names

  	
   

  	
  65

  
	
  4.4

  	
   

  	
  Infrastructure

  	
   

  	
  65

  
	
  4.5

  	
   

  	
  GUARANTOR

  	
   

  	
  66

  
	
  4.6

  	
   

  	
  Locations

  	
   

  	
  66

  
	
  4.7

  	
   

  	
  Title To Assets

  	
   

  	
  67

  
	
  4.8

  	
   

  	
  Indebtedness

  	
   

  	
  68

  
	
  4.9

  	
   

  	
  Insurance

  	
   

  	
  70

  
	
  4.10

  	
   

  	
  Licenses; Material
  Contracts

  	
   

  	
  71

  
	
  4.11

  	
   

  	
  Leases

  	
   

  	
  71

  
	
  4.12

  	
   

  	
  Requirements of Law

  	
   

  	
  71

  
	
  4.13

  	
   

  	
  Labor Relations

  	
   

  	
  72

  
	
  4.14

  	
   

  	
  Maintain Properties

  	
   

  	
  73

  
	
  4.15

  	
   

  	
  Taxes

  	
   

  	
  73

  
	
  4.16

  	
   

  	
  No Margin Stock or
  Securities

  	
   

  	
  74

  
	
  4.17

  	
   

  	
  ERISA

  	
   

  	
  74

  
	
  4.18

  	
   

  	
  Hazardous Materials and
  Environmental Compliance

  	
   

  	
  75

  
	
  4.19

  	
   

  	
  Litigation

  	
   

  	
  78

  
	
  4.20

  	
   

  	
  Dividends; Investments;
  Corporate Action

  	
   

  	
  78

  
	
  4.21

  	
   

  	
  Loans

  	
   

  	
  80

  
	
  4.22

  	
   

  	
  Protection of Assets

  	
   

  	
  80

  
	
  4.23

  	
   

  	
  Line of Business

  	
   

  	
  80

  
	
  4.24

  	
   

  	
  Affiliate Transactions

  	
   

  	
  81

  
	
  4.25

  	
   

  	
  Further Assurances

  	
   

  	
  81

  
	
  4.26

  	
   

  	
  Adequacy OF Disclosure

  	
   

  	
  81

  
	
  4.27

  	
   

  	
  No Restrictions on
  Liabilities

  	
   

  	
  82

  
	
  4.28

  	
   

  	
  Other Covenants

  	
   

  	
  82

  
	
  ARTICLE V. -
  FINANCIAL REPORTING AND PERFORMANCE COVENANTS:

  	
   

  	
  82

  
	
  5.1

  	
   

  	
  Maintain Records

  	
   

  	
  82

  
	
  5.2

  	
   

  	
  Access to Records

  	
   

  	
  83

  
	
  5.3

  	
   

  	
  Immediate Notice to Agent

  	
   

  	
  84

  
	
  5.4

  	
   

  	
  Borrowing Base Certificate

  	
   

  	
  85

  
	
  5.5

  	
   

  	
  Weekly Reports

  	
   

  	
  85

  
	
  5.6

  	
   

  	
  Monthly Reports

  	
   

  	
  86

  
	
  5.7

  	
   

  	
  Quarterly Reports

  	
   

  	
  87

  
	
  5.8

  	
   

  	
  Annual Reports

  	
   

  	
  88

  
	
  5.9

  	
   

  	
  Officers’ Certificates

  	
   

  	
  88

  
	
  5.10

  	
   

  	
  Inventories, Appraisals,
  and Audits

  	
   

  	
  89

  
	
  5.11

  	
   

  	
  Additional Financial
  Information

  	
   

  	
  90

  
	
  5.12

  	
   

  	
  Financial Performance
  Covenants

  	
   

  	
  91

  
	
  ARTICLE VI. - USE AND
  COLLECTION OF COLLATERAL:

  	
   

  	
  91

  
	
  6.1

  	
   

  	
  Use of Inventory Collateral

  	
   

  	
  91

  
	
  6.2

  	
   

  	
  Inventory Quality

  	
   

  	
  92

  
	
  6.3

  	
   

  	
  Adjustments and Allowances

  	
   

  	
  92

  
	
  6.4

  	
   

  	
  Validity of Accounts

  	
   

  	
  92

  
	
  6.5

  	
   

  	
  Notification to Account
  Debtors

  	
   

  	
  93

  



 



 ii
 









 


	
  ARTICLE VII. - CASH MANAGEMENT; PAYMENT OF LIABILITIES:

  	
   

  	
  93

  
	
  7.1

  	
   

  	
  Depository Accounts

  	
   

  	
  93

  
	
  7.2

  	
   

  	
  Credit Card Receipts

  	
   

  	
  94

  
	
  7.3

  	
   

  	
  The Concentration, Blocked,
  and Operating Accounts

  	
   

  	
  94

  
	
  7.4

  	
   

  	
  Proceeds and Collection of
  Accounts

  	
   

  	
  96

  
	
  7.5

  	
   

  	
  Payment of Liabilities

  	
   

  	
  97

  
	
  7.6

  	
   

  	
  The Operating Account and
  Disbursement Account

  	
   

  	
  98

  
	
  ARTICLE VIII. - GRANT
  OF SECURITY INTEREST:

  	
   

  	
  98

  
	
  8.1

  	
   

  	
  Grant of Security Interest

  	
   

  	
  98

  
	
  8.2

  	
   

  	
  Extent and Duration of
  Security Interest

  	
   

  	
  100

  
	
  8.3

  	
   

  	
  Perfection of Security
  Interests

  	
   

  	
  100

  
	
  ARTICLE IX. -
  COLLATERAL AGENT AS BORROWERS’ ATTORNEY-IN-FACT:

  	
   

  	
  103

  
	
  9.1

  	
   

  	
  Appointment as Attorney-In-Fact

  	
   

  	
  103

  
	
  9.2

  	
   

  	
  No Obligation to Act

  	
   

  	
  104

  
	
  ARTICLE X. - EVENTS
  OF DEFAULT:

  	
   

  	
  105

  
	
  10.1

  	
   

  	
  Failure to Pay Revolving
  Credit

  	
   

  	
  105

  
	
  10.2

  	
   

  	
  Failure To Make Other
  Payments

  	
   

  	
  105

  
	
  10.3

  	
   

  	
  Failure to Perform Covenant
  or Liability (No Grace Period)

  	
   

  	
  105

  
	
  10.4

  	
   

  	
  Failure to Perform Covenant
  or Liability (Grace Period)

  	
   

  	
  106

  
	
  10.5

  	
   

  	
  Misrepresentation

  	
   

  	
  106

  
	
  10.6

  	
   

  	
  Acceleration of Other Debt.
  Breach of Lease

  	
   

  	
  106

  
	
  10.7

  	
   

  	
  Default Under Other
  Agreements

  	
   

  	
  107

  
	
  10.8

  	
   

  	
  Intentionally Omitted

  	
   

  	
  107

  
	
  10.9

  	
   

  	
  Attachment; Judgment;
  Restraint of Business

  	
   

  	
  107

  
	
  10.10

  	
   

  	
  Business Failure

  	
   

  	
  107

  
	
  10.11

  	
   

  	
  Bankruptcy

  	
   

  	
  108

  
	
  10.12

  	
   

  	
  Default by Guarantor or
  Affiliate

  	
   

  	
  108

  
	
  10.13

  	
   

  	
  Indictment -
  Forfeiture

  	
   

  	
  108

  
	
  10.14

  	
   

  	
  Termination of Guaranty

  	
   

  	
  108

  
	
  10.15

  	
   

  	
  Challenge to Loan Documents

  	
   

  	
  108

  
	
  10.16

  	
   

  	
  Intentionally Omitted

  	
   

  	
  109

  
	
  10.17

  	
   

  	
  Change in Control

  	
   

  	
  109

  
	
  10.18

  	
   

  	
  Uninsured Losses

  	
   

  	
  109

  
	
  10.19

  	
   

  	
  ERISA

  	
   

  	
  109

  
	
  ARTICLE XI. - RIGHTS
  AND REMEDIES UPON DEFAULT:

  	
   

  	
  109

  
	
  11.1

  	
   

  	
  Rights of Enforcement

  	
   

  	
  109

  
	
  112

  	
   

  	
  Sale of Collateral

  	
   

  	
  110

  
	
  113

  	
   

  	
  Occupation of Business
  Location

  	
   

  	
  111

  
	
  114

  	
   

  	
  Grant of Nonexclusive
  License

  	
   

  	
  111

  
	
  115

  	
   

  	
  Assembly of Collateral

  	
   

  	
  111

  
	
  116

  	
   

  	
  Rights and Remedies

  	
   

  	
  111

  
	
  ARTICLE XII -
  NOTICES:

  	
   

  	
  112

  
	
  12.1

  	
   

  	
  Notice Addresses

  	
   

  	
  112

  
	
  12.2

  	
   

  	
  Notice Given

  	
   

  	
  113

  
	
  ARTICLE XIII. - TERM:

  	
   

  	
  114

  



 



 iii
 









 


	
  13.1

  	
   

  	
  Termination of Revolving
  Credit.

  	
   

  	
  114

  
	
  13.2

  	
   

  	
  Actions On Termination.

  	
   

  	
  114

  
	
  ARTICLE XIV. -
  GENERAL:

  	
   

  	
  114

  
	
  14.1

  	
   

  	
  Protection of Collateral.

  	
   

  	
  114

  
	
  14.2

  	
   

  	
  Publicity.

  	
   

  	
  114

  
	
  14.3

  	
   

  	
  Successors and Assigns.

  	
   

  	
  114

  
	
  14.4

  	
   

  	
  Severability.

  	
   

  	
  115

  
	
  14.5

  	
   

  	
  Amendments; Course of
  Dealing.

  	
   

  	
  115

  
	
  14.6

  	
   

  	
  Power of Attorney.

  	
   

  	
  115

  
	
  14.7

  	
   

  	
  Application of Proceeds.

  	
   

  	
  116

  
	
  14.8

  	
   

  	
  Increased Costs.

  	
   

  	
  116

  
	
  14.9

  	
   

  	
  Costs and Expenses of the
  Agent and Lenders.

  	
   

  	
  116

  
	
  14.10

  	
   

  	
  Copies and Facsimiles.

  	
   

  	
  117

  
	
  14.11

  	
   

  	
  New York Law.

  	
   

  	
  117

  
	
  14.12

  	
   

  	
  Consent to Jurisdiction.

  	
   

  	
  117

  
	
  14.13

  	
   

  	
  Indemnification.

  	
   

  	
  118

  
	
  14.14

  	
   

  	
  Rules of Construction.

  	
   

  	
  118

  
	
  14.15

  	
   

  	
  Intent.

  	
   

  	
  120

  
	
  14.16

  	
   

  	
  Participations.

  	
   

  	
  120

  
	
  14.17

  	
   

  	
  Right of Set-Off.

  	
   

  	
  121

  
	
  14.18

  	
   

  	
  Pledges To Federal Reserve
  Banks.

  	
   

  	
  121

  
	
  14.19

  	
   

  	
  Maximum Interest Rate.

  	
   

  	
  121

  
	
  14.20

  	
   

  	
  Waivers.

  	
   

  	
  121

  
	
  14.21

  	
   

  	
  Counterparts.

  	
   

  	
  122

  
	
  14.22

  	
   

  	
  Electronic Submissions.

  	
   

  	
  122

  
	
  14.23

  	
   

  	
  Bank of America, N.A as Agent.

  	
   

  	
  123

  
	
  14.24

  	
   

  	
  Joint Borrower Provisions.

  	
   

  	
  123

  
	
  14.25

  	
   

  	
  Transitional Arrangements.

  	
   

  	
  127

  
	
  14.26

  	
   

  	
  Confidentiality.

  	
   

  	
  128

  



 



 iv
 









EXHIBITS


	
  2.7

  	
  :

  	
  SwingLine Note

  
	
  2.9

  	
  :

  	
  Revolving Credit Note

  
	
  2.22

  	
  :

  	
  Revolving Credit Lenders’ Commitments

  
	
  4.2

  	
  :

  	
  Affiliates

  
	
  4.3

  	
  :

  	
  Trade Names

  
	
  4.6(a)

  	
  :

  	
  Locations, Leases, and Landlords

  
	
  4.6(c)

  	
  :

  	
  Form of Landlord Waiver

  
	
  4.7(a)

  	
  :

  	
  Encumbrances

  
	
  4.7(d)

  	
  :

  	
  Third Party Bailees

  
	
  4.8

  	
  :

  	
  Indebtedness

  
	
  4.9

  	
  :

  	
  Insurance Policies

  
	
  4.10

  	
  :

  	
  Licenses; Material Contracts

  
	
  4.11

  	
  :

  	
  Capital Leases

  
	
  4.15

  	
  :

  	
  Taxes

  
	
  4.17

  	
  :

  	
  ERISA

  
	
  4.18

  	
  :

  	
  Environmental Compliance

  
	
  4.19

  	
  :

  	
  Litigation

  
	
  4.20

  	
  :

  	
  Investments

  
	
  5.4

  	
  :

  	
  Form of Borrowing Base Certificate

  
	
  5.9

  	
  :

  	
  Officer’s Compliance Certificate

  
	
  5.12(a)

  	
  :

  	
  Financial Performance Covenants

  
	
  5.12(b)

  	
  :

  	
  Business Plan

  
	
  7.1

  	
  :

  	
  DDA’s

  
	
  7.2

  	
  :

  	
  Credit Card Arrangements

  
	
  8.3(d)

  	
  :

  	
  Investment Property

  



 



 v














SECOND
AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT


March 13, 2007


THIS
AGREEMENT is made between


Bank of
America, N.A., a national banking association, with offices
at 100 Federal Street, Boston, Massachusetts 
02110, as agent (in such capacity, herein the “Administrative
Agent”) for the benefit of the Lenders,
on a Pro Rata basis, based upon each Lender’s Percentage Commitment, who are,
at present, those financial institutions identified on the signature pages of
this Agreement and who in the future are those Persons (if any) who become a “Lender” in accordance with the provisions of Article VII of
the Agency Agreement;


and


Bank of
America, N.A., a national banking association, with offices
at 100 Federal Street, Boston, Massachusetts 
02110, as agent (in such capacity, herein the “Collateral
Agent”) for the benefit of the Lenders and the Administrative Agent,


and


Cave
Springs, Inc., a Delaware corporation (collectively, with the
Lead Borrower, the “Borrowers” and
each individually, a “Borrower”),
which has its principal executive offices at Little Falls Centre II,
2751 Centerville Road, Suite 3207, Wilmington,
DE  19808,


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


and


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


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


WITNESSETH:



 1
 








ARTICLE I. - Definitions:


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


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


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


“ACH”:  Automated clearing house.


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


“Acquired Real Property”: Any real property acquired by the
Borrowers after the date hereof, other than the Headquarters Facility, and
including but not limited to real property acquired by the Borrowers after the
date hereof consisting of the Lead Borrower’s leased Domestic Distribution
Center located at the Philadelphia Naval Business Center.


“Administrative Agent”:  Defined in the Preamble.


“Affiliate”:


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



 2
 








interests; or has directly or indirectly the right to
elect the majority of directors of both such parties; or


(b)                                 Any
corporation, limited liability company, trust, partnership, joint venture, or
other enterprise which: is a parent, brother-sister, subsidiary, or
affiliate, of any Obligor; has such enterprise’s tax returns or financial
statements consolidated with the Lead Borrower’s; is a member of the same
controlled group of corporations (within the meaning of Section 1563(a)(1), (2)
and (3) of the Internal Revenue Code of 1986, as amended from time to time) of
which the Lead Borrower is a member; controls or is controlled by the Lead
Borrower.


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


“Agency Agreement”:   That certain Agency Agreement dated March
13, 2007, by and among the Administrative Agent, the Collateral Agent, and the
Lenders.


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


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


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


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


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


“Approved Electronic Form”:  Defined in Section 14.22.


“Approved Security-Free SERPS”:
All non-qualified supplemental employee retirement plans approved by a majority
of the independent members of the Obligor’s board of directors providing for
payments by the Obligor into a Security-Free Rabbi Trusts, and designated as an
“Approved Security-Free SERP” in a writing from the Lead Borrower to the
Administrative Agent, which writing identifies the date on which such members
of the board of directors have approved such plan.



 3
 








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


“Availability”:                   The sum of:


(a)                                  The
Borrowing Base


Minus


(b)                                 The
aggregate unpaid balance of the Loan Account


Minus


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


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


(i)                                     Rent
for any location in a Landlord State with respect to which a Landlord Waiver
has not been received by the Collateral Agent (which initially shall be one (1)
month rent for any such location).


(ii)                                  Customer
Credit Liabilities (the Availability Reserve for which initially shall be up to
Thirty-Three Percent (33%) of Customer Credit Liabilities and which may be
adjusted based on changes in the operation of the Borrower’s business).


(iii)                               Taxes
and other governmental charges, including, ad valorem, personal property, and
other taxes which might have priority over the Collateral Interests of the
Collateral Agent in the Collateral.


(iv)                              Payables
(based upon payables which are past the Borrower’s normal trade terms).


“Bank of
America”:   Bank of
America, N.A. in its individual capacity.


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


“Base”:  The Base is the publicly announced prime rate
from time to time by Bank of America (or any successor in interest to Bank of
America) (which is not intended



 4
 








to be Bank of America’s lowest or most favorable rate in effect at any
time).  In the event that said bank (or
any such successor) ceases to announce such a rate, “Base” shall refer to that
rate or index announced or published from time to time as the Administrative
Agent, in good faith, designates as the functional equivalent to said
rate.  Any change in “Base” shall be
effective, for purposes of the calculation of interest due hereunder, when such
change is made effective generally by the bank on whose rate or index “Base” is
being set.  In all events, interest that
is determined by reference to Base (or any successor to Base) shall be
calculated on a 365/366-day year and actual days elapsed.


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


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


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


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


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


“Borrowers”:  Defined in the Preamble.


“Borrowing Base”:                                        The
lesser of:


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


or


(b)                                 the
Borrowing Base B.


“Borrowing Base A”:  The sum of:


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


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


(ii)                the
face amount of Eligible Accounts arising from the leasing of a customer list,
marketing services, or an Account owing to



 5
 








a Borrower from an account debtor operating a
department or specialty store or other location in which a Borrower leases or
licenses a portion of the space in such store 
(provided, however, that customer list or marketing services Accounts
shall be included only to the extent that they do not exceed $7,000,000 in the
aggregate) multiplied by Eighty Percent (80%), 


Plus


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


Plus


(c)                                  approved
Eligible Nondomestic Licensing Accounts, multiplied by
the Nondomestic Licensing Advance Rate;


Plus


(d)                                                         the
sum of:


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


(ii) (A) the sum of (I) the NOLV of Eligible Finished
Goods Inventory (net of Inventory Reserves) not located in department or
specialty stores or other locations in which a Borrower leases or licenses a
portion of the space in such store; plus (II) the lesser of (a) 21% of the sum of the NOLV of Eligible
Finished Goods Inventory, Eligible L/C Inventory, and Eligible In-Transit
Inventory (in each case, net of Inventory Reserves) or (b) the NOLV of Eligible
Finished Goods Inventory (net of Inventory Reserves) located in department or
specialty stores or other locations in which a Borrower leases or licenses a
portion of the space in such store  multiplied by (B) the applicable Inventory Advance Rate, and


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



 6
 








Plus


(e)                                  the
amount equal to (i) the Determined Value of the Eligible Fixed Assets multiplied by the Real Estate Advance Rate; less (ii) the Second Mortgage Cap; less
(iii) the New HQ Encumbrance Amount;


Plus


(f)                                        the
sum of:


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


PLUS


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


PLUS


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


PLUS


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


PLUS


(v) 90% of Eligible
Liquid Collateral consisting of securities with maturities of 180 days or less
from the date of acquisition issued or fully guaranteed or insured as to
payment of principal and interest by the United States



 7
 








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


PLUS


(vi) 85% of Eligible
Liquid Collateral consisting of securities (not held by Bank of America) with
maturities of 180 days or less from the date of acquisition issued or fully
guaranteed or insured as to payment of principal and interest by the United
States Treasury (or a money market fund (other than a fund held by Bank of
America) whose assets consist entirely of cash, securities with maturities of
180 days or less from the date of acquisition issued or fully guaranteed or
insured as to payment of principal and interest by the United States Treasury,
and certificates of de­posit with maturities of 365 days or less from the date
of acqui­sition issued by a FDIC-insured financial institution);


PLUS


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


PLUS


(viii) 75% of Eligible
Liquid Collateral consisting of senior unsecured bonds (not held by Bank of
America) of a



 8
 








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


Minus


(g)                                 Availability
Reserves.


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


“Borrowing Base Certificate”:  Defined in Section 5.4.


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


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


“Capital Adequacy Demand”:  Defined in Section 14.8.


“Capital Adequacy Charge”:  Defined in Section 14.8.


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



 9
 








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


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


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


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


(b)                                 The
acquisition after the date hereof, by any group of persons (within the meaning
of the Securities Exchange Act of 1934, as amended) or by any Person, of beneficial
ownership (within the meaning of Rule 13d-3 of the Securities Exchange Act of
1934, as amended), directly or indirectly, of 50% or more of the issued and
outstanding capital stock of any Obligor having the right to vote for the
election of directors of such Obligor.


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


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


“Closing Date”:  The date on which all conditions precedent in
Article III of this Agreement are satisfied.


“Collateral”:  Defined in Section 8.1.


“Collateral Agent”:  Defined
in the Preamble.


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


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


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



 10
 








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


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


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


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


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


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


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



 11
 








of the subject Inventory solely as directed by the Collateral Agent or
the Term Loan Collateral Agent.


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


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


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


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


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


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


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


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


“EBITDA”:  The Borrowers’ Consolidated earnings
(excluding extraordinary gains and gains from the sale of assets other than in
the ordinary course of business) before interest, taxes, depreciation,
amortization, loss on extinguishment of debt, and other non-cash expenses
properly deducted in determining earnings in accordance with GAAP.  The term “non-cash expenses” includes,
without limitation, stock-based compensation expense, gain or loss on
impairment of long-lived assets, and gain or loss on disposal of assets.


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



 12
 








Agent in its reasonable discretion (determined in accordance with
customary credit considerations). 
Without limiting the generality of the foregoing, no Account shall be an
Eligible Account if:


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


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


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


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


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


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


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


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


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



 13
 








suspended business, ceased to be solvent, or consented
to or suffered a receiver, trustee, liquidator or custodian to be appointed for
it or for all or a significant portion of its assets or affairs; or


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


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


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


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


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


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


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


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


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



 14
 








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


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


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


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


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


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



 15
 








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


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


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


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


(e)                                  such
Inventory either


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


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


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



 16
 








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


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


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


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


“Eligible Liquid Collateral”:  Each of the following:


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


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


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


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


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



 17
 








Agent and the Term Loan
Collateral Agent; and (iv) either held by Bank of America or by another
financial institution acceptable to the Collateral Agent with whom the
Collateral Agent and the applicable Borrower have agreed to a written control
agreement in form and substance satisfactory to Collateral Agent.  In no event shall Investment Property or
other assets or investments which are assets or investments of a Security-Free
Rabbi Trust held under an Approved Security-Free SERP constitute Eligible
Liquid Collateral.


“Eligible
Nondomestic Licensing Accounts”:  Accounts arising from licensing or
franchising of Borrower’s intellectual property which would qualify as Eligible
Accounts except that it arises from an Account Debtor outside the United
States, which is subject in each case to due diligence and approval by the
Collateral Agent and first priority perfection under the local law of the
United States and the local laws of the jurisdiction of such Account Debtor.


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


“Employee Benefit Plan”:  As defined in ERISA.


“Encumbrance”:  Each of the following:


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


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


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


“Environmental Laws”:  All of the following:


(a)                                  Any
and all federal, state, local or municipal laws, rules, orders, regulations,
statutes, ordinances, codes, decrees or requirements which regulate or relate
to, or impose any standard of



 18
 








conduct or liability on account of or in respect to
environmental protection matters, including, without limitation, Hazardous
Materials, as are now or hereafter in effect.


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


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


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


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


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


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


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


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


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


“Fixed Charge Coverage
Ratio”:  For any twelve month
period, the ratio of Borrowers’ consolidated (a) EBITDA minus Gross
Non-Financed Capital Expenditures minus



 19
 








the payment of any dividends or other distributions on capital stock of
the Lead Borrower (except distributions in such stock), plus (or minus) the increase (or decrease) in total
deferred rent liability, to (b) scheduled cash interest expense, plus
scheduled principal payments on account of current maturities of long term
Indebtedness, plus, without duplication, payments for the scheduled
redemption or acquisition of Securities, plus income taxes paid in cash,
all as determined in accordance with GAAP, provided, however, that
contributions made by Borrowers under any Approved Security-Free SERP into a
Security-Free Rabbi Trust shall be treated as a reduction of EBITDA as used in
the calculation of the Fixed Charge Coverage Ratio, and the GAAP Supplemental
Employee Retirement Plan expense related to such Security-Free Rabbit Trust
will not be treated as a reduction of EBITDA as used in the calculation of the
Fixed Charge Coverage Ratio.


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


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


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



 20
 








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


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


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


Sales (Minus) Cost of
Goods Sold


Sales


“Gross Non-Financed
Capital Expenditures”:  
The amount equal to: (a) Capital Expenditures minus (b) only to the
extent included in clause (a) hereof, the amount of Capital Expenditures
financed through Indebtedness (other than Indebtedness incurred under this
Agreement).


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


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


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


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



 21
 








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


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


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


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


(e)                                  As
lessee under Capital Leases;


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


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


“Indebtedness”
also includes:


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


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


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


“Indemnified Person”:  Defined in Section 14.13.



 22
 








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


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


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


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


“Index Offer Rate”:  For any Interest Period with respect to any
Index Loan, the rate per annum equal to the British Bankers Association LIBOR
Rate (“BBA LIBOR”), as published by Reuters (or other commercially
available source providing quotations of BBA LIBOR as designated by the
Administrative Agent from time to time) at approximately 11:00 a.m., London
time, two Business Days prior to the commencement of such Interest Period, for
Dollar deposits (for delivery on the first day of such Interest Period) with a
term equivalent to such Interest Period. 
If such rate is not available at such time for any reason, then the “Index
Offer Rate” for such Interest Period shall be the rate per annum determined by
the Administrative Agent to be the rate at which deposits in Dollars for
delivery on the first day of such Interest Period in same day funds in the
approximate amount of the Index Loan being made, continued or converted by Bank
of America and with a term equivalent to such Interest Period would be offered
by Bank of America’s London Branch to major banks in the London interbank
eurodollar market at their request at approximately 11:00 a.m. (London time)
two Business Days prior to the commencement of such Interest Period. In the
event that the Index Offer Rate for an Index Loan cannot be determined through
any of the methods provided above, it will be determined in whatever manner
Administrative Agent may reasonably determine or if Administrative Agent deems
that it cannot be determined, the Index Offer Rate will be unavailable.  “Index Rate”:  That per annum rate (calculated on a
365/366-day year and actual days elapsed) equal to the Index Offer Rate plus
the Index Margin except that, in the event that the Administrative Agent
determines that any Lender may be subject to the Reserve Percentage, the “Index
Rate” shall mean, with respect to any Index Loans then outstanding (from the
date on which that Reserve Percentage first became applicable to such loans),
and with respect to all Index



 23
 








Loans thereafter made, an interest rate per annum equal the sum of (a)
plus (b), where:


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


Index
Offer Rate


1 minus Reserve
Percentage


(b) is the applicable Index Margin.


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


“Intercreditor Agreement”: That
certain Intercreditor Agreement dated as of even date herewith by and among the
Administrative Agent, the Collateral Agent, the Term Loan Agent, and the Term
Loan Collateral Agent, acknowledged by the Obligors as of the date hereof, as
it may be amended or restated.


“Interest Payment Date”:  With reference to:


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


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


“Interest Period”:


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


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


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



 24
 








(ii)                                  Subject
to Subsections (iii) and (iv), below, any Interest Period applicable to a Index
Loan, which Interest Period begins on a day for which there is no numerically
corresponding day in the calendar month during which such Interest Period ends,
shall end on the last Index Business Day of the month during which that
Interest Period ends.


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


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


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


“Inventory Advance Rate”:  The following percentages for the applicable
timeframes:


	
  Timeframe

  	
   

  	
  Percentage

  	
   

  
	
  From the Closing Date to (but not including) the
  first day of the first calendar month beginning after the first anniversary
  of the Closing Date

  	
   

  	
  100

  	
  %

  
	
  From and including the first day of the first
  calendar month beginning after the first anniversary of the Closing Date to
  (but not including) the first day of the first calendar month beginning after
  the second anniversary of the Closing Date

  	
   

  	
  95

  	
  %

  
	
  From and
  including the first day of the first calendar month beginning after the
  second anniversary of the Closing Date to Maturity

  	
   

  	
  90

  	
  %

  



 



 25
 








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


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


(ii)                                  Seasonality.


