Exhibit 10.1


EXECUTION VERSION


TERM LOAN AND SECURITY AGREEMENT


Bank of America, N.A.,


The Term Administrative Agent and Term Collateral Agent


for the Term Lenders Referenced Herein


Banc of America Securities LLC


Sole Lead Arranger and Sole Book Runner


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:

  	
  1

  
	
  ARTICLE II. - THE
  TERM LOAN

  	
  31

  
	
  2.1

  	
  Commitment to Make the Term
  Loan

  	
  31

  
	
  2.2

  	
  Increase in the Term Loan

  	
  31

  
	
  2.3

  	
  Election of Term Loan
  Interest Rate and Interest Period

  	
  32

  
	
  2.4

  	
  Term Agent’s Records of
  Liabilities

  	
  34

  
	
  2.5

  	
  The Term Note

  	
  34

  
	
  2.6

  	
  Payment of Principal of the
  Term Loan

  	
  34

  
	
  2.7

  	
  Interest On The Term Loan

  	
  37

  
	
  2.8

  	
  Fees

  	
  37

  
	
  2.9

  	
  Concerning Fees

  	
  38

  
	
  2.10

  	
  Changed Circumstances

  	
  38

  
	
  2.11

  	
  Term Lenders’ Commitments

  	
  39

  
	
  2.12

  	
  Designation of Lead
  Borrower as Borrowers’ Agent

  	
  41

  
	
  ARTICLE III. -
  CONDITIONS PRECEDENT:

  	
  41

  
	
  3.1

  	
  Corporate Due Diligence

  	
  41

  
	
  3.2

  	
  Opinion

  	
  42

  
	
  3.3

  	
  Officers’ Certificates

  	
  42

  
	
  3.4

  	
  Additional Documents

  	
  42

  
	
  3.5

  	
  Representations and
  Warranties

  	
  44

  
	
  3.6

  	
  All Fees and Expenses Paid

  	
  44

  
	
  3.7

  	
  No Borrower Default

  	
  45

  
	
  3.8

  	
  No Adverse Change

  	
  45

  
	
  3.9

  	
  Absence of litigation

  	
  45

  
	
  3.10

  	
  Finalization of Revolving
  loan facility

  	
  45

  
	
  3.11

  	
  No other Material
  Indebtedness

  	
  45

  
	
  3.12

  	
  Validity of Liens

  	
  45

  
	
  3.13

  	
  Rating of Term Loan Facility

  	
  46

  
	
  3.14

  	
  Documents

  	
  46

  
	
  3.15

  	
  Conditions to Funding of
  Term Loan

  	
  46

  
	
  ARTICLE IV. - GENERAL
  REPRESENTATIONS, COVENANTS AND WARRANTIES:

  	
  46

  
	
  4.1

  	
  Payment and Performance of
  Liabilities

  	
  47

  
	
  4.2

  	
  Due Organization. Corporate
  Authorization. No Conflicts

  	
  47

  
	
  4.3

  	
  Trade Names

  	
  48

  
	
  4.4

  	
  Infrastructure

  	
  48

  
	
  4.5

  	
  GUARANTOR

  	
  49

  
	
  4.6

  	
  Locations

  	
  49

  
	
  4.7

  	
  Title To Assets

  	
  50

  
	
  4.8

  	
  Indebtedness

  	
  51

  
	
  4.9

  	
  Insurance

  	
  53

  
	
  4.10

  	
  Licenses; Material
  Contracts

  	
  54

  
	
  4.11

  	
  Leases

  	
  55

  



 



 i
 









 


	
  4.12

  	
  Requirements of Law

  	
  55

  
	
  4.13

  	
  Labor Relations

  	
  55

  
	
  4.14

  	
  Maintain Properties

  	
  56

  
	
  4.15

  	
  Taxes

  	
  57

  
	
  4.16

  	
  No Margin Stock or
  Securities

  	
  58

  
	
  4.17

  	
  ERISA

  	
  58

  
	
  4.18

  	
  Hazardous Materials and
  Environmental Compliance

  	
  59

  
	
  4.19

  	
  Litigation

  	
  62

  
	
  4.20

  	
  Dividends; Investments;
  Corporate Action

  	
  62

  
	
  4.21

  	
  Loans

  	
  64

  
	
  4.22

  	
  Protection of Assets

  	
  64

  
	
  4.23

  	
  Line of Business

  	
  64

  
	
  4.24

  	
  Affiliate Transactions

  	
  64

  
	
  4.25

  	
  Further Assurances

  	
  65

  
	
  4.26

  	
  Adequacy OF Disclosure

  	
  65

  
	
  4.27

  	
  No Restrictions on
  Liabilities

  	
  66

  
	
  4.28

  	
  Other Covenants

  	
  66

  
	
  ARTICLE V. -
  FINANCIAL REPORTING AND PERFORMANCE COVENANTS:

  	
  66

  
	
  5.1

  	
  Maintain Records

  	
  66

  
	
  5.2

  	
  Access to Records

  	
  67

  
	
  5.3

  	
  Immediate Notice to Term
  Agent

  	
  68

  
	
  5.4

  	
  Weekly and Monthly Reports

  	
  69

  
	
  5.5

  	
  Quarterly Reports

  	
  69

  
	
  5.6

  	
  Annual Reports

  	
  70

  
	
  5.7

  	
  Officers’ Certificates

  	
  70

  
	
  5.8

  	
  Inventories, Appraisals,
  and Audits

  	
  71

  
	
  5.9

  	
  Additional Financial
  Information

  	
  72

  
	
  5.10

  	
  Financial Performance
  Covenants

  	
  73

  
	
  ARTICLE VI. - USE AND
  COLLECTION OF COLLATERAL:

  	
  73

  
	
  6.1

  	
  Use of Inventory Collateral

  	
  73

  
	
  6.2

  	
  Inventory Quality

  	
  73

  
	
  6.3

  	
  Adjustments and Allowances

  	
  74

  
	
  6.4

  	
  Validity of Accounts

  	
  74

  
	
  6.5

  	
  Notification to Account
  Debtors

  	
  74

  
	
  ARTICLE VII. - CASH
  MANAGEMENT

  	
  74

  
	
  7.1

  	
  Depository Accounts

  	
  74

  
	
  7.2

  	
  The Blocked Accounts

  	
  75

  
	
  7.3

  	
  Proceeds and Collection of
  Accounts

  	
  76

  
	
  ARTICLE VIII. - GRANT
  OF SECURITY INTEREST:

  	
  77

  
	
  8.1

  	
  Grant of Security Interest

  	
  77

  
	
  8.2

  	
  Extent and Duration of
  Security Interest

  	
  78

  
	
  8.3

  	
  Perfection of Security
  Interests

  	
  78

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

  	
  82

  
	
  9.1

  	
  Appointment as Attorney-In-Fact

  	
  82

  



 



 ii
 









 


	
  9.2

  	
  No Obligation to Act

  	
  83

  
	
  ARTICLE X. - EVENTS
  OF DEFAULT:

  	
  83

  
	
  10.1

  	
  Failure to Pay Term Loan and other Liabilities

  	
  83

  
	
  10.2

  	
  Failure to Perform Covenant or Liability (No Grace Period)

  	
  83

  
	
  10.3

  	
  Failure to Perform Covenant or Liability (Grace Period)

  	
  84

  
	
  10.4

  	
  Misrepresentation

  	
  84

  
	
  10.5

  	
  Acceleration of Other Debt. Breach of Lease

  	
  85

  
	
  10.6

  	
  Default Under Other Agreements

  	
  85

  
	
  10.7

  	
  Attachment; Judgment; Restraint of Business

  	
  85

  
	
  10.8

  	
  Business Failure

  	
  86

  
	
  10.9

  	
  Bankruptcy

  	
  86

  
	
  10.10

  	
  Default by Guarantor or Affiliate

  	
  86

  
	
  10.11

  	
  Indictment - Forfeiture

  	
  86

  
	
  10.12

  	
  Termination of Guaranty

  	
  87

  
	
  10.13

  	
  Challenge to Loan Documents

  	
  87

  
	
  10.14

  	
  Change in Control

  	
  87

  
	
  10.15

  	
  Uninsured Losses

  	
  87

  
	
  10.16

  	
  ERISA

  	
  87

  
	
  ARTICLE XI. - RIGHTS
  AND REMEDIES UPON DEFAULT:

  	
  88

  
	
  11.1

  	
  Rights of Enforcement

  	
  88

  
	
  11.2

  	
  Sale of Collateral

  	
  88

  
	
  11.3

  	
  Occupation of Business
  Location

  	
  89

  
	
  11.4

  	
  Grant of Nonexclusive
  License

  	
  89

  
	
  11.5

  	
  Assembly of Collateral

  	
  90

  
	
  11.6

  	
  Rights and Remedies

  	
  90

  
	
  11.7

  	
  Application of Proceeds

  	
  90

  
	
  ARTICLE XII. -
  NOTICES:

  	
  91

  
	
  12.1

  	
  Notice Addresses

  	
  91

  
	
  Suite 3207

  	
  92

  
	
  12.2

  	
  Notice Given

  	
  92

  
	
  ARTICLE XIII. - TERM:

  	
  93

  
	
  13.1

  	
  Termination

  	
  93

  
	
  13.2

  	
  Actions On Termination

  	
  93

  
	
  ARTICLE XIV. -
  GENERAL:

  	
  93

  
	
  14.1

  	
  Protection of Collateral

  	
  93

  
	
  14.2

  	
  Publicity

  	
  94

  
	
  14.3

  	
  Successors and Assigns

  	
  94

  
	
  14.4

  	
  Severability

  	
  94

  
	
  14.5

  	
  Amendments; Course of
  Dealing

  	
  94

  
	
  14.6

  	
  Power of Attorney

  	
  95

  
	
  14.7

  	
  Application of Proceeds

  	
  95

  
	
  14.8

  	
  Increased Costs

  	
  95

  
	
  14.9

  	
  Costs and Expenses of the
  Term Agent and Term Lenders

  	
  96

  
	
  14.10

  	
  Copies and Facsimiles

  	
  96

  
	
  14.11

  	
  New York Law

  	
  96

  
					



 



 iii
 









 


	
  14.12

  	
  Consent to Jurisdiction

  	
  96

  
	
  14.13

  	
  Indemnification

  	
  97

  
	
  14.14

  	
  Rules of Construction

  	
  98

  
	
  14.15

  	
  Intent

  	
  99

  
	
  14.16

  	
  Participations

  	
  100

  
	
  14.17

  	
  Right of Set-Off

  	
  100

  
	
  14.18

  	
  Pledges To Federal Reserve Banks

  	
  101

  
	
  14.19

  	
  Maximum Interest Rate

  	
  101

  
	
  14.20

  	
  Waivers

  	
  101

  
	
  14.21

  	
  Counterparts

  	
  102

  
	
  14.22

  	
  Electronic Submissions

  	
  102

  
	
  14.23

  	
  Joint Obligor Provisions

  	
  103

  
	
  14.24

  	
  Confidentiality

  	
  106

  
	
  14.25

  	
  Intercreditor Agreement

  	
  107

  
	
  ARTICLE XV. - THE
  TERM AGENT

  	
  107

  
	
  15.1

  	
  Appointment and Authority

  	
  107

  
	