(iii)                               Shrinkage.


(iv)                              Imbalance.


(v)                                 Change
in Inventory character.


(vi)                              Change
in Inventory composition.


(vii)                           Change in Inventory mix.


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


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


(x)                                   Return
to vendors.



 26
 








(xi)                                Damage.


(xii)                             Inventory in the
possession of any bailee.


(xiii)                          Design room Inventory.


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


“Issuer”:  The issuer of any L/C.


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


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


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


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


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


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


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


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



 27














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


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


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


(iv)                              All
interest, fees, and charges and other amounts which may be charged by any Agent
or the Lenders, to the Obligors and/or which may be due from the Obligors to
any Agent or the Lenders, from time to time, including, without limitation,
interest and fees that accrue after the commencement by or against any Obligor
or any Affiliate thereof of any proceeding under the Bankruptcy Code naming
such Person as the debtor in such proceeding, regardless of whether such
interest and fees are allowed claims in such proceeding.


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


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


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



 28
 








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


(c) Notwithstanding the
foregoing, 
Indebtedness arising solely under the Term Loan Agreement does not
constitute Liabilities as that term is defined herein.


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


“Liquid Collateral
Investments”: The Borrower’s Investment Property in which the
Collateral Agent holds a first priority (other than a prior security interest
held by the securities intermediary maintaining a securities account in which
the Investment Property is maintained, to the extent such prior security
interest secures the securities intermediary’s customary fees and charges),
perfected, valid, and enforceable lien and security interest to secure the
Liabilities, which are not subject to any restriction on their use (other than
restrictions in favor of Collateral Agent), but excluding any Investment
Property or any other assets of any Security-Free Rabbi Trust.


“Loan Account”:  Defined in Section 2.8.


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


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



 29
 








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


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


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


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


 “Maturity Date”:   March 13, 2012, or if such day is
not a Business Day, the next succeeding Business Day.


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


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


“Net Capital Expenditures”:   The amount equal to:
(a) Capital Expenditures minus (b) the amount of tenant improvement
allowances received in cash, to the extent not already deducted from clause
(a) hereof.


“New HQ Encumbrance Amount”: The
maximum amount of Indebtedness secured by an Encumbrance permitted by clause
(j) of the definition of Permitted Encumbrances.


“NOLV”: Net orderly liquidation
value of any item or group of items of Inventory as determined by the
Collateral Agent in accordance with customary credit



 30
 








considerations after review of the then-most recent appraisal report
prepared by an appraiser satisfactory to the Collateral Agent, as updated from
time to time as the Collateral Agent may reasonably determine.


“Nondomestic Licensing Advance Rate”:  The amount determined by the Collateral Agent’s
sole discretion from time to time as being the Nondomestic Licensing Advance
Rate.


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


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


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


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


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


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


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


“Participant”:  Defined in Section 14.16.


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


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


“Permissible Overloans”:  Defined in the Agency Agreement.


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



 31
 








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


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


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


(v)                                 all
Persons, assets or divisions acquired shall be in the lines of business in
which Obligors are currently engaged or in a business reasonably related
thereto or such other lines of business as may be consented to by Administrative
Agent.


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


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


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


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


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



 32
 








(v)                                 all
Persons, assets or divisions created shall be in the lines of business in which
Obligors are currently engaged or in a business reasonably related thereto or
such other lines of business as may be consented to by Administrative Agent.


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


“Permitted Encumbrances”:  The following:


(a)                                  Encumbrances
in favor of the Collateral Agent.


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


(c)                                  Those Encumbrances securing the Term Loan
Facility.


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


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



 33
 








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


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


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


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



 34
 








Real Property, together with the improvements and
fixtures thereon.


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


(j) Purchase money security interests on any
improvements to or fixtures on or the construction of an addition or additions
to the Headquarters Facility or additional buildings at the Headquarters
Facility securing Indebtedness incurred or assumed for the purpose of financing
all or any part of the cost of constructing, or of acquiring such additions,
improvements or fixtures on the Headquarters Facility; provided
however that (i) any such Encumbrance
attaches to such improvements or fixtures on the Headquarters Facility
concurrently with or within twenty (20) days after the acquisition thereof,
(ii) such Encumbrance attaches solely to the Headquarters Facility or the
improvements or fixtures thereon, and (iii) the principal amount of the
Indebtedness secured thereby does not exceed 100% of the cost of such
additions, improvements and fixtures provided, however, that the holder
of any such Indebtedness shall have agreed that the Collateral Agent shall have
the right to utilize the Domestic Distribution Center portion of the
Headquarters Facility, at no cost or expense to the Agents or Lenders (other
than a pro rated amount for the period in which the Collateral Agent is
utilizing such portion of the Headquarters Facility), to the extent necessary
or appropriate to sell, lease or otherwise dispose of the Collateral, such
agreement to be in form and substance satisfactory to the Collateral Agent in
its sole discretion.


(k) Inclusive of those Encumbrances (if any) listed on
EXHIBIT 4.7 in favor of landlords,
liens or security interests held by the Borrowers’ landlords for up to a
maximum of twenty (20) store locations in the aggregate.


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



 35
 








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


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


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


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


“Pricing Adjusted Availability”:
The sum of:


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


Minus


(ii)                                  The
aggregate unpaid balance of the Loan Account


Minus


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


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


“Pro Forma Fixed Charge
Coverage Ratio”: For any twelve month period, the ratio of Borrowers’
consolidated (a) EBITDA during such period minus projected Gross Non-Financed Capital Expenditures for the
following twelve month period minus projected Distributions for the
following twelve month period plus
(or minus) the projected
increase (or decrease) in total deferred rent liability for the following
twelve month period, to (b) projected cash interest expense for the
following twelve month period, plus
projected principal payments on account of current maturities of long term
Indebtedness for the following twelve month period, plus projected income taxes paid in cash for the following
twelve month period, all as determined in accordance with GAAP,  provided,
however, that contributions made by Borrowers under any Approved
Security-Free SERP into a Security-Free



 36
 








Rabbi Trustshall be treated as a reduction of EBITDA as used in the
calculation of the Pro Forma Fixed Charge Coverage Ratio, and the GAAP
Supplemental Employee Retirement Plan expense related to such Security-Free
Rabbi Trusts will not be treated as a reduction of EBITDA as used in the
calculation of the Pro Forma Fixed Charge Coverage Ratio.  Any projections used in computing Pro Forma
Fixed Charge Coverage Ratio shall be determined by the Borrowers and acceptable
to the Administrative Agent in its reasonable discretion.


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


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


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


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


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


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


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


“Requirement of Law”:  As to any Person:


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



 37
 








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


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


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


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


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


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


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


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


“Revolving Credit Loan
Ceiling”:   $65,000,000,
provided that at the written request of the Borrowers, accompanied by a
certificate of each Obligor’s respective Secretary as to the due adoption and
continued effectiveness of each corporate resolution adopted with respect to
such increase and attesting to the true signatures of each Person authorized as
a signatory to any document effecting such increase, and with the prior written
consent of the Administrative Agent in its sole discretion, the Revolving
Credit Loan Ceiling shall be increased an additional $20,000,000, in increments
of $2,500,000  up to a maximum Revolving Credit
Loan Ceiling of $85,000,000. 
Notwithstanding the foregoing, at any time that the Indenture Agreement
restricts Indebtedness, the Revolving Credit Loan Ceiling shall at no time
exceed the amount that the Indenture Agreement permits Borrowers and the
Restricted Subsidiaries (as defined in the Indenture Agreement) to incur as
Indebtedness (as defined in the Indenture Agreement) hereunder at such time.


“Revolving Credit Note”:  Defined in Section 2.9.


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



 38
 








“Second Agreement”:  That certain Amended and Restated Loan and
Security Agreement dated as of October 15, 2004, by and between Borrowers,
Guarantors, Agents, and Lenders, as amended (except as amended hereby).


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


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


“Security-Free Rabbi Trust”:  Shall
be the grantor trusts established by Mothers Work, Inc. in accordance with
Internal Revenue Service Revenue Procedure 92-64 to accept both employer and
employee contributions made under the terms of the Approved Security-Free
SERPS, so long as the Lead Borrower has designated such grantor trust as a
Security-Free Rabbi Trust in a writing delivered to the Administrative Agent,
which writing designates the name of the trust company with whom such trust has
been established and the date of such establishment.  In no circumstances shall the
Collateral Agent or the Lenders under this Agreement have a security interest
in the assets of such grantor trusts.


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


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


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


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



 39
 








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


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


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


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


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


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


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


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


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


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


“Term Loan Agent”:  Bank of America, N.A. in its capacity as
agent under the Term Loan Agreement or any successor therein.


“Term Loan Collateral Agent”:  Bank of America, N.A. in its capacity as
collateral agent under the Term Loan Agreement or any successor therein.



 40
 








“Term Loan Agreement”:  That certain senior term loan facility of
even date between Borrowers and Bank of America, N.A. as Term Loan Agent.


“Term Loan Facility”:  That certain term loan facility in the
initial amount of $90,000,000, subject to increase to up to $140,000,000 as
provided under and as documented by the Term Loan Agreement.


“Term Priority Collateral”: As
defined in the Intercreditor Agreement.


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


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


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


“Unused Line Fee”:   Defined in Section 2.14.


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


ARTICLE II. - THE REVOLVING CREDIT


2.1       Establishment of Revolving Credit.


(a)          The Lenders 
hereby establish a revolving line of credit (the “Revolving Credit”) in the Borrowers’ favor
pursuant to which the Lenders, acting through the Administrative Agent,  shall make loans and advances and otherwise
provide financial accommodations to and for the account of the Borrowers until
the Maturity Date its Pro Rata share of advances (each, a “Revolving Credit  Loan”) as provided herein in each instance equal to its
applicable Percentage Commitment of 
Availability, up to a maximum amount of its applicable Dollar
Commitment.  The obligations of each
Lender hereunder shall be several and not joint.



 41
 








(b)         Loans, advances, and financial accommodations
under the Revolving Credit shall be made with reference to the Borrowing Base
and shall be subject to Availability. 
The Borrowing Base and Availability shall be determined by the Collateral
Agent by reference to Borrowing Base Certificates furnished as provided in Section
5.4 below (subject to Reserves established by the Collateral Agent):


(c)          The commitment of each Lender to provide such
loans, advances, and financial accommodations is subject to Section 2.2.


(d)         The proceeds of borrowings under the Revolving
Credit shall be used solely to refinance the Second Agreement, to provide
financing for working capital purposes, debt prepayments (including on account
of the notes issued under the Indenture Agreement and any prepayment fees and
costs and expenses related thereto), Distributions, Capital Expenditures and
other general corporate purposes of the Borrowers, all solely to the extent
permitted by this Agreement.  No proceeds
of a borrowing under the Revolving Credit may be used, nor shall any be
requested, with a view towards the accumulation of any general fund or funded
reserve of the Borrowers other than in the ordinary course of the Borrowers’
business and consistent with the provisions of this Agreement.


2.2       Advances in Excess of Borrowing Base
(Overloans).


(a)          No Lender has any obligation to make any loan
or advance, or otherwise to provide any credit to or for the benefit of the
Borrowers where the result of such loan, advance, or credit is an Overloan
except in respect to Permissible Overloans which the Agents deem prudent.


(b)         The Lenders’ obligations, among themselves,
are subject to Section 3.3 of the Agency Agreement (which relates to
each Lender’s making amounts available to the Administrative Agent) and to
Sections 6.1(d) and 6.5(a) of the Agency Agreement (which relate to Permissible
Overloans).


(c)          The Lenders’ providing of an Overloan on any
one occasion does not affect the obligations of the Borrowers hereunder (such
as the Borrowers’ obligation to immediately repay any amount which otherwise
constitutes an Overloan) nor shall it obligate the Lenders to do so on any
other occasion.


2.3       Risks of Value of Collateral.


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



 42
 








credits, and advances and
the providing of financial accommodations under the Revolving Credit.


2.4       Commitment to Make Revolving Credit
Loans and Support Letters of Credit.


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


(a)          No Overloan is then outstanding and none will
result therefrom.


(b)         No Suspension Event or Event of Default has
occurred or would result therefrom.


2.5       Revolving Credit Loan Requests.


(a)           Requests for loans and advances under the
Revolving Credit or for the continuance or conversion of an interest rate
applicable to a Revolving Credit Loan may be requested by the Lead Borrower in
such manner as may from time to time be reasonably acceptable to the
Administrative Agent.


(b)         Subject to the provisions of this Agreement,
the Lead Borrower may request a Revolving Credit Loan and elect an interest
rate and Interest Period to be applicable to that Revolving Credit Loan by
giving notice to the Administrative Agent by no later than the following:


(i)                                     If
such Revolving Credit Loan is to be or is to be converted to a Base Margin
Loan: By 1:00 p.m. on the Business Day on which the subject Revolving Credit
Loan is to be made or is to be so converted . 
Base Margin Loans requested by the Lead Borrower, other than those
resulting from the conversion of an Index Loan, shall not be less than
$10,000.00.


(ii)                                  If
such Revolving Credit Loan is to be or is to be converted to an Index
Loan:  By 1:00 p.m., three (3) Index
Business Days before the commencement of any new Interest Period or the end of
the then applicable Interest Period. 
Index Loans and conversions to Index Loans shall each be not less than
$1,000,000.00 and in increments of $500,000.00 in excess of such minimum.


(iii)                               Any
Index Loan which matures while a Suspension Event or Event of Default exists,
may be converted, at the option of the Administrative Agent, to a Base Margin
Loan notwithstanding any



 43
 








notice from
the Lead Borrower that such Revolving Credit Loan is to be continued as an
Index Loan.


(c)          Any request for a Revolving Credit Loan or
for the continuance or conversion of a Revolving Credit Loan which is made
after the applicable deadline therefor, as set forth above, shall be deemed to
have been made at the opening of business on the then next Business Day or
Index Business Day, as applicable, unless the Administrative Agent, in its
discretion, determines to deem it to have been made earlier.  Each request for a Revolving Credit Loan or for
the conversion of a Revolving Credit Loan shall be made in such manner as may
from time to time be acceptable to the Administrative Agent.


(d)          Intentionally omitted.


(e)          The Lead Borrower may request that the
Administrative Agent cause the issuance of L/C’s for the account of the
Borrowers as provided in Section 2.18.


(f)            The Administrative Agent may rely on any
request for a loan or advance, or other financial accommodation under the
Revolving Credit which the Administrative Agent, in good faith, believes to
have been made by a Person duly authorized to act on behalf of the Lead
Borrower and may decline to make any such requested loan or advance, or
issuance, or to provide any such financial accommodation pending the
Administrative Agent’s being furnished with such documentation concerning that
Person’s authority to act as may be satisfactory to the Administrative
Agent.  As an accommodation to Borrowers,
Administrative Agent may in its discretion permit telephonic requests for
Revolving Credit Loans and electronic transmittal of instructions,
authorizations, agreements or reports to Administrative Agent by Borrowers,
provided that Administrative Agent only shall accept or act upon telephonic or
electronic communications from an authorized representative of Lead Borrower,
or such other individuals identified by Lead Borrower from time to time in a
written notice delivered to Administrative Agent.  Administrative Agent and Lenders shall have
no liability to Borrowers for any loss or damage suffered by Borrowers as a
result of Administrative Agent’s honoring of any requests, execution of any
instructions, authorizations or agreements or reliance on any reports
communicated to it telephonically or electronically and purporting to have been
sent to Administrative Agent by an authorized representative of Borrowers, and
Administrative Agent shall have no duty to verify the origin of any such
communication or the authority of the Person sending it.


(g)         A request by the Lead Borrower for loan or
advance or other financial accommodation under the Revolving Credit shall be
irrevocable and shall constitute certification by each Borrower that as of the
date of such request, each of the following is true and correct:


(i)                                     There
has been no material adverse change in the Borrowers’ financial condition
(taken as a whole) from the most recent financial information furnished
Administrative Agent or any Lender pursuant to this Agreement.



 44
 








(ii)                                  Each
representation, not relating to a specific date, which is made herein or in any
of the Loan Documents is then true and correct in all material respects as of
and as if made on the date of such request (except (A) to the extent of changes
resulting from transactions contemplated or permitted by this Agreement or the
other Loan Documents and changes occurring in the ordinary course of business
which singly or in the aggregate would not reasonably be expected to have a
Material Adverse Effect and (B) to the extent that such representations and
warranties expressly relate to an earlier date).


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


(h)          If, at any time or from time to time, a
Suspension Event or Event of Default exists which is continuing,


(i)                                     The
Administrative Agent may suspend the Revolving Credit immediately, in which
event neither the Administrative Agent nor the Lenders shall be obligated
during such suspension to make any loans or advances or to provide any
financial accommodation hereunder or to seek the issuance of any L/C.


(ii)                                  The
Administrative Agent may suspend the right of the Lead Borrower to request any
Index Loan or to convert any Base Margin Loan to an Index Loan.


2.6       Making Of Revolving Credit Loans.


(a)          A loan or advance under the Revolving Credit
shall be made by the Transfer of the proceeds of such loan or advance to the
Operating Account or as otherwise instructed by the Lead Borrower.


(b)         A loan or advance shall be deemed to have been
made under the Revolving Credit (and the Borrowers shall be indebted to the
Agent or Lenders for the amount thereof immediately) upon the Administrative
Agent’s initiation of the Transfer of the proceeds of such loan or advance in
accordance with the Lead Borrower’s instructions (if such loan or advance is of
funds requested by the Lead Borrower) or the charging of the amount of such
loan to the Loan Account (in all other circumstances).


(c)          There shall not be any recourse to or
liability of the Agent or Lenders (except to the extent caused by the gross
negligence or willful misconduct of the Agent or Lenders as determined by a
court of competent jurisdiction), on account of:


(i)                                     Any
delay in the making of any loan or advance requested under the Revolving
Credit.



 45
 








(ii)                                  Any
delay by any bank or other depository institution in treating the proceeds of
any such loan or advance as collected funds.


(iii)                               Any
delay in the receipt, and/or any loss, of funds which constitute a loan or
advance under the Revolving Credit, the wire transfer of which was properly
initiated by the Agent or Lenders in accordance with wire instructions provided
to the Administrative Agent by the Lead Borrower).


2.7       SwingLine Loans.


(a)          For ease of administration of Revolving
Credit Loans, Revolving Credit Loans which are Base Margin Loans may be made by
the Administrative Agent, in its capacity as the SwingLine Lender (in the
aggregate, the “SwingLine Loans”)
in accordance with the procedures set forth in this Agreement for the making of
Revolving Credit Loans. The unpaid principal balance of the SwingLine Loans
shall not at any one time be in excess of the SwingLine Loan Ceiling (which
SwingLine Loan Ceiling is subject to amendment from time to time, by reasonable
advance notice by the Administrative Agent to the Lead Borrower).


(b)         The aggregate unpaid principal balance of
SwingLine Loans shall bear interest at the rate applicable to Base Margin Loans
and shall be repayable as a Revolving Credit Loan under the Revolving Credit.


(c)          The Borrower’s obligation to repay SwingLine
Loans may be evidenced by a Note in the form of EXHIBIT 2.7 (“SwingLine Note”),
executed by the Borrowers and payable to the Administrative Agent.  Neither the original nor a copy of the
SwingLine Note shall be required to establish or prove any Liability.   Upon the Lead Borrower being provided with
an affidavit (which shall include an indemnity reasonably satisfactory to the
Lead Borrower) from the Administrative Agent to the effect that the SwingLine
Note has been lost, mutilated, or destroyed, the Borrowers shall execute and
deliver a replacement of any SwingLine Note to the Administrative Agent.


(d)         For all purposes of this Loan Agreement, the
SwingLine Loans and the Borrower’s obligations to the Administrative Agent
constitute Revolving Credit Loans and are secured as “Liabilities.”


(e)          SwingLine Loans may be subject to periodic
settlement with the Lenders.


2.8       The Loan Account.


(a)          An account (“Loan Account”) shall be opened on the books of the
Administrative Agent in which a record shall be kept of all loans and advances
made under the Revolving Credit.


(b)         The Administrative Agent may also keep a
record (either in the Loan Account or elsewhere, as the Administrative Agent
may from time to time elect) of all interest, fees,



 46
 








service charges, costs, expenses, and other debits owed to the Agent
and the Lender on account of the Liabilities and of all credits against such
amounts so owed.


(c)          All credits against the Liabilities shall be
conditional upon receipt of final payment to the Administrative Agent and the
Lenders of the items giving rise to such credits.  The amount of any item credited against the
Liabilities which is charged back against the Agent or the Lenders for any
reason or is not so paid shall be a Liability and shall be added to the Loan
Account, whether or not the item so charged back or not so paid is returned.


(d)         Except as otherwise provided herein, all fees,
service charges, costs, and expenses for which the Borrowers are obligated
hereunder are payable on demand.  In the
determination of Availability, the Administrative Agent may deem fees, service
charges, accrued interest (except for interest charged on Index Loans, which,
unless charged earlier, shall be charged on the Interest Payment Date), and
other payments which will be due and payable between the date of such
determination and the first day of the then next succeeding month as having
been advanced under the Revolving Credit whether or not such amounts are then
due and payable.


(e)          The Administrative Agent, without the request
of the Lead Borrower, may advance under the Revolving Credit any interest, fee,
service charge, or other payment to which the Agent or any Lender is entitled
from the Borrowers pursuant hereto and may charge the same to the Loan Account
notwithstanding that such amount so advanced may result in Borrowing Base being
exceeded.  Any amount which is added to
the principal balance of the Loan Account as provided in this Section 2.8(e)
shall bear interest, at the interest rate then and thereafter applicable to
Base Margin Loans.  Such action on the
part of the Administrative Agent shall not constitute a waiver of the
Administrative Agent’s right or the Borrowers’ obligations under Section
2.10(b).


(f)            Any statement rendered by the Agent or the
Lenders to the Borrowers concerning the Liabilities shall, in the absence of
manifest error, be considered correct and accepted by the Borrowers and shall
be conclusively binding upon the Borrowers unless the Lead Borrower provides
the Administrative Agent with written objection thereto within Twenty (20) days
from the mailing of such statement, which written objection shall indicate,
with particularity, the reason for such objection.  In the absence of manifest error, the Loan
Account and the Agent’s and Lenders’ books and records concerning the loan
arrangement contemplated herein and the Liabilities shall be prima facie
evidence and proof of the items described therein.


2.9       The Revolving Credit Note.


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



 47
 








to the effect that a
Revolving Credit Note has been lost, mutilated, or destroyed, the Lead Borrower
and the other Borrowers shall execute and deliver a replacement thereof to such
Lender.


2.10                        Payment
of the Loan Account.


(a)          The Borrowers may
repay all or any portion of the principal balance of the Loan Account from time
to time until the Termination Date, without premium or penalty except as
expressly set forth herein.


(b)         The Borrowers, without notice or demand from
the Administrative Agent, shall pay the
Administrative Agent that amount, from time to time, which is necessary so that
there is no Overloan outstanding.


(c)          The Borrowers shall
repay the then entire unpaid balance of the Revolving Credit and all other
Liabilities on the Termination Date.


(d)         The Administrative Agent shall cause payments,
pursuant to Sections 2.10(a) and 2.10(b), to be applied in
accordance with Section 7.5(a) of this Agreement, provided that the
Administrative Agent shall cause those application of payments (if any),
pursuant to Sections 2.10(a) and 2.10(b) against Index Loans then
outstanding in such manner as results in the least cost to the Borrowers, but
shall not have any affirmative obligation to do so nor liability on account of
the Administrative Agent’s failure to have done so.  In no event shall action or inaction taken by
the Administrative Agent excuse the Borrowers from any indemnification
obligation under Section 2.10(e).


(e)          Upon the request of the Administrative Agent,
each Borrower, jointly and severally, shall indemnify the Agent and Lenders and
hold the Agent and Lenders harmless from and against any loss, cost or expense
(including loss of anticipated profits) which the Agent or Lenders may sustain
or incur (including, without limitation, by virtue of acceleration after the
occurrence of any Event of Default) as a consequence of any of the following:


(i)                                     Default
by the Borrowers in payment of the principal amount of or any interest on any
Index Loan as and when due and payable, including any such loss or expense
arising from interest or fees payable by the Agent or Lenders in order to
maintain its Index Loans.


(ii)                                  Default
by the Borrowers in making a borrowing or conversion  after the Borrowers has given (or is deemed
to have given) a request for a Revolving Credit Loan or a request to convert a
Revolving Credit Loan from one applicable interest rate to another.


(iii)                               The
making of any payment on an Index Loan or the making of any conversion of any
such Loan to a Base Margin Loan on a day that is not the last day of the
applicable Interest Period with respect



 48
 








thereto,
including interest or fees payable by the Agent and Lenders as “breakage fees”.


2.11                                                Interest On Revolving Credit Loans.


(a)          Each Revolving Credit Loan which consists of
a Base Margin Loan shall bear interest at the Base Margin Rate (determined
based upon a 365/366-day year and actual days elapsed), unless and until it is
made as, or is converted to, an Index Loan pursuant to Section 2.5 hereof.


(b)         Each Revolving Credit Loan which consists of
an Index Loan shall bear interest at the applicable Index Rate (determined
based upon a 365/366-day year and actual days elapsed).


(c)          Subject to, and in accordance with, the
provisions of this Agreement, the Lead Borrower may cause all or a part of the
unpaid principal balance of Revolving Credit Loans to bear interest at the Base
Margin Rate or the Index Rate as specified from time to time by the Lead
Borrower.


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


(e)          The Borrowers shall pay accrued and unpaid
interest on each Revolving Credit Loan in arrears on the applicable Interest
Payment Date therefor.  Following the
occurrence and during the continuance of any Event of Default (and whether or
not the Agent exercises the Agent’s rights on account thereof), all Revolving
Credit Loans shall bear interest, at the option of the Agent, at a rate which
is the aggregate in the case of Base Margin Loan, of the then applicable Base
Margin Rate plus Two Percent (2.00%) per annum, and in the case of Index
Loans, the then applicable Index Rate plus Two Percent (2.00%) per annum.


(f)            The Index Margin and Base Margin shall be
reset for each fiscal quarter as of the first (1st) day of such fiscal quarter (the “Margin Adjustment Date”) based upon the
Margin Pricing Grid set forth below for the prior fiscal quarter, subject to
the provisions in the definitions of “Base Margin” and “Index Margin”:


MARGIN
PRICING GRID


	
  Tier

  	
   

  	
  Pricing Adjusted

  Availability*

  	
   

  	
  INDEX

  MARGIN

  (Percentage)

  	
   

  	
  BASE

  MARGIN

  (Percentage)

  	
   

  
	
  I

  	
   

  	
  >$35,000,000

  	
   

  	
  1.00

  	
  %

  	
  0.00

  	
  %

  
	
  II

  	
   

  	
  >$17,500,000
  and <  

  	
   

  	
  1.25

  	
  %

  	
  0.00

  	
  %

  
	
   

  	
   

  	
  $

  	
  35,000,000

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  III

  	
   

  	
  <$17,
  500,000

  	
   

  	
  1.50

  	
  %

  	
  0.00

  	
  %

  
									



 



 49
 
















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


2.12                                                Revolving Credit Commitment Fee.


As compensation for the respective commitments of the Lenders at the
execution of this Agreement to make loans and advances to the Borrowers under
the Revolving Credit and as compensation for the Lenders’ maintenance of
sufficient funds available for such purpose, the Lenders shall have earned as
of the Closing Date the “Revolving Credit
Commitment Fee” in the amount set forth in the Agent’s Fee Letter.


2.13                                                Intentionally Omitted.


2.14                                                Unused Line Fee.


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


2.15                                                Early Termination Fee.


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



 50
 








(a)           One-Fifth of One Percent (0.20%) of the
Revolving Credit Loans as in effect immediately prior to such termination or
reduction in the event termination occurs prior to two years after the Closing
Date.


(b)   Zero
Percent (0.00%) of the Revolving Credit Loans as in effect immediately prior to
such termination or reduction in the event termination occurs after two years
after the Closing Date.


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


For the avoidance of
doubt, no prepayment fees shall be payable under Section 2.15 of the Second
Agreement in connection with the execution and delivery of this Agreement as an
amendment and restatement thereof.


2.16                                                Concerning Fees.


The Borrowers
shall not be entitled to any credit, rebate or repayment of the Revolving
Credit Commitment Fee, Unused Line Fee, Revolving Credit Early Termination Fee,
or other fee earned by the Agent or Lenders pursuant to this Agreement or any
Loan Document notwithstanding any termination of this Agreement or suspension
or termination of the Agent’s or Lenders’ obligation to make loans and advances
hereunder.


2.17                                                Intentionally Omitted.


2.18                                                Procedures For Issuance Of L/C’s.


(a)          The Lead Borrower may request that the
Administrative Agent cause the issuance of L/C’s for the account of the
Borrower.  Each such request shall be in
such manner as may from time to time be acceptable to the Administrative Agent.


(b)         The Administrative Agent will endeavor to
cause the issuance of any L/C so requested by the Lead Borrower, provided that, at the time that the request is made, the
Revolving Credit has not been suspended as provided in Section 2.5(h)
and if so issued:


(i)                                     The
aggregate Stated Amount of all L/C’s then outstanding (giving effect to the
issuance of the requested L/C), does not exceed Thirty Million Dollars ($30,000,000);


(ii)                                  The
expiry of the requested L/C is not later than the earlier of Thirty (30) days
prior to the Maturity Date or the following:


(A)                              For
standby L/C’s: One (1) year from initial issuance.



 51
 








(B)                                For
documentary L/C’s: One hundred (120) days from issuance; and


(iii)                               an
Overloan will not result from the issuance of the subject L/C.


(c)          Unless otherwise agreed between the Lead
Borrower and the Administrative Agent, the Issuer of all L/C’s shall be Bank of
America and any successor to Bank of America.


(d)         The Lead Borrower shall also execute such
other documentation to apply for and support the issuance of an L/C as may be
required by Bank of America or its successor or any other  Issuer, including, without limitation, in
respect of the Special Purpose Credit. This Agreement shall control any
conflict between this Agreement and any such documentation.


(e)          There shall not be any recourse to, nor
liability of, the Agent or Lenders on account of


(i)                                     Any
delay or refusal by an Issuer to issue an L/C; or


(ii)                                  Any
action or inaction of an Issuer on account of or in respect to, any L/C.


(f)            The Borrowers shall reimburse the Issuer
for the amount of any honoring of a drawing under an L/C on the same day on
which such honoring takes place. The Borrowers authorize the Administrative
Agent and the Issuer to charge Borrowers’ Operating Account for such
purpose.  In the event the funds in the
Operating Account are not sufficient, the Administrative Agent or Lenders,
without the request of the Lead Borrower, may advance under the Revolving
Credit (and charge to the Loan Account) the amount of any honoring of any L/C
and other amount for which the Borrowers, the Lenders, the Agent, or the Issuer
becomes obligated on account of, or in respect to, any L/C.  Such advance shall be made whether or not a
Suspension Event exists or such advance would result in an Overloan.  Such action shall not constitute a waiver of
the Administrative Agent’s rights under Section 2.10(b) hereof.


2.19                                                Fees For L/C’s.


(a)          The Borrowers shall pay to the Administrative
Agent a fee, for the benefit of the Lenders, on account of each L/C procured by
the Administrative Agent, quarterly in arrears, and on the Termination Date and
on the End Date, equal to the following:


(i)                                     For
standby L/C’s:   (a) For the first
$8,500,000 of the Stated Amount of such standby L/Cs, the applicable Index
Margin less One-Half of One Percent (0.50%) per annum, of the Stated Amount of
such standby L/Cs, and (b) for the excess, if any, over $8,500,000, the
applicable Index Margin, of the Stated Amount of such standby L/Cs, in each
case payable on the Stated Amount of each outstanding standby L/C quarterly in
arrears on the first day of each fiscal quarter.



 52
 








(ii)                                  For
documentary L/C’s:  The applicable Index
Margin less One-Half of One Percent (0.50%) per annum, payable on the weighted
average of the Stated Amount of such documentary L/C outstanding at any time
during the period since the then most recent payment of such fee, payable
quarterly in arrears, on the first day of each fiscal quarter, and on the End
Date.


(iii)                               Notwithstanding
Subsections (i) and (ii), above, following the occurrence of any Event of
Default (and whether or not the Administrative Agent exercises the
Administrative Agent’s rights on account thereof), the above fees, at the
option of the Administrative Agent, shall be Two Percent (2.00%) per annum
above the applicable rates above.


(b)         In addition to the fee to be paid as provided
in Section 2.19(a), above, the Borrowers shall pay to the Administrative
Agent (or to the Issuer, if so requested by Administrative Agent), on demand,
all issuance, processing, negotiation, amendment, and administrative fees and
other amounts charged by the Issuer on account of, or in respect to, any L/C.


(c)          If any change in any law, executive order or
regulation, or any directive of any administrative or governmental authority
(whether or not having the force of law), or in the interpretation thereof by
any court or administrative or governmental authority charged with the administration
thereof, shall either:


(i)                                     impose,
modify or deem applicable any reserve, special deposit or similar requirements
against letters of credit heretofore or hereafter issued by any Issuer or with
respect to which the Agent, the Lenders or any Issuer has an obligation to lend
to fund drawings under any L/C; or


(ii)                                  impose
on any Issuer any other condition or requirements relating to any such letters
of credit;


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



 53















among the Borrowers and
other letter of credit customers of such Issuer, if done in good faith and made
on an equitable basis and in accordance with such officer’s certificate, shall
be conclusive and binding on the Borrowers.


2.20                CONCERNING L/C’S.


(a)   None of the
Issuer, the Issuer’s correspondents, or any advising, negotiating, or paying
bank with respect to any L/C shall be responsible in any way for:


(i)            The performance by any beneficiary under any
L/C of that beneficiary’s obligations to any Borrower.


(ii)           The form, sufficiency, correctness,
genuineness, authority of any person signing, falsification, or the legal
effect of, any documents called for under any L/C if such documents on their
face appear to be in order.


(b)   The Issuer
may honor, as complying with the terms of any L/C and of any drawing
thereunder, any drafts or other documents otherwise in order, but signed or
issued by an administrator, executor, conservator, trustee in bankruptcy,
debtor in possession, assignee for the benefit of creditors, liquidator,
receiver, or other legal representative of the party authorized under such L/C
to draw or issue such drafts or other documents.


(c)   Unless the
Lead Borrower on behalf of itself and the other Borrowers instructs any Issuer
otherwise, in the particular instance, the Lead Borrower hereby authorizes any
Issuer to:


(i)            Select an advising bank;


(ii)           Select a paying bank; and


(iii)          Select a negotiating bank.


(d)   All
directions, correspondence, and funds transfers relating to any L/C are at the
risk of the Borrowers.  The Issuer shall
have discharged the Issuer’s obligations under any L/C or the drawing
thereunder which includes payment instructions if the Issuer initiates the
method of payment called for thereby (or initiates any other commercially reasonable
and comparable method). None of the Agent, the Lenders or the Issuer shall have
any responsibility for any inaccuracy, interruption, error, or delay in
transmission or delivery by post, telegraph or cable, or for any inaccuracy of
translation, excepting gross negligence or willful misconduct.


(e)   The Agent’s,
the Lenders’ and the Issuer’s rights, powers, privileges and immunities
specified in or arising under this Agreement are in addition to any heretofore
or at any time hereafter otherwise created or arising, whether by statute or
rule of law or contract.


(f)    Except to
the extent otherwise expressly provided hereunder or agreed to in writing by
the Issuer and the Lead Borrower, the L/C will be governed by either, at the
election of



 54
 









the Issuer, the Uniform Customs and Practice for Documentary Credits,
International Chamber of Commerce, Publication No. 500, and any subsequent
revisions thereof, or the International Standby Practices – ISP 98,
International Chamber of Commerce Publication, No 590, and subsequent revisions
thereto.


The
obligations of the Borrowers under this Agreement with respect to L/C’s are
absolute, unconditional, and irrevocable and shall be performed strictly in
accordance with the terms hereof under all circumstances, whatsoever including,
without limitation, the following:


(i)            Any lack of validity or enforceability or
restriction, restraint, or stay in the enforcement of this Agreement, any L/C,
or any other agreement or instrument relating thereto;


(ii)           Any amendment or waiver of, or consent to the
departure from, any L/C;


(iii)          The existence of any claim, set-off,
defense, or other right which the Borrowers may have at any time against the
beneficiary of any L/C; and


(iv)          Any good faith honoring of a drawing under
any L/C, which drawing possibly could have been dishonored based upon a strict
construction of the terms of the L/C.


2.21                CHANGED CIRCUMSTANCES.


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


(b)   The
Administrative Agent’s determination of the Index Rate as provided above shall
be conclusive.  Furthermore, if the
Administrative Agent or the Lenders determines, in good faith (which
determination shall be conclusive), prior to the commencement of any Interest
Period that (A) U.S. Dollar deposits of sufficient amount and maturity for
funding the Revolving Credit Loans are not available to the Administrative
Agent or the Lenders in the London Interbank Eurodollar market in the ordinary
course of business, or (B) by reason of circumstances affecting the London
Interbank Eurodollar market, adequate and fair means do not exist for
ascertaining the rate of interest to be applicable to the Revolving Credit
Loans requested by the Borrowers to be Index Loans or the Revolving Credit
Loans bearing interest at the rates set forth in this Agreement shall not
represent the effective pricing to the Administrative Agent for U.S.



 55
 









Dollar deposits of a comparable amount for the relevant period (such as
for example, but not limited to, official reserve requirements required by
Regulation D to the extent not given effect in determining the rate), the
Administrative Agent shall promptly notify the Lead Borrower and (1) all
existing Index Loans shall convert to Base Margin Loans upon the end of the
applicable Interest Period, and (2) no additional Index Loans shall be made
until such circumstances are cured.


(c)   If, after
the date hereof, the introduction of, or any change in any applicable law,
treaty, rule, regulation or guideline or in the interpretation or administration
thereof by any governmental authority or any central bank or other fiscal,
monetary or other authority having jurisdiction over the Agent, the Lenders or
their respective lending offices (a “Regulatory Change”),
shall, in the opinion of counsel to the Agent or the Lenders, make it unlawful
for the Agent or the Lenders to make or maintain Index Loans, then the
Administrative Agent shall promptly notify the Lead Borrower and (A) the Index
Loans shall immediately convert to Base Margin Loans on the last Business Day
of the then existing Interest Period or on such earlier date as required by law
and (B) no additional Index Loans shall be made until such circumstance is
cured.


(d)   If, for any
reason, an Index Loan is paid prior to the last Business Day of any Interest
Period or if an Index Loan does not occur on a date specified by the Lead
Borrower in its request (other than as a result of a default by the Agent or
the Lenders), the Borrowers agree to indemnify the Agent and the Lenders
against any loss (including any loss on redeployment of the deposits or other
funds acquired by the Agent or the Lenders to fund or maintain such Index Rate
Loan) cost or expense incurred by the Agent or the Lenders as a result of such
prepayment or failure to occur.


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



 56
 









(f)    The Agent
and Lenders shall receive payments of amounts of principal of and interest with
respect to the Index Loans free and clear of, and without deduction for, any
Taxes.  If (A) the Agent or any Lender
shall be subject to any Tax in respect of any Index Loans or any part thereof
or, (B) the Borrowers shall be required to withhold or deduct any Tax from any
such amount, the Index Rate applicable to such Index Loans shall be adjusted by
the Administrative Agent or such Lender to reflect all additional costs incurred
by the Agent or such Lender in connection with the payment by the Agent or such
Lender or the withholding by the Borrowers of such Tax and the Borrowers shall
provide the Agent or such Lender with a statement detailing the amount of any
such Tax actually paid by the Borrowers. Determination by the Administrative
Agent or such Lender of the amount of such costs shall be conclusive absent
manifest error.  If after any such
adjustment any part of any Tax paid by the Agent or such Lender is subsequently
recovered by the Agent or such Lender, the Agent or such Lender, as applicable,
shall reimburse the Borrowers to the extent of the amount so recovered.  A certificate of an officer of the
Administrative Agent or such Lender setting forth the amount of such recovery
and the basis therefor shall be conclusive absent manifest error.


2.22                LENDERS’ COMMITMENTS.


(a)   Subject to
Section 7.1 of the Agency Agreement (which provides for assignments and
assumptions of commitments), each Lender’s “Percentage Commitment”,
and “Dollar Commitment” is set forth on EXHIBIT 2.22(a).


(b)   The
obligations of each Lender are several and not joint.  No Lender shall have any obligation to make
any loan or advance under the Revolving Credit in excess of the lesser of the
following:


(i)            that Lender’s Percentage Commitment of the
subject loan or advance or of Availability; and


(ii)           that Lender’s unused Dollar Commitment.


(c)   No Lender
shall have any liability to the Borrowers on account of the failure of any
other Lender to provide any loan or advance under the Revolving Credit nor any
obligation to make up any shortfall which may be created by such failure.


(d)   The Dollar
Commitments, Percentage Commitments, and identities of the Lenders may be
changed, from time to time by the reallocation or assignment of Dollar
Commitments and Percentage Commitments amongst the Lenders or with other
Persons who become “Lenders”, provided,
however unless an Event of
Default has occurred (in which event, no consent of the Lead Borrower is
required) any assignment to a Person not then a Lender shall be subject to the
prior written consent of the Lead Borrower (not to be unreasonably withheld),
which consent will be deemed given unless the Lead Borrower provides the
Administrative Agent with written objection, not more than Five (5) Business
Days after the Administrative Agent shall have given the Lead Borrower written
notice of a proposed assignment.



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(e)   Upon written
notice given the Lead Borrower from time to time by the Administrative Agent,
of any assignment or allocation referenced in Section 2.22(d):


(i)            The Lead Borrower and the other Borrowers, if
required by the Administrative Agent, shall execute one or more Revolving
Credit Notes (which notes shall replace any Revolving Credit Notes theretofore provided
by the Borrowers) to reflect such changed Dollar Commitments, Percentage
Commitments, and identities and shall deliver such Revolving Credit Notes to
the Administrative Agent (which promptly thereafter shall cancel and deliver to
the Lead Borrower the Revolving Credit Notes so replaced, if any).   In the event that the Administrative Agent
does not require the delivery of Revolving Credit Notes or that in the event
that a Revolving Credit Note is to be exchanged following its acceleration or
the entry of an order for relief under the Bankruptcy Code with respect to the
Borrowers, the Administrative Agent, in lieu of causing the Lead Borrower to
execute one or more new Revolving Credit Notes, may issue the Administrative
Agent’s Certificate confirming the resulting Dollar Commitments and Percentage
Commitments.


(ii)           Such change shall be effective from the
effective date specified in such written notice and any Person added as a
Lender shall have all rights and privileges of a Lender hereunder thereafter as
if such Person had been a signatory to this Agreement and any other Loan
Document to which a Lender is a signatory and any Person removed as a Lender
shall be relieved of any obligations or responsibilities of a Lender hereunder
thereafter.


2.23                DESIGNATION OF LEAD BORROWER AS BORROWERS’ AGENT.


(a)   Each
Borrower hereby irrevocably designates and appoints the Lead Borrower as that
Borrower’s agent to obtain loans and advances under the Revolving Credit, the
proceeds of which shall be available to each Borrower for those uses as those
set forth in this Agreement.  As the
disclosed principal for its agent, each Borrower shall be obligated to the
Agent and Lenders on account of loans and advances so made as if made directly
by the Agent or Lenders to that Borrower, notwithstanding the manner by which
such loans and advances are recorded on the books and records of the Lead
Borrower and of any Borrower.


(b)   Each
Borrower recognizes that credit available to it under the Revolving Credit is
in excess of and on better terms than it otherwise could obtain on and for its
own account and that one of the reasons therefor is its joining in the credit
facility contemplated herein with all other Borrowers.  Consequently, each Borrower hereby assumes
and agrees to discharge all Liabilities of each of the other Borrowers as if
the Borrower which is so assuming and agreeing were each of the other
Borrowers.



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(c)   The Lead
Borrower shall act as a conduit for each Borrower (including itself, as a
“Borrower”) on whose behalf the Lead Borrower has requested a Revolving Credit
Loan.


(d)   The proceeds
of each loan and advance provided under the Revolving Credit which is requested
by the Lead Borrower shall be deposited into the Operating Account or as
otherwise indicated by the Lead Borrower. 
The Lead Borrower shall cause the transfer of the proceeds thereof to
the Borrower(s) on whose behalf such loan and advance was obtained.  The Agent and Lenders shall not have any
obligation to assure the proper application of such proceeds.


ARTICLE III. — CONDITIONS
PRECEDENT:


As a condition to
the effectiveness of this Agreement, the establishment of the Revolving Credit,
the procurement of the initial L/C issued hereunder, and the making of the
first loan under the Revolving Credit, each of the documents respectively
described in Sections 3.1 through and including 3.4 (each in form and substance
satisfactory to the Agent) shall have been delivered to the Agent, and the
conditions respectively described in Sections 3.5 through and including 3.10,
shall have been satisfied as of the Closing Date:


3.1  CORPORATE DUE DILIGENCE.


(a)   A
Certificate of corporate good standing issued with respect to each Obligor by
the Secretary of State of the State in which that Obligor was organized.


(b)   Certificates
of qualification to do business as a foreign corporation, issued by the
Secretary(ies) of State of each State in which such Obligor’s conduct of
business or ownership of assets of requires such qualification, except where
the failure to so qualify would not have a Material Adverse Effect.


(c)   A
Certificate of each Obligor’s respective Secretary as to the due adoption and
continued effectiveness of, each corporate resolution adopted in connection
with the establishment of the loan arrangement contemplated by the Loan
Documents and attesting to the true signatures of each Person authorized as a
signatory to any of the Loan Documents, such certificate to set forth the text
of each such resolution in an attachment thereto.


3.2  OPINION.


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


3.3  OFFICERS’ CERTIFICATES.


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



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3.4  ADDITIONAL DOCUMENTS.


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


(a)   Loan
Documents.  Each of the Loan Documents shall have been
duly executed and delivered by the respective parties thereto shall be in full
force and effect and shall be in form and substance satisfactory to Agent.


(b)   Assignment. An assignment of Fleet Retail Group, LLC’s
right, title and interest in and to the Second Agreement.


(c)   Agency
Agreement.  An executed copy of the Agency Agreement
dated as of the Closing Date, by and between the Administrative Agent, the
Collateral Agent and the Lenders.


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


(e)   Blocked Account Agreements.


(i) Duly executed and delivered amendment to the
Blocked Account Agreement by and between Collateral Agent, Lead Borrower and
JPMorgan Chase Bank, N.A., successor-in-interest to Bank One, N.A., in form and
substance satisfactory to Collateral Agent,


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


(iii) Subject to Section 7.3(a)(ii) duly executed and
delivered Blocked Account Agreement by and between Collateral Agent, Term Loan
Agent, Lead Borrower and Wachovia Bank, N.A., in form and substance
satisfactory to Collateral Agent.


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


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



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


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


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


(k)   Trademark Security Agreement.  Duly executed and delivered Amended and
Restated Trademark Security Agreement dated as of the Closing Date, by and
between Obligors, Term Loan Agent, and Collateral Agent.


(l)    Landlord Waivers.  Duly executed and delivered notifications to
the landlords in connection with the Collateral Access Agreements for the
Domestic Distribution Centers, in form and substance reasonably satisfactory to
the Collateral Agent, together with any waiver and subordination agreements
required under the Term Loan Agreement.


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


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


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


(p)   Customs Broker Agreement.  Duly executed and delivered notifications to
each of Barthco International, Jose David Gonzalez, Excel and Garden City
Customs Services, regarding the Custom Broker Agreement by and between each
such party, respectively, Lead Borrower, and the Collateral Agent, each in form
and substance satisfactory to Collateral Agent.


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


(r)    Date-down to  Title
Policy. 
A date-down endorsement to the existing loan policy of title
insurance issued by Commonwealth Land Title Insurance Company with respect



 61
 









to the Mortgaged Property, subject to the
exceptions set forth in the existing title policy for the Mortgaged Property
and such other exceptions as may be acceptable to Collateral Agent and
confirming that all real estate taxes are paid through the date of such
date-down.


(s)   Mortgage Amendment.  The Collateral Agent, the term Lender, the
Lead Borrower and PIDCFC shall have recorded an amendment to the Mortgage in
form and substance satisfactory to the Collateral Agent (the “Mortgage
Amendment”) to reflect the Term Loan Agreement as being secured by a fourth
priority mortgage.


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


(u)   Authorization/Incumbency.  Borrower shall have provided copies or
originals as appropriate of the resolutions of the board of directors of the
Lead Borrower, PIDA, and PIDCFC and any other usual evidence of authority and
incumbency for the Lead Borrower, PIDA, and PIDCFC to enter into all documents
related to the Mortgage Amendment and the amendment to the Subordination
Agreement; and


(v)   Intercreditor Agreement.  The Intercreditor Agreement with the Term Loan
Agent and the Term Loan Collateral Agent with respect to the Term Loan
Facility, together with the Term Loan Agreement and all documentation required
for the Term Loan Facility, each in form and substance satisfactory to the
Administrative Agent and the Collateral Agent.


3.5  REPRESENTATIONS AND WARRANTIES.


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


3.6  MINIMUM DAY ONE EXCESS AVAILABILITY.


On the Closing
Date, after giving effect to any initial funding under the Revolving Credit,
all then held checks (if any), accounts payable which are beyond credit terms
then accorded the Borrowers, overdrafts, any charges to the Loan Account made
in connection with the establishment of the credit facility contemplated
hereby; and L/C’s to be issued at, or immediately subsequent to, such
establishment, Excess Availability shall not be less than $20,000,000.


3.7  ALL FEES AND EXPENSES PAID.


All fees due at or
immediately after the first funding under the Revolving Credit and all costs
and expenses incurred by the Agent and Lenders in connection with the
establishment of



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the credit facility
contemplated hereby (including the reasonable fees and expenses of counsel to
the Agent and Lenders and including all fees under the Collateral Agent’s fee
letter and the Revolving Credit Commitment Fee) shall have been paid in full.


3.8  NO BORROWER DEFAULT.


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


3.9  NO ADVERSE CHANGE.


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


3.10                FINALIZATION OF TERM LOAN FACILITY


Documentation
providing for the Term Loan Facility is finalized and acceptable to the
Administrative Agent in all respects, and an intercreditor agreement respecting
the Term Loan Facility is finalized and acceptable to the Administrative Agent
in all respects.


3.11                VALIDITY OF LIENS.


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


3.12                DOCUMENTS.


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


ARTICLE IV. - GENERAL
REPRESENTATIONS, COVENANTS AND WARRANTIES:


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


4.1  PAYMENT AND PERFORMANCE OF LIABILITIES.


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



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4.2  DUE ORGANIZATION. CORPORATE AUTHORIZATION. NO
CONFLICTS.


(a)   The exact
name of each Obligor, as set forth in each Obligor’s organizational documents,
is set forth in EXHIBIT
4.2 hereof.  Each Obligor presently is and shall hereafter
remain in good standing as the type of entity indicated on EXHIBIT 4.2 hereof and be duly organized under the laws
of the state of its incorporation indicated in EXHIBIT 4.2 hereof
and shall hereafter remain duly qualified and in good standing in every other
State in which, by reason of the nature or location of that Obligor’s assets or
operation of that Borrower’s business, such qualification may be necessary,
except where the failure to so qualify or be in good standing would not have a
Material Adverse Effect.  EXHIBIT 4.2 accurately describes the corporate structure
of the Obligors and any Affiliates, including the identity of shareholders
holding more than 25% of the issued and outstanding stock having the right to
vote, limited and general partners, or members, as the case may be.


(b)   Each
Affiliate of the Obligors is listed on EXHIBIT 4.2. The Lead Borrower shall provide the
Administrative Agent with prior written notice of any entity’s becoming or
ceasing to be an Affiliate (provided, however, that with respect to any
Affiliate that become or cease to become Affiliate solely due to issuances or
exchanges of the publicly-traded stock of the Lead Borrower, the Lead Borrower
shall provide the Administrative Agent with written notice thereof on or before
the thirtieth (30th) day of the next month thereafter).


(c)   No Obligor
shall change its State of incorporation or its taxpayer identification number
without twenty-one (21) days prior written notice to Administrative Agent and
its counsel, provided that no such change shall occur unless no Suspension
Event has occurred that is continuing.


(d)   Each Obligor
has all requisite corporate power and authority to execute and deliver all Loan
Documents to which the Obligor is a party and has and will hereafter retain all
requisite corporate power to perform all Liabilities.


(e)   The
execution and delivery by each Obligor or by the Lead Borrower of each Loan
Document on behalf of each Obligor that is a party thereto, such Obligor’s
consummation of the transactions contemplated by such Loan Documents
(including, without limitation, the creation of Collateral Interests by such
Obligor to secure the Liabilities), such Borrower’s performance under such Loan
Document, the borrowings hereunder, and the use of the proceeds thereof:


(i)            Have been duly authorized by all necessary
corporate action on the part of such Obligor;


(ii)           Do not, and will not, contravene in any
material respect any provision of any Requirement of Law or material obligation
of such Obligor; and


(iii)          Will not result in the creation or imposition
of, or the obligation to create or impose, any Encumbrance upon any assets of
such



 64
 









Obligor
pursuant to any Requirement of Law or obligation of such Obligor, except
pursuant to the Loan Documents and the Term Loan Agreement.


(f)    The Loan
Documents have been duly executed and delivered by the Lead Borrower and the
other Borrowers or by the Lead Borrower on behalf of itself and the other
Borrowers and by the Guarantor, as the case may be and are the legal, valid and
binding obligations of the Obligors, enforceable against the Obligors in
accordance with their respective terms, except to the extent enforceability may
be limited by applicable bankruptcy, insolvency, moratorium, or other similar
laws affecting the enforcement of creditors’ rights generally and by general
principles of equity.


4.3  TRADE NAMES.


(a)   EXHIBIT
4.3 is a listing of:


(i)            All names under which each Obligor has
conducted its business within the past Five (5) years, and


(ii)           All entities and/or persons with whom each
Obligor ever consolidated or merged within the past five (5) years, or from
whom each Obligor ever acquired in a single transaction or in a series of
related transactions substantially all of such entity’s or Person’s assets
within the past five (5) years.


(b)   The Lead
Borrower will provide the Administrative Agent with not less than twenty-one
(21) days prior written notice (with reasonable particularity) of any change to
any Obligor’s name from that under which such Obligor is conducting its
business at the execution of this Agreement and such Obligor will not effect
such change unless no Suspension Event has occurred that is continuing.


4.4  INFRASTRUCTURE.


(a)   The Obligor
have and will maintain a sufficient infrastructure to conduct their business as
presently conducted and as contemplated to be conducted as described in the
Business Plan.


(b)   Each Obligor
owns and possesses, or has the right to use (and will hereafter own, possess,
or have such right to use) all patents, industrial designs, trademarks, trade
names, trade styles, brand names, service marks, logos, copyrights, trade
secrets, know-how, confidential information, and other intellectual or
proprietary property of any third Person necessary for the Obligors’ conduct of
the Obligor’ business, except where such failure could not reasonably be
expected to have a Material Adverse Effect.


(c)   The conduct
by the Obligors of the Obligors’ business does not presently infringe (nor will
the Obligors conduct their business in the future so as to infringe) the
patents, industrial designs, trademarks, trade names, trade styles, brand
names, service marks, logos,



 65
 









copyrights, trade secrets, know-how, confidential information, or other
intellectual or proprietary property of any third Person, except where the
infringement could not reasonably be expected to have a Material Adverse
Effect.


4.5  GUARANTOR.


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


4.6  LOCATIONS.


(a)   The
Collateral, and the books, records, and papers of the Obligors pertaining
thereto, are kept and maintained solely at the Obligors’ chief executive
offices and those locations which are listed on EXHIBIT 4.6(a),
which includes, with respect to each such location, the name and address of the
landlord on the Lease which covers such location (or an indication that the
Obligors own the subject location) and of all service bureaus with which any
such records are maintained.  The
Obligors shall supplement EXHIBIT
4.6(a) on a monthly basis
after the date hereof to reflect any Permitted Store Openings/Closings,
additional Domestic Distribution Centers (for which prior notice has been given
pursuant to the definition thereof), or new chief executive offices.


(b)   The Obligors
shall not remove any of the Collateral from such chief executive office or
those locations listed on EXHIBIT
4.6(a) except to:


(i)            accomplish the Costa Rican Transaction;


(ii)           accomplish sales of Inventory in the ordinary
course of business;


(iii)          move Inventory from one such location to
another such location;


(iv)          utilize such of the Collateral as is removed
from such locations in the ordinary course of business (such as motor
vehicles); or


(v)           move Inventory from one store to another
store in connection with Permitted Store Openings/Closings.