  15.2

  	
  Rights as a Term Lender

  	
  108

  
	
  15.3

  	
  Exculpatory provisions

  	
  108

  
	
  15.4

  	
  Reliance by Term Agents

  	
  109

  
	
  15.5

  	
  Delegation of Duties

  	
  110

  
	
  15.6

  	
  Resignation of Term Agents

  	
  110

  
	
  15.7

  	
  Non-Reliance on Term
  Administrative Agent and Other Term Lenders

  	
  111

  
	
  15.8

  	
  Collateral and Guaranty
  Matters

  	
  111

  
	
  15.9

  	
  Notice of Transfer

  	
  112

  
	
  15.10

  	
  Reports and Financial Statements

  	
  112

  
	
  15.11

  	
  Agency for Perfection

  	
  113

  
	
  15.12

  	
  Indemnification of Term Agents

  	
  113

  
	
  15.13

  	
  Relation among Term Lenders

  	
  113

  
	
  15.14

  	
  Action by Term Agents; Consents; Waivers; Amendments

  	
  113

  
	
  15.15

  	
  Non-Consenting Term Lender

  	
  115

  
	
  ARTICLE XVI. -
  ASSIGNMENT BY TERM LENDERS

  	
  116

  
	
  16.1

  	
  Assignments and Assumptions

  	
  116

  
	
  16.2

  	
  Assignment Procedures

  	
  116

  
	
  16.3

  	
  Effect of Assignment

  	
  117

  
				



 



 iv
 









EXHIBITS


	
  2.5

  	
  :

  	
  Term Note

  
	
  2.11

  	
  :

  	
  Term Lenders’ Commitments

  
	
  3.15

  	
  :

  	
  Form of Term Loan Draw Notice

  
	
  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

  
	
  5.7

  	
  :

  	
  Officer’s Compliance Certificate

  
	
  5.10(a)

  	
  :

  	
  Financial Performance Covenants

  
	
  5.10(b)

  	
  :

  	
  Business Plan

  
	
  8.3(d)

  	
  :

  	
  Investment Property

  
	
  16.2

  	
  :

  	
  Assignment and Acceptance

  



 



 v















TERM 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 “Term Administrative
Agent”) for the benefit of the Term Lenders, on a Pro Rata basis,
based upon each Term Lender’s Commitment Percentage, 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 “Term Lender” in accordance with the
provisions of this 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 “Term Collateral Agent”)
for the benefit of the Term Lenders and the Term Administrative Agent,


and


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


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,


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:


ARTICLE I. - Definitions:


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



 1
 









“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 the Lead Borrower’s leased Domestic Distribution
Center.


“Additional
Commitment Lender”:  Defined
in Section 2.2.


“Adjustment Date”:  The first day following each date the Term
Administrative Agent receives (i) for the first three quarters of each Fiscal
Year of the Borrowers, commencing with the fiscal quarter ending December 31,
2007, the quarterly financial statements required by Section 5.5 and the
Compliance Certificate required by Section 5.7(a), and (ii) for the fourth quarter
of each Fiscal Year of the Borrowers, commencing with Fiscal Year ending
September 30, 2007, the annual financial statements required by Section 5.6 and
the Compliance Certificate required by Section 5.7(a).


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


“Agent Fee Letter”:  That certain letter dated as of February 14,
2007 by and between the Term Administrative Agent, Banc of America Securities
LLC and the Lead Borrower concerning Term Agent’s and the Arranger’s fees, as
supplemented by that certain Joinder to Fee Letter dated as of even date
herewith by and between the Borrowers and the Term Administrative Agent.


“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 Obligors’ boards of directors providing for payments
by the Obligors into a Security-Free Rabbi Trusts, and designated as an “Approved
Security-Free SERP” in a writing from the Lead Borrower to the Term
Administrative Agent, which writing identifies the date on which such members
of the board of directors have approved such plan.


“Arranger”: 
Banc of America Securities LLC.


“Attributable
Indebtedness”:  On any date,
(a) in respect of any Capital Lease of any Person, the capitalized amount thereof
that would appear on a balance sheet of such Person prepared as of such date in
accordance with GAAP, (b) in respect of any Synthetic Lease Obligation, the
capitalized amount of the remaining lease or similar payments under the
relevant lease or other applicable agreement or instrument that would appear on
a balance sheet of such Person prepared as of such date in accordance with GAAP
if such lease or other agreement or instrument were accounted for as a Capital
Lease and (c) all Synthetic Debt of such Person.



 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.


“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”: 
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
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 Term 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”: 
1.00%.


“Base Margin Loan”: 
Any portion of the Term Loan bearing interest at the Base Margin Rate.


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


“Blocked Account”: 
Defined in Section 7.2(a)(i).


“Blocked Account Agreement”:  An agreement, in form satisfactory to the
Term Collateral Agent, which agreement recognizes the Term Collateral Agent’s
Collateral Interest in the contents of the account which is the subject of such
agreement and agrees that such contents shall be transferred, after the
occurrence and during the continuance of an Event of Default and subject to the
Intercreditor Agreement, only as otherwise instructed by the Term Collateral
Agent.


“Borrowers”:  Defined in the Preamble.


“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
Term Administrative Agent or any Term Lender is not open to the general public
to conduct business.



 4
 









“Business Plan”:  The Borrowers’ business plan annexed hereto
as EXHIBIT  5.10(b) and any revision, amendment, or
update of such business plan, provided such revision, amendment, or update has
been accepted in writing by the Term Administrative Agent.


“Capital Adequacy
Demand”:  Defined in Section 14.8.


“Capital Adequacy
Charge”:  Defined in Section
14.8.


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


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


“Certificate”:  Any certificate in form and substance acceptable
to the Term 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 Term
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 (other than Section3.15) are satisfied.



 5
 









“Collateral”: 
Defined in Section 8.1.


“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 Term Lender, that
respective Term Lender’s Dollar Commitment.


“Commitment
Percentage”:  As set forth on EXHIBIT 2.11, annexed hereto, reflecting,
with respect to any Term Lender, the ratio of (i) the amount of the Dollar
Commitment of such Term Lender to (ii) the aggregate amount of the Dollar
Commitments of all Term Lenders, or, in the event that the Commitments have
been terminated, the ratio of (i) the amount of the Term Loan owing to such
Term Lender to (ii) the aggregate amount of the Term Loan outstanding as to all
Term Lenders (in each case, as such percentage may change in accordance with
the provisions of this Agreement).


“Consolidated Current Assets” means, at any
date, all amounts (other than cash and cash equivalents, short term investments
and the current portion of deferred income taxes) that would, in conformity
with GAAP, be included in the caption “total current assets” (or any like
caption) on a consolidated balance sheet of the Lead Borrower and its
Subsidiaries at such date.


“Consolidated Current Liabilities” means, at
any date, all amounts that would, in conformity with GAAP, be included in the
caption “total current liabilities” (or any like caption) on a consolidated
balance sheet of the Lead Borrower and its Subsidiaries at such date, but
excluding (a) the current portion of any Consolidated Funded Indebtedness of
the Lead Borrower and its Subsidiaries and (b) without duplication of clause
(a) above, all Indebtedness consisting of Revolving Credit Loans (as defined in
the Revolving Loan Agreement) and SwingLine Loans (as defined in the Revolving
Loan Agreement) to the extent otherwise included therein, (c) the current
portion of deferred income taxes and (d) any liability in respect of net
obligations pursuant to hedge agreements related solely to interest rate
protection.


“Consolidated EBITDA”:  At any date of determination, an
amount equal to Consolidated Net Income of the Lead Borrower and its
Subsidiaries on a consolidated basis for the most recently completed
Measurement Period plus (a) the following to the extent deducted in
calculating such Consolidated Net Income: 
(i) Consolidated Interest Charges, (ii) the provision for federal,
state, local and foreign income taxes payable, (iii) depreciation and
amortization expense, (iv) loss on extinguishment of debt, and (v) other
expenses (i.e., “non-cash expenses”) reducing such Consolidated Net Income
which do not represent a cash item in such period or any future period (in each
case of or by the Lead Borrower and its Subsidiaries for such Measurement
Period) and minus (b) the following to the extent included in
calculating such Consolidated Net Income: 
(i) federal, state,



 6
 









local and foreign income tax credits and (ii) all non-cash items
increasing Consolidated Net Income (in each case of or by the Lead Borrower and
its Subsidiaries for such Measurement Period). 
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.


“Consolidated Funded
Indebtedness”:  As of any date of determination, for the Lead
Borrower and its Subsidiaries on a consolidated basis, the sum of (a) the
outstanding principal amount of all obligations, whether current or long-term,
for borrowed money (including Liabilities hereunder) and all obligations
evidenced by bonds, debentures, notes, loan agreements or other similar
instruments, (b) all purchase money Indebtedness, (c) all direct obligations
arising under letters of credit (including standby and commercial), bankers’
acceptances, bank guaranties, surety bonds and similar instruments, (d) all
obligations in respect of the deferred purchase price of property or services
(other than trade accounts payable in the ordinary course of business), (e) all
Attributable Indebtedness, (f) without duplication, all guarantees with respect
to outstanding Indebtedness of the types specified in clauses (a) through (e)
above of Persons other than the Lead Borrower or any of its Subsidiaries, and
(g) all Indebtedness of the types referred to in clauses (a) through (f) above
of any partnership or joint venture (other than a joint venture that is itself
a corporation or limited liability company) in which the Lead Borrower or any
of its Subsidiaries is a general partner or joint venturer, unless such
Indebtedness is expressly made non-recourse to the Lead Borrower or such
Subsidiary.


“Consolidated
Interest Charges”:  For any Measurement Period, the sum of (a)
all interest, premium payments, debt discount, fees, charges and related
expenses in connection with borrowed money (including capitalized interest) or
in connection with the deferred purchase price of assets, in each case to the
extent treated as interest in accordance with GAAP, (b) all interest paid or
payable with respect to discontinued operations and (c) the portion of rent
expense under Capital Leases that is treated as interest in accordance with
GAAP, in each case, of or by the Lead Borrower and its Subsidiaries on a
consolidated basis for the most recently completed Measurement Period.


“Consolidated Interest
Coverage Ratio”:  As of any date of determination, the ratio of
(a) Consolidated EBITDA to (b) Consolidated Interest Charges, in each case, of
or by the Lead Borrower and its Subsidiaries on a consolidated basis for the
most recently completed Measurement Period.


“Consolidated
Leverage Ratio”:  As of any date of determination, the ratio of
(a) Consolidated Funded Indebtedness as of such date to (b) Consolidated
EBITDA, in each case, of or by the Lead Borrower and its Subsidiaries on a
consolidated basis for the most recently completed Measurement Period; provided,
however, that contributions made by the Borrowers under any Approved
Security-Free SERP into a Security-Free Rabbi Trust shall be treated as a
reduction of



 7
 









Consolidated EBITDA as used in the calculation of the Consolidated
Leverage Ratio, and the GAAP Supplemental Employee Retirement Plan expense
related to such Security-Free Rabbi Trust will not be treated as a reduction of
Consolidated EBITDA as used in the calculation of the Consolidated Leverage
Ratio.