(c)   The
Borrowers shall use their reasonable efforts to provide the Collateral Agent
with Landlord Waivers or subordinations, in substantially the form annexed
hereto as EXHIBIT 4.6(c) for each of the Borrowers’ locations in any
of the Landlord States or the chief executive office (if it is not located in
the Headquarters Facility) or any new Domestic Distribution Center.  The Collateral Agent may establish an
Availability Reserve for each such location as to which such a waiver is not so
delivered, which Availability Reserve shall be reduced or eliminated upon
delivery of a waiver for such location.


(d)   The
Borrowers will not:



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(i)            Execute, alter, modify, or amend any Lease
for the Headquarters Facility or the Domestic Distribution Facilities, unless
such alteration, modification or amendment is for more economically favorable
terms for the Borrowers.


(ii)           Commit to, or open or close any location at
which the Borrowers maintains, offers for sales, or stores any of the
Collateral, except that (A) the Borrowers may open or close, in their business
judgment, locations within department or specialty stores or other locations in
which a Borrower leases or licenses a portion of the space in such store; and
(B) the Borrowers may: (I) open, during any Fiscal Year, new stores in an
amount not to exceed Twenty Percent (20%) of the number of stores (other than
locations within department or specialty stores or other locations in which a
Borrower leases or licenses a portion of the space in such store) existing as
of the first day of such Fiscal Year (including stores that have closed since
such first day), and (II) close, during any Fiscal Year, stores in an amount
not to exceed Twenty Percent (20%) of the number of stores (other than
locations within department or specialty stores or other locations in which a
Borrower leases or licenses a portion of the space in such store) existing as
of the first day of such Fiscal Year (not including stores that have opened
since such first day) (“Permitted Store Openings/Closings”).


(e)   No tangible
personal property of the Borrowers is in the care or custody of any third party
or stored or entrusted with a bailee or other third party and none shall
hereafter be placed under such care, custody, storage, or entrustment, except
(i) as otherwise disclosed pursuant to, or permitted by, this Section 4.6, (ii)
for Inventory located in department or specialty stores or other locations in
which a Borrower leases or licenses a portion of the space in such store; (iii)
for goods in control of a customs broker, which has entered into a Customs
Brokers Agreement, (iv) for work-in-progress at contractors (whether or not in
the United States), and (v) to the extent such goods do not constitute Eligible
Inventory, Eligible In-Transit Inventory or Eligible L/C Inventory, any raw
materials at contractors (whether or not in the United States), finished goods
out for re-working, and goods in transit.


4.7  TITLE TO ASSETS.


(a)   The Obligors
are, and shall hereafter remain, the owners of the Collateral free and clear of
all Encumbrances other than Encumbrances or exceptions to ownership listed on EXHIBIT 4.7(a) and other Permitted Encumbrances. The
Obligors do not and shall not have possession of any property on consignment to
the Obligors.


(b)   The Obligors
shall not acquire or obtain the right to use any Equipment in which Equipment
any third party has an interest (notwithstanding that the acquisition or right
to use of such Equipment is otherwise permitted by this Agreement), except for:



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(i)            Equipment which is merely incidental to the
conduct of the Obligors’ business.


(ii)           Equipment subject to (a) Capital Leases or
purchase money security interests comprised in each case of Permitted
Encumbrances; and (b) operating leases.


(c)   The Obligors
do not have any goods, documents of title or other Collateral in the custody,
control, or possession of a third party, except as set forth in EXHIBIT 4.7(d) and except for goods located in the United
States in transit to a location of the Borrowers permitted herein or in the
ordinary course of business of the Obligors in the possession of the carrier
transporting such goods.  In the event
that any goods, documents of the title or other Collateral are at any time
after the date hereof in the custody, control or possession of any other person
not referred to in EXHIBIT
4.7(d) or such carriers,
Obligors shall promptly notify the Collateral Agent thereof in writing.  Promptly upon Collateral Agent’s request, the
Obligors shall deliver to the Agent a collateral access agreement, in form and
substance acceptable to the Collateral Agent in its sole discretion, duly
authorized, executed and delivered by such person and Borrowers.


(d)   EXHIBIT
4.7(d) is a schedule of all
customs brokers employed by the Obligors for the transport of goods in the
ordinary course of the business of the Obligors.  The Obligors shall not employ any other
customs brokers unless (i) the Obligors have provided the Collateral Agent with
thirty (30) days prior notice thereof and (ii) such customs broker has executed
and delivered to the Collateral Agent a Customs Broker Agreement.  The Collateral Agent shall not give notice to
any of the Obligors’ customs brokers to follow the instructions of the
Collateral Agent as provided in any Customs Brokers Agreement except upon or
following the occurrence and during the continuance of an Event of Default and
not in violation of the Intercreditor Agreement.


4.8  INDEBTEDNESS.


(a)   The Obligors
do not and shall not hereafter have any Indebtedness with the exceptions of:


(i)            Any Indebtedness under the Revolving Credit
or the Term Loan Facility;


(ii)           The Indebtedness (if any) listed on EXHIBIT 4.8, annexed hereto;


(iii)          Indebtedness for Equipment or Real Estate
secured by purchase money security interests or purchase money liens that are
Permitted Encumbrances;


(iv)          Capital Leases that are Permitted
Encumbrances for the acquisition of Equipment or Real Estate;



 68
 









(v)           unsecured Indebtedness
up to the aggregate amount of $75,000,000;


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


(vii)         Any unsecured
Indebtedness related to the redemption of the Series A Preferred Stock, in the
maximum aggregate amount of $800,000;


(viii)        Indebtedness to finance
the construction of an addition or additions to the Headquarters Facility or
additional buildings on the Headquarters Facility premises or to acquire
fixtures for the Headquarters Facility to the extent secured by Permitted
Encumbrances described in clause (j) of the definition thereof; and


(ix)          Any Indebtedness between
any of the Borrowers.


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


(b)   The Obligors
shall not permit more than 25% of that portion of the aggregate of their
Indebtedness for the purchase of goods or services which is not the subject of
a good faith dispute to remain unpaid more than 30 days beyond then current
trade terms provided to the subject Borrower by the supplier of such goods and
services.


(c)           The Obligors shall not
prepay Indebtedness except (i) the Liabilities; (ii) Indebtedness under the
Term Loan Agreement as follows: (A) other than in connection with a Liquidation
and not in contravention of the Intercreditor Agreement: (1) mandatory
prepayments of Indebtedness under the Term Loan Agreement; and (2) so long as
no Suspension Event or Event of Default has occurred and is continuing,
voluntary prepayments of Indebtedness under the Term Loan Agreement but only to
the extent that, upon and after giving effect thereto, pro forma Excess
Availability would not be less than 22.5% of the Borrowing Base; or (B) in
connection with a Liquidation, prepayments of Indebtedness under the Term Loan
Agreement in accordance with the Intercreditor Agreement; (iii) not in
contravention of any intercreditor or subordination agreement as may be in
effect with respect to other Indebtedness, and so long as no Suspension Event
or Event of Default has occurred and is continuing, prepayments of such other
Indebtedness but only to the extent that, upon and after giving effect thereto,
pro forma Excess Availability would not be less than 22.5% of the Borrowing
Base; or (iv) prepayments associated with the redemption of the Series A
Preferred Stock, in the maximum aggregate amount of $800,000.


(d)           Except for prepayments
permitted under Section 4.8(c), the Borrowers shall not make any payment of any
part or all of any Subordinated Debt or take any other action



 69
 









or omit to take any other
action in respect of any Subordinated Debt in contravention of the written
terms of any instrument evidencing such Subordinated Debt, or enter into any
agreement (written or oral) which could in any way be considered to amend,
modify or terminate any instrument or agreement evidencing or relating to
Subordinated Debt.


4.9  INSURANCE.


(a)   EXHIBIT 4.9, is a schedule of all insurance policies
owned by the Obligors or under which the Obligors are the named insured.  Each of such policies is in full force and
effect.  The Obligors are not in material
default or violation of any such policy and, to the Obligors’ knowledge, no
issuer is in material default or violation of any such policy.


(b)   The Obligors
shall have and maintain at all times insurance covering such risks, in such
amounts, containing such terms, in such form, and for such periods customary
for entities in similar industries and in similar locations as Obligors, and
written by such companies as may be reasonably satisfactory to the Agent.


(c)   All
insurance carried by the Obligors shall provide for a minimum of thirty (30)
days’ written notice of cancellation to the Collateral Agent and all such
insurance which covers the Collateral shall include an endorsement in favor of
the Collateral Agent that is reasonably acceptable to the Collateral Agent.


(d)   The coverage
reflected on EXHIBIT 4.9 presently satisfies the foregoing
requirements, it being recognized by the
Obligors, however, that such requirements may change hereafter to
reflect changing circumstances.


(e)   The Obligors
shall furnish the Agent from time to time with certificates or other evidence
reasonably satisfactory to the Agent regarding compliance by the Borrowers with
the foregoing requirements.


(f)    In the
event of the failure by the Obligors to maintain insurance as required herein,
the Collateral Agent, at its option, may obtain such insurance, provided, however,
the Collateral Agent’s obtaining of such insurance shall not constitute a cure
or waiver of any Event of Default occasioned by the Obligors’ failure to have
maintained such insurance.


(g)   The Lead
Borrower shall advise the Collateral Agent of each claim in excess of
$1,000,000 (or, following the occurrence and during the continuance of an Event
of Default, $100,000) made by any Obligor under any policy of insurance which
covers the Collateral and will permit the Collateral Agent, at the Collateral
Agent’s option in each instance, to the exclusion of the Obligors, to conduct
the adjustment of each such claim in excess of such amounts (and, at the
Collateral Agent’s option in each instance, of all claims following the
occurrence of any Event of Default). 
Upon and following the occurrence and during the continuation of an
Event of Default, the Obligors hereby appoint the Collateral Agent as the
Obligors’ attorney in fact to obtain, adjust, settle, and cancel any insurance
described in this section and to endorse in favor of the Collateral Agent any
and all drafts and other instruments



 70
 









with respect to such insurance. 
The within appointment, being coupled with an interest, is irrevocable
until this Agreement is terminated by a written instrument executed by a duly
authorized officer of the Collateral Agent. The Agent shall not be liable on
account of any exercise pursuant to said power except where there has been a
final judicial determination (in a proceeding in which the Agent had an
opportunity to be heard) that such exercise was conducted in a grossly
negligent manner or in willful misconduct. 
The Administrative Agent may apply any proceeds of such insurance
against the Liabilities, whether or not such have matured, in such order of
application as the Administrative Agent may determine.  The Administrative Agent’s and Collateral
Agent’s rights under this Section 4.09(g) shall be subject to the Intercreditor
Agreement.


4.10                LICENSES; MATERIAL CONTRACTS.


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


4.11                LEASES.


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


4.12                REQUIREMENTS OF LAW.


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



 71
 









4.13                LABOR RELATIONS.


(a)   No Obligor
has been and is presently a party to any collective bargaining or other labor
contract.


(b)   There is not
presently pending and, to the Obligors’ knowledge, there is not threatened any
of the following:


(i)            Any strike, slowdown, picketing, work
stoppage, or employee grievance process;


(ii)           Any proceeding against or affecting any
Obligor relating to the alleged violation of any Requirement of Law pertaining
to labor relations or National Labor Relations Board, the Equal Employment
Opportunity Commission, or any comparable governmental body, organizational
activity, or other labor or employment dispute against or affecting any Obligor,
which, if determined adversely to such Obligor could not have a Material
Adverse Effect;


(iii)          Any lockout of any employees by any Obligor,
(and no such action is contemplated by any Obligor); or


(iv)          Any application for the certification of a
collective bargaining agent.


(c)   No work
stoppage or other labor dispute exists, and, to Obligors’ knowledge, no event
has occurred or circumstance exists that could provide the basis for any work
stoppage or other labor dispute.


(d)   Each
Obligor:


(i)            (A) Has complied in all material respects
with all Requirements of Law relating to employment, equal employment
opportunity, nondiscrimination, immigration, wages, hours, benefits, and
occupational safety and health, except such noncompliance which would not reasonably
be expected to have a Material Adverse Effect; and (B) has complied in all
material respects with all Requirements of Law relating to collective
bargaining, the payment of social security and similar taxes, and plant
closing.


(ii)           Is not liable for the payment of more than a de minimus amount of compensation,
damages, taxes, fines, penalties, or other amounts, however designated, for
such Obligor’s failure to comply with any Requirement of Law referenced in
Section 4.12.



 72
 









4.14                MAINTAIN PROPERTIES.


Each Obligor
shall:


(a)   Keep the
Collateral in good order and repair (ordinary reasonable wear and tear and
insured casualty excepted);


(b)   Not suffer
or cause the waste or destruction of any material part of the Collateral;


(c)   Not use any
of the Collateral in material violation of any policy of insurance thereon; and


(d)   Not sell,
lease, or otherwise dispose of any of the Collateral, other than the following:


(i)            The Costa Rican Transaction


(ii)           The sale of Inventory in compliance with this
Agreement;


(iii)          The disposal of Equipment which is obsolete,
worn out, or damaged beyond repair, which Equipment is replaced to the extent
necessary to preserve or improve the operating efficiency of such Borrower;


(iv)          The turning over to the Agent of all Receipts
as provided herein; and


(v)           The sale, lease, or disposition of Collateral
in connection with the movement of Inventory from one store to another store in
connection with Permitted Store Openings/Closings.


4.15                TAXES.


(a)   Each Obligor has filed, or caused to be filed, in a timely manner all
Federal, state and other material tax returns, reports and declarations which
are required to be filed by it.  All
information in such tax returns, reports and declarations is complete and
accurate in all material respects.  Each
Obligor has paid or caused to be paid all taxes due and payable or claimed due
and payable in any assessment received by it, which, if unpaid, would result in
a material Encumbrance on any of its properties or assets, except taxes the
validity of which are being contested in good faith by appropriate proceedings
diligently pursued and available to such Borrower and with respect to which
adequate reserves in conformity with GAAP have been set aside on its
books.  Adequate provision has been made
for the payment of all accrued and unpaid Federal, state, county, local,
foreign and other taxes whether or not yet due and payable and whether or not
disputed.


(b)   No agreement
is extant which waives or extends any statute of limitations applicable to the
right of the Internal Revenue Service or any state taxing authority to assert a



 73
 









deficiency or make any other claim for or in respect to any Federal or
state taxes.  No issue has been raised in
any such examination which, by application of similar principles, reasonably
could be expected to result in the assertion of a deficiency for any fiscal
year open for examination, assessment, or claim by any Federal or state or
local taxing authority.


(c)   Except as
disclosed on EXHIBIT
4.15, there are no
examinations of or with respect to the Obligors presently being conducted by
the Internal Revenue Service or any other taxing authority.


(d)   The Obligors
have, and hereafter shall: pay, as they become due and payable, all taxes and
unemployment contributions and other charges of any kind or nature levied,
assessed or claimed against any Obligor or the Collateral by any person or
entity whose claim could result in an Encumbrance upon any asset of any Obligor
or by any governmental authority (other than taxes and charges being contested
in good faith and for which adequate reserves have been established); properly
exercise any trust responsibilities imposed upon the Obligors by reason of
withholding from employees’ pay or by reason of the Obligors’ receipt of sales
tax or other funds for the account of any third party; timely make all
contributions and other payments as may be required pursuant to any Employee
Benefit Plan now or hereafter established by the Obligors; and timely file all
tax and other returns and other reports with each governmental authority to
whom the Obligors are obligated to so file, except in those cases where
extensions have been granted or are permitted of which the Obligors have given
the Administrative Agent written notice.


(e)   At its
option, the Agent may, but shall not be obligated to, pay any taxes,
unemployment contributions, and any and all other charges levied or assessed
upon the Obligors or the Collateral by any person or entity or governmental
authority (provided that, if no Liabilities (other than Liabilities solely
attributable to the L/C’s) are outstanding, then Agent may pay such amounts
only if the Obligors have not paid them when due), and make any contributions
or other payments on account of the Obligors’ Employee Benefit Plan as the Agent,
in the Agent’s discretion, may deem necessary or desirable, to protect,
maintain, preserve, collect, or realize upon any or all of the Collateral or
the value thereof or any right or remedy pertaining thereto, provided, however,
the Agent’s making of any such payment shall not constitute a cure or waiver of
any Event of Default occasioned by the Obligors’ failure to have made such
payment.


4.16                NO MARGIN STOCK OR SECURITIES.


The Obligors are not engaged in the business of extending credit for
the purpose of purchasing or carrying any margin stock (within the meaning of
Regulations U, T, and X of the Board of Governors of the Federal Reserve System
of the United States).  No part of the
proceeds of any borrowing hereunder will be used at any time to purchase or
carry any such margin stock or to extend credit to others for the purpose of
purchasing or carrying any such margin stock.


4.17                ERISA.


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



 74
 









(a)   Violate or
fail to be in material compliance with Employee Benefit Plan maintained by the
Obligors;


(b)   Except as
set forth in EXHIBIT
4.17, fail timely to file all reports and filings
required by ERISA to be filed by the Borrowers;


(c)   Engage in
any “prohibited transactions” or “reportable events” (respectively as described
in ERISA);


(d)   Engage in,
or commit, any act such that a tax or penalty could be imposed upon the
Obligors on account thereof pursuant to ERISA;


(e)   Accumulate
any material funding deficiency within the meaning of ERISA;


(f)    Terminate
any Employee Benefit Plan such that a lien could be asserted against any assets
of the Obligors on account thereof pursuant to ERISA; or


(g)   Be a member
of, contribute to, or have any obligation under any Employee Benefit Plan which
is a multiemployer plan within the meaning of Section 4001(a) of ERISA.


4.18                HAZARDOUS MATERIALS AND ENVIRONMENTAL COMPLIANCE.


(a)   The Obligors
have never:


(i)            Been legally responsible for any release or
threat of release of any Hazardous Material; or


(ii)           Received notification of any release or
threat of release of any Hazardous Material from any site or vessel occupied or
operated by the Borrowers and/or of the incurrence of any expense or loss in
connection with the assessment, containment, or removal of any release or
threat of release of any Hazardous Material from any such site or vessel.


(b)   The Obligors
shall:


(i)            Dispose of any Hazardous Material only in
compliance with all Environmental Laws; and


(ii)           Not store on any site or vessel occupied or
operated by the Obligors and not transport or arrange for the transport of any
Hazardous Material, except if such storage or transport is in the ordinary
course of the Obligors’ business and is in compliance with all Environmental
Laws.


(c)   The Lead
Borrower shall provide the Administrative Agent with written notice upon
obtaining knowledge of any expense or loss incurred by any governmental
authority or



 75
 









other Person in connection with the assessment, containment, or removal
of any Hazardous Material, for which expense or loss the Borrowers may be
liable.


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


(i)            none of the Borrowers,
their Subsidiaries or any operator of the Headquarters Facility and the
Domestic Distribution Facilities or any operations thereon is in violation, or
alleged violation, of any judgment, decree, order, law, license, rule or
regulation pertaining to environmental matters, including without limitation,
those arising under the Resource Conservation and Recovery Act (“RCRA”), the Comprehensive Environmental
Response, Compensation and Liability Act of 1980 as amended (“CERCLA”), the Superfund Amendments and
Reauthorization Act of 1986 (“SARA”),
the Federal Clean Water Act, the Federal Clean Air Act, the Toxic Substances
Control Act, or any state, local or foreign law, statute, regulation,
ordinance, order or decree relating to health, safety or the environment
(hereinafter “Environmental Laws”),
which violation would have a material adverse effect on the environment or a
Material Adverse Effect, provided that for operators or operation prior to the
time that Borrowers owned or operated such real estate, said representation
shall be limited to Borrower’s knowledge;


(ii)           neither the Borrowers
nor any of their Subsidiaries has received notice from any third party
including, without limitation, any Governmental Authority, (A) that any one of
them has been identified by the United States Environmental Protection Agency
(“EPA”) as a potentially
responsible party under CERCLA with respect to a site listed on the National
Priorities List, 40 C.F.R. Part 300 Appendix B; (B) that any hazardous waste,
as defined by 42 U.S.C. §6903(5), any hazardous substances as defined by 42
U.S.C. §9601(14), any pollutant or contaminant as defined by 42 U.S.C.
§9601(33) and any toxic substances, oil or hazardous materials or other
chemicals or substances regulated by any Environmental Laws (“Hazardous Substances”) which any one of
them has generated, transported or disposed of has been found at any site at
which a Governmental Authority has conducted or has ordered that any Borrowers
or any of their Subsidiaries conduct a remedial investigation, removal or other
response action pursuant



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to any Environmental Law; or (iii) that it is or shall
be a named party to any claim, action, cause of action, complaint, or legal or
administrative proceeding (in each case, contingent or otherwise) arising out
of any third party’s incurrence of costs, expenses, losses or damages of any
kind whatsoever in connection with the release of Hazardous Substances;


(iii)          except as set forth on EXHIBIT 4.18 attached hereto: (A) no
portion of the Headquarters Facility and the Domestic Distribution Facilities
has been used for the handling, processing, storage or disposal of Hazardous
Substances except in accordance with applicable Environmental Laws; and no
underground tank or other underground storage receptacle for Hazardous
Substances is located on any portion of the Headquarters Facility and the
Domestic Distribution Facilities; (B) in the course of any activities conducted
by the Borrowers, their Subsidiaries or operators of its properties, no
Hazardous Substances have been generated or are being used on the Headquarters
Facility and the Domestic Distribution Facilities except in accordance with
applicable Environmental Laws; (C) there have been no releases (i.e. any past
or present releasing, spilling, leaking, pumping, pouring, emitting, emptying,
discharging, injecting, escaping, disposing or dumping) or threatened releases
of Hazardous Substances on, upon, into or from the properties of the Borrowers
or their Subsidiaries, which releases would have a material adverse effect on
the value of any of the Headquarters Facility and the Domestic Distribution
Facilities or adjacent properties or the environment; (iv) to the best of the
Borrowers’ knowledge, there have been no releases on, upon, from or into any
real property in the vicinity of any of the Headquarters Facility and the
Domestic Distribution Facilities which, through soil or groundwater
contamination, may have come to be located on, and which would have a material
adverse effect on the value of, the Headquarters Facility and the Domestic
Distribution Facilities ; and (v) in addition, any Hazardous Substances that
have been generated on any of the Headquarters Facility and the Domestic
Distribution Facilities have been transported offsite only by carriers having
an identification number issued by the EPA (or the equivalent thereof in any
foreign jurisdiction), treated or disposed of only by treatment or disposal
facilities maintaining valid permits as required under applicable Environmental
Laws, which transporters and facilities have been and are, to the best of the
Borrowers’ knowledge, operating in compliance with such permits and applicable
Environmental Laws provided that for purposes of this clause (iii),
representations relating to real property for a period prior to the



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operation or occupation by Borrowers shall be to
Borrowers’ knowledge; and


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


4.19                LITIGATION.


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


4.20                DIVIDENDS; INVESTMENTS; CORPORATE ACTION.


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


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


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


(iii)  Invest in or purchase any stock or securities
or rights to purchase any such stock or securities, of any corporation or other
entity (except (A) in Eligible Liquid Collateral, (B) investments (including,
without limitation, capital contributions and loans) to Guarantor or its
Subsidiaries, in an aggregate amount not to exceed Fifteen Million Dollars
($15,000,000) (without duplication of the advances permitted under Section
4.21(e) hereof) in the aggregate after the Closing Date; (C) as permitted in
Section 4.20(c); (D) so long as there has not occurred a Suspension Event or an
Event of Default, and no Suspension Event or Event of Default would result
therefrom, contributions under one or more Approved Security-Free SERPS to the
related Security-Free Rabbi Trusts in the amount of not more than $4,000,000
per annum, and not more than $10,000,000 in the aggregate, and subject to
delivery of a certificate to the Administrative Agent demonstrating pro forma
compliance with Section 5.12 hereof upon and following the



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making
of such contributions); (E) investments of the assets held in any Security-Free
Rabbi Trusts pursuant to Approved Security-Free SERPs; and (F) fixed income
instruments or fixed income equity securities, in each case rated A- or better
by a rating agency acceptable to Administrative Agent with intermediate to
perpetual maturities that (i) are structured with frequent short-term auction
periods of the type described in EXHIBIT 4.20
and that meet the qualifications with respect thereto as set forth therein; and
(ii) are subject to the first-priority security interest in favor of the Term
Loan Collateral Agent and a security interest in favor of the Collateral Agent
second only in priority to the Term Loan Collateral Agent to the extent and in
the degree set forth in the Intercreditor Agreement pursuant to Section
8.3(d)(ii);


(iv) 
Merge or consolidate or be merged or consolidated with or into any other
corporation or other entity (except as permitted in Section 4.20(c));


(v) 
Consolidate any of the Obligors’ operations with those of any other
corporation or other entity (other than with any other present or future
Obligor) (except as part of a Permitted Acquisition or Permitted Creation);


(vi) 
Organize any Affiliate (except as permitted in Section 4.20(c)), or
create any Affiliate, except pursuant to a Permitted Creation;


(vii)  Subordinate any debts or obligations owed to
the Obligors by any third party to any other debts owed by such third party to
any other Person;


(viii)  Acquire any assets other than in the ordinary
course and conduct of the Obligors’ business as conducted at the execution of
this Agreement (except as permitted in Section 4.20(c)); or


(ix)  Make any
Loans except as permitted in Section 4.21.


(b)  Borrowers may
make dividends, distributions and common stock buybacks provided that (A) no
Suspension Event or Event of Default has occurred which is continuing at the
time of such dividend, distribution, or buyback, and (B) upon and after giving
effect thereto, pro forma Excess Availability is at least 22.5% of Borrowing
Base.  Lead Borrower may repurchase
capital stock held by officers, directors, and employees in an amount not to
exceed $5,000,000 in the aggregate per annum provided that upon and after
giving effect thereto, pro forma Excess Availability is at least 15% of the
Borrowing Base and such purchase is approved by the Lead Borrower’s Board of
Directors and conducted on an arm’s length basis.


(c)  So long as
there is no Suspension Event that has occurred or would occur as a result
thereof, and the pro forma Excess Availability is at least 22.5% of the
Borrowing Base upon and after giving effect thereto, the Borrowers may make
Permitted Acquisitions and Permitted Creations, provided, that, the aggregate
amount of consideration for all Permitted Acquisitions and Permitted Creations
(including all Indebtedness incurred, repaid or assumed in connection with all
acquisitions occurring after the Closing Date and net of cash and cash
equivalents acquired), cash paid, and capital stock issued or expended in
respect of all such



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acquisitions after the
Closing Date shall not exceed $75,000,000 (exclusive of any consideration
delivered to another Borrower, whether such Borrower is now a Borrower or
becomes a Borrower prior to delivery of such consideration (whether in the form
of cash of capital stock)) in the aggregate following the Closing Date.


4.21                LOANS.


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


(a)   Advance
payments made to the Obligors’ suppliers in the ordinary course; and


(b)   Advances to
the Obligors’ officers, employees, and salespersons with respect to reasonable
expenses to be incurred by such officers, employees, and salespersons for the
benefit of the Obligors, which expenses are properly substantiated by the
person seeking such advance and properly reimbursable by the Obligors.


(c)   Additional
advances to the Obligors’ employees approved by the Chief Financial Officer, in
an amount not more than $1,000,000 in the aggregate.


(d)   Advances
from a Borrower to another Borrower.


(e)   Advances to
Guarantors and their Subsidiaries, in an aggregate amount not to exceed Fifteen
Million Dollars ($15,000,000) (without duplication of the investments permitted
under Section 4.20(a)(iii)(B)).


4.22                PROTECTION OF ASSETS.


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


4.23                Line of Business.


The Obligors shall
not engage in any business other than the business in which it is currently
engaged or a business reasonably related thereto, or such other lines of
business as may be consented to by the Administrative Agent.



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4.24                Affiliate
Transactions.


The Obligors shall not make any payment, nor give any value to any
Affiliate except for goods and services actually purchased by the Obligors
from, or sold by the Borrowers to, such Affiliate for a price and on terms
which shall be no be less favorable to the Borrowers than those which would
have been charged and imposed in an arms length transaction, other than the
investments permitted under clauses (B), (C), (D), and (E) of Section
4.20(a)(iii) and dividends, distributions and common stock buybacks and
repurchases permitted by Section 4.20(b).


4.25                Further
Assurances.


(a)   Other than
property and assets in Canada and as otherwise provided in this Agreement, the
Obligors are not the owner of, nor have they any interest in, any property or
asset in which a Collateral Interest is required to be granted hereunder which,
immediately upon the satisfaction of the conditions precedent to the
effectiveness of the credit facility contemplated hereby (Article III) will not
be subject to perfected Collateral Interests in favor of the Collateral Agent
(subject only to Permitted Encumbrances) to secure the Liabilities.


(b)   The Obligors
will not hereafter acquire any asset or any interest in property in which a
Collateral Interest is required to be granted hereunder which is not,
immediately upon such acquisition, subject to such a perfected Collateral
Interest in favor of the Collateral Agent (subject only to Permitted
Encumbrances) to secure the Liabilities.


(c)   The Obligors
shall execute and deliver to the Agent such instruments, documents, and papers,
and shall do all such things from time to time hereafter as the Agent may
reasonably request to carry into effect the provisions and intent of this
Agreement; to protect and perfect the Agent’s Collateral Interests in the
Collateral; and to comply with all applicable statutes and laws; and facilitate
the collection of the Receivables Collateral. 
The Obligors shall execute all such instruments as may be reasonably
required by the Agent with respect to the recordation and/or perfection of the
Collateral Interests created or contemplated herein.


(d)   The Obligors
hereby designate the Agent as and for the Obligors’ true and lawful attorney,
with full power of substitution, to sign and file any financing statements in
order to perfect or protect the Agent’s Collateral Interests in the Collateral.


(e)   A carbon,
photographic, or other reproduction of this Agreement or of any financing
statement or other instrument executed pursuant to this Section 4.25 shall
be sufficient for filing to perfect the security interests granted herein.


4.26                Adequacy OF
Disclosure.


(a)   All
financial statements furnished to the Agent or the Lenders by the Obligors have
been prepared in accordance with GAAP consistently applied and present fairly the
Consolidated condition of the Obligors at the date(s) thereof and the
Consolidated results of operations and cash flows of the Obligors for the
period(s) covered subject, in the
case of interim financials, to normal year end adjustments.  There has been no change in the financial
condition, results of operations, or cash flows of the Obligors since the
date(s) of such financial statements,



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other than changes in the ordinary course of business, which changes
have not been materially adverse, either singularly or in the aggregate.


(b)   The Obligors
do not have any contingent obligations or obligation under any Lease or Capital
Lease which is not noted in the Obligors’ most recent Consolidated financial
statements furnished to the Agent or the Lenders prior to the execution of this
Agreement which would have a Material Adverse Effect.


(c)   No document, instrument, agreement, or paper now or hereafter given the
Agent or the Lenders by or on behalf of the Obligors or any guarantor of the
Liabilities in connection with the execution of this Agreement by the Agent or
Lenders contains or will contain any untrue statement of a material fact or
omits or will omit to state a material fact necessary in order to make the
statements therein not misleading.  There
is no fact known to the Borrowers which has, or which, in the foreseeable
future could have, a Material Adverse Effect which has not been disclosed in
writing to the Agent or Lenders.


4.27                No
Restrictions on Liabilities.


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


(a)   The granting
of Collateral Interests in favor of the Agent on any asset of any Obligor; or


(b)   The
incurrence of any of the Liabilities.


4.28                Other
Covenants.


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


ARTICLE V. - FINANCIAL REPORTING
AND PERFORMANCE COVENANTS:


5.1  Maintain Records.


The Obligors
shall:


(a)   At all
times, keep proper books of account, in which full, true, and accurate entries
shall be made of all of the Obligors’ transactions, all in accordance with GAAP
applied consistently with prior periods to fairly reflect the financial
condition of the Obligors at the close of, and its results of operations for,
the periods in question.



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(b)   Timely
provide the Agent with those financial reports, statements, and schedules
required by this Article V or otherwise, each of which reports, statements and
schedules shall be prepared, to the extent applicable, in accordance with GAAP
applied consistently with prior periods to fairly reflect the financial
condition of the Obligors at the close of, and its results of operations for,
the period(s) covered therein.


(c)   At all
times, keep accurate current records of the Collateral including, without
limitation, accurate current stock, cost, and sales records of its Inventory,
accurately and sufficiently itemizing and describing the kinds, types, and
quantities of Inventory and the cost and selling prices thereof.


(d)   At all
times, retain independent certified public accountants who are reasonably
satisfactory to the Administrative Agent and instruct such accountants to fully
cooperate with, and be available to, the Administrative Agent to discuss the
Obligors’ financial performance, financial condition, operating results,
controls, and such other matters, within the scope of the retention of such
accountants, as may be raised by the Administrative Agent.


(e)   Not change
their respective fiscal years, tax identification numbers, or state of
incorporation, except as set forth herein.


5.2  Access to Records.


(a)   The Obligors
shall accord the Agent and the Agent’s representatives access from time to time
as the Agent and such representatives may require to all properties owned by or
over which any Obligor has control.  The
Agent and such representatives shall have the right, and the Obligors will
permit the Agent and the Agent’s representatives from time to time (upon prior
notice and during normal business hours, if prior to the occurrence and
continuance of a Suspension Event) as Agent and such representatives may
request, to examine, inspect, copy, and make extracts from any and all of the
Obligors’ books, records, electronically stored data, papers, and files.  The Obligors shall make all of the Obligors’
copying facilities available to the Agent and the Agent’s representatives.


(b)   The Obligors
hereby authorize the Agent and the Agent’s representatives to:


(i)            Subject to Section 14.26, inspect, copy,
duplicate, review, cause to be reduced to hard copy, run off, draw off, and
otherwise use any and all computer or electronically stored information or data
which relates to the Obligors, whether maintained by Obligors or by any service
bureau, contractor, accountant, or other person, and directs any such service
bureau, contractor, accountant, or other person who maintains such information
for the Obligor fully to cooperate with the Agent and the Agent’s
representatives with respect thereto.


(ii)           Verify at any time the Collateral or any
portion thereof, including upon and following the occurrence and during the
continuance of any Suspension Event: verification with Account Debtors, and/or



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with
the Borrowers’ computer billing companies, collection agencies, and accountants
and to sign the name of the Obligors on any notice to the Obligors’ Account
Debtors or verification of the Collateral.


(iii)          Deliver to the Term Loan Administrative
Agent, the Term Loan Collateral Agent, and the Term Lenders under the Term Loan
Facility any and all information regarding the Obligors, including without
limitation, copies of materials relating to appraisals, commercial finance
audits, and items delivered or obtained hereunder or in connection with the
Loan Documents.


5.3  Immediate Notice to Agent.


(a)   The Lead
Borrower shall provide the Administrative Agent and Collateral Agent with
written notice promptly upon the occurrence of any of the following events,
which written notice shall be with reasonable particularity as to the facts and
circumstances in respect of which such notice is being given:


(i)            Any change in the Authorized Officers.


(ii)           The completion of any physical count of all
or a material portion of the Obligor’s Inventory (together with a copy of the
results thereof certified by the Lead Borrower).


(iii)          Any cessation by the Obligors of their making
payment to its creditors generally as the Obligors’ debts become due.


(iv)          Any failure by the Obligors to pay rent at
any forty or more of the Borrowers’ locations, which failure continues for more
than Ten (10) days following the last day on which such rent was payable.


(v)           Any material adverse change in the business,
operations, or financial affairs of the Obligors.


(vi)          The existence of any Suspension Event or
Event of Default.


(vii)         Any decision on the part of any Obligor to
discharge the Obligors’ present independent accountants or any withdrawal or
resignation by such independent accountants from their acting in such capacity.


(viii)        Any litigation which, if determined adversely
to the Obligors, could be reasonably expected to have a Material Adverse
Effect.


(ix)           Any
violation of any Environmental Law that the Obligors or any of their
Subsidiaries reports in writing or is reportable by such Person in writing (or
for which any written report supplemental to



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any oral report is made) to any Governmental Authority
and upon becoming aware thereof, of any inquiry, proceeding, investigation, or
other action, including a notice from any agency of potential environmental
liability, of any Governmental Authority.


(b)   The Lead
Borrower shall:


(i)            Provide the Administrative Agent, when so
distributed, with copies of any materials distributed to the shareholders of
any Obligor (qua such
shareholders).


(ii)           At the reasonable request of the
Administrative Agent, from time to time, provide the Agent with copies of all
advertising (including copies of all print advertising and duplicate tapes of
all video and radio advertising).


(iii)          Provide the Administrative Agent, when
received by the Obligors, with a copy of any management letter or similar
communications from any accountant of the Obligors.


5.4  Borrowing Base Certificate.


The Lead Borrower
shall provide the Collateral Agent by 11:30 a.m., on the tenth Business Day of
each month, with a “Borrowing Base
Certificate” (in the form of EXHIBIT
5.4 as such form may be revised
from time to time by the Collateral Agent), reflecting the Obligor’s condition
on the last Business Day of the reporting period immediately prior to the date
when furnished, provided that, for any week that Excess Availability is less
than 15% of the Borrowing Base, the Lead Borrower shall provide the Agent by
11:30 a.m., weekly, on the Second (2nd) Business Day of the following week,
with such Borrowing Base Certificate reflecting the Borrower’s condition on the
last Business Day of the prior week. Such Certificate shall be signed by an
Authorized Officer and may be sent to the Agent by facsimile or email (with
electronic signature) transmission.  Such
weekly Borrowing Base Certificates shall be required until Excess Availability
has next exceeded 20% of the Borrowing Base for 20 consecutive Business Days,
at which point monthly Borrowing Base Certificates shall again be required in
accordance with this Section.  Each
Borrowing Base Certificate shall contain a certification that no Obligor has
entered into any agreements,of the type described in clause (a)(ii) of the
definition of “Borrowing Base A”, or amendments or modifications to agreements
of such type, other than (i) agreements that have been delivered to the
Administrative Agent prior to the delivery of such Borrowing Base Certificate;
or (ii) agreements that are delivered to the Administrative Agent concurrently
with such Borrowing Base Certificate.


5.5  Weekly Reports.


In the event that
a Borrowing Base Certificate is required weekly, then, in addition, on a weekly
basis, on Tuesday of each week (as of the then immediately preceding Saturday)
the Lead Borrower shall provide the Collateral Agent with a flash inventory and
accounts receivable



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collateral report (each
in such form as may be specified from time to time by the Collateral Agent). Such
report may be sent to the Collateral Agent by facsimile transmission, provided
that the original thereof is forwarded to the Collateral Agent on the date of
such transmission.


5.6  Monthly Reports.


(a)   Monthly, the
Lead Borrower shall provide the Collateral Agent with original counterparts of
the following (each in such form as the Collateral Agent from time to time may
specify):


(i)            Within Fifteen (15) days of the end of the
previous month:


(A)          A “Stock Ledger Report”.


(B)           A “General Ledger Inventory Report”.


(C)           Reconciliation between stock ledger and
general ledger as of the end of the subject month.


(D)          A leased department inventory report (for
locations within department or specialty stores or other locations in which a
Borrower leases or licenses a portion of the space in such store).


(E)           L/C inventory and in-transit inventory report
(if in the Borrowing Base).


(F)           A “General Ledger Accounts Receivable
Report”.


(G)           A “General Ledger Other Accounts Receivable
Report”.


(H)          An aging of the Borrowers’ Accounts.


(I)            An aging of the Borrowers’ accounts payable.


(J)            Third party statements as to Eligible Liquid
Collateral and Liquid Collateral Investments.


(K)          A Gross Margin reconciliation.


(L)           A store activity report.


(ii)           Within Thirty (30) days of the end of the
previous month:


(A)          The Officer’s Compliance Certificate
described in Section 5.9.



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(B)           An
internally prepared financial statement of the Borrowers’ financial condition
and the results of its operations for, the period ending with the end of the subject
month, which financial statement shall include, at a minimum, a consolidated
balance sheet, income statement, cash flow and comparison to the Business Plan,
which statement shall be certified by the Lead Borrower’s chief financial
officer or chief operating officer as fairly presenting the financial position
of the Borrowers in accordance with GAAP (subject to year-end audit
adjustments).


(C)           In addition, if Accounts in an aggregate face amount in excess of
$500,000 become newly ineligible because they fall within one of the specified
categories of ineligibility set forth in the definition of Eligible Accounts or
otherwise established by Administrative Agent, Borrowers shall notify the
Administrative Agent of such occurrence no later than the sixth Business Day
following such occurrence and the Borrowing Base shall thereupon be adjusted to
reflect such occurrence.


(D)          After
Excess Availability falls below 25% of the Borrowing Base and until Excess
Availability has next exceeded 25% of the Borrowing Base for 40 consecutive
Business Days, the Borrower shall deliver a report as to the Fixed Charge
Coverage Ratio as of the then most recent month ended, for the 12 month period
ending with such month.


(b)   For purposes
of Section 5.6(a)(i), above, the first “previous month” in respect of
which the items required by that Section shall be provided shall be September
2004, and for purposes of Section 5.6(a)(ii), above, the first “previous
month” in respect of which the items required by that Section shall be provided
shall be August 2004.


(c)   Until
otherwise requested by the Administrative Agent, the items required by Sections
5.6(a)(i), and 5.6(a)(ii)(C) may be delivered in electronic format.


5.7  Quarterly Reports.


Quarterly, within
Forty Five (45) days following the end of each of the Borrower’s first three
fiscal quarters, the Borrowers shall provide the Agent with an original
counterpart of a management prepared financial statement of the Borrowers for
the period from the beginning of the Borrowers’ then current fiscal year
through the end of the subject quarter, with comparative information for the
same period of the previous fiscal year, which statement shall include, at a
minimum, a consolidated balance sheet, income statement (if requested, on a
company specific and on a “consolidating” basis), and cash flows and
comparisons for the corresponding quarter of the then immediately previous
year, as well as to the Business Plan.



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5.8  Annual Reports.


(a)   Annually,
within 90 days following the end of the Borrowers’ fiscal year, the Lead
Borrower shall furnish the Agent with the following:


(i)            Borrowers’ Consolidated annual financial
statement, which statement shall have been prepared by, and bear the
unqualified opinion of, the Borrowers’ independent certified public accountants
(i.e. said statement shall be “certified” by such accountants) and shall
include, at a minimum (with comparative information for the then prior fiscal
year) a balance sheet, income statement, statement of changes in shareholders’
equity, and cash flows; and


(ii)           The Officer’s Compliance Certificate
described in Section 5.9.


(b)   Each annual
statement shall be accompanied by such accountant’s certificate indicating
that, in conducting the audit for such annual statement, nothing came to the
attention of such accountants to believe that any Suspension Event relating to
the financial performance covenants imposed pursuant to Section 5.12 had occurred during the subject fiscal year
(or if one or more had occurred, the facts and circumstances thereof).


5.9  Officers’ Certificates.


(a)   The Lead
Borrower shall cause its Authorized Officer to certify, in the form attached
hereto as EXHIBIT 5.9 (the “Officer’s Compliance Certificate”) in connection with those monthly and annual statements to be
furnished pursuant to this Agreement that:


(i)            Such statement was prepared in accordance
with GAAP consistently applied and presents fairly and in all materal respects
the financial condition of the Borrowers at the close of, and the results of
the Borrowers’ operations and cash flows for, the period(s) covered, subject, however
to the following:


(A)          usual year end adjustments (this exception
shall not be included in the Certificate which accompanies such annual
statement).


(B)           Material Accounting Changes (in which event,
such certificate shall include a schedule (in reasonable detail) of the effect
of each such Material Accounting Change) not previously specifically taken into
account in the determination of the financial performance covenant imposed
pursuant to Section 5.12.


(ii)           No Suspension Event or Event of Default has
occurred which is continuing, or if such event has occurred, its nature (in
reasonable



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detail)
and the steps (if any) being taken or contemplated by the Borrowers to be taken
on account thereof.


(iii)          The Borrowers were in compliance (or had
failed to comply) as of the date of the applicable statement with each of the
financial performance covenants included in Section 5.12 hereof; such
certification to be accompanied by calculations demonstrating such compliance
or failure to comply.


5.10                Inventories,
Appraisals, and Audits.


(a)   The
Collateral Agent may, at the expense of the Borrowers, participate in and/or
observe each inventory and any cycle count of the Collateral which is
undertaken on behalf of the Borrowers (provided that any expenses of Collateral
Agent for which Collateral Agent seeks reimbursement shall be reasonable
expenses).  No Borrower may, without the
prior written consent of the Collateral Agent, change the methodology to be
followed in connection with the conduct of and reporting on the results of such
inventory from the methodology employed by the Borrowers as of the date of this
Agreement.


(b)   The
Borrowers, at their expense, shall cause each store location, warehouse, and
distribution center to have not less than One (1) physical inventory or cycle
count in each Twelve (12) month period to be undertaken consistent with current
practice, while this Agreement is in effect (the scheduling of which shall be
subject to the Collateral Agent’s reasonable discretion), and in reasonable
cocoperation with the Term Collateral Agent conducted by such inventory takers
as are reasonably satisfactory to the Collateral Agent and following such
methodology as may be reasonably satisfactory to the Agent.


(i)            The Lead Borrower shall provide the
Collateral Agent with a copy of the preliminary results of each such inventory
(as well as of any other physical inventory undertaken by the Borrowers) within
Ten (10) days after its completion.


(ii)           The Lead Borrower shall provide the
Collateral Agent with a reconciliation of the results of each such inventory
(as well as of any other physical inventory undertaken by the Borrowers) to the
Borrowers’ books and records within Thirty (30) days following the completion
of such inventory.


(iii)          The Collateral Agent, in its discretion and
in reasonable cooperation with the Term Loan Collateral Agent, following the
occurrence of and during the continuance of a Suspension Event, may cause such
additional inventories to be taken as the Collateral Agent determines (each, at
the expense of the Borrowers).


(c)   If at any
time during any 12-month period Excess Availability falls below 60% of the
Borrowing Base for at least 15 consecutive Business Days, the Collateral Agent



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contemplates obtaining up to One (1) appraisal (at the expense of the
Borrowers) of the Borrowers’ Inventory at any time during such 12-month period,
and if at any time during any 12-month period Excess Availability falls below
30% of the Borrowing Base for at least 5 consecutive Business Days, the
Collateral Agent contemplates obtaining up to One (1) additional appraisal (at
the expense of the Borrowers) of the Borrowers’ Inventory at any time during
such 12-month period , but in its discretion, may obtain additional appraisals
of the Borrowers’ Inventory and Real Estate in the event it deems it reasonably
necessary in its discretion (such additional appraisals, if not conducted after
and during the continuance of an Event of Default, shall be at Collateral Agent’s
expense).  In addition, the Collateral
Agent may obtain in reasonable cooperation with the Term Loan Collateral Agent,
an appraisal of the Headquarters Facility (at the expense of the Borrower) at
any time after the Borrower incurs additional Indebtedness after the date
hereof secured by the Headquarters Facility in excess of $1,000,000.


(d)   If at any
time during any 12-month period Excess Availability falls below 60% of the
Borrowing Base for at least 15 consecutive Business Days, the Collateral Agent
contemplates conducting One (1) commercial finance audit (at the expense of the
Borrowers) of the Borrowers’ books and records, and if at any time during any
12-month period Excess Availability falls below 30% of the Borrowing Base for
at least 5 consecutive Business Days, the Collateral Agent contemplates
obtaining up to One (1) additional commercial finance audit (at the expense of
the Borrowers), but in its discretion, may obtain more in the event it deems it
reasonably necessary in its discretion (such additional commercial finance
audits, if not conducted after and during the continuance of an Event of
Default, shall be at Collateral Agent’s expense).


5.11                Additional
Financial Information.


(a)   In addition
to all other information required to be provided pursuant to this Article V,
the Lead Borrower promptly shall provide the Agent (and any guarantor of the
Liabilities), such other and additional information concerning the Obligors,
the Collateral, the operation of the Obligors’ business, and the Obligors’
financial condition, including financial reports and statements (including
supporting schedules), as the Agent may from time to time reasonably request
from the Lead Borrower.


(b)   The Lead
Borrower may provide the Agent,
from time to time hereafter, with updated forecasts of the Obligors’
anticipated performance and operating results.


(c)   The Lead
Borrower shall, no later than Thirty (30) days prior to the end of each of the
Borrowers’ fiscal years, furnish the Administrative Agent with a draft updated
and extended forecast (which forecast shall be proposed by the Lead Borrower to
become the Business Plan as provided in clause (5.11(d) below) which shall go
out at least through the end of the then next fiscal year and shall include a
Consolidated income statement, balance sheet, and statement of cash flow, by
month, as well as components of the Borrowing Base and shall include
assumptions as are reasonably satisfactory to the Agent, each prepared in
conformity with GAAP and consistent with the Borrowers’ then current practices,
and the Lead Borrower shall, no later than Sixty (60) days after the end of
each of the Borrowers’ fiscal years, furnish the Agent with a final updated and
extended forecast which shall go out at least through the end of the then



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next fiscal year and shall include a Consolidated income statement,
balance sheet, and statement of cash flow, by month, as well as components of
the Borrowing Base and shall include assumptions as are reasonably satisfactory
to the Agent, each prepared in conformity with GAAP and consistent with the
Borrowers’ then current practices,.


(d)   The
Administrative Agent, following the receipt of any of such forecast, may, but
shall not be under any obligation to, accept in writing such forecast (in which
event, such forecast shall become the Business Plan).


(e)   Intentionally
omitted.


(f)    Promptly
after the sending or filing thereof, as the case may be, the Obligors shall
deliver to the Administrative Agent copies of any proxy statements, financial
statements or reports which Obligors have sent to shareholders qua shareholders
and copies of any regular, periodic and special reports or registration
statements which Obligors file with the Securities and Exchange Commission of
any governmental authority which may be substituted therefore, or any national
securities exchange.


(g)   The Obligors
recognize that all appraisals, inventories, analysis, financial information,
and other materials which the Agent may obtain, develop, or receive with
respect to the Obligors is confidential to the Agent and that, except as
otherwise provided herein, the Obligors are not entitled to receipt of any of
such appraisals, inventories, analysis, financial information, and other
materials, nor copies or extracts thereof or therefrom.


5.12                Financial
Performance Covenants.


The Borrowers
shall observe and comply with those financial performance covenants set forth
on EXHIBIT 5.12(a) certain of
which covenants are based on the Business Plan set forth on EXHIBIT 5.12(b).  Compliance with such financial performance
covenants shall be made as if no Material Accounting Changes had been made
(other than any Material Accounting Changes specifically taken into account in
the setting of such covenants).  The
Administrative Agent may determine the Borrowers’ compliance with such
covenants based upon financial reports and statements provided by the Lead
Borrower to the Administrative Agent (whether or not such financial reports and
statements are required to be furnished pursuant to this Agreement) as well as
by reference to interim financial information provided to, or developed by, the
Administrative Agent.


ARTICLE VI. - USE AND COLLECTION
OF COLLATERAL:


6.1  Use of Inventory Collateral.


(a)   The
Borrowers shall not engage in any sale of the Inventory other than for fair
consideration in the conduct of the Borrowers’ business in the ordinary course
and shall not engage in sales or other dispositions to creditors, sales or
other dispositions in bulk, or any use of any of the Inventory in breach of any
provision of this Agreement.



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(b)   No sale of
Inventory shall be on consignment, approval, or under any other circumstances
such that, with the exception of the Borrowers’ customary return policy
applicable to the return of Inventory purchased by the Borrowers’ retail
customers in the ordinary course, such Inventory may be returned to the
Borrowers without the consent of the Agent.


6.2  Inventory Quality.


All Inventory now
owned or hereafter acquired by the Borrowers is and will be of good and
merchantable quality and free from defects (other than defects within customary
trade tolerances or for purchases of “irregular” Inventory in accordance with
current practices).


6.3  Adjustments and Allowances.


The Borrowers may
grant such allowances or other adjustments to the Borrowers’ Account Debtors
(exclusive of extending the time for payment of any Account or Account
Receivable, which shall not be done except in the ordinary course of the
Borrowers’ business) as the Borrowers may reasonably deem to accord with sound
business practice, provided, however, upon the occurrence and during
the continuance of an Event of Default, the authority granted the Borrowers
pursuant to this Section 6.3 may be limited or terminated by the
Collateral Agent at any time in the Collateral Agent’s discretion.


6.4  Validity of Accounts.


(a)   The amount
of each Account shown on the books, records, and invoices of the Borrowers
represented as owing by each Account Debtor is and will be the correct amount
actually owing by such Account Debtor and shall have been fully earned by
performance by the Borrowers.


(b)   Upon and
following the occurrence and during the continuance of any Suspension Event,
the Collateral Agent from time to time may verify in reasonable cooperation
with the Term Loan Collateral Agent the Receivables Collateral directly with
the Borrowers’ Account Debtors, such verification to be undertaken in keeping
with commercially reasonable commercial lending standards.


(c)   The
Borrowers have no knowledge of any impairment of the validity or collectibility
of any material portion of the Accounts (and no knowledge of any impairment of
the validity or collectibility of any of the Eligible Accounts or Eligible
Credit Card Receivables) and the Lead Borrower shall notify the Collateral
Agent of any such fact immediately after any Borrower becomes aware of any such
impairment.


(d)   Except with
respect to performance bonds in respect of construction contracts, up to an
aggregate maximum of $2,500,000, for which the sole collateral is the
Borrower’s cash, the Borrowers shall not post any bond to secure any Borrowers’
performance under any agreement to which any Borrower is a party nor cause any
surety, guarantor, or other third party obligee to become liable to perform any
obligation of any Borrower (other than to the Agent or the Term Loan Agent) in
the event of such Borrower’s failure so to perform.



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6.5  Notification to Account Debtors.


The Collateral
Agent shall have the right (upon and following the occurrence and during the
continuance of any Suspension Event) to notify any of the Borrowers’ Account
Debtors to make payment directly to the Collateral Agent and to collect all
amounts due on account of the Collateral.


ARTICLE VII. -  CASH MANAGEMENT; PAYMENT OF LIABILITIES:


7.1  Depository Accounts.


(a)   Annexed
hereto as EXHIBIT 7.1 is a Schedule of all present DDA’s, which
includes, with respect to each depository (i) the name and address of that
depository; (ii) the account number(s) of the account(s) maintained with such
depository; and (iii) a contact person at such depository.


(b)   The Lead
Borrower shall deliver the following to the Collateral Agent, as a condition to
the effectiveness of this Agreement:


(i)            With respect to DDA’s that are not Blocked
Accounts, the Operating Account, or Exempt DDA’s, notification, executed on
behalf of the Obligors, to each depository institution with which any DDA is
maintained, in form satisfactory to the Collateral Agent of the Collateral
Agent’s interest in such DDA.


(ii)           With respect to DDA’s that are Blocked Accounts
or the Operating Account, a Blocked Account Agreement with any depository
institution at which such accounts are maintained.


(c)   The Obligors
will not establish any DDA hereafter (other than an Exempt DDA) unless,
contemporaneous with such establishment, the Lead Borrower delivers the
following to the Collateral Agent:


(i)            With respect to DDA’s that are not Blocked
Accounts, the Operating Account, or Exempt DDA’s, notification to the
depository at which such DDA is established if the same would have been
required pursuant to Section 7.1(b)(i) if the subject DDA were open at
the execution of this Agreement; and


(ii)           With respect to DDA’s that are Blocked
Accounts or the Operating Account, a Blocked Account Agreement executed on
behalf of the depository at which such DDA is established if the same would
have been required pursuant to Section 7.1(b)(ii) if the DDA were open
at the execution of this Agreement.



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7.2  Credit Card Receipts.


(a)   Annexed
hereto as EXHIBIT 7.2, is a Schedule which describes all arrangements
to which the Obligors are a party with respect to the payment to the Obligors
of the proceeds of credit card charges for sales by the Obligors.


(b)   The Obligors
shall deliver to the Collateral Agent, as a condition to the effectiveness of
this Agreement, notification, executed on behalf of the Obligors, to each of
the Obligors’ credit card clearinghouses and processors of notice (in form
satisfactory to the Collateral Agent), which notice provides that payment of
all credit card charges submitted by the Obligors to that clearinghouse or
other processor and any other amount payable to the Obligors by such
clearinghouse or other processor shall be directed to the Operating Account, or
if a Sweep Period is effect, as otherwise designated from time to time by the
Collateral Agent.  The Obligors shall not
change such direction or designation except upon and with the prior written
consent of the Collateral Agent.


7.3  The Concentration, Blocked, and Operating Accounts.


(a)   The
following checking accounts have been or will be established (and are so
referred to herein):


(i)            The “Concentration Account”:
Established by the Administrative Agent with Fleet National Bank.


(ii)           The “Blocked Account(s)”:
Established by each of the Obligors with (A) JPMorgan Chase Bank, N.A., Wells
Fargo Bank, N.A., and Bank of America, and upon and following the date that is
60 days after the date hereof, Wachovia Bank, N.A. (provided that the accounts
at Wachovia Bank, N.A. shall not become Blocked Accounts if, after the Borrower
has used best efforts to cause Wachovia Bank, N.A. to enter into a Blocked
Account Agreement acceptable to the Collateral Agent and the Term Loan
Collateral Agent, Wachovia Bank, N.A. has not entered into such an agreement)  or (B) any other banks satisfactory to the
Administrative Agent, into which deposits from other DDA’s must be directed and
from which the Obligors shall not make disbursements other than to the
Operating Account or the Concentration Account.