“Consolidated Net
Income”:  At any date of
determination, the net income (or loss) of the Lead Borrower and its
Subsidiaries on a consolidated basis for the most recently completed
Measurement Period; provided that Consolidated Net Income shall exclude
(a) extraordinary gains and extraordinary losses for such Measurement Period,
(b) the net income of any Subsidiary during such Measurement Period to the
extent that the declaration or payment of dividends or similar distributions by
such Subsidiary of such income is not permitted by operation of the terms of
its organizational documents or any agreement, instrument or law applicable to
such Subsidiary during such Measurement Period, except that the Lead Borrower’s
equity in any net loss of any such Subsidiary for such Measurement Period shall
be included in determining Consolidated Net Income, and (c) any income (or
loss) for such Measurement Period of any Person if such Person is not a
Subsidiary, except that the Lead Borrower’s equity in the net income of any
such Person for such Measurement Period shall be included in Consolidated Net
Income up to the aggregate amount of cash actually distributed by such Person
during such Measurement Period to the Lead Borrower or a Subsidiary as a
dividend or other distribution (and in the case of a dividend or other
distribution to a Subsidiary, such Subsidiary is not precluded from further
distributing such amount to the Lead Borrower as described in clause (b) of
this proviso).


“Consolidated Working Capital” means, at any
date, the excess of Consolidated Current Assets on such date over
Consolidated Current Liabilities on such date.


“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 reasonable
attorneys’ fees and reasonable out-of-pocket expenses incurred by
the Term Agents’ attorneys, and all reasonable costs incurred by any Term Agent
including, without limitation, reasonable costs and expenses associated with
any bankruptcy or insolvency proceeding or travel on behalf of any Term Agent,
where such costs and expenses are directly or indirectly related to or in
respect of such Term Agent’s: 
administration and management of the Liabilities; negotiation,
documentation,



 8
 









and amendment of any Loan Document; or efforts to preserve, protect,
collect, or enforce the Collateral, the Liabilities, and/or the Term Agent’s
Rights and Remedies and/or any of the rights and remedies of any such Term
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 Term
Lender’s Special Counsel.  The Costs of
Collection are Liabilities, and at the Term Administrative Agent’s option may
bear interest at the then effective Base Margin Rate.


“Customs Broker
Agreement”:  An agreement in
form satisfactory to the Term Collateral Agent, among the Lead Borrower or any
Obligor, Term Collateral Agent and Revolving 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 Term Collateral Agent and the Revolving Loan Collateral Agent
and agrees, subject to the terms of the Intercreditor Agreement, upon notice
from the Term Collateral Agent or the Revolving Loan Collateral Agent, as then
applicable, to hold and dispose of the subject Inventory solely as directed by
the Term Collateral Agent.


“Default”:  Any occurrence, circumstance, or state of
facts with respect to a Borrower which 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.


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


“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.


“Dollar Commitment”:  As set forth on EXHIBIT 2.11, 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 Term Loan Amount.


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


“Draw Conditions”:  In addition to the conditions precedent set
forth in Article III of this Agreement, (i) the delivery of a notice of
redemption by the Obligors to the Trustee under the Indenture Agreement
pursuant to Section 3.01 of the Indenture Agreement that the Obligors have
elected to redeem all of the outstanding



 9
 









Securities (as defined in the Indenture Agreement), (ii) the delivery
of a notice of redemption by the Obligors to all Holders (as defined in the
Indenture Agreement) of the outstanding Securities under the Indenture
Agreement in the form required pursuant to Section 3.03 of the Indenture
Agreement, and (iii) the delivery of a notice in the form of Exhibit 3.15
hereto to the Term Loan Agent stating that the above conditions and the
conditions set forth in Section 3.15 have been satisified as of the Draw Date.


“Draw Date”:  The date on which the Draw Conditions and the
other conditions precedent set forth in Article III have been satisfied and the
Term Loan is borrowed.


“Eligible Assignee”:  In the case of an assignment by a Term
Lender, a bank, insurance company, or company engaged in the business of making
commercial loans organized under the laws of the United States of America, or a
commercial bank organized under the laws of any other country which is a member
of the OECD, or a political subdivision of any such country, provided that such bank is acting through
a branch or agency located in the country in which it is organized or another
country which is also a member of the OECD, having a combined capital and
surplus in excess of $300,000,000.00, or any Affiliate of any Term Lender, or
any Person to whom a Term Lender assigns its rights and obligations under this
Agreement as part of a programmed assignment and transfer of such Term Lender’s
rights of a material portion of such Term Lender’s portfolio of asset based
credit facilities; provided that in no event shall “Eligible Assignee”
include any Obligor or any Affiliate of any Obligor.


“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 Term Collateral Agent with maturities of 2 years or
less from the date of acquisition;



 10
 









in each case only to the
extent (i) subject to the Term Collateral Agent’s first priority (subject only
to the lien granted to the Revolving Loan Agent) perfected, valid, and
enforceable security interest to secure the Liabilities; (ii) immediately
available to the Term Collateral Agent; (iii) not subject to any restriction on
their use (other than in favor of Term Collateral Agent and the Revolving Loan
Agent); and (iv) either held by Bank of America or by another financial
institution acceptable to the Term Collateral Agent with whom the Term
Collateral Agent and the applicable Borrower have agreed to a written control
agreement in form and substance satisfactory to Term 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.


“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.


“Environmental Laws”:  All of the following:


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


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



 11
 









“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 Term
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 Cash Flow”:  For any Fiscal Year of the Borrowers, the
excess (if any) of (a) the sum of (i) Consolidated EBITDA for such Fiscal Year
plus (ii) decreases
in Consolidated Working Capital for such Fiscal Year, over (b)
the sum (for such Fiscal Year) of (i) Consolidated Interest Charges actually
paid in cash by the Lead Borrower and its Subsidiaries, (ii) scheduled
principal repayments, to the extent actually made, of Consolidated Funded
Indebtedness (excluding the obligations under the Revolving Loan Agreement but
including the Term Loan pursuant to Section 2.6(b), (iii) all income
taxes actually paid in cash by the Lead Borrower and its Subsidiaries, (iv)
Capital Expenditures actually made by the Lead Borrower and its Subsidiaries in
such Fiscal Year, (v) increases in
Consolidated Working Capital for such Fiscal Year, and (vi) cash payments made
in respect of long-term liabilities of the Lead Borrower and its Subsidiaries
other than Indebtedness.


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


“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 Term Administrative Agent, (a) the
Borrowers’ compliance with the financial performance covenants imposed pursuant
to Section 5.10 shall be determined as if such Material Accounting
Change had not taken place and (b) the Lead Borrower



 12
 









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
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.


“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.



 13
 









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


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


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


(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.



 14
 









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


“Indemnified Person”:  Defined in Section 14.13.


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


“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 portion of the Term Loan which bears
interest at an Index Rate.


“Index Margin”:


(a)           From and
after the Closing Date until the first Adjustment Date, the percentage set
forth in Level I of the pricing grid below; and


(b)           From and
after the first Adjustment Date (notwithstanding that such Adjustment Date may
occur prior to the expiration of any applicable Interest Period), the Index
Margin shall be determined from the following pricing grid based upon the
Consolidated Leverage Ratio (without any rounding of such ratio to any lesser
number of decimal places) as of the fiscal quarter ended immediately preceding
such Adjustment Date and shall continue at the applicable Level below from such
Adjustment Date until the next succeeding Adjustment Date (in each case,
notwithstanding that such Adjustment Date may occur prior to the expiration of
any applicable Interest Period); provided, however, that notwithstanding
anything to the contrary set forth herein, upon the occurrence and during the
continuance of an Event of Default, the Term Agent may immediately increase the
Index Margin to that set forth in Level I (even if the Consolidated Leverage
Ratio requirements for a different Level have been met) and interest shall
accrue as set forth in Section 2.7(e) hereof. 
At such time as all Events of Default are no longer continuing, the
Index Margin shall once again be determined based on the pricing grid below.


	
  Level

  	
   

  	
  Consolidated Leverage

  Ratio

  	
   

  	
  Index Margin

  
	
  I

  	
   

  	
  Greater than or equal to 1.50 to 1.00

  	
   

  	
  2.50%

  
	
  II

  	
   

  	
  Less than 1.50 to 1.00

  	
   

  	
  2.25%

  



 



 15
 









“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 Term
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 Term 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
Term Administrative Agent may reasonably determine or if Term Administrative
Agent deems that it cannot be determined, the Index Offer Rate will be
unavailable.


“Index Rate”:  That per annum rate (calculated on a 360-day
year and actual days elapsed) equal to the Index Offer Rate plus the Index
Margin except that, in the event that the Term Administrative Agent determines
that any Term Lender may be subject to the Reserve Percentage, the “Index Rate”
shall mean, with respect to any Index Loans then outstanding (from the date on
which that Reserve Percentage first became applicable to such loans), and with
respect to all Index Loans thereafter made, an interest rate per annum equal
the sum of (a) plus (b), where:


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


Index
Offer Rate


1 minus Reserve
Percentage


(b) is the applicable Index Margin.


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


“Intercreditor
Agreement”:  That certain
Intercreditor Agreement dated as of even date herewith by and among the Term
Agent and the Revolving Loan Agent and acknowledged by the Obligors.


“Interest Payment
Date”:  With reference to:



 16
 









(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.


(b)           Each
Base Margin Loan: the last Business Day of each month in arrears and the
Termination 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 Section2.3) to the
Term Administrative Agent.


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


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


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


(iv)          
The Lead Borrower shall not select, renew, or convert any interest rate for any
outstanding principal amount of the Term 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



 17
 









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.


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


“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 Term Collateral Agent in the Collateral.


“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.


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


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


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


(i)            Any
and all direct and indirect liabilities, debts, and obligations of any of the
Obligors to any Term Agent or the Term 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 Term Agent
or the Term Lenders, (including all future advances whether or not made
pursuant to a commitment by any Term Agent or the Term Lenders), whether or not
any of such are liquidated, unliquidated, primary, secondary, secured,
unsecured, direct, indirect, absolute, contingent, or of any other



 18
 









type, nature, or description, or by reason of any
cause of action which any Term Agent or the Term Lenders, may hold against the
Obligors.


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


(iv)          All
interest, fees, and charges and other amounts which may be charged by any Term
Agent or the Term Lenders, to the Obligors and/or which may be due from the
Obligors to any Term Agent or the Term 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 Term Agent or the Term Lenders, in
respect of any agreement between the Obligors and any Term Agent or the Term
Lenders, or instrument furnished by the Obligors to any Term Agent or Term
Lenders (including, without limitation, Costs of Collection, reasonable
attorneys’ fees, including reasonable fees and expenses of Term Lenders’
Special Counsel), and all court and litigation costs and expenses).


(vi)          Any
and all covenants of the Obligors to or with any Term Agent or the Term
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 Term Agent
or the Term Lenders, or instrument furnished by the Obligors to any Term Agent or
the Term Lenders.


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


(b)           Any
and all direct or indirect liabilities, debts, and obligations of the Obligors
to any Term Agent or the Term Lenders or any Affiliate of any Term Agent or
Affiliate of the Term 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.



 19
 









“Liquidation”:  The exercise, by the Term Collateral Agent,
of those rights accorded to the Term 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.


“Loan Documents”:  This Agreement, each instrument and document
executed and/or delivered as contemplated by Article III, below (including
without limitation the Agent Fee Letter) 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 Term Agent
or any Affiliate of any Term Agent, including, without limitation, any
transaction which arises out of any cash management (including any ACH transfer
arrangements), depository, investment, or interest rate protection, or
equipment leasing services provided by any Term Agent or any Affiliate of any
Term Agent, as each may be amended from time to time.


“Loans”:  Collectively, Base Margin Loans and Index
Loans.


“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 5.10, 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 Term 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, 2013, or if such day is not a Business Day, the
next succeeding Business Day.


“Measurement Period”:  means, at any date of determination, the most
recently completed four fiscal quarters of the Lead Borrower, provided that until the end of the first
full four fiscal quarters after the Draw Date only, in the calculation of the
Consolidated Interest Coverage Ratio and Permitted Payments Amount,
Consolidated Interest Charges shall, for all purposes other than the
calculation of



 20
 









Consolidated EBITDA, be calculated on a pro forma
twelve month basis for the first full four fiscal quarters after the Draw Date.


“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 Revolving Loan Agent, for the benefit of, among others, the Term
Lenders.


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


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


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


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


With respect to any Term Lender, as indicated adjacent to such Term
Lender’s signature at the foot of this Agreement.  With respect to any Person who becomes a Term
Lender hereafter pursuant to this 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.


“Participant”:  Defined in Section 14.6.


“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.


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


(i)            immediately
prior to, and after giving effect thereto, no Default 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;



 21
 









(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 Term Collateral Agent, for the benefit of Term 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 the Obligors are currently engaged or a business reasonably related
thereto or such other lines of business as may be consented to by Term
Administrative Agent.


“Permitted Acquisition Requirements”:
The Borrowers (a) immediately causing any new Subsidiary to
become a Borrower or guarantor hereunder, as determined by the Term
Administrative Agent, by executing and delivering to Term Administrative Agent
a counterpart agreement acceptable to Term Administrative Agent in its
discretion, (b) immediately thereupon, causing the Term 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 Term 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 Default 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 Term Collateral Agent, for the benefit of Term 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


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


“Permitted Creation Requirements”:  The Borrowers (a) immediately causing any
new Subsidiary to become a Borrower or guarantor hereunder, as determined by the
Term Administrative Agent, by executing and delivering to Term Administrative
Agent a counterpart agreement acceptable to Term Administrative Agent in its



 22
 









discretion, (b) immediately thereupon, causing the Term 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 Term Agent may require in its
discretion.


“Permitted
Encumbrances”:  The following:


(a)           Encumbrances
in favor of the Term Collateral Agent.


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


(c)           Those
Encumbrances in favor of the Revolving Loan Collateral Agent securing the
liabilities under the Revolving Loan Agreement.


(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 reserves; 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 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.



 23
 









(g)           Purchase
money security interests or capitalized equipment leases on any Equipment
acquired or held by the Obligors and securing Indebtedness permitted by Section
4.8(a)(iv) or 4.8(a)(v) 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 Term
Collateral Agent shall have the right to utilize, at no cost or expense to the
Term Agents or Term Lenders (other than a pro rated amount for the period in
which the Term 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 Term
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 permitted by Section 4.8(a)(ix) or Section 4.8(a)(x) 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 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 permitted pursuant to Section 4.8(a)(ix) or
Section 4.8(a)(x)



 24
 









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 permitted pursuant to Section 4.8(a)(ix) or
Section 4.8(a)(x) 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 thereon provided, however, that the
holder of any such Indebtedness shall have agreed that the Term Collateral
Agent shall have the right to utilize the Domestic Distribution Center portion
of the Headquarters Facility, at no cost or expense to the Term Agents or Term
Lenders (other than a pro rated amount for the period in which the Term 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 Term Collateral
Agent in its reasonable 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, to the extent that such liens or security interests of each landlord
(i) relate to Collateral located at a specific store location or (ii) have been
subordinated to the lien and security interest of the Term Collateral Agent
pursuant to the lease between the landlord and the Borrowers.



 25
 









“Permitted Payments Amount”:  An amount not to exceed (a) fifty percent
(50%) of the cumulative Consolidated Net Income of the Borrowers and their
Subsidiaries after the date of this Agreement plus (b) one hundred percent
(100%) of the net equity proceeds received by the Borrowers, including proceeds
received in connection with the exercise of stock options or warrants, after
the date of this Agreement, so long as after giving effect to any such payment,
the ratio of (x) Consolidated EBITDA for the applicable Measurement Period to
(y) Consolidated Interest Charges for the applicable Measurement Period plus
all such payments, on a pro forma basis, is and shall be greater than
2.00:1.00.


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


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


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


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


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


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


“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 Term Lender
vis-à-vis any other Term Lender, a fraction (expressed as a percentage), the
numerator of which shall be the amount of such Term Lender’s Dollar Commitment
and the denominator of which shall be the aggregate of all of the Term Lenders’
Dollar Commitments, as adjusted from time to time in accordance with the
provisions of this Agreement, provided
that, if all Dollar Commitments have been terminated, the numerator
shall be the unpaid amount of the Term Loan held by such Term Lender and the
denominator shall be the aggregate unpaid principal amount of the Term Loan.


“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.


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



 26















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


“Regulatory Change”:  Defined in Section 2.10(c).


“Reports”:  Defined in Section 15.10.


“Required Lenders”:  Term Lenders holding more than 50% of the
Commitments or, in the event that the Commitments have been terminated, Term
Lenders holding 50% or more of the outstanding Term Loan.


“Requirement of Law”:  As to any Person:


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


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


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


“Reserve Percentage”:   The decimal equivalent of that rate
applicable to a Term 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 Term 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.


“Revolving Loan Agent”:  Bank of America, N.A., as agent for the
lenders under the Revolving Loan Agreement.


“Revolving Loan
Collateral Agent”:  Bank of
America, N.A., as collateral agent for the lenders under the Revolving Loan
Agreement.



 27
 









“Revolving Loan Agreement”:  That certain Second Amended and Restated Loan
and Security Agreement of even date by and among the Obligors, the lenders
party thereto, and the Revolving Loan Agent, as agent for the lenders
thereunder.


“Second Mortgage Cap”:
The amount as might be agreed to from time to time between the Term Collateral
Agent and PIDA as constituting the extent of the mortgage lien evidenced by the
PIDA Mortgage, subject to further reduction upon Term 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
the Lead Borrower in accordance with Internal Revenue Service Revenue Procedure
92-64 to accept both employer and employee contributions made under the terms
of one or more 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 Term 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 Term Collateral Agent or the Term 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”:  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 Revolving Loan Agent as Lender,
and Fleet National Bank, as predecessor in interest to Bank of America, N.A.,
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.


“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 Term Administrative Agent.



 28
 









“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.


“Synthetic
Debt”:  with respect to
any Person as of any date of determination thereof, all obligations of such
Person in respect of transactions entered into by such Person that are intended
to function primarily as a borrowing of funds (including any minority interest
transactions that function primarily as a borrowing) but are not otherwise
included in the definition of “Indebtedness” or as a liability on the
consolidated balance sheet of such Person and its Subsidiaries in accordance
with GAAP.


“Synthetic
Lease Obligation”: means the monetary obligation of a Person
under (a) a so-called synthetic, off-balance sheet or tax retention lease, or
(b) an agreement for the use or possession of property (including sale and
leaseback transactions), in each case, creating obligations that do not appear
on the balance sheet of such Person but which, upon the application of the
Bankruptcy Code or any other bankruptcy laws to such Person, would be
characterized as the indebtedness of such Person (without regard to accounting
treatment).


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


“Term
Administrative Agent”: 
Defined in the Preamble.


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


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


“Term
Collateral Agent”:   Defined
in the Preamble.



 29
 









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


“Term
Loan”:  As defined in Section
2.1 of this Agreement.


“Term Loan Amount”:  $90,000,000, subject to any increase thereof
pursuant to Section 2.2 of this Agreement.


“Term
Loan Increase”: 
Defined in Section 2.2.


“Term
Loan Increase Date”: 
Defined in Section 2.2.


“Term
Note”:  Defined in Section
2.2.


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


“Termination
Date”:  The earliest of
(a) the Maturity Date; or (b) the occurrence of any event described in Section
10.9, below; or (c) the date set as the Termination Date in a notice by the
Term Administrative Agent to the Lead Borrower on account of the occurrence of
any Event of Default other than as described in Section 10.9, below; or
(d) termination of the Term Lenders’ commitments as provided hereunder or, if
the Draw Date has occurred, the date of the Borrowers’ prepayment of the Term
Loan in full; or (e) in the event that the Draw Date has not occurred on or before
ninety (90) days following the Closing Date, the Termination Date shall be the
date which is ninety (90) days following the Closing Date.


“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 Term 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 Term Administrative Agent shall be effective without the
consent of the Term 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
Fee”:  Defined in Section
2.8.


“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).



 30
 









ARTICLE II. - The TERM LOAN


2.1  Commitment to Make the Term Loan.


(a)   Subject to satisfaction of (i)
the conditions precedent set forth in Article III hereof (other than Section
3.15) on or prior to the Closing Date and (ii) the Draw Conditions and the
conditions precedent set forth in Section 3.15 on or prior to the Draw Date,
the Borrowers shall borrow from the Term Lenders and the Term Lenders shall
lend to the Borrowers on the Draw Date the sum of Ninety Million Dollars
($90,000,000.00) (the “Term Loan”),
repayable with interest as provided herein.


(b)   The proceeds of the Term Loan
shall be used solely to refinance existing Indebtedness under the Indenture Agreement
(including any prepayment fees and costs and expenses related thereto), and for
other general corporate purposes of the Borrowers, all solely to the extent
permitted by this Agreement.  To the
extent that the Draw Date occurs prior to the date of prepayment of the
existing Indebtedness under the Indenture Agreement (including any prepayment
fees and costs and expenses related thereto), the proceeds of the Term Loan
shall be invested in Eligible Liquid Collateral and shall be subject to a first
priority security interest in favor of the Term Collateral Agent for its
benefit and the benefit of the Term Administrative Agent and the Term Lenders
(subject to no other Encumbrances).


2.2  Increase in the Term Loan.


(a)   So long as no Default or Event
of Default exists or would arise as a result thereof, the Lead Borrower shall
have the right at any time, but only one time during the term of this
Agreement, to request an increase of the then outstanding amount of the Term
Loan in an amount not to exceed $50,000,000.00. 
Any such requested increase shall be first made to all existing Term
Lenders on a Pro Rata basis. In the event that any existing Term Lender does
not notify the Term Administrative Agent within ten (10) Business Days from the
receipt of the requested increase that the such existing Term Lender will make
such increase, and the amount of its increase, the existing Term Lender shall
be deemed to have declined the requested increase. To the extent that one or
more existing Term Lenders decline to increase the then outstanding amount of
the Term Loan, or all Term Lenders in the aggregate decline to increase the
then outstanding amount of the Term Loan to the amount requested by the Lead
Borrower, the Term Administrative Agent shall use commercially reasonable
efforts, in consultation with the Lead Borrower, to arrange for other Term
Lenders to further increase such Term Lenders’ Dollar Commitment in an amount
greater than such Term Lenders’ Pro Rata share of the requested increase or for
other Persons to become Term Lenders hereunder and to issue commitments in an
amount equal to the amount of the increase in the then outstanding amount of
the Term Loan requested by the Lead Borrower and not accepted by some or all of
the existing Term Lenders (each such increase by either means, a “Term Loan Increase”, and each such Person issuing, or Term
Lender making such increase, an “Additional Commitment
Lender”), provided, however, that (x) no Term Lender shall be
obligated to provide a Term Loan Increase as a result of any such request by
the Lead Borrower, and (y) any Additional Commitment Lender which is not an
existing Term Lender shall be subject to the approval of the Term
Administrative Agent and (z) nothing contained herein shall constitute the
unconditional obligation of the Term Administrative



 31
 









Agent to provide or obtain commitments for
such Term Loan Increase, as the Term Administrative Agent only is agreeing
hereby to use its commercially reasonable efforts to arrange for Term Loan
Increases and Additional Commitment Lenders.