(iii)          The “Operating Account”:  Established by each of the Obligors with
Fleet National Bank, from which only disbursements may be made and into which
advances under the Revolving Credit may be deposited or deposits from the
Blocked Account(s) may be made.



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(b)   The contents
of each DDA and of the Blocked Account constitutes Collateral and Proceeds of
Collateral. The contents of the Concentration Account constitutes the
Administrative Agent’s property.


(c)   The Obligors
shall not establish any Blocked Account hereafter except upon not less than
thirty (30) days written notice to the Collateral Agent and the delivery to the
Collateral Agent of a Blocked Account Agreement with respect thereto.


(d)   The Obligors
shall pay all fees and charges of, and maintain such impressed balances as may
be required by the depository in which any account is opened as required hereby
(even if such account is opened by and/or is the property of the Agent).


(e)   Notwithstanding
anything to the contrary contained in this Section 7.3 or elsewhere in
this Agreement, each Blocked Account Agreement shall provide (except as the
Collateral Agent may otherwise agree in writing) that, until Collateral Agent
has notified the financial institution maintaining such Blocked Account in
writing to forward by daily sweep all amounts in the applicable Blocked Account
to the Concentration Account, all amounts in the applicable Blocked Account
shall be forwarded pursuant to the instructions of the applicable Obligor given
to the depository institution maintaining such Blocked Account from time to time.  Collateral Agent shall be entitled, at its
election, to give the aforementioned notification to such financial
institution, or to request that the Obligors deliver such a notification to
such financial institution under Section 7.3(f), at any time after either (i)
the occurrence and during the continuance of an Event of Default, or (ii)
except as specified in Section 7.3(g)(1), Excess Availability (A) has been less
than 15% of the Borrowing Base for 5 consecutive Business Days; or (B) Excess
Availability has been less than 12.5% of the Borrowing Base at any time (the
period during which the Collateral Agent may give such a notice, a “Sweep
Period”); provided, however, that, subject to the following
sentence, each Sweep Period will be suspended at the election of Lead Borrower
within Five (5) Business Days of:  (y)
Agent’s and Lenders’ written waiver of any relevant Event of Default; or (z)
Borrowers’ Excess Availability exceeding 30% of the Borrowing Base for Sixty
(60) consecutive days (a “Sweep
Suspension”).  A Sweep Suspension will be permitted to occur
only Two (2) times during the effectiveness of this Agreement, such that in the
event that Excess Availability is (A) less than 15% of the Borrowing Base for 5
consecutive business days; or (B) less than 12.5% of the Borrowing Base at any
time, or an Event of Default occurs after a second Sweep Suspension has
occurred, no Sweep Suspension will be effective and the Sweep Period shall
continue in effect.


(f)    Except as
set forth in Section 7.3(g)(1), the Obligors agree that, at any time or from
time to time during a Sweep Period that the Collateral Agent requests that the
Obligors deliver to such a financial institution an instruction to forward by
daily sweep all amounts in the applicable Blocked Account to the Concentration
Account, the Obligors shall immediately upon such a request deliver such an
instruction to such financial institution and deliver a written copy thereof to
the Collateral Agent.


(g)   Notwithstanding
anything to the contrary in Sections 7.3(e) or 7.3(f), with respect to the Lead
Borrower’s Blocked Accounts numbered 1417650388 and 1000008202 at the Bank of
America, N.A., the Collateral Agent agrees that:



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(1)
if a Sweep Period is triggered solely by an event under clause (ii) of Section
7.3(e) above, then the Collateral Agent shall, prior to sending the instruction
described in Section 7.3(e) to Bank of America, N.A., request that the Obligors
deliver such an instruction, and the Collateral Agent shall, in such a
circumstance, itself send such an instruction to Bank of America, N.A. only if
the Obligors have failed to demonstrate to Collateral Agent, prior to 5:00 p.m.
(Boston time) on the Business Day following the date of such request, that the
Obligors have delivered the requested instruction; and


(2)
if the Collateral Agent itself has delivered an instruction to Bank of America,
N.A. to forward by daily sweep all amounts in the applicable Blocked Account to
the Concentration Account, the Collateral Agent agrees that if and when either
or both of the two (2) permitted Sweep Suspensions becomes effective, it shall
thereafter, at the request of the Lead Borrower, and until the commencement of
a subsequent Sweep Period, either: (a) instruct the Bank of America to cause
amounts at such Blocked Accounts to be redirected to the Operating Account,
instead of the Concentration Account; (b) subject to Bank of America, N.A.’s
agreement to do so, enter into a new Blocked Account Agreement with the Bank of
America, N.A. substantially in the form of the Blocked Account Agreement dated
as of or about even date herewith, with such changes thereto as may be
reasonably requested by the parties, with respect to the such Blocked Accounts
or new Blocked Accounts at Bank of America, N.A.; or (c) take such other steps
to redirect amounts at such Blocked Accounts to the Operating Account or as the
Lead Borrower and the Collateral Agent may otherwise agree in writing in their
sole discretion.


7.4  Proceeds and Collection of Accounts.


(a)   All Receipts
constitute Collateral and proceeds of Collateral and shall be held in trust by
the Obligors for the Collateral Agent, shall not be commingled with any of the
Obligors’ other funds, and shall be deposited and/or transferred only to a
Blocked Account, the Operating Account, or the Concentration Account, or
another DDA permitted hereunder (and, in such case, only if the funds in such
DDA are deposited and/or transferred to a Blocked Account, Operating Account,
or Concentration Account).


(b)   The Obligors
shall cause the ACH or wire transfer to a Blocked Account or the Operating
Account, as designated by Collateral Agent (or, during any Sweep Period, shall
permit the Agent to cause such daily ACH or wire transfers to a Blocked Account
or the Operating Account), no less frequently than weekly (and, during any
Sweep Period, no less frequently than daily) (and whether or not there is then
an outstanding balance in the Loan Account) of the following:


(i)            The contents of each DDA (other than any
Exempt DDA, the Blocked Accounts, or the Operating Account).  Each such transfer to be net of any minimum
balance, not to exceed $2,500 multiplied by the number of stores from which
receipts are deposited into



 96
 








such
DDA, as may be required to be maintained in the subject DDA by the bank at
which such DDA is maintained.


(ii)           The proceeds of all credit card charges not
otherwise provided for pursuant hereto.


Telephone advice
(confirmed by written notice) shall be provided to the Collateral Agent on each
Business Day on which any such transfer is made.


(c)   During any
Sweep Period, whether or not any Liabilities are then outstanding, the
Borrowers shall cause the daily ACH or wire transfer to the Concentration
Account, or as otherwise designated by Collateral Agent (or shall permit the
Collateral Agent to cause such daily ACH or wire transfers to the Concentration
Account or as otherwise designated by Collateral Agent), of then entire ledger
balance of each Blocked Account or the Operating Account, net of such minimum
balance, not to exceed $2,500, as may be required to be maintained in the
Blocked Account or the Operating Account by the depository which the Blocked
Account or the Operating Account is maintained.


(d)   In the event
that, notwithstanding the provisions of this Section 7.4, the Obligors
receive or otherwise have dominion and control of any Receipts, or any proceeds
or collections of any Collateral, such Receipts, proceeds, and collections
shall be held in trust by the Obligors for the Collateral Agent and shall not
be commingled with any of the Obligors’ other funds or deposited in any account
of the Borrowers other than as set forth herein or as instructed by the
Collateral Agent.


(e)  Notwithstanding the provision of this Article
VII, the proceeds of any Term Priority Collateral shall be delivered to the
Term Loan Collateral Agent to the extent required by the Intercreditor
Agreement.


7.5  Payment of Liabilities.


(a)   On each
Business Day, the Administrative Agent shall apply the then collected balance,
if any, of the Concentration Account (net of fees charged, and of such minimum
balances as may be required by the bank at which the Concentration Account is
maintained) first, towards the unpaid balance of SwingLine Loans, second,
towards the unpaid balance of the Loan Account and third towards all other
Liabilities.


(b)   The
following rules shall apply to deposits and payments under and pursuant to this
Agreement:


(i)            Funds shall be deemed to have been deposited
to the Concentration Account on the Business Day on which deposited, provided
that notice of such deposit is available to the Administrative Agent by 2:00
p.m. on that Business Day.


(ii)           Funds paid to the Agent, other than by
deposit to the Concentration Account, shall be deemed to have been received on
the Business



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Day
when they are good and collected funds, provided
that notice of such payment is available to the Agent by 2:00 p.m.
on that Business Day.


(iii)          If notice of a deposit to the Concentration
Account (Section 7.5(b)(i)) or payment (Section 7.5(b)(ii)) is
not available to the Agent until after 2:00 p.m. on a Business Day, such
deposit or payment shall be deemed to have been made at 9:00 a.m. on the then
next Business Day.


(iv)          All deposits to the Concentration Account and
other payments to the Agent are subject to clearance and collection.


(c)   The
Administrative Agent shall transfer to the Operating Account any surplus in the
Concentration Account remaining after the application towards the Liabilities
referred to in Section 7.5(a), above (less those amount which are to be
netted out, as provided therein) provided,
however, in the event that a Suspension Event or Event of Default
exists and/or one or more L/C’s are then outstanding, then the Agent may
establish a funded reserve of up to 110% of the aggregate Stated Amounts of
such L/C’s.  Such funded reserve shall
either be (i) returned to the Borrowers provided
that, no Suspension Event or Event of Default exists or (ii) applied
towards the Liabilities following Acceleration.


7.6  The Operating Account and Disbursement Account.


Except as
otherwise specifically provided in, or permitted by, this Agreement, all checks
shall be drawn by the Borrowers upon, and other disbursements shall be made by
the Borrowers solely from, the Operating Account or Exempt DDAs.


ARTICLE VIII. -  GRANT OF SECURITY INTEREST:


8.1  Grant of Security Interest.


To secure the
Obligors’ prompt, punctual, and faithful performance and payment of all and
each of the Liabilities, each Obligor hereby grants to the Collateral Agent,
for the benefit of the Agents and the Lenders, a continuing security interest
in and to, and assigns to the Collateral Agent certain assets as set forth
below of the Obligors, and each item thereof, whether now owned or now due, or
in which that Obligor has an interest, or hereafter acquired, arising, or to
become due, or in which that Obligor obtains an interest, and all products,
Proceeds, substitutions, and accessions of or to any of the following (all of
which, together with any other property in which the Agent may in the future be
granted a security interest, is referred to herein as the “Collateral”):


(a)   All
Accounts.


(b)   All
Inventory.



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(c)   All General
Intangibles.


(d)   All Goods.


(e)   All Chattel
Paper.


(f)    All
Leasehold Interests.


(g)   The
Headquarters Facility, together with all Fixtures in connection therewith or
located thereon.


(h)   All
Letter-of-Credit Rights.


(i)    All Payment
Intangibles.


(j)    All
Supporting Obligations.


(k)   All books,
records, and information relating to the Collateral and/or to the operation of
the Obligors’ business, and all rights of access to such books, records, and
information, and all property in which such books, records, and information are
stored, recorded, and maintained.


(l)    All
Investment Property, Instruments, Documents, Documents of Title, Deposit Accounts,
policies and certificates of insurance, deposits, impressed accounts,
compensating balances, money, cash, or other property.


(m)  All
commercial tort claims.


(n)   All
insurance proceeds, refunds, and premium rebates, including, without
limitation, proceeds of fire and credit insurance, whether any of such
proceeds, refunds, and premium rebates arise out of any of the foregoing (
8.1(a) through 8.1(n)) or otherwise.


(o)   All
supporting obligations and all present and future liens, security interests,
rights, remedies, title and interest in, to and in respect of Accounts and
other Collateral, including (i) rights and remedies relating to guaranties,
contracts of suretyship, letter of credit and credit and other insurance
related to the Collateral, (ii) rights of stoppage in transit, replevin,
repossession, reclamation and other rights and remedies of an unpaid vendor,
lien or secured party, (iii) goods described in invoices, documents, contracts
or instruments with respect thereto, or otherwise representing or evidencing,
Accounts or other Collateral, including returned, repossessed and reclaimed
goods, and (iv) deposits by and property of Account Debtors or other persons
securing the obligations of Account Debtors.


(p)  All proceeds of the foregoing.


For the avoidance of
doubt, the term “Collateral” shall never include contributions to any
Security-Free Rabbi Trusts pursuant to the related Approved Security-Free SERPs
where such



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contributions occurred at
a time when there was no Suspension Event or Event of Default that had occurred
and was continuing as of such date.  If a
Suspension Event or Event of Default occurs, then the assets held in a
Security-Free Rabbi Trust shall constitute “Collateral” to the extent such assets
were contributed during the continuance of a Suspension Event or Event of
Default; provided that contributions made to any Security-Free Rabbi Trusts
pursuant to the related Approved Security-Free SERPs prior to, or after the
waiver of or cure of, a Suspension Event or Event of Default, shall not
constitute “Collateral”.


8.2  Extent and Duration of Security Interest.


The security
interest created and granted herein is in addition to, and supplemental of, any
security interest previously granted by the Obligors to the Agent and shall
continue in full force and effect applicable to all Liabilities until all
Liabilities have been paid and/or satisfied in full, the Commitment of the
Lenders to make loans and other financial accommodations has been terminated,
and the security interest granted herein is specifically terminated in writing
by a duly authorized officer of the Collateral Agent.


8.3  Perfection of Security Interests.


(a)   Each of the
Obligors agrees to take all action that the Collateral Agent may request as a
matter of nonbankruptcy law to perfect and protect the Collateral Agent’s
Collateral Interest in the Collateral and for such Collateral Interest to
obtain the priority therefore contemplated hereby, including, without
limitation, executing and delivering such documents and instruments, financing
statements, obtaining such notices and assents of third parties, obtaining
governmental approvals and providing such other instruments and documents in
recordable form as the Collateral Agent may request.  Obligors irrevocably and unconditionally
authorize the Collateral Agent to file at any time and from time to time such
financing statements with respect to the Collateral naming the Collateral Agent
or its designee as the secured party and Obligors as debtors, as Collateral
Agent may require, together with any amendment and continuations with respect
thereto, that (a) indicate the Collateral (i) as “all assets of such Obligor”
or words of similar effect, regardless of whether any particular asset
comprised in the Collateral falls within the scope of Article 9 of the Uniform
Commercial Code of the State of New York or such jurisdiction, or (ii) as being
of an equal or lesser scope or with greater detail, and (b) provide any other
information required by part 5 of Article 9 of the Uniform Commercial Code of
any jurisdiction for the sufficiency or filing office acceptance of any
financing statement or amendment, including (i) whether such Obligor is an
organization, the type of organization and any organization identification
number issued to such Obligor and, (ii) in the case of a financing statement
filed as a fixture filing, if any, a sufficient description of real property to
which the Collateral relates.  Such
Obligor agrees to furnish any such information to the Collateral Agent promptly
upon the Agent’s request.  Obligors
hereby authorize Collateral Agent to adopt on behalf of Obligors any symbol
required for authenticating any electronic filing.  In no event shall Obligors at any time file,
or permit or cause to be filed, any correction statement or termination
statement with respect to any financing statement (or amendment or continuation
with respect thereto) naming Collateral Agent or its designee as secured party
and Obligors as debtors.



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(b)   No Obligor
has any Chattel Paper (whether tangible or electronic) or instruments as of the
date hereof.  In the event that any
Obligor shall be entitled to or shall receive any Chattel Paper or instrument
after the date hereof, such Obligor or the Lead Obligor shall promptly notify
Collateral Agent thereof in writing. 
Promptly upon the receipt thereof by or on behalf of such Obligor
(including by any agent or representative), such Obligor or the Lead Borrower
shall deliver, or cause to be delivered to Collateral Agent, all tangible
Chattel Paper and instruments that such Obligor or may at any time acquire,
accompanied by such instruments of transfer or assignment duly executed in
blank as Collateral Agent may from time to time specify, in each case except as
Collateral Agent may otherwise agree.  At
Collateral Agent’s option, such Obligor or the Lead Borrower shall, or
Collateral Agent may at any time on behalf of such Obligor, cause the original
of any such instrument or Chattel Paper to be conspicuously marked in a form
and manner acceptable to Collateral Agent with the following legend referring
to Chattel Paper or instruments as applicable: “This [chattel
paper][instrument] is subject to the security interest of [name of Collateral
Agent] and any sale, transfer, assignment or encumbrance of this [chattel
paper][instrument] violates the rights of such secured party.”


(c)   In the event
that any Obligor shall at any time hold or acquire an interest in any
electronic Chattel Paper or any “transferable record” (as such term is defined
in Section 201 of the Federal Electronic Signatures in Global and National
Commerce Act or in Section 16 of the Uniform Electronic Transactions Act as in
effect in any relevant jurisdiction), such Obligor or the Lead Borrower shall
promptly notify Collateral Agent thereof in writing.  Promptly upon Collateral Agent’s request,
such Obligor or the Lead Borrower shall take, or cause to be taken, such
actions as Collateral Agent may reasonably request to give Collateral Agent
control of such electronic Chattel Paper under Section 9-105 of the UCC and
control of such transferable record under Section 201 of the Federal Electronic
Signatures in Global and National Commerce Act or, as the case may be, Section
16 of the Uniform Electronic Transactions Act, as in effect in such jurisdiction.


(d)   Except as
set forth on Exhibit 8.3(d), no Obligor owns or holds, directly or indirectly,
beneficially or as record owner or both, any Investment Property, as of the
date hereof, or has any investment account, securities account, commodity
account or other similar account with any bank or other financial institution
or other securities intermediary or commodity intermediary as of the date
hereof.


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



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nominee,
or (B) arrange for Collateral Agent to become the registered owner of the
securities.


(ii)           No Obligor shall, directly or indirectly, after the date hereof open,
establish or maintain any investment account, securities account, commodity
account or any other similar account (other than a deposit account) with any securities
intermediary or commodity intermediary unless each of the following conditions
is satisfied:  (A)  Collateral Agent shall have received not less
than Five (5) Business Days prior written notice of the intention of a Obligor
to open or establish such account which notice shall specify in reasonable
detail and specificity acceptable to Collateral Agent the name of the account,
the owner of the account, the name and address of the securities intermediary
or commodity intermediary at which such account is to be opened or established,
the individual at such intermediary with whom such Obligor is dealing and the
purpose of the account, (B) the securities intermediary or commodity
intermediary (as the case may be) where such account is opened or maintained
shall be acceptable to Collateral Agent, and (C) on or before the opening of
such investment account, securities account or other similar account with a
securities intermediary or commodity intermediary, such Obligor or the Lead
Borrower shall as Collateral Agent may specify either (1) execute and deliver,
and cause to be executed and delivered to Collateral Agent, an investment
property control agreement (in form and substance acceptable to the Collateral
Agent in its reasonable discretion)  with
respect thereto duly authorized, executed and delivered by such Obligor or the
Lead Borrower and such securities intermediary or commodity intermediary or (2)
arrange for Collateral Agent to become the entitlement holder with respect to
such investment property on terms and conditions acceptable to Collateral
Agent.


(e)   No Obligor
is the beneficiary or otherwise entitled to any Letter of Credit Rights as of
the date hereof.  In the event that any
Obligor shall be entitled to or shall receive any Letter of Credit Rights, such
Obligor or the Lead Borrower shall promptly notify Collateral Agent thereof in
writing.  Such Obligor or the Lead
Borrower shall immediately, as Collateral Agent may specify, either (i)
deliver, or cause to be delivered to Collateral Agent, with respect to any such
letter of credit, banker’s acceptance or similar instrument, the written
agreement of the issuer and any other nominated person obligated to make any
payment in respect thereof (including any confirming or negotiating bank), in
form and substance satisfactory to Collateral Agent, consenting to the
assignment of the proceeds of the letter of credit to Collateral Agent by such
Obligor and agreeing to make all payments thereon directly to Collateral Agent
or as Collateral Agent may otherwise direct or (ii) cause Collateral Agent to
become, at such Obligor’s expense, the transferee beneficiary of the letter of
credit, banker’s acceptance or similar instrument (as the case may be).



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(f)    No Obligor
has any commercial tort claims as of the date hereof.  In the event that any Obligor shall at any
time after the date hereof have any commercial tort claims, such Obligor or the
Lead Borrower shall promptly notify Collateral Agent thereof in writing, which
notice shall (i) set forth in reasonable detail the basis for and nature of
such commercial tort claim and (ii) include the express grant by such Obligor
to Collateral Agent of a security interest in such commercial tort claim (and
the proceeds thereof).  In the event that
such notice does not include such grant of a security interest, the sending
thereof by such Obligor to Collateral Agent shall be deemed to constitute such
grant to Collateral Agent.  Upon the
sending of such notice, any commercial tort claim described therein shall
constitute part of the Collateral and shall be deemed included therein.  Without limiting the authorization of Agent
otherwise provided herein or otherwise arising by the execution by Obligors of
this Agreement, Agent is hereby irrevocably authorized from time to time and at
any time to file such financing statements naming Agent or its designee as
secured party and Obligors as debtors, or any amendments to any financing
statements, covering any such commercial tort claim as Collateral. In addition,
Obligors shall promptly upon Agent’s request, execute and deliver, or cause to
be executed and delivered, to Agent such other agreements, documents and
instruments as Agent may require in connection with such commercial tort claim.


(g)   The Obligors
hereby covenant and agree that each Leasehold Interest shall at all times be
free and clear of all liens, claims and encumbrances of any nature or
description (other than Permitted Encumbrances) and no other creditor of the
estate (secured or unsecured) shall be entitled to encumber any Leasehold
Interest without the express written consent of the Collateral Agent.


(h)  The due and punctual payment and performance
of the Obligations shall also be secured by the Encumbrance created by the
Mortgage upon the Headquarters Facility of Lead Borrower described therein.


(i)            Notwithstanding
anything herein to the contrary, the Obligors (I) may hold assets consisting of
Chattel Paper, Letter of Credit Rights, and commercial tort claims in an
aggregate amount not to exceed $50,000 in which the Collateral Agent’s security
interest has not been perfected; and (II) may hold assets consisting of
Investment Property in an aggregate amount not to exceed $10,000 in which the
Collateral Agent’s security interest has not been perfected.


ARTICLE IX. - COLLATERAL AGENT AS
BORROWERS’ ATTORNEY-IN-FACT:


9.1  Appointment as Attorney-In-Fact.


The Obligors
hereby irrevocably constitutes and appoints the Collateral Agent as the
Obligor’s true and lawful attorney, with full power of substitution, following
the occurrence and during the continuance of an Event of Default subject to the
terms of the Intercreditor Agreement, to convert the Collateral into cash at
the sole risk, cost, and expense of the Obligors, but for the ratable benefit
of the Collateral Agent. The rights and powers granted the Collateral



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Agent by this appointment
include but are not limited to the right and power, following the occurrence
and during the continuance of an Event of Default, to:


(a)   Prosecute,
defend, compromise, or release any action relating to the Collateral.


(b)   Sign change
of address forms to change the address to which the Obligors’ mail is to be
sent to such address as the Collateral Agent shall designate; receive and open
the Obligors’ mail; remove any Receivables Collateral and Proceeds of
Collateral therefrom and turn over the balance of such mail either to the
Obligors or to any trustee in bankruptcy, receiver, assignee for the benefit of
creditors of the Obligors, or other legal representative of the Obligors whom
the Collateral Agent determines to be the appropriate person to whom to so turn
over such mail.


(c)   Endorse the
name of the Obligors in favor of the Collateral Agent upon any and all checks,
drafts, notes, acceptances, or other items or instruments; sign and endorse the
name of the Obligors on, and receive as secured party, any of the Collateral,
any invoices, schedules of Collateral, freight or express receipts, or bills of
lading, storage receipts, warehouse receipts, or other documents of title
respectively relating to the Collateral.


(d)   Sign the
name of the Obligors on any notice to the Obligors’ Account Debtors or
verification of the Receivables Collateral; sign the Obligors’ name on any
Proof of Claim in Bankruptcy against Account Debtors, and on notices of lien, claims
of mechanic’s liens, or assignments or releases of mechanic’s liens securing
the Accounts.


(e)   Take all
such action as may be necessary to obtain the payment of any letter of credit
and/or banker’s acceptance of which any Obligor is a beneficiary.


(f)    Repair,
manufacture, assemble, complete, package, deliver, alter or supply goods, if
any, necessary to fulfill in whole or in part the purchase order of any
customer of the Borrowers.


(g)   Use, license
or transfer any or all General Intangibles of the Obligors.


9.2  No Obligation to Act.


The Collateral
Agent shall not be obligated to do any of the acts or to exercise any of the
powers authorized by Section 9.1 herein, but if the Collateral Agent
elects to do any such act or to exercise any of such powers, it shall not be
accountable for more than it actually receives as a result of such exercise of
power, and shall not be responsible to the Obligors for any act or omission to
act except for any act or omission to act as to which there is a final determination
made in a judicial proceeding (in which proceeding the Collateral Agent has had
an opportunity to be heard) which determination includes a specific finding
that the subject act or omission to act had been grossly negligent or in actual
bad faith.



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ARTICLE X. -  EVENTS OF DEFAULT:


The occurrence of
any event described in this Article X respectively shall constitute an “Event of Default” herein.  Upon the occurrence of any Event of Default
described in Section 10.11, any and all Liabilities shall become due and
payable without any further act on the part of the Agent. Upon the occurrence
of any other Event of Default, the Administrative Agent may by written notice
to the Lead Borrower declare any and all Liabilities immediately due and
payable and thereupon any and all such Liabilities shall become immediately due
and payable.  The occurrence of any Event
of Default shall also constitute, without notice or demand, a default under all
other agreements between the Agent or Lenders and the Obligors and instruments
and papers heretofore, now or hereafter given the Agent or Lenders.


10.1                Failure to
Pay Revolving Credit.


The failure by the
Obligors to pay any amount when due under the Revolving Credit.


10.2                Failure To
Make Other Payments.


The failure by the
Obligors to pay when due (or upon demand, if payable on demand) any payment
Liability other than under the Revolving Credit.


10.3                Failure to
Perform Covenant or Liability (No Grace Period).


The failure by the
Obligors to promptly, punctually, faithfully and timely perform, discharge, or
comply with any covenant or Liability not otherwise described in Section 10.1
or Section 10.2 hereof, and included in any of the following provisions hereof:


	
  Section

  	
  Relates to:

  
	
   

  	
   

  
	
  4.3(b)

  	
  Notice of Name Change

  
	
   

  	
   

  
	
  4.6

  	
  Location of Collateral

  
	
   

  	
   

  
	
  4.7

  	
  Title to Assets

  
	
   

  	
   

  
	
  4.8

  	
  Indebtedness

  
	
   

  	
   

  
	
  4.9

  	
  Insurance Policies

  
	
   

  	
   

  
	
  4.15

  	
  Pay taxes

  
	
   

  	
   

  
	
  4.20

  	
  Dividends, Investments, Corporate Actions

  
	
   

  	
   

  
	
  4.24

  	
  Affiliate Transactions

  
	
   

  	
   

  
	
  4.25

  	
  Further Assurances

  



 



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  6.1

  	
  Use of Collateral

  
	
   

  	
   

  
	
  Article V

  	
  Reporting Requirements and Financial Performance
  Covenants

  
	
   

  	
   

  
	
  Article VII

  	
  Cash Management

  



 


10.4                Failure to
Perform Covenant or Liability (Grace Period).


The failure by the
Obligors, within Thirty (30) days following the earlier of the Obligors’
knowledge of a breach of any covenant or Liability not described in any of Sections
10.1, 10.2, or 10.3 or of the Lead Borrower’s receipt of
written notice from the Administrative Agent of the breach thereof, to
promptly, punctually, faithfully and timely perform, discharge or comply with
any such covenant or Liability not otherwise described in Sections 10.1, 10.2,
or 10.3.


10.5                Misrepresentation.


The determination by the
Administrative Agent that any representation or warranty at any time made by
the Obligors to the Agent was not true or complete in all material respects
when given.


10.6                Acceleration
of Other Debt. Breach of Lease.


(a)   (i) The occurrence of any event
such that any Indebtedness under the Term Loan Facility could be accelerated
(whether or not any action is taken on account of such occurrence), provided
that such event shall cease to be an Event of Default if, at any time prior to
the end of the tenth (10th) day
after the commencement of a Liquidation, the occurrence of such event has been
waived such that it has not caused and could not then cause acceleration under
the Term Loan Facility.


(ii) The occurrence of any event such that
any Indebtedness of the Obligors in excess of $3,000,000 (other than under the
Term Loan Facility) to any creditor other than the Agent could be accelerated
(whether or not the subject creditor takes any action on account of such
occurrence).


(b)   The occurrence of any of the
following with respect to Leases on which any Borrower is the lessee or is
obligated:


(i)            An aggregate of more than $500,000 in rent
is then overdue, except to the extent being contested in good faith and for
which adequate reserves have been established by such Obligor.