(b)   No Term Loan Increase shall
become effective unless and until each of the following conditions has been
satisfied:


(i)                                     any
Additional Commitment Lender shall have executed and delivered a joinder to the
Loan Documents in such form as the Term Administrative Agent may reasonably
require;


(ii)                                  the
Borrowers shall have paid such commitment fees and other compensation to the
Additional Commitment Lenders as the Lead Borrower, the Term Administrative
Agent and each such Additional Commitment Lenders may agree;


(iii)                               the
Borrowers shall have paid an arrangement fee to the Term Administrative Agent
as the Lead Borrower and the Term Administrative Agent may agree, as more fully
set forth in the Fee Letter;


(iv)                              to
the extent requested by any Additional Commitment Lender, a Note will be issued
at the Borrowers’ expense, to each such Additional Commitment Lender, to the
extent necessary to reflect the new Dollar Commitment of such Additional
Commitment Lender; and


(v)                                 the
Obligors and the Additional Commitment Lenders shall have delivered such other
instruments, documents and agreements as the Term Administrative Agent may have
reasonably requested.


(c)   The Term Administrative Agent
shall promptly notify each Term Lender as to the effectiveness of each Term
Loan Increase (with each date of such effectiveness being referred to herein as
a “Term Loan Increase Date”), and at such
time (w) the Commitments under, and for all purposes of, this Agreement shall
be increased by the aggregate amount of such Term Loan Increases, (x) Exhibit 2.11 shall be deemed modified, without further
action, to reflect the revised Commitments and Commitment Percentages of the
Term Lenders, (y) this Agreement shall be deemed amended, without further
action, to the extent necessary to reflect such increase in the Commitments,
such Term Loan Increases, and the addition of the Additional Commitment Lenders
(if applicable) and (z) a Loan shall be made on such Term Loan Increase Date in
an amount equal to the amount of the Term Loan Increase.



 32
 









2.3  Election of Term Loan Interest Rate
and Interest Period


(a)   Requests for the continuance or
conversion of an interest rate applicable to any outstanding portion of the
Term Loan may be requested by the Lead Borrower in such manner as may from time
to time be reasonably acceptable to the Term Administrative Agent.


(b)   Subject to the provisions of
this Agreement, the Lead Borrower may elect an interest rate and Interest
Period to be applicable to any outstanding portion of the Term Loan by giving
notice to the Term Administrative Agent by no later than the following:


(i)                                     If
such outstanding portion of the Term Loan is to be converted to a Base Margin
Loan: By 1:00 p.m. on the Business Day on which the subject outstanding portion
of the Term Loan 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 outstanding portion of the Term Loan 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 Default or Event of Default exists, may be
converted, at the option of the Term Administrative Agent, to a Base Margin
Loan notwithstanding any notice from the Lead Borrower that such outstanding
portion of the Term Loan is to be continued as an Index Loan.


(c)   Any request for the continuance
or conversion of any outstanding portion of the Term 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 Term Administrative Agent, in its
discretion, determines to deem it to have been made earlier.  Each request for the conversion of any
outstanding portion of the Term Loan shall be made in such manner as may from
time to time be acceptable to the Term Administrative Agent.


(d)   The Term Administrative Agent
may rely on any request for any financial accommodation under the Term Loan
which the Term 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 provide any such financial accommodation pending the Term
Administrative Agent’s being furnished with such documentation concerning that
Person’s authority to act as may be satisfactory to the Term Administrative
Agent.



 33
 









(e)   If, at any time or from time to
time, a Default or Event of Default exists which is continuing, the Term
Administrative Agent may suspend the right of the Lead Borrower to convert any
Base Margin Loan to an Index Loan.


2.4  Term Agent’s Records of Liabilities


(a)   The Term Administrative Agent
may also keep a record of all interest, fees, service charges, costs, expenses,
and other debits owed to the Term Agents and the Term Lenders on account of the
Liabilities and of all credits against such amounts so owed.


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


(c)   Borrowers hereby authorize the
Revolving Loan Agent, from time to time, without prior notice to Borrowers, to
charge such all amounts owed to the Term Agents and the Term Lenders on account
of the Liabilities not paid by the Borrowers (when due and payable), to the
Borrowers’ loan account under the Revolving Loan Agreement and to use the
proceeds of an advance under the Revolving Loan Agreement to pay all such
amounts to the Term Agents and the Term Lenders when due.


(d)   Any statement rendered by the
Term Administrative Agent or the Term 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 Term 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 Term Administrative Agent’s and Term 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.


2.5  The Term Note.


The Borrowers’ obligation
to repay the Term Loan, with interest as provided herein, may, upon the request
of any Term Lender, be evidenced by a Note or Notes (each, individually, and
collectively, in the aggregate, a “Term Note”)
in the form of EXHIBIT 2.5,
annexed hereto, executed by the Lead Borrower and the other Borrowers, payable
to the applicable Term Lender.  Neither
the original nor a copy of any Term 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 Term Lender to
the effect that a Term Note has been lost, mutilated, or destroyed, the Lead
Borrower and the other Borrowers shall execute and deliver a replacement
thereof to such Term Lender.



 34
 









2.6  Payment of Principal of the Term
Loan.


(a)   The Borrowers may repay all or any portion of the
principal balance of the Term Loan from time to time until the Termination Date
in minimum amounts not less than $1,000,000 and integral multiples of
$1,000,000 in excess thereof, without premium or penalty except as expressly
set forth in Section 2.6(f) hereof.  The
Term Administrative Agent shall cause such payments to be applied first,
to all interest and fees due with respect to the Term Loan, second, to
the outstanding principal balance of the Term Loan (provided that the Term
Administrative Agent shall cause those application of payments (if any),
pursuant to this Section 2.6 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 Term
Administrative Agent’s failure to have done so), and third, to all other
outstanding Liabilities.


(b)   The principal amount of the
Term Loan shall be paid in
quarterly installments of $225,000 each, commencing with the first fiscal
quarter ending after the Draw Date, which amounts shall be payable on the last
day of each fiscal quarter (or the first Business Day after such day if the
last day of any fiscal quarter is not a Business Day).  Such amounts shall be increased in the event
of a Term Loan Increase in accordance with Section 2.2 above by a
quarterly amount equal to 0.25% of the aggregate amount of the Term Loan
Increase.


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


(d)   If any Obligor, whether in a
single transaction or a series of transactions:


(i)                                     sells
or transfers any Property (other than as permitted pursuant to Section
4.14(d) hereof) in excess of $1,000,000 in any Fiscal Year;


(ii)                                  receives
any proceeds of insurance (other than proceeds of business interruption
insurance to the extent such proceeds constitute compensation for lost
earnings) or condemnation awards (and payments in lieu thereof) in excess of
$1,000,000 in any Fiscal Year;


then the Obligors
shall apply, or cause to be applied, within ten (10) days after the receipt of
such net proceeds, one hundred percent (100%) of the net proceeds thereof in
excess of such $1,000,000 threshold received by the Obligors to the prepayment
of the principal balance of the Term Loan in the inverse order of maturity; provided,
that, notwithstanding the foregoing, so long as no Default or Event of
Default has occurred and is continuing, if the Obligors reasonably expect the
net proceeds of any such insurance or condemnation awards in respect of the
foregoing clause (ii), or a portion thereof, to be reinvested in productive
assets of a kind then used or usable in the Obligors business, and, within 365
days after such occurrence makes such reinvestment, then Borrower shall deliver
such net proceeds, or applicable portion thereof, to the Term Administrative
Agent to be held by the Term Administrative Agent in a cash collateral account
pending such reinvestment; provided further that, in the event that such
proceeds are not reinvested as provided above within such 365-day period, such
proceeds shall be applied to the prepayment of the principal balance of the
Term Loan in the inverse order of maturity.



 35
 









(e)   Within ten (10) days of
delivery to Term Administrative Agent of Borrower’s annual audited financial
statements in accordance with the terms of Section 5.6 of this
Agreement, but in any event no later than the one hundredth (100th) day after the end of each Fiscal Year
of the Borrowers (commencing with the Fiscal Year of the Borrowers ending
September 30, 2008), the Lead Borrower shall furnish to the Term Administrative
Agent a written calculation of Excess Cash Flow for such Fiscal Year and
deliver to the Term Administrative Agent an amount equal to fifty percent (50%)
of such Excess Cash Flow in excess of $5,000,000, for application to the
principal balance of the Term Loan in the inverse order of maturity; provided
that if such financial statements have not been delivered within the time
periods set forth above, such Excess Cash Flow payment shall be determined by
the Term Administrative Agent based on the Term Administrative Agent’s estimate
of the Borrowers’ Excess Cash Flow in accordance with the Term Administrative
Agent’s review of the Borrowers’ monthly financial statements previously
delivered to the Term Administrative Agent. 
Upon delivery of the annual financial statements described above to Term
Administrative Agent, if the actual Excess Cash Flow payment to which the Term
Administrative Agent is entitled exceeds any payment estimated by Term
Administrative Agent, the Borrowers shall pay the Term Administrative Agent an
amount equal to the difference between the actual Excess Cash Flow payment
required and the Excess Cash Flow payment estimated by Term Administrative Agent
(but the Term Administrative Agent shall in no event be obligated to refund or
adjust any estimated Excess Cash Flow payment which exceeds the actual Excess
Cash Flow payment based on such financial statements).  Notwithstanding the foregoing, so long as the
Borrowers’ Consolidated Leverage Ratio, as tested at the end of such Fiscal
Year, is less than 2.25:1.00, such Excess Cash Flow payment for such Fiscal
Year shall be twenty-five percent (25%) of such Excess Cash Flow in excess of
$5,000,000.


(f)    Upon the request of the Term
Administrative Agent, each Borrower, jointly and severally, shall indemnify the
Term Agents and Term Lenders and hold the Term Agents and Term Lenders harmless
from and against any loss, cost or expense (including loss of anticipated
profits) which the Term Agents or Term 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 Term Agent or Term Lenders in
order to maintain its Index Loans.


(ii)                                  Default
by the Borrowers in making a conversion after the Borrowers have given (or are
deemed to have given) a request to convert any outstanding principal amount of
the Term 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



 36
 









is not the last day of the applicable Interest Period with respect
thereto, including interest or fees payable by the Term Agent and Term Lenders
as “breakage fees”.


2.7  Interest On The Term Loan.


(a)   Any outstanding principal
amount of the Term 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).


(b)   Any outstanding principal
amount of the Term Loan which consists of an Index Loan shall bear interest at
the applicable Index Rate (determined based upon a 360-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 the Term Loan 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 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 the Term 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 Term Agent exercises the Term Agent’s rights on account thereof), the
Liabilities shall bear interest, at the option of the Term Agent, at a rate which
is the aggregate in the case of Base Margin Loan, of the then applicable Base
Margin Rate as set forth in Section 2.7(a) above plus two percent
(2.00%) per annum, and in the case of Index Loans, the then applicable Index
Rate as set forth in Section 2.7 (b) above plus two percent
(2.00%) per annum.


2.8  Fees.


(a)   The Borrowers shall pay to the
Arranger and the Term Administrative Agent for their own respective accounts
fees in the amounts and at the times specified in the Agent Fee Letter.  Such fees shall be fully earned when paid and
shall not be refundable for any reason whatsoever.


(b)   In addition to any other fee to
be paid by the Borrowers on account of the Term Loan pursuant to the Agent Fee
Letter, the Borrowers shall pay the Term Administrative Agent, for the benefit
of the Term Lenders, an unused fee (the “Unused Fee”)
equal to (i) from and after the Closing Date until the date which is forty-five
(45) days after the Closing Date, 0.25% per annum (calculated on the basis of
actual number of days elapsed in a year of 360 days) of the aggregate principal
amount of the Commitments, and (ii) in the event that the Draw Date has not
occurred on or before forty-five (45) days after the Closing Date, from and
after the date



 37
 









which is forty-six (46) days after the
Closing Date until the date which is ninety (90) days after the Closing Date,
0.50% per annum (calculated on the basis of actual number of days elapsed in a
year of 360 days) of the aggregate principal amount of the Commitments, such
fee to accrue from and after the Closing Date and to be paid monthly in arrears
until such time as the proceeds of the Term Loan have been advanced to the
Borrowers on the Draw Date.


2.9  Concerning Fees.


The Borrowers shall not be entitled to any
credit, rebate or repayment of the Unused Fee or other fee earned by the Term
Agent or Term Lenders pursuant to this Agreement or any Loan Document
notwithstanding any termination of this Agreement.


2.10                        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 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; and (C) as of the last day
of any Interest Period, to convert all or any portion of the Index Loans to
Base Margin Loans; provided, that Loans may not be continued as or converted to
Index Loans, if the continuation or conversion thereof would violate the
provisions of Sections 2.10(b) or 2.10(c) of this Agreement or if
an Event of Default has occurred and is continuing.


(b)   The Term Administrative Agent’s
determination of the Index Rate as provided above shall be conclusive.  Furthermore, if the Term Administrative Agent
or the Term 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 Loans are not
available to the Term Administrative Agent or the Term 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 Loans requested by the Borrowers to be Index Loans or the
Loans bearing interest at the rates set forth in this Agreement shall not
represent the effective pricing to the Term Administrative Agent for U.S.
Dollar deposits of a comparable amount for the relevant period (such as for
example, but not limited to, official reserve requirements required by
Regulation D to the extent not given effect in determining the rate), the Term
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 Term Agent, the Term Lenders or their
respective lending offices (a “Regulatory Change”),
shall, in the opinion of counsel to the Term Agent or the Term Lenders, make it
unlawful for the Term Agent or the Term Lenders to make or maintain Index
Loans, then the Term 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



 38
 









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 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 Term Agent or the Term
Lenders; (B) subject the Term Agent, the Term Lenders or the Index Loans to any
Tax or change the basis of taxation of payments to the Term Agent or the Term
Lenders of principal or interest due from the Borrowers to the Term Agent or
the Term Lenders hereunder (other than a change in the taxation of the overall net
income of the Term Agent or the Term Lenders); or (C) impose on the Term Agent
or the Term Lenders any other condition regarding the Index Loans or the Term
Agent’s or Term Lenders’ funding thereof, and the Term Administrative Agent or
Term Lenders shall determine (which determination shall be conclusive) that the
result of the foregoing is to increase the cost to the Term Agent or the Term
Lenders of making or maintaining the Index Loans or to reduce the amount of
principal or interest received by the Term Agent or Term Lenders hereunder,
then the Borrowers shall pay to the Term Agent or the Term Lenders, on demand,
such additional amounts as the Term Administrative Agent or the Term Lenders
shall, from time to time, determine are sufficient to compensate and indemnify
the Term Agent or Term Lenders from such increased cost or reduced amount.  Each Term 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 Term Lender (including, without
limitation, by reason of any economic, legal, or regulatory cost or
disadvantage that such Term Lender may bear or suffer by reason of such designation).


(e)   The Term Agent and Term 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 Term Agent or any Term 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 Term Administrative Agent or such Term Lender to reflect all additional
costs incurred by the Term Agent or such Term Lender in connection with the
payment by the Term Agent or such Term Lender or the withholding by the
Borrowers of such Tax and the Borrowers shall provide the Term Agent or such
Term Lender with a statement detailing the amount of any such Tax actually paid
by the Borrowers. Determination by the Term Administrative Agent or such Term
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 Term Agent or such Term Lender is subsequently recovered by the
Term Agent or such Term Lender, the Term Agent or such Term Lender, as
applicable, shall reimburse the Borrowers to the extent of the amount so recovered.  A certificate of an officer of the Term
Administrative Agent or such Term Lender setting forth the amount of such
recovery and the basis therefor shall be conclusive absent manifest error.



 39
 









2.11                        Term Lenders’ Commitments.


(a)   Subject to Article XVI of this
Agreement (which provides for assignments and assumptions of commitments) and Section
2.2 hereof, each Term Lender’s “Commitment Percentage”,
and “Dollar Commitment” is set forth on EXHIBIT 2.11.


(b)   The obligations of each Term
Lender are several and not joint.  No
Term Lender shall have any obligation to make any Term Loan in excess of that
Term Lender’s Dollar Commitment.


(c)   No Term Lender shall have any
liability to the Borrowers on account of the failure of any other Term Lender
to provide any Term Loan nor any obligation to make up any shortfall which may
be created by such failure.


(d)   The Dollar Commitments,
Commitment Percentages, and identities of the Term Lenders may be changed, from
time to time by the reallocation or assignment of Dollar Commitments and
Commitment Percentages amongst the Term Lenders or with other Persons who
become “Term Lenders” and as provided in Section 2.2 hereof; 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 Term Lender or an
Affiliate of a Term 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 Term Administrative Agent with
written objection, not more than five (5) Business Days after the Term
Administrative Agent shall have given the Lead Borrower written notice of a
proposed assignment.


(e)   Upon written notice given the Lead
Borrower from time to time by the Term Administrative Agent, of any assignment
or allocation referenced in Section 2.11(d):


(i)                                     The Lead Borrower
and the other Borrowers, if required by the Term Administrative Agent, shall
execute one or more Term Notes (which notes shall replace any Term Notes
theretofore provided by the Borrowers) to reflect such changed Dollar
Commitments, Commitment Percentages, and identities and shall deliver such Term
Notes to the Term Administrative Agent (which promptly thereafter shall cancel
and deliver to the Lead Borrower the Term Notes so replaced, if any).  In the event that the Term Administrative
Agent does not require the delivery of Term Notes or that in the event that a
Term 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
Term Administrative Agent, in lieu of causing the Lead Borrower to execute one
or more new Term Notes, may issue the Term Administrative Agent’s Certificate
confirming the resulting Dollar Commitments and Commitment Percentages.


(ii)                                  Such change shall be
effective from the effective date specified in such written notice and any
Person added as a Term Lender shall have all rights and privileges of a Term
Lender hereunder



 40
 









thereafter as if such Person had been a signatory to this Agreement and
any other Loan Document to which a Term Lender is a signatory and any Person
removed as a Term Lender shall be relieved of any obligations or
responsibilities of a Term Lender hereunder thereafter.


(f)    Prior to the Draw Date, the
Borrowers may, upon notice to the Term Administrative Agent, terminate or from
time to time permanently reduce the Commitments in whole or in part; provided
that (i) any such notice shall be received by the Term Administrative Agent not
later than 11:00 a.m. five Business Days prior to the date of termination or
reduction, and (ii) any such partial reduction shall be in an aggregate amount
of $1,000,000 or any whole multiple of $1,000,000 in excess thereof.  Upon the earlier to occur of (i) the Draw
Date, upon the funding of the Term Loan, or (ii) the date which is ninety (90)
days following the Closing Date, in the event that the Draw Date has not occurred
prior to such date, the Commitments of the Term Lenders shall be automatically
terminated.


2.12                        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 the Term Loan, 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 Term Agent and Term Lenders on account
of the Term Loan so made as if made directly by the Term Agent or Term 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)   The Lead Borrower shall act as
a conduit for each Borrower (including itself, as a “Borrower”) on whose behalf
the Lead Borrower has requested the Term Loan.


ARTICLE
III. - Conditions Precedent:


As a condition to the
effectiveness of this Agreement and the making of the Term Loan, each of the
documents respectively described in Sections 3.1 through and including
3.4 (each in form and substance satisfactory to the Term Agent) shall have been
delivered to the Term Agent, and the conditions respectively described in Sections
3.5 through and including 3.14, shall have been satisfied as of the Closing
Date, and as a condition to the Term Lenders making the Term Loan on the Draw
Date, the conditions described in Section 3.15 shall have been satisfied as of
the Draw 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



 41
 









ownership of assets 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 Term 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 Term Agent in the Loan Documents are
true and complete as of the date of such certificate, and that no event has
occurred which is or which, solely with the giving of notice or passage of time
(or both), would be an Event of Default.


3.4  Additional Documents.


Such additional
instruments and documents as the Term 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 Term Agent.


(b)   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, in each case in form and
substance satisfactory to the Term Collateral Agent.


(c)                                  Blocked
Account Agreements.


(i) Duly executed and delivered amendment to the
Blocked Account Agreement by and between Bank of America, N.A., acting as Term
Collateral Agent and Revolving Loan Collateral Agent, Lead Borrower and
JPMorgan Chase Bank, N.A. (f/k/a Bank One, N.A.), in form and substance
satisfactory to Term Collateral Agent;


(ii)  Duly
executed and delivered notification to Wells Fargo Bank, N.A. with respect to
the Blocked Account Agreement by and between Bank of



 42
 









America, N.A., acting as Term Collateral Agent and
Revolving Loan Collateral Agent, Lead Borrower and Wells Fargo Bank, N.A., in
form and substance satisfactory to Term Collateral Agent; and


(iii) Subject to Section7.2(a)(i), duly executed and
delivered Blocked Account Agreement by and between Bank of America, N.A.,
acting as Term Collateral Agent and Revolving Loan Collateral Agent, Lead
Borrower and Wachovia Bank, N.A., in form and substance satisfactory to Term
Collateral Agent;


(d)           Financial Projections.  Delivery of pro forma consolidated financial
statements of the Borrowers, and forecasts prepared by management of the
Borrowers, each in form reasonably satisfactory to the Term Agent, including
balance sheets, income statements and cash flow statements, on
an annual basis for the Fiscal Year ending September 30, 2007 and each year
thereafter for the remaining term hereof.