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(ii)           Default and the expiry of any applicable grace
period with respect to more than Twenty (20) Leases of retail stores, except if
the existence of such default is disputed in good faith by the Obligors and the
applicable landlord has been stayed or agreed in writing to forbear from
instituting proceedings to recover possession of the leased premises or
otherwise terminate the subject Lease or Obligors’ rights to peaceful
possession of the subject premises.


(iii)          Default and the expiry of any applicable
grace period of any Lease of any warehouse or distribution center.


10.7                Default Under
Other Agreements.


The occurrence of any
breach or default under any agreement (including any Loan Document other than
this Loan Agreement) between the Agent and the Obligors or instrument given by
the Obligors to the Agent and the expiry, without cure, of any applicable grace
period (notwithstanding that the subject Agent may not have exercised all or
any of its rights on account of such breach or default).


10.8                Intentionally
Omitted.


10.9                Attachment;
Judgment; Restraint of Business.


(a)   The service of process upon the
Agent or the Lenders or any Participant seeking to attach, by trustee, manse,
or other process, any of an Obligor’s funds on deposit with, or assets of such
Obligor in the possession of, the Agent or the Lenders or such Participant.


(b)   The entry of any judgment
against any Obligor or group of Obligors (which, if a money judgment, is in
excess of $1,000,000 singly, or in the aggregate), which judgment is not
satisfied (if a money judgment) or appealed from (with execution or similar
process stayed) within any applicable appeal period.


(c)   The entry of any order or the
imposition of any other process having the force of law, the effect of which is
to restrain in any material way the conduct by any Obligor of its business in
the ordinary course.


10.10              Business
Failure.


Any act by, against, or
relating to any Obligor, or its property or assets, which act constitutes the
determination, by such Obligor, to initiate a program of partial or total self-liquidation;
application for, consent to, or sufferance of the appointment of a receiver,
trustee, or other person, pursuant to court action or otherwise, over all, or
any part of any Obligor’s property; the granting of any trust mortgage or
execution of an assignment for the benefit of the creditors of any Obligor, or
the occurrence of any other voluntary or involuntary liquidation or extension
of debt agreement for any Obligor; the offering by or entering into by any
Obligor of any composition, extension, or any other arrangement seeking relief
from or extension of the debts of such Obligor; or the initiation of any
judicial or non-judicial proceeding



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or agreement by, against,
or including any Obligor which seeks or intends to accomplish a reorganization
or arrangement with creditors; and/or the initiation by or on behalf of such
Obligor of the liquidation or winding up of all or any part of such Obligor’s
business or operations.


10.11              Bankruptcy.


The failure by any
Obligor to generally pay its debts as they mature; adjudication of bankruptcy
or insolvency relative to any Obligor; the entry of an order for relief or
similar order with respect to any Obligor in any proceeding pursuant to the
Bankruptcy Code or any other federal bankruptcy law; the filing of any complaint,
application, or petition by any Obligor initiating any matter in which such
Obligor is or may be granted any relief from the debts of that Obligor pursuant
to the Bankruptcy Code or any other insolvency statute or procedure; the filing
of any complaint, application, or petition against any Obligor initiating any
matter in which the Obligor is or may be granted any relief from the debts of
that Obligor pursuant to the Bankruptcy Code or any other insolvency statute or
procedure.


10.12              Default by
Guarantor or Affiliate.


The occurrence of any of
the foregoing Events of Default with respect to any guarantor or endorser, or
surety of the Liabilities, or the occurrence of any of the foregoing Events of
Default with respect to any Subsidiary, or Affiliate (other than an Affiliate
that is an Affiliate solely due to ownership of the Lead Borrower’s
publicly-traded stock) of any Obligor, as if such guarantor, endorser, surety,
Subsidiary, or Affiliate were the “ Obligor “ described therein.


10.13              Indictment -
Forfeiture.


The indictment of, or
institution of any legal process or proceeding against, any Obligor or any
member of any Obligor’s senior management, under any federal, state, municipal,
and other civil or criminal statute, rule, regulation, order, or other requirement
having the force of law where the relief, penalties, or remedies sought or
available include the forfeiture of any property of any Obligor and/or the
imposition of any stay or other order, the effect of which could be to restrain
in any material way the conduct by that Obligor of its business in the ordinary
course.


10.14              Termination
of Guaranty.


The termination or
attempted termination (other than a mere request for consent to termination) of
any guaranty by any guarantor of the Liabilities.


10.15              Challenge to
Loan Documents.


(a)   Any challenge by or on behalf
of any Borrower or any guarantor of the Liabilities to the validity of any Loan
Document or the applicability or enforceability of any Loan Document strictly
in accordance with the subject Loan Document’s terms or which seeks to void,
avoid, limit, or otherwise adversely affect any security interest created by or
in any Loan Document or any payment made pursuant thereto.



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(b)   Any determination by any court
or any other judicial or government authority that any Loan Document is not
enforceable strictly in accordance with the subject Loan Document’s terms or
which voids, avoids, limits, or otherwise adversely affects any security
interest created by any Loan Document or any payment made pursuant thereto.


10.16              Intentionally
Omitted.


10.17              Change in
Control.


Any Change in Control.


10.18              Uninsured
Losses.


Any material loss,
theft, damage or destruction of any of the Collateral not fully covered
(subject to such deductibles as Administrative Agent and Lenders shall have
permitted) by insurance.


10.19              ERISA.


A reportable event
shall occur which Agent, in its sole discretion, shall determine in good faith
constitutes grounds for the termination by the Pension Benefit Guaranty
Corporation of any Plan or for the appointment by the appropriate United Stated
district court of a trustee for any Plan, or if any Plan shall be terminated in
a “distress termination” pursuant to Section 4041(c) or any such trustee shall
be requested or appointed, or if any Obligor is in “default” (as defined in
Section 4219(c)(5) of ERISA) with respect to payments to a Multiemployer Plan
resulting from such Obligor’s complete or partial withdrawal from such Plan.


ARTICLE XI. - RIGHTS AND REMEDIES
UPON DEFAULT:


Upon the occurrence of any
Event of Default described in Section 10.11 and upon Acceleration, and
at all times thereafter, the Agent shall have the following rights and remedies
in addition to all of the rights, remedies, powers, privileges, and discretions
available to Agent prior to the occurrence of an Event of Default.  Such rights and remedies shall be subject in
each case to the Intercreditor Agreement.


11.1                Rights of
Enforcement.


The Collateral Agent
shall have all of the rights and remedies of a secured party upon default under
the UCC, in addition to which the Collateral Agent shall have all and each of
the following rights and remedies:


(a)   To give notice to any bank at
which any DDA or Blocked Account is maintained and in which Proceeds of
Collateral are deposited, to turn over such Proceeds directly to the Collateral
Agent.



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(b)   To give notice to any of the
Obligors’ customs brokers to follow the instructions of the Collateral Agent as
provided in any Customs Brokers Agreement.


(c)   To collect the Receivables
Collateral with or without the taking of possession of any of the Collateral.


(d)   To take possession of all or
any portion of the Collateral.


(e)   To sell, lease, or otherwise
dispose of any or all of the Collateral, in its then condition or following
such preparation or processing as the Collateral Agent deems advisable and with
or without the taking of possession of any of the Collateral.


(f)    To conduct one or more going
out of business sales which include the sale or other disposition of the
Collateral.


(g)   To apply the Receivables
Collateral or the Proceeds of the Collateral towards (but not necessarily in
complete satisfaction of) the Liabilities.


(h)   To exercise all or any of the
rights, remedies, powers, privileges, and discretions under all or any of the
Loan Documents.


11.2                Sale of
Collateral.


(a)   Any sale or other disposition
of the Collateral may be at public or private sale upon such terms and in such
manner as the Collateral Agent deems advisable, having due regard to compliance
with any statute or regulation which might affect, limit, or apply to the
Collateral Agent’s disposition of the Collateral.


(b)   The Collateral Agent, in the
exercise of the Collateral Agent’s rights and remedies upon default, may
conduct one or more going out of business sales, in the Collateral Agent’s own
right or by one or more agents and contractors. Such sale(s) may be conducted
upon any premises owned, leased, or occupied by any Obligor.  The Collateral Agent and any such agent or
contractor, in conjunction with any such sale, may augment the Inventory with
other goods (all of which other goods shall remain the sole property of the
Collateral Agent or such agent or contractor). 
Any amounts realized from the sale of such goods which constitute
augmentations to the Inventory (net of an allocable share of the costs and
expenses incurred in their disposition) shall be the sole property of the
Collateral Agent or such agent or contractor and neither the Obligors nor any
Person claiming under or in right of the Obligors shall have any interest
therein.


(c)   Unless the Collateral is
perishable or threatens to decline speedily in value, or is of a type
customarily sold on a recognized market (in which event the Collateral Agent
shall provide the Lead Borrower with such notice as may be practicable under
the circumstances), the Collateral Agent shall give the Lead Borrower at least
Ten (10) days prior written notice of the date, time, and place of any proposed
public sale, and of the date after which any private sale or other disposition
of the Collateral may be made.  The
Obligors agree that such written notice shall satisfy all requirements for
notice to the Obligors which are imposed under the UCC or



 110
 









other applicable law with respect to the
exercise of the Collateral Agent’s rights and remedies upon default.


(d)   The Collateral Agent or the
Lenders may credit bid and may purchase the Collateral, or any portion of it at
any sale held under this Article XI.


(e)   If any of the Collateral is
sold, leased, or otherwise disposed of by the Collateral Agent on credit, the
Liabilities shall not be deemed to have been reduced as a result thereof unless
and until payment is finally received thereon by the Collateral Agent.


11.3                Occupation of
Business Location.


In connection with the
Collateral Agent’s exercise of the Collateral Agent’s rights under this Article
XI, the Collateral Agent may enter upon, occupy, and use any premises owned or
occupied by any Obligor, and may exclude the Obligors from such premises or
portion thereof as may have been so entered upon, occupied, or used by the
Collateral Agent.  The Collateral Agent
shall not be required to remove any of the Collateral from any such premises
upon the Agent’s taking possession thereof, and may render any Collateral
unusable to the Obligors.  In no event
shall the Agent be liable to the Obligors for use or occupancy by the
Collateral Agent of any premises pursuant to this Article XI, nor for any
charge (such as wages for the Obligors’ employees and utilities) incurred in
connection with the Collateral Agent’s exercise of the Agent’s Rights and
Remedies.


11.4                Grant of
Nonexclusive License.


Each Obligor hereby
grants to the Collateral Agent a royalty free nonexclusive irrevocable license
to use, apply, and affix any trademark, trade name, logo, or the like in which
that Obligor now or hereafter has rights, such license being with respect to
the Collateral Agent’s exercise of the rights hereunder including, without
limitation, in connection with any completion of the manufacture of Inventory
or sale or other disposition of Inventory.


11.5                Assembly of
Collateral.


The Collateral Agent may
require the Obligors to assemble the Collateral and make it available to the
Collateral Agent at the Obligors’ sole risk and expense at a place or places
which are reasonably convenient to both the Collateral Agent and Obligors.


11.6                Rights and
Remedies.


The rights, remedies,
powers, privileges, and discretions of the Agent hereunder, under any other
Loan Document or under applicable law (herein, the “Agent’s
Rights and Remedies”) shall be cumulative and not exclusive of any
rights or remedies which it would otherwise have.  No delay or omission by the Agent in
exercising or enforcing any of the Agent’s Rights and Remedies shall operate
as, or constitute, a waiver thereof.  No
waiver by the Agent of any Event of Default or of any default under any other
agreement shall operate as a waiver of any other default hereunder or under any
other agreement.  No single or partial
exercise of any of the Agent’s Rights or Remedies, and no express or implied
agreement or transaction of whatever



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nature entered into
between the Agent and any person, at any time, shall preclude the other or
further exercise of the Agent’s Rights and Remedies.  No waiver by the Agent of any of the Agent’s
Rights and Remedies on any one occasion shall be deemed a waiver on any
subsequent occasion, nor shall it be deemed a continuing waiver.  The Agent’s Rights and Remedies may be
exercised at such time or times and in such order of preference as the Agent
may determine. The Agent’s Rights and Remedies may be exercised without resort
or regard to any other source of satisfaction of the Liabilities.


ARTICLE XII. - NOTICES:


12.1                Notice
Addresses.


All notices, demands, and
other communications made in respect of this Agreement (other than a request
for a loan or advance or other financial accommodation under the Revolving
Credit) shall be made to the following addresses, each of which may be changed
upon Seven (7) days written notice to all others given by certified mail,
return receipt requested:


If
to the Agent:


Bank
of America, N.A.


100
Federal Street


Boston,
MA  02110


Attention:  Sally A. Sheehan, Managing Director


Fax:  (617) 434-4339


With a
copy to:


Brown
Rudnick Berlack Israels LLP


One
Financial Center


Boston,
MA 02111


Attention:  Andrew P. Strehle, Esquire


Fax:  617 856-8201


If to the Lenders:


Bank of America, N.A.


100 Federal Street


Boston, MA  02110


Attention:  Sally A. Sheehan, Managing Director


Fax:  (617) 434-4339


If to the Obligors:


c/o
Lead Borrower


Mothers Work, Inc.


456 North Fifth Street


Philadelphia, PA  19123



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Attention:  Edward M. Krell,
Executive Vice President - Chief Financial Officer


Fax: (215) 923-0975


With a
copy to:


Pepper
Hamilton LLP


3000
Two Logan Square


Eighteenth
and Arch Streets


Philadelphia,
PA  19103-2799


Attention:  David G. Smith, Esquire


Fax:  (215) 981-4750


12.2                Notice Given.


(a)   Except as otherwise
specifically provided herein, notices shall be deemed made and correspondence
received, as follows (all times being local to the place of delivery or
receipt):


(i)            By mail: the sooner of when actually
received or Three (3) days following deposit in the United States mail, postage
prepaid.


(ii)           By recognized overnight express delivery:
the Business Day following the day when sent.


(iii)          By Hand: If delivered on a Business Day after
9:00 a.m. and no later than Three (3) hours prior to the close of customary
business hours of the recipient, when delivered.  Otherwise, at the opening of the then next Business
Day.


(iv)          By Facsimile transmission (which must include
a header on which the party sending such transmission is indicated): If sent on
a Business Day after 9:00 a.m. and no later than Three (3) hours prior to the
close of customary business hours of the recipient, One (1) hour after being
sent.  Otherwise, at the opening of the
then next Business Day.


(b)   Rejection or refusal to accept
delivery and inability to deliver because of a changed address or facsimile
number for which no due notice was given shall each be deemed receipt of the notice
sent.


(c)   Collateral Agent will give the
Lead Borrower notice of its intention to foreclose on its security interests by
recognized overnight express delivery.



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ARTICLE XIII. - TERM:


13.1                Termination
of Revolving Credit.


The Revolving Credit
shall remain in effect (subject to suspension as provided in Section 2.5(h)
hereof) until the Termination Date.


13.2                Actions On
Termination.


On the Termination Date,
the Borrowers shall pay the Administrative Agent (whether or not then due), in
immediately available funds, all then Liabilities including, without
limitation: the entire balance of the Loan Account (including the unpaid
principal balance of the Revolving Credit Loans); any then remaining
installments of the Revolving Credit Commitment Fee; any payments due on
account of the indemnification obligations included in Section 2.10(e);
any accrued and unpaid Unused Line Fee; and all unreimbursed costs and expenses
of Agent for which the Borrowers are responsible; and shall make such
arrangements concerning any L/C’s then outstanding are reasonably satisfactory
to the Administrative Agent.  Until such
payment, all provisions of this Agreement, other than those contained in
Article II which place an obligation on the Agent to make any loans or advances
or to provide financial accommodations under the Revolving Credit or otherwise,
shall remain in full force and effect until all Liabilities shall have been
paid in full.  The release by the
Collateral Agent of the Collateral Interests granted the Agent by the Obligors
hereunder may be upon such conditions and indemnifications as the Collateral
Agent may require.


ARTICLE XIV. - GENERAL:


14.1                Protection of
Collateral.


The Agent has no duty as
to the collection or protection of the Collateral beyond the safe custody of
such of the Collateral as may come into the possession of the Agent.


14.2                Publicity.


The Administrative Agent,
at its expense, may issue a “tombstone” notice of the establishment of the
credit facility contemplated by this Agreement and may make reference to the
Obligors (and may utilize any logo or other distinctive symbol associated with
the Borrowers) in connection with any advertising, promotion, or marketing
undertaken by the Administrative Agent.


14.3                Successors
and Assigns.


This Agreement shall be binding
upon the Obligors and the Obligors’ representatives, successors, and assigns
and shall inure to the benefit of the Agent and the Lenders and their
respective successors and assigns, provided, however, no trustee or other fiduciary appointed with respect
to the Obligors shall have any rights hereunder.  In the event that the Agent or Lenders
assigns or transfers its rights under this Agreement, the assignee shall
thereupon succeed to and become vested with all rights, powers, privileges, and
duties of such assignor hereunder and such assignor shall thereupon be
discharged and relieved from its duties and obligations hereunder.



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14.4                Severability.


Any determination that
any provision of this Agreement or any application thereof is invalid, illegal,
or unenforceable in any respect in any instance shall not affect the validity,
legality, or enforceability of such provision in any other instance, or the
validity, legality, or enforceability of any other provision of this Agreement.


14.5                Amendments;
Course of Dealing.


(a)   This Agreement and the other
Loan Documents incorporate all discussions and negotiations between the
Obligors, the Agent and the Lenders, either express or implied, concerning the
matters included herein and in such other instruments, any custom, usage, or
course of dealings to the contrary notwithstanding.  No such discussions, negotiations, custom,
usage, or course of dealings shall limit, modify, or otherwise affect the
provisions thereof.  No failure by the
Agent or Lenders to give notice to the Lead Borrower of the Obligors’ having
failed to observe and comply with any warranty or covenant included in any Loan
Document shall constitute a waiver of such warranty or covenant or the
amendment of the subject Loan Document. 
No change made by the Agent to the manner by which Availability is
determined shall obligate the Agent to continue to determine Availability in
that manner.


(b)   The Obligors may undertake any
action otherwise prohibited hereby, and may omit to take any action otherwise
required hereby, upon and with the express prior written consent of the Agent.
No consent, modification, amendment, or waiver of any provision of any Loan
Document shall be effective unless executed in writing by or on behalf of the
party to be charged with such modification, amendment, or waiver (and if such
party is the Agent then by a duly authorized officer thereof).  Notwithstanding the foregoing sentence, any
increase in the Revolving Credit Loan Ceiling, up to a maximum of $85,000,000,
shall be deemed effective upon and with express written consent of the
Borrowers and the Administrative Agent and those Lenders that agree in writing
to increase their Revolving Credit Commitments in connection with such
increase. Any modification, amendment, or waiver provided by the Administrative
Agent shall be in reliance upon all representations and warranties theretofore
made to the Administrative Agent by or on behalf of the Borrowers (and any
guarantor, endorser, or surety of the Liabilities) and consequently may be rescinded
in the event that any of such representations or warranties was not true and
complete in all material respects when given.


14.6                Power of
Attorney.


In connection with all
powers of attorney included in this Agreement, the Obligors hereby grant unto
the Agent full power to do any and all things necessary or appropriate in
connection with the exercise of such powers as fully and effectually as the
Obligors might or could do, hereby ratifying all that said attorney shall do or
cause to be done by virtue of this Agreement. 
No power of attorney set forth in this Agreement shall be affected by
any disability or incapacity suffered by the Obligors and each shall survive
the same. All powers conferred upon the Agent by this Agreement, being coupled
with an interest, shall be irrevocable until this Agreement is terminated by a
written instrument executed by a duly authorized officer of the Agent.



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14.7                Application
of Proceeds.


The proceeds of any
collection, sale, or disposition of the Collateral, or of any other payments
received hereunder, shall be applied towards the Liabilities in such order and
manner as the Administrative Agent determines in its sole discretion,
consistent, however, with the provisions of this Agreement and the Agency
Agreement.  The Obligors shall remain
liable for any deficiency remaining following such application.


14.8                Increased
Costs.


If the Administrative
Agent or Lenders shall have determined that the adoption of any law, rule or
regulation regarding capital adequacy, or any change therein or in the
interpretation or application thereof, or compliance by the Agent or Lenders
with any request or directive regarding capital adequacy (whether or not having
the force of law) from any central bank or governmental authority enacted after
the date hereof, does or shall have the effect of reducing the rate of return
on such party’s capital as a consequence of its obligations hereunder to a
level below that which the Agent or Lenders could have achieved but for such
adoption, change or compliance (taking into consideration the Agent’s or
Lenders’ policies with respect to capital adequacy) by a material amount, then
from time to time, after submission by the Administrative Agent or Lenders to
the Lead Borrower of a written demand therefor (“Capital
Adequacy Demand”) together with the certificate described below, the
Borrowers shall pay to the Agent or Lenders, as applicable, such additional
amount or amounts (“Capital Adequacy Charge”)
as will compensate the Agent or Lenders for such reduction, such Capital
Adequacy Demand to be made with reasonable promptness following such
determination.  A certificate of the
Administrative Agent or Lenders claiming entitlement to payment as set forth
above shall be conclusive.  Such
certificate shall set forth the nature of the occurrence giving rise to such
reduction, the amount of the Capital Adequacy Charge to be paid to the Agent or
Lenders, and the method by which such amount was determined.  In determining such amount, the
Administrative Agent or Lenders may use any reasonable averaging and
attribution method, applied on a non-discriminatory basis.


14.9                Costs and
Expenses of the Agent and Lenders.


The Borrowers shall pay
from time to time on demand all Costs of Collection and all reasonable costs,
expenses, and disbursements of (including attorneys’ reasonable fees and
expenses) which are incurred by the Agent and Lenders in connection with the
preparation, negotiation, execution, and delivery of this Agreement and of any
other Loan Documents, and all other reasonable costs, expenses, and
disbursements which may be incurred connection with or in respect to the credit
facility contemplated hereby or which otherwise are incurred with respect to
the Liabilities.


(a)   The Borrowers shall pay on from
time to time on demand all reasonable costs and expenses (including reasonable
attorneys’ fees and expenses) incurred by the Agent and all reasonable costs
and expenses (including reasonable attorney’s fees and expenses) incurred by
the Lenders to the Lenders’ Special Counsel, following the occurrence of any
Event of Default.



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(b)   The Borrowers authorize the
Administrative Agent to pay all such fees and expenses and in the
Administrative Agent’s discretion, to add such fees and expenses to the Loan
Account.


(c)   The undertaking on the part of
the Borrowers in this Section 14.9 shall survive payment of the
Liabilities and/or any termination, release, or discharge executed by the Agent
in favor of the Borrowers, other than a termination, release, or discharge
which makes specific reference to this Section 14.9.


14.10              Copies and
Facsimiles.


This Agreement and all
documents which relate thereto, which have been or may be hereinafter furnished
the Agent or the Lenders may be reproduced by the Agent or Lenders by any
photographic, microfilm, xerographic, digital imaging, or other process, and
such Person making such reproduction may destroy any document so
reproduced.  Any such reproduction shall
be admissible in evidence as the original itself in any judicial or
administrative proceeding (whether or not the original is in existence and
whether or not such reproduction was made in the regular course of business).
Any facsimile which bears proof of transmission shall be binding on the party
which or on whose behalf such transmission was initiated and likewise shall be
so admissible in evidence as if the original of such facsimile had been
delivered to the party which or on whose behalf such transmission was received.


14.11              New York Law.


This Agreement and all
rights and obligations hereunder, including matters of construction, validity,
and performance, shall be governed by the law of the State of New York.


14.12              Consent to
Jurisdiction.


(a)   Each Obligor agrees that any
legal action, proceeding, case, or controversy against the Obligors with
respect to any Loan Document may be brought in the Supreme Court for New York
County or in the United States District Court, Southern District of New York,
sitting in New York City, New York, or the Superior Court of Suffolk County,
Massachusetts or in the United States District Court, District of
Massachusetts, sitting in Boston, Massachusetts, as the Agent may elect in the
Agent’s sole discretion.  By execution
and delivery of this Agreement, each Borrower, for itself and in respect of its
property, accepts, submits, and consents generally and unconditionally, to the
jurisdiction of the aforesaid courts.


(b)   Each Obligor WAIVES personal service of
any and all process upon it, and irrevocably consents to the service of process
out of any of the aforementioned courts in any such action or proceeding by the
mailing of copies thereof by certified mail, postage prepaid, to Lead Borrower
at Lead Borrower’s address for notices as specified herein, such service to
become effective Five (5) Business Days after such mailing.


(c)   Each Obligor WAIVES any objection based on
forum non conveniens and any objection to venue of any action or proceeding
instituted under any of the Loan Documents and consents to the granting of such
legal or equitable remedy as is deemed appropriate by the Court.



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(d)   Nothing herein shall affect the
right of the Agent to bring legal actions or proceedings in any other competent
jurisdiction.


(e)   Each Obligor agrees that any
action commenced by any Borrower asserting any claim arising under or in
connection with this Agreement or any other Loan Document shall be brought
solely in the Superior Court of Suffolk County, Massachusetts or in the United
States District Court, District of Massachusetts, sitting in Boston,
Massachusetts, and that such Courts shall have exclusive jurisdiction with
respect to any such action.


14.13              Indemnification.


The Obligors shall
indemnify, defend, and hold the Agent and Lenders and any Participant and any
of their respective employees, officers, or agents (each, an “Indemnified Person”) harmless of and from any claim brought
or threatened against any Indemnified Person by the Borrowers, any guarantor or
endorser of the Liabilities, or any other Person (as well as from attorneys’
reasonable fees, expenses, and disbursements in connection therewith) on
account of the relationship of any Obligor or of any other guarantor or
endorser of the Liabilities (each of claims which may be defended, compromised,
settled, or pursued by the Indemnified Person with counsel of the Agent’s or
Lenders’ or Participant’s (as the case may be) selection, but at the expense of
the Obligors) other than any claim as to which a final determination is made in
a judicial proceeding (in which the Agent, Lenders and any other Indemnified
Person has had an opportunity to be heard), which determination includes a
specific finding that the Indemnified Person seeking indemnification had acted
in a grossly negligent manner or in actual bad faith.  This indemnification shall survive payment of
the Liabilities and/or any termination, release, or discharge executed by the
Agent or Lenders in favor of the Obligors, other than a termination, release,
or discharge duly executed on behalf of the Agent or Lenders which makes
specific reference to this Section 14.13.


14.14              Rules of
Construction.


The following rules of
construction shall be applied in the interpretation, construction, and
enforcement of this Agreement and of the other Loan Documents:


(a)   Unless otherwise specifically
provided for herein, interest and any fee or charge which is stated as a per
annum percentage shall be calculated based on a 365/366 day year and actual
days elapsed.


(b)   Words in the singular include
the plural and words in the plural include the singular.


(c)   Any reference, herein, to a
circumstance or event’s having “more than a de minimis
adverse effect” and any similar reference is to a circumstance or event which
(x) in a well-managed enterprise, would receive the active attention of senior
management with a view towards it being reversed or remedied; or (y) if not
reversed or remedied, could reasonably be expected to lead to its becoming a
material adverse effect.



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(d)   Cross references to Sections in
this Agreement begin with the Article in which that Section appears and then the
Section to which reference is made. (For example, a reference to “Section 5.6”
is to subsection 6, which appears in Article V of this Agreement).


(e)   Titles, headings (indicated by
being underlined or shown in Small Capitals) and any Table of Contents are
solely for convenience of reference; do not constitute a part of the instrument
in which included; and do not affect such instrument’s meaning, construction,
or effect.


(f)    The words “includes” and “including”
are not limiting.


(g)   Text which follows the words “including,
without limitation” (or similar words) is illustrative and not limiting.


(h)   Except where the context
otherwise requires or where the relevant subsections are joined by “or”,
compliance with any Section or provision of any Loan Document which constitutes
a warranty or covenant requires compliance with all subsections (if any) of
that Section or provision.  Except where
the context otherwise requires, compliance with any warranty or covenant of any
Loan Document which includes subsections which are joined by “or” may be
accomplished by compliance with any of such subsections.


(i)    Text which is shown in italics, shown in bold,
shown IN ALL CAPITAL LETTERS, or in any combination of the foregoing, shall be
deemed to be conspicuous.


(j)    The words “may not” are
prohibitive and not permissive.


(k)   The word “or” is not exclusive.


(l)    Any reference to a Person’s “knowledge”
(or words of similar import) are to such Person’s knowledge assuming that such
Person has undertaken reasonable and diligent investigation with respect to the
subject of such “knowledge” (whether or not such investigation has actually
been undertaken).