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


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


(g)   Trademark Security Agreement.  Duly executed and delivered Amended and
Restated Trademark Security Agreement dated as of the Closing Date, by and
between Obligors, Revolving Loan Collateral Agent, and Term Collateral Agent in
form and substance reasonably satisfactory to the Term Collateral Agent.


(h)   Landlord Waiver
Notifications.  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 Term Collateral Agent.


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


(j)    Customs Broker Agreement
Notifications.  Duly executed and
delivered notifications to each of Barthco International, Jose David Gonzalez,
Excel and Garden City Customs Services regarding the Customs Broker Agreement
by and between each such party, respectively, Lead Borrower, and Bank of
America, N.A., acting as Term Collateral Agent and



 43
 









Revolving Loan Collateral Agent, each in form
and substance satisfactory to Term Collateral Agent.


(k)   Title Policy.  A
date-down endorsement to the existing loan policy of title insurance issued by
Commonwealth Land Title Insurance Company with respect 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 the
Term Collateral Agent and, confirming that all real estate taxes are paid
through the date of such date-down.


(l)      Mortgage Amendment.  The Term Collateral Agent, the Revolving Loan
Collateral Agent, the Lead Borrower and PIDC Financing Corporation shall have
recorded an amendment to the Mortgage in form and substance satisfactory to the
Term Collateral Agent (the “Mortgage Amendment”)
to reflect this Agreement as being secured by a third priority mortgage.


(m)    Subordination Agreement.  PIDA shall have amended its existing
Subordination Agreement with Revolving Loan Collateral Agent 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;


(n)     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 PIDC Financing Corporation and any other usual
evidence of authority and incumbency for the Lead Borrower, PIDA, and PIDC
Financing Corporation to enter into all documents related to the Mortgage
Amendment and the amendment to the Subordination Agreement;


(o)     Intercreditor Agreement.  The Intercreditor Agreement with the
Revolving Loan Agent and the Revolving Loan Collateral Agent, together with the
Revolving Loan Agreement and all documentation required for the revolving
credit facility in connection therewith, each in form and substance
satisfactory to the Term Administrative Agent and the Term Collateral Agent.


(p)   Revolving Loan Documents.  The Revolving Loan Agreement and all
documentation required for the revolving credit facility in connection
therewith shall be in full force and effect.


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.



 44
 









3.6  All Fees and Expenses Paid.


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


3.7  No Borrower Default.


After giving effect to
the transactions hereunder and under the Revolving Loan Agreement, no Default
or Event of Default has occurred which is continuing.


3.8  No Adverse Change.


As of the Closing Date,
no event shall have occurred or failed to occur, which occurrence or failure is
or could have a Material Adverse Effect upon the Obligors’ financial condition
when compared with such financial condition or circumstances at June 30,
2004.  As of the Closing Date, there
shall not have occurred any material disruption or material adverse change in
the financial or capital markets in general that has had, in the reasonable
opinion of the Term Agent, a material adverse effect on the market for loan
syndications, or that has materially and adversely affected the syndication of
the Term Loan, and no material changes in governmental regulations or policies
affecting the Obligors or their subsidiaries, the Term Agent or the Term
Lenders shall have occurred.


3.9  Absence of litigation.


As of the Closing
Date, no action, suit, investigation or proceeding shall be pending or, to the
knowledge of the Borrowers, threatened in any court or before any arbitrator or
governmental authority that could reasonably be expected to have a Material
Adverse Effect.


3.10                        Finalization of Revolving loan
facility.


Documentation
providing for the revolving credit facility pursuant to the Revolving Loan
Agreement in an amount not to exceed $65,000,000 (subject to increase up to
$85,000,000 in the aggregate pursuant to the terms of the Revolving Loan
Agreement) is finalized and acceptable to the Term Administrative Agent in all
respects and is consummated on the Closing Date.


3.11                        No other Material Indebtedness.


No other material
Indebtedness of the Obligors shall remain outstanding on the Closing Date other
than (a) the revolving credit facility established pursuant to the Revolving
Loan, (b) the notes outstanding under the Indenture Agreement, (c) other
existing funded Indebtedness not to exceed $5,000,000 in the aggregate, and (d)
existing letters of credit outstanding not to exceed $10,000,000 in the
aggregate.



 45
 









3.12                        Validity of Liens.


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


3.13                        Rating of Term Loan Facility.


The Term Loan
shall have received a rating from Standard & Poor’s Ratings Services, a
division of The McGraw-Hill Companies, Inc., and Moody’s Investors Service,
Inc. of not less than B or B2.


3.14                        Documents.


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


3.15                        Conditions to Funding of Term Loan.


In addition to the
conditions set forth in Sections 3.1 through 3.14 hereof, the request by the
Borrowers for the Lenders to fund the Term Loan on the Draw Date (with respect
to the conditions set forth in clauses (a), (b) and (c) below) or to fund any
Term Loan Increase on any Term Loan Increase Date (with respect to the
conditions set forth in clauses (b) and (c) below) shall be irrevocable and
shall constitute certification by each Borrower that as of the date of such
request and the funding of the Term Loan or any Term Loan Increase, each of the
following, as applicable, is true and correct:


(a)   The Draw Conditions have been
satisfied and the Draw Date shall occur on or before ninety (90) days following
the Closing Date.


(b)   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).


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


ARTICLE IV. - General Representations, Covenants and Warranties:


To induce the Term Agent
and Term 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



 46
 









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.


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 Term 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 becomes or cease to become an Affiliate solely
due to issuances or exchanges of the publicly-traded stock of the Lead
Borrower, the Lead Borrower shall provide the Term Administrative Agent with
written notice thereof on or before the thirtieth (30th) day of the next month thereafter).


(c)   No Obligor shall change its
Fiscal Year, its state of incorporation or its taxpayer identification number
without twenty-one (21) days prior written notice to Term Administrative Agent
and its counsel, provided that no such change shall occur if a Default or an
Event of Default has occurred and 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;



 47
 









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


(iii)                               Will not result in the
creation or imposition of, or the obligation to create or impose, any
Encumbrance upon any assets of such Obligor pursuant to any Requirement of Law
or obligation of such Obligor, except pursuant to the Loan Documents and the
Revolving 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 Term 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 if
a Default or Event of Default has occurred and is continuing.


4.4  Infrastructure.


(a)   The Obligors 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



 48
 









Obligors’ conduct of the Obligors’ business,
except where the failure to do so 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,
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 Term 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



 49
 









the chief executive office (if it is not
located in the Headquarters Facility) or any new Domestic Distribution Center.


(d)   The Borrowers will not:


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


(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) 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.



 50
 









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


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


(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 Term Collateral Agent thereof in
writing.  Promptly upon Term Collateral
Agent’s request, the Obligors shall deliver to the Term Agent a collateral
access agreement, in form and substance acceptable to the Term 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 Term
Collateral Agent with thirty (30) days prior notice thereof and (ii) such
customs broker has executed and delivered to the Term Collateral Agent a
Customs Broker Agreement.  The Term
Collateral Agent shall not give notice to any of the Obligors’ customs brokers
to follow the instructions of the Term 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 in accordance with the Intercreditor
Agreement.


4.8  Indebtedness.


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


(i)                                     The
Term Loan;


(ii)                                  Any
Indebtedness pursuant to the Revolving Loan Agreement;


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


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



 51
 









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


(vi)                              unsecured
Indebtedness up to the aggregate amount of $75,000,000, provided that
the Borrowers shall deliver a certificate to the Term Administrative Agent
demonstrating that upon the incurrence of such Indebtedness, the Borrowers
shall be in pro forma compliance with Section 5.10 hereof;


(vii)                           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;


(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;


(ix)                                Indebtedness
secured by Permitted Encumbrances described in clauses (h), (i) and (j) of the
definition thereof; provided that in connection with the incurrence of
any Indebtedness permitted under this clause (ix) to finance the acquisition of
any Acquired Real Property, the Lead Borrower will use its commercially
reasonable best efforts to cause a Mortgage on such Acquired Real Property (in
the event that such Acquired Real Property has a fair market value in excess of
$2,500,000) to be granted in favor of the Term Collateral Agent, it being
understood that any such Mortgage granted to the Term Collateral Agent may be
subordinate to any existing or new mortgage or other lien assumed or granted in
connection with such acquisition by the Obligors of such Acquired Real
Property; and provided further that any such Indebtedness incurred
pursuant to this clause (ix), together with all Indebtedness incurred pursuant
to clause (x) below in excess of $2,500,000, shall not exceed $20,000,000 in
the aggregate;


(x)                                   Indebtedness
incurred to finance all or any part of the cost of acquiring and the making of
improvements to the Acquired Real Property consisting of the facility located
at the Philadelphia Naval Business Center secured by Permitted Encumbrances
described in clauses (h), (i) and (j) of the definition thereof; provided
that in connection with the incurrence of any Indebtedness permitted under
this clause (x) to finance the acquisition of such Acquired



 52















Real Property,
the Lead Borrower will use its commercially reasonable best efforts to cause a
Mortgage on such Acquired Real Property (in the event that such Acquired Real
Property has a fair market value in excess of $2,500,000) to be granted in
favor of the Term Collateral Agent, it being understood that any such Mortgage
granted to the Term Collateral Agent may be subordinate to any existing or new
mortgage or other lien assumed or granted in connection with such acquisition
by the Obligors of such Acquired Real Property; and provided further that
any such Indebtedness incurred pursuant to this clause (x) in excess of
$2,500,000, together with all Indebtedness incurred pursuant to clause (ix)
above, shall not exceed $20,000,000 in the aggregate;


(xi)                                Indebtedness
in an amount not to exceed $800,000 related to the redemption of the Series A
Preferred Stock;


(xii)                             Indebtedness
on account of the Special Purpose Credit; and


(xiii)                          Any
Indebtedness between any of the Borrowers.


(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 other Indebtedness other than (i) the Liabilities,
(ii) prepayments permitted under the Revolving Loan Agreement (as in effect on
the date hereof), (iii) prepayments with respect to Liquidation of the
Collateral, (iv) prepayments of Indebtedness pursuant to Section 4.8(a)(xi)
above, and (v) so long as Default or Event of Default has occurred and is
continuing at the time of such payment, and such payments are not prohibited by
the terms of any applicable subordination agreement or intercreditor agreement,
other prepayments that, together with all other payments made under this
Section 4.8(c) (v) and Section 4.20(b) (iii) after the Closing Date, do not
exceed the Permitted Payments Amount.


(d)           Except
for prepayments permitted under Section 4.8(c), the Borrowers shall not
make any payment of any part or all of any Subordinated Debt, or take any other
action or omit to take any other action in respect of any Subordinated Debt in
contravention of the written terms of any instrument evidencing such
Subordinated Debt, or enter into any agreement (written or oral) which could in
any way be considered to amend, modify or terminate any instrument or agreement
evidencing or relating to Subordinated Debt.


4.9  INSURANCE.


(a)   EXHIBIT 4.9, is a schedule of all insurance policies owned
by the Obligors or under which the Obligors are the named insured.  Each of such policies is in full force and 



 53
 









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 Term Agent.