(m)  Terms which are defined in one
section of any Loan Document are used with such definition throughout the
instrument in which so defined.


(n)   The symbol “$” refers to United
States Dollars.


(o)   Unless limited by reference to
a particular Section or provision, any reference to “herein”, “hereof”, or “within”
is to the entire Loan Document in which such reference is made.


(p)   References to “this Agreement”
or to any other Loan Document is to the subject instrument as amended to the
date on which application of such reference is being made.


(q)   Except as otherwise
specifically provided, all references to time are to Boston time.



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(r)    In the determination of any
notice, grace, or other period of time prescribed or allowed hereunder:


(i)            Unless otherwise provided (I) the day of
the act, event, or default from which the designated period of time begins to
run shall not be included and the last day of the period so computed shall be
included unless such last day is not a Business Day, in which event the last
day of the relevant period shall be the then next Business Day and (II) the
period so computed shall end at 5:00 p.m. on the relevant Business Day.


(ii)           The word “from” means “from and including”.


(iii)          The words “to” and “until” each mean “to, but
excluding”.


(iv)          The word “through” means “to and including”.


(s)   The Loan Documents shall be
construed and interpreted in a harmonious manner and in keeping with the
intentions set forth in Section 19.15 hereof, provided, however, in the
event of any inconsistency between the provisions of this Agreement and any
other Loan Document, the provisions of this Agreement shall govern and control.


14.15              Intent.


It is intended that:


(a)   This Agreement take effect as a
sealed instrument.


(b)   The scope of the Collateral
Interests created by any Obligor to secure the Liabilities be broadly construed
in favor of the Agent and that they cover all assets of each Borrower.


(c)   All Collateral Interests
created in favor of the Agent at any time and from time to time by any Obligor
secure all Liabilities, whether now existing or contemplated or hereafter
arising.


(d)   Except as specifically limited
herein, all reasonable costs, expenses, and disbursements incurred by the Agent
and, to the extent provide herein, the Lenders, in connection with such Person’s
relationship(s) with the Obligors shall be borne by the Obligors.


14.16              Participations.


The Agent or Lenders may
sell participations to one or more financial institutions (a “Participant”) all or a portion of the Agent’s or Lenders’
rights and obligations under this Agreement, provided, however, that except with the consent of the
Borrowers (which may not be unreasonably withheld or delayed), the only rights granted to
the participant pursuant to such participation arrangements with respect to
waivers, amendments or modifications of the Loan



 120
 









Documents shall be the rights to
approve waivers, amendments or modifications that would reduce the principal of
or the interest rate on any Loans, extend the term or increase the amount of
the Commitment of such Lender as it relates to such participant, increase the
availability of Loans or L/C’s to the Borrowers, reduce the amount of any fees
to which such participant is entitled, or extend any regularly scheduled
payment date for principal or interest.  No such sale of a
participation shall relieve the Agent or Lenders from the Agent’s or Lenders’
obligations hereunder.


14.17              Right of Set-Off.


Any and all deposits or
other sums at any time credited by or due to the Obligors from the Agent,
Lenders or any Participant or from any Affiliate of any of the foregoing, and
any cash, securities, instruments or other property of the Obligors in the
possession of any of the foregoing, whether for safekeeping or otherwise
(regardless of the reason such Person had received the same), to the extent
permitted by law, shall at all times constitute security for all Liabilities
and for any and all obligations of the Obligors to the Agent, Lenders or any
Participant or such Affiliate and may be applied or set off against the
Liabilities and against such obligations at any time, whether or not such are
then due and whether or not other collateral is then available to the Agent.


14.18              Pledges To
Federal Reserve Banks.


Nothing included in this
Agreement shall prevent or limit the Agent or Lenders from pledging all or any
portion of that Agent’s or any Lender’s interest and rights under this Agreement
to any funding source of such Agent or Lender or, to the extent that the Agent
or Lenders is subject to any of the twelve Federal Reserve Banks organized
under §4 of the Federal Reserve Act (12 U.S.C. §341), from pledging all or any
portion of that Agent’s or Lenders’ interest and rights under this Agreement, provided, however, neither such pledge nor the enforcement
thereof shall release the Agent or Lenders from their respective obligations
hereunder or under any of the Loan Documents.


14.19              Maximum Interest
Rate.


Regardless of any
provision of any Loan Document, the Agent and Lenders shall not be entitled to
contract for, charge, receive, collect, or apply as interest on any Liability,
any amount in excess of the maximum rate imposed by applicable law.  Any payment which is made which, if treated
as interest on a Liability would result in such interest’s exceeding such
maximum rate shall be held, to the extent of such excess, as additional
collateral for the Liabilities as if such excess were “Collateral.”


14.20              Waivers.


(a)   Each Borrower (and all
guarantors, endorsers, and sureties of the Liabilities) make each of the
waivers included in Section 14.20(b), below, knowingly, voluntarily, and
intentionally, and understands that Agent and Lenders, in establishing the
facilities contemplated



 121
 









hereby and in providing loans and other
financial accommodations to or for the account of the Borrowers as provided
herein, whether not or in the future, is relying on such waivers.


(b)   EACH BORROWER, AND EACH SUCH
GUARANTOR, ENDORSER, AND SURETY RESPECTIVELY WAIVES THE FOLLOWING:


(i)            Except as otherwise specifically required
hereby, notice of non-payment, demand, presentment, protest and all forms
of demand and notice, both with respect to the Liabilities and the Collateral.


(ii)           Except as otherwise specifically required
hereby, the right to notice and/or hearing prior to the Agent’s exercising of
the Agent’s rights upon default.


(iii)          THE RIGHT TO A JURY IN ANY TRIAL OF ANY CASE
OR CONTROVERSY IN WHICH THE AGENT OR LENDER IS OR BECOMES A PARTY (WHETHER SUCH
CASE OR CONTROVERSY IS INITIATED BY OR AGAINST THE AGENT OR LENDER OR IN WHICH
THE AGENT OR LENDER IS JOINED AS A PARTY LITIGANT), WHICH CASE OR CONTROVERSY
ARISES OUT OF OR IS IN RESPECT OF, ANY RELATIONSHIP AMONGST OR BETWEEN ANY
BORROWER OR ANY OTHER PERSON AND THE AGENT OR LENDER LIKEWISE WAIVES THE RIGHT
TO A JURY IN ANY TRIAL OF ANY SUCH CASE OR CONTROVERSY).


(iv)          Any defense, counterclaim, set-off,
recoupment, or other basis on which the amount of any Liability, as stated on
the books and records of the Agent or Lenders, could be reduced or claimed to
be paid otherwise than in accordance with the tenor of and written terms of
such Liability.


(v)           Any claim to consequential, special, or
punitive damages.


14.21              Counterparts.


This Agreement, any of
the Loan Documents, and any amendments, waivers, consents or supplements may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which, when so executed and delivered, shall be
deemed an original, but all of which counterparts together shall constitute but
one agreement.


14.22              Electronic
Submissions.


Upon not less than Thirty
(30) days’ prior written notice (the “Approved Electronic Form
Notice”), the Agent may permit or require that any of the documents,
certificates, forms,



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deliveries or other
communications, authorized, required or contemplated by this Agreement or the
Loan Documents, be submitted to the Agent in “Approved
Electronic Form” (as hereafter defined), subject to any reasonable
terms, conditions and requirements in the applicable Approved Electronic Forms
Notice.  For purposes hereof “Electronic Form” means e-mail, e-mail attachments, data
submitted on web-based forms or any other communication method that delivers
machine readable data or information to the Agent, and “Approved
Electronic Form” means an Electronic Form that has been approved in
writing by the Agent (which approval has not been revoked or modified by the
Agent) and sent to the Borrowers in an Approved Electronic Form Notice.  Except as otherwise specifically provided in
the applicable Approved Electronic Form Notice, any submissions made in an
applicable Approved Electronic Form shall have the same force and effect that
the same submissions would have had if they had been submitted in any other
applicable form authorized, required or contemplated by this Agreement or the
Loan Documents.


14.23              Bank of
America, N.A.. as Agent.


The Lenders have
appointed the Agent as their agent to act on their behalf under the credit
facility pursuant to the terms of the “Agency Agreement”,
so referred to herein, between the Lenders and the Agent.  If at any time the Lenders or the Agent
elects to terminate the agency relationship, the Lenders or the Agent shall give
Thirty (30) days written notice of such event to the Lead Borrower.  Thereafter, all rights and obligations of the
Agent contained in this Agreement and the other Loan Documents shall revert to
the Lenders or another Agent, if appointed by the Lenders.


14.24              Joint
Borrower Provisions.


(a)   Each Borrower represents to the
Agent and Lenders that it is an integral part of a consolidated enterprise, and
that each Borrower will receive direct and indirect benefits from the
availability of the joint credit facility provided for herein, and from the
ability to access the collective credit resources of the consolidated
enterprise that are Borrowers.


(b)   Each Borrower is, and at all
times shall be, jointly and severally liable for each and every one of the
Liabilities hereunder, regardless of which Borrower requested, received, used,
or directly enjoyed the benefit of the extensions of credit hereunder.  All of the Collateral shall secure all of the
Liabilities.  Each Borrower’s Liabilities
are independent obligations and are absolute and unconditional.  Each Borrower, to the extent permitted by
law, hereby waives any defense to such Liabilities that may arise by reason of
the disability or other defense or cessation of liability of any other Borrower
for any reason other than payment in full. 
Each Borrower also waives any defense to such Liabilities that it may
have as a result of the Agent’s election of or failure to exercise any right,
power, or remedy, including, without limitation, the failure to proceed first against
such other Borrower or any security it holds for such other Borrower’s
Liabilities under any Loan Document, if any. 
Without limiting the generality of the foregoing, each Borrower
expressly waives all demands and notices whatsoever (except for any demands or
notices, if any, that such Borrower expressly is entitled to receive pursuant
to the



 123
 









terms of any Loan Document), and agrees that
the Agent may, without notice (except for such notice, if any, as such Borrower
expressly is entitled to receive pursuant to the terms of any Loan Document)
and without releasing the liability of such Borrower, extend for the benefit of
any other Borrower the time for making any payment, waive or extend the
performance of any agreement or make any settlement of any agreement for the
benefit of any other Borrower, and may proceed against each Borrower, directly
and independently of any other Borrower, as such obligee may elect in
accordance with this Agreement.


(c)   Each Borrower acknowledges that
the Liabilities of such Borrower undertaken herein or in the other Loan
Documents, and the grants of security interests and liens by such Borrower to
secure Liabilities of the other Borrower could be construed to consist, at
least in part, of the guaranty of Liabilities of the other Borrower and, in
full recognition of that fact, each Borrower consents and agrees as hereinafter
set forth in the balance of this Section 14.24.  The consents, waivers, and agreements of the
Borrowers that are contained in the balance of this Section 14.24 are
intended to deal with the suretyship aspects of the transactions evidenced by
the Loan Documents (to the extent that a Borrower may be deemed a guarantor or
surety for the Liabilities of another Borrower) and thus are intended to be
effective and applicable only to the extent that any Borrower has agreed to
answer for the Liabilities of another Borrower or has granted a lien or
security interest in Collateral to secure the Liabilities of another
Borrower.  Conversely, the consents,
waivers, and agreements of the Borrowers that are contained in the balance of
this Section 14.24 shall not be applicable to the direct Liabilities of
a Borrower with respect to credit extended directly to such Borrower, and shall
not be applicable to security interests or liens on Collateral of a Borrower
given to directly secure direct Liabilities of such Borrower where no aspect of
guaranty or suretyship is involved.  Each
Borrower consents and agrees that the Lenders may, at any time and from time to
time, without notice or demand, whether before or after any actual or purported
termination, repudiation or revocation of this Agreement by any one or more
Borrowers, and without affecting the enforceability or continuing effectiveness
hereof as to such Borrower, in accordance with the terms of the Loan
Documents:  (a) supplement, restate,
modify, amend, increase, decrease, extend, renew, accelerate or otherwise
change the time for payment or the terms of the Liabilities or any part
thereof, including any increase or decrease of the rate(s) of interest thereon;
(b) supplement, restate, modify, amend, increase, decrease or waive, or
enter into or give any agreement, approval or consent with respect to, the
Liabilities or any part thereof, or any of the Loan Documents or any security
or guarantees granted or entered into by any Person(s) other than such
Borrower, or any condition, covenant, default, remedy, right, representation or
term thereof or thereunder; (c) accept new or additional instruments,
documents or agreements in exchange for or relative to any of the Loan
Documents or the Liabilities or any part thereof, (d) accept partial
payments on the Liabilities; (e) receive and hold additional security or
guarantees for the Liabilities or any part thereof, (f) release, reconvey,
terminate, waive, abandon, fail to perfect, subordinate, exchange, substitute,
transfer or enforce any security or guarantees, and apply any security and
direct the order or manner of sale thereof as the Lenders in their sole and
absolute discretion may determine; (g) release any other Person
(including, without limitation, any other Borrower) from any personal liability
with respect to the Liabilities or any part thereof, (h) with respect to
any Person other than such Borrower (including, without limitation, any other
Borrower), settle, release on terms satisfactory to the Lenders or by operation
of applicable laws or otherwise



 124
 









liquidate or enforce any Liabilities and any
security therefor or guaranty thereof in any manner, consent to the transfer of
any security and bid and purchase at any sale; or (i) consent to the
merger, change or any other restructuring or termination of the corporate or
partnership existence of any other Borrower or any other Person, and
correspondingly agree, in accordance with all applicable provisions of the Loan
Documents, to the restructure of the Liabilities, and any such merger, change,
restructuring or termination shall not affect the liability of any Borrower or
the continuing effectiveness hereof, or the enforceability hereof with respect
to all or any part of the Liabilities.


(d)   Upon the occurrence and during
the continuance of any Event of Default, the Agent may enforce the Loan
Documents independently as to each Borrower and independently of any other
remedy the Agent at any time may have or hold in connection with the
Liabilities, and it shall not be necessary for the Agent to marshal assets in
favor of any Borrower or any other Person or to proceed upon or against or
exhaust any security or remedy before proceeding to enforce this Agreement or
any other Loan Documents.  Each Borrower
expressly waives any right to require the Agent to marshal assets in favor of
any Borrower or any other Person or to proceed against any other Borrower or
any Collateral provided by any Person, and agrees that the Agent may proceed
against Borrowers or any Collateral in such order as they shall determine in
their sole and absolute discretion, subject to the terms hereof.


(e)   The Agent may file a separate
action or actions against any Borrower, whether action is brought or prosecuted
with respect to any security or against any other Person, or whether any other
Person is joined in any such action or actions. 
Each Borrower agrees, for itself, that the Agent and any other Borrower,
or any Affiliate of any other Borrower (other than such Borrower itself), may
deal with each other in connection with the Liabilities or otherwise, or alter
any contracts or agreements now or hereafter existing between any of them, in
any manner whatsoever, all without in any way altering or affecting the
continuing efficacy as to such Borrower of the Loan Documents.


(f)    The Agent’s rights hereunder
shall be reinstated and revived, and the enforceability of this Agreement shall
continue, with respect to any amount at any time paid on account of the
Liabilities which thereafter shall be required to be restored or returned by
the Agent (including, without limitation, the restoration or return of any
amount pursuant to a court order or judgment (whether or not final or non-appealable),
or pursuant to a good faith settlement of a pending or threatened avoidance or
recovery action, or pursuant to good faith compliance with a demand made by a
Person believed to be entitled to pursue an avoidance or recovery action (such
as a bankruptcy trustee or a Person having the avoiding powers of a bankruptcy
trustee, or similar avoiding powers), and without requiring the Agent to oppose
or litigate avoidance or recovery demands or actions that it believes in good
faith to be meritorious or worthy of settlement or compliance, or pursue or
exhaust appeals), all as though such amount had not been paid.  The rights and priorities of the Agent
created or granted herein and the enforceability of the Loan Documents at all
times shall remain effective to cover the full amount of all the Liabilities
even though the Liabilities, including any part thereof or any other security
or guaranty therefor, may be or hereafter may become invalid or otherwise
unenforceable as against any Borrower and whether or not any other Borrower
shall have any personal liability with respect thereto.



 125
 









(g)   To the maximum extent permitted
by applicable law, each Borrower, for itself, expressly waives any and all
defenses now or hereafter arising or that otherwise might be asserted by reason
of (a) any disability or other defense of any other Borrower with respect
to the Liabilities or with respect to the enforceability of the Agent’s
security interest in or Encumbrance on any collateral securing any of the
Liabilities (including, without limitation, the Collateral), (b) the
unenforceability or invalidity of any security or guaranty for the Liabilities
or the lack of perfection or continuing perfection or failure of priority of
any security for the Liabilities, (c) the cessation for any cause
whatsoever of the liability of any other Borrower (other than by reason of the
full payment and performance of all Liabilities), (d) any failure of the
Agent to give notice of sale or other disposition of Collateral to any other Borrower
or any other Person other than such waiving Borrower, or any defect in any
notice that may be given to any other Borrower for any other Person other than
such waiving Borrower, in connection with any sale or disposition of any
collateral securing the Liabilities or any of them (including, without
limitation, the Collateral), (e) any failure of the Agent to comply with
applicable law in connection with the sale or other disposition of any
collateral or other security for any Liabilities that is owned by another
Borrower or by any other Person other than such waiving Borrower, including any
failure of the Agent to conduct a commercially reasonable sale or other
disposition of any such collateral or other security for any Liabilities,
(f) any act or omission of the Agent or others that directly or indirectly
results in or aids the discharge or release of any other Borrower, or the
Liabilities of any other Borrower, or any security or guaranty therefor, by
operation of law or otherwise, or (g) any law which provides that the
obligation of a surety or guarantor must neither be larger in amount nor in
other respects more burdensome than that of the principal or which reduces a
surety’s or guarantor’s obligation in proportion to the principal
obligation.  Until such time, if any, as
all of the Liabilities (other than contingent Liabilities and indemnities which
survive repayment of the Loans) have been paid and performed in full and no
portion of any commitment of the Lenders to any Borrower under any Loan
Document remains in effect, no Borrower shall have any right of subrogation,
contribution, reimbursement or indemnity, and each Borrower expressly waives
any right to enforce any remedy that the Agent now have or hereafter may have
against any other Person and waives the benefit of, or any right to participate
in, any collateral now or hereafter held by the Agent.  Except to the extent expressly provided for
in any Loan Document, each Borrower expressly waives, to the maximum extent
permitted by applicable law, all rights or entitlements to presentments,
demands for payment or performance, notices of nonpayment or nonperformance,
protests, notices of protest, notices of dishonor and all other notices or
demands of any kind or nature whatsoever with respect to the Liabilities, and
all notices of acceptance of the Loan Documents or of the existence, creation
or incurring of new or additional Liabilities.


(h)   Each Borrower hereby agrees to
keep each other Borrower fully apprised at all times as to the status of its
business, affairs, finances, and financial condition, and its ability to
perform its Liabilities under the Loan Documents, and in particular as to any
adverse developments with respect thereto. 
Each Borrower hereby agrees to undertake to keep itself apprised at all
times as to the status of the business, affairs, finances, and financial
condition of each other Borrower, and of the ability of each other Borrower to
perform its Liabilities under the Loan Documents, and in particular as to any
adverse developments with respect to any thereof.  Each Borrower hereby agrees, in light of the
foregoing mutual covenants to inform each other,



 126
 









and to keep themselves and each other
informed as to such matters, that the Agent shall have no duty to inform any
Borrower of any information pertaining to the business, affairs, finances, or
financial condition of any other Borrower, or pertaining to the ability of any
other Borrower to perform its Liabilities under the Loan Documents, even if
such information is adverse, and even if such information might influence the
decision of one or more of the Borrowers to continue to be jointly and
severally liable for, or to provide Collateral for, Liabilities of one or more
of the other Borrowers.  To the fullest
extent permitted by applicable law, each Borrower hereby expressly waives any
duty of the Agent to inform any Borrower of any such information.


(i)    Borrowers and each of them
warrant and agree that each of the waivers and consents set forth herein are
made after consultation with legal counsel and with full knowledge of their
significance and consequences, with the understanding that events giving rise
to any defense or right waived may diminish, or otherwise adversely affect
rights that Borrowers otherwise may have against other Borrowers, the Agent or
others, or against Collateral, and that, under the circumstances, the waivers
and consents herein given are reasonable. 
If any of the waivers or consents herein is determined to be contrary to
any applicable law or public policy, such waivers and consents shall be
effective to the maximum extent permitted by law.


14.25              Transitional
Arrangements.


This Agreement shall, on and as of the Closing Date,
supersede the Second Agreement, in its entirety, except as provided in this
Section 14.25.  On the Closing Date, the
rights and obligations of the parties under the First Agreement shall be
subsumed within and governed by this Agreement, provided, however,


(a)    that each of the “Revolving Credit Loans”
(as defined in the Second Agreement) outstanding under the Second Agreement on
the Closing Date shall continue to bear interest up to the Closing Date at the
rate at which they bear interest under the Second Agreement and, on and after
the Closing Date, all of such Loans under the Second Agreement shall be
converted to Revolving Credit Loans hereunder and shall bear interest at the
rates set forth hereunder;


(b)    that any letter of credit or L/C
outstanding under the Second Agreement on the Closing Date shall for the
purposes of this Agreement, together with the Special Purpose Credit, be a L/C
hereunder;


(c)    that each
and every other Loan Document under the Second Agreement shall, unless
explicitly restated, substituted or replaced in connection herewith, continue
in full force and effect and that any and all references therein to the Second
Agreement shall be deemed to constitute references to this Agreement; and


(d)   all fees,
letter of credit fees and other fees and expenses owing or accruing under or in
respect of the Second Agreement shall be calculated as of the Closing Date
(prorated in the case of any fractional periods), and shall be paid in
accordance with the method and on the dates, specified in the Second Agreement,
as if the Second Agreement were still in effect.



 127
 









14.26              Confidentiality.


(a)   Obligors and each Lender will
maintain, as confidential (other than to their respective attorneys, agents,
accountants, participants and prospective participants) all of the following:


(i)            Proprietary approaches, techniques, and
methods of analysis which are applied by any Agent in the administration of the
credit facility contemplated by this Agreement.


(ii)           Proprietary forms and formats utilized by
any Agent in providing reports to the Lenders pursuant hereto, which forms or
formats are not of general currency.


(b)           Agent and each Lender
will maintain, as confidential (other than to their respective attorneys,
agents, accountants, participants and prospective participants) all
confidential information provided by the Obligors pursuant to the Loan
Documents, except that such confidential information may be disclosed by Agent
or such Lender (a) to its Affiliates and to its and its Affiliates’
respective partners, directors, officers, employees, agents, advisors and representatives
(it being understood that the Persons to whom such disclosure is made will be informed
of the confidential nature of such information and instructed to keep such
information confidential), (b) to the extent requested by any regulatory
authority purporting to have jurisdiction over it (including any
self-regulatory authority, such as the National Association of Insurance
Commissioners), (c) to the extent required by applicable laws or
regulations or by any subpoena or similar legal process, (d) to any other party
hereto, (e) in connection with the exercise of any remedies hereunder or under
any other Loan Document or any action or proceeding relating to this Agreement
or any other Loan Document or the enforcement of rights hereunder or
thereunder, (f) subject to an agreement containing provisions substantially the
same as those of this Section, to (i) any assignee of or Participant in, or any
prospective assignee of or Participant in, any of its rights or obligations
under this Agreement or (ii) any actual or prospective counterparty (or its
advisors) to any swap or derivative transaction relating to the Borrowers and
their obligations, (g) with the consent of the Borrowers or (h) to the
extent such information (i) becomes publicly available other than as a
result of a breach of this Section or (ii) becomes available to the Agent,
any Lender or any of their respective Affiliates on a nonconfidential basis
from a source other than the Borrowers..


(c)           Nothing included herein shall prohibit the
disclosure of any such information as may be required to be provided by
judicial process or by regulatory authorities having jurisdiction over any
party to this Agreement.


[REMAINDER OF PAGE
INTENTIONALLY BLANK]



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Signature
Page to Loan and Security Agreement


	
  

  	
  MOTHERS WORK, INC.

  
	
   

  	
  (“Lead Borrower”)

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Edward M. Krell

  
	
   

  	
   

  	
  Edward M. Krell

  
	
   

  	
   

  	
  Executive Vice President –

  
	
   

  	
   

  	
  Chief Financial Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  CAVE SPRINGS, INC.

  
	
   

  	
  (a “Borrower”)

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Edward M. Krell

  
	
   

  	
   

  	
  Edward M. Krell

  
	
   

  	
   

  	
  Executive Vice President –

  
	
   

  	
   

  	
  Chief Financial Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  MOTHERS WORK CANADA, INC.

  
	
   

  	
  (a “Guarantor”)

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Edward M. Krell

  
	
   

  	
   

  	
  Edward M. Krell

  
	
   

  	
   

  	
  Treasurer

  
	
   

  	
   

  	
   

  



 



 129















 


	
  

  	
  Signature Page to Loan and Security Agreement

  
	
   

  	
   

  
	
   

  	
   

  
	
  

  	
  BANK OF AMERICA, N.A.

  
	
   

  	
  (“Lender”)

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Christine Hutchinson

  
	
   

  	
  Print Name:

  	
  Christine Hutchinson

  
	
   

  	
  Title:

  	
  Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  BANK OF AMERICA, N.A.

  
	
   

  	
  (“Administrative Agent”)

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Christine Hutchinson

  
	
   

  	
  Print Name:

  	
  Christine Hutchinson

  
	
   

  	
  Title:

  	
  Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  BANK OF AMERICA, N.A.

  
	
   

  	
  (“Collateral Agent”)

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Christine Hutchinson

  
	
   

  	
  Print Name:

  	
  Christine Hutchinson

  
	
   

  	
  Title:

  	
  Vice President

  
				



 



 1















EXHIBIT
5.12(a)


Financial
Covenants


This Exhibit is
attached to and made part of that certain 
Second Amended and Restated Loan and Security Agreement between Bank of
America, N.A., as Administrative Agent, Collateral Agent, and Lender, the other
Lenders party thereto, and Mothers Work, Inc., as Lead Borrower, and the other
Borrowers and Guarantors party thereto, dated as of March 13, 2007.  Capitalized terms used in this Exhibit and
not separately defined herein shall have the meanings ascribed under the Second
Amended and Restated Loan and Security Agreement.


1)  Fixed Charge Coverage Ratio


At any time or
from time to time that Excess Availability is less than 10% of the Borrowing
Base on any day; then the Fixed Charge Coverage Ratio, based on the then-most
recent month ended, must equal or exceed the following:  during the periods set forth below:


	
  Period

  	
   

  	
  Minimum Fixed Charge Coverage Ratio

  
	
   

  	
   

  	
   

  
	
  For each period of twelve consecutive months ending
  on each month through and including the period of twelve consecutive months
  ending on September 30, 2008

  	
   

  	
  1.000 to 1.000

  
	
   

  	
   

  	
   

  
	
  For each period of twelve consecutive months ending
  on each month from and after the period of twelve consecutive months ending
  on October 31, 2008 through and including the period of twelve consecutive
  months ending on September 30, 2009

  	
   

  	
  1.025 to 1.000

  
	
   

  	
   

  	
   

  
	
  For each period of twelve consecutive months ending
  on each month from and after the period of twelve consecutive months ending
  on October 31, 2009 through and including the period of twelve consecutive
  months ending on September 30, 2010

  	
   

  	
  1.050 to 1.000

  
	
   

  	
   

  	
   

  
	
  For each period of twelve consecutive months ending
  on each month from and after the period of twelve consecutive months ending
  on October 31, 2010

  	
   

  	
  1.100 to 1.000

  



 



 1
 









2)  Capital Expenditures


Borrowers may
incur Capital Expenditures in their discretion, provided that:


(A) for any fiscal
year as to which the Borrowers’ projected pro forma Excess Availability, as
provided under Section 5.11(c), is at least 10% of the Borrowing Base, this
Section (2) shall not limit the Borrowers’ incurrence of  Capital Expenditures in their discretion,
unless actual Excess Availability falls below 10% of the Borrowing Base  during such fiscal year (in which case clause
(B) shall apply); and


(B) during any
fiscal year in which Excess Availability actually falls below 10% of the
Borrowing Base, Borrowers shall not permit Net Capital Expenditures to exceed
$35,000,000.


If, for any fiscal year
in which clause (B) applies, the Borrowers actually incur less than $35,000,000
in Net Capital Expenditures, the Borrowers may, in addition to the $35,000,000
that Borrowers may incur in the following year, incur additional Net Capital
Expenditures in an amount equal to the lesser of (i) Fifty Percent (50%) of the
unused amount of Net Capital Expenditures (below the $35,000,000 maximum) from
the previous fiscal year, or (ii) $10,000,000.



 2