(c)   All
insurance carried by the Obligors shall provide for a minimum of thirty (30)
days’ written notice of cancellation to the Term Collateral Agent and all such
insurance which covers the Collateral shall include an endorsement in favor of
the Term Collateral Agent that is reasonably acceptable to the Term 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 Term Agent from time to time with certificates or
other evidence reasonably satisfactory to the Term 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 Term Collateral Agent, at its option, may obtain such insurance, provided, however,
the Term 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 Term 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 Term Collateral Agent, at the Term
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 Term 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 Term 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 Term Collateral Agent
any and all drafts and other instruments with respect to such insurance.  The within appointment, being coupled with an
interest, is irrevocable until this Agreement is terminated by a written
instrument executed by a duly authorized officer of the Term Collateral Agent.
The Term 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 Term Agent had an opportunity to be heard) that such
exercise was conducted in a grossly negligent manner or in willful misconduct.  The Term Administrative Agent shall apply any
proceeds of such insurance against the Liabilities as set forth in Section 2.6
hereof.



 54
 









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 Term Administrative
Agent) to the Term 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 Term
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 Term Agent may reasonably determine.


4.12                        Requirements of Law.


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


4.13                        Labor Relations.


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


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


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


(ii)                                  Any
proceeding against or affecting any Obligor relating to the alleged violation
of any Requirement of Law pertaining to labor relations or National Labor
Relations Board, the Equal 



 55
 









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.


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:



 56
 









(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 Revolving Loan Agent of all Receipts as provided in the
Revolving Loan Agreement; and


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


4.15                        Taxes.


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


(b)   No
agreement is extant which waives or extends any statute of limitations
applicable to the right of the Internal Revenue Service or any state taxing
authority to assert a deficiency or make any other claim for or in respect to
any Federal or state taxes.  No issue has
been raised in any such examination which, by application of similar
principles, reasonably could be expected to result in the assertion of a
deficiency for any Fiscal Year open for examination, assessment, or claim by
any Federal or state or local taxing authority.


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


(d)   The
Obligors have, and hereafter shall: pay, as they become due and payable, all
taxes and unemployment contributions and other charges of any kind or nature
levied, assessed or claimed against any Obligor or the Collateral by any person
or entity whose claim could result in an Encumbrance upon any asset of any
Obligor or by any governmental authority (other than taxes and charges being
contested in good faith and for which adequate reserves have 



 57
 









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 Term Administrative Agent written notice.


(e)   At
its option, the Term 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, and make any contributions or other payments on account of the
Obligors’ Employee Benefit Plan as the Term Agent, in the Term 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 Term Agent’s making
of any such payment shall not constitute a cure or waiver of any Event of
Default occasioned by the Obligors’ failure to have made such payment.


4.16                        No Margin Stock or Securities.


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


4.17                        ERISA.


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


(a)   Violated
or shall violate or failed or shall fail to be in material compliance with the
Employee Benefit Plan maintained by the Obligors;


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


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


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


(e)   Accumulated
or shall accumulate any material funding deficiency within the meaning of
ERISA;



 58
 









(f)    Terminated
or shall 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)   Been
a member of or shall be a member of, contributed to or shall 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 Term Administrative Agent with written notice
upon obtaining knowledge of any expense or loss incurred by any governmental
authority or other Person in connection with the assessment, containment, or
removal of any Hazardous Material, for which expense or loss the Borrowers may
be liable.


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



 59
 









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 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 



 60
 









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 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 



 61
 









Mortgage or to the effectiveness of any other
transactions contemplated hereby.


4.19                        Litigation.


As of the Closing Date,
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:


(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 Default or
an Event of Default, and no Default or Event of Default would result therefrom,
contributions to one or more Approved Security-Free SERPS or 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 Term Administrative Agent demonstrating pro forma compliance
with Section 5.10 hereof upon and following the making of such
contributions); (E) investments of assets permitted to be contributed to any
Approved Security-Free SERP or related Security-Free Rabbi Trust hereunder; and
(F) fixed income instruments or fixed income equity securities, in each case
rated A- or better by a rating agency acceptable to the Term 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 Collateral Agent pursuant to Section
8.3(d) (ii) and  a security interest in
favor of the Revolving Loan Collateral Agent;


(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));



 62
 









(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 Subsidiary (except as permitted
in Section 4.20(c)), or create any Subsidiary, 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)     (i) Borrowers may make dividends,
distributions and common stock buybacks in an amount not to exceed $10,000,000
in the aggregate per annum provided that (A) no Default or Event of Default has
occurred which is continuing at the time of such dividend, distribution, or
buyback, and (B) subject to delivery of a certificate to the Term
Administrative Agent demonstrating pro forma compliance with Section 5.10
hereof upon the making of such dividend, distribution or common stock buyback,
(ii)  Borrowers 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 such purchase is approved
by the Lead Borrower’s Board of Directors and conducted on an arm’s length
basis and subject to delivery of a certificate to the Term Administrative Agent
demonstrating pro forma compliance with Section 5.10 hereof upon such
repurchase, and (iii) Borrowers may make other payments otherwise prohibited by
Section 4.20(a) in an amount, when taken together with all payments made
under Section 4.8(c) (v) and this Section 4.20(b) (iii) after the Closing Date,
do not exceed the Permitted Payments Amount.


(c)   So
long as there is no Default or Event of Default that has occurred or would
occur as a result thereof, the Borrowers may make Permitted Acquisitions and
Permitted Creations, provided, that, the aggregate amount of consideration for
all Permitted Acquisitions and Permitted Creations (including all Indebtedness
incurred, repaid or assumed in connection with all acquisitions occurring after
the Closing Date and net of cash and cash equivalents acquired), cash paid, and
capital stock issued or expended in respect of all such acquisitions after the
Closing Date shall not exceed $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; and provided
further that the Consolidated Leverage Ratio at the time of any Permitted
Acquisition or Permitted Creation and after giving effect to such Permitted
Acquisition or Permitted Creation pursuant to this Section 4.20(c), does
not and shall not exceed (x) the required Consolidated Leverage Ratio as
applicable for such period as set forth in Section 5.10, less
0.25 (e.g., if such Permitted Acquisition or Permitted Creation occurred during
the fiscal quarter ending March 30, 2009, the Consolidated Leverage Ratio at
the time of  such 



 63
 









Permitted Acquisition or Permitted Creation and after giving effect to
such Permitted Acquisition or Permitted Creation shall not exceed 3.25:1.00).


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 Term 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 Term Agent may deem necessary or desirable
to repair, insure, maintain, preserve, collect, or realize upon any of the
Collateral.  The Term 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 Term Agent has had an
opportunity to be heard), from which finding no further appeal is available,
that the Term Agent had acted in actual bad faith or in a grossly negligent
manner.  The Borrowers shall pay to the
Term Administrative Agent, on demand, all amounts paid or incurred by the Term
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 they are currently
engaged or a business reasonably related thereto or such other lines of
business as may be consented to by Term Administrative Agent.


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 



 64
 









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 investments permitted under Section
4.20(a) (iii) and dividends, distributions, stock buybacks and repurchases
permitted under 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 Term 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 Term Collateral Agent (subject only to Permitted
Encumbrances) to secure the Liabilities.


(c)   The
Obligors shall execute and deliver to the Term Agent such instruments,
documents, and papers, and shall do all such things from time to time hereafter
as the Term Agent may reasonably request to carry into effect the provisions
and intent of this Agreement; to protect and perfect the Term 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 Term Agent with
respect to the recordation and/or perfection of the Collateral Interests
created or contemplated herein.


(d)   The
Obligors hereby designate the Term 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 Term 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 Term Agent or the Term 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.  As of the Closing Date, there has been no
change in the financial condition, results of operations, or cash flows of the
Obligors since the date(s) of such financial statements, other than changes in
the ordinary course of business, which changes have not been materially
adverse, either singularly or in the aggregate.



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(b)   The
Obligors do not have any contingent obligations or obligation under any Lease
or Capital Lease which is not noted in the Obligors’ most recent consolidated
financial statements furnished to the Term Agent or the Term 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 Term Agent
or the Term Lenders by or on behalf of the Obligors or any guarantor of the
Liabilities in connection with the execution of this Agreement by the Term
Agent or Term Lenders contains or will contain any untrue statement of a
material fact or omits or will omit to state a material fact necessary in order
to make the statements therein not misleading. 
There is no fact known to the Borrowers which has, or which, in the
foreseeable future could have, a Material Adverse Effect on the financial
condition of the Obligors or any such guarantor which has not been disclosed in
writing to the Term Agent or Term 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 Term 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
(excluding any covenant or representation and warranty made solely as of the
Closing Date).


ARTICLE V. - Financial
Reporting and Performance Covenants:


5.1
 Maintain Records.


The Obligors shall:


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


(b)   Timely
provide the Term 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 



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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, retain independent certified public accountants who are reasonably
satisfactory to the Term Administrative Agent and instruct such accountants to
fully cooperate with, and be available to, the Term 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 Term Administrative Agent.


(d)   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 Term Agent and the Term Agent’s representatives
access from time to time as the Term Agent and such representatives may require
to all properties owned by or over which any Obligor has control.  The Term Agent and such representatives shall
have the right, and the Obligors will permit the Term Agent and the Term Agent’s
representatives from time to time (upon prior notice and during normal business
hours, if prior to the occurrence and continuance of a Default or Event of
Default) as Term 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; provided that
the Term Agent agrees that it shall exercise such rights only in the event that
the results of any such examination of such books and records are not delivered
to the Term Agent by the Revolving Loan Agent in accordance with the terms of
the Intercreditor Agreement.  The Obligors
shall make all of the Obligors’ copying facilities available to the Term Agent
and the Term Agent’s representatives.


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


(i)                                     Subject
to Section 14.24, 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 Term Agent and the Term 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 Default or Event of Default:
verification with Account Debtors, and/or with the Borrowers’ computer billing
companies, 



 67
 









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.


5.3                               Immediate Notice to Term Agent.


(a)   The
Lead Borrower shall provide the Term Administrative Agent and Term 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 their 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 Default or Event of Default.


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


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


(ix)                                Any
violation of any Environmental Law that the Obligors or any of their
Subsidiaries reports in writing or is reportable by such Person in writing (or
for which any written report supplemental to any oral report is made) to any
Governmental Authority and upon becoming aware thereof, of any inquiry,
proceeding, investigation, or other action, including a notice from any agency
of potential environmental liability, of any Governmental Authority.



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(b)   The Lead Borrower shall:


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


(ii)                                  Provide the Term
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  Weekly and Monthly Reports.


(a)   Upon the request of the Term Collateral Agent, the Lead Borrower
shall provide the Term Collateral Agent with copies of any weekly or monthly
reports provided to the Revolving Loan Agent as reasonably requested by the
Term Collateral Agent.


(b)   Monthly, the Lead Borrower shall provide the Term Collateral Agent
with original counterparts of the following (each in such form as the Term
Collateral Agent from time to time may specify), within thirty (30) days of the
end of the previous month:


(i)                                     The Officer’s
Compliance Certificate described in Section 5.7.


(ii)                                  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).


(iii)                               Upon request of the Term
Administrative Agent, copies of any new agreements relating to (i) leasing of a
customer list, (ii) marketing services, or (iii) leased department
relationships in which a Borrower leases or licenses a portion of the space in
a store, together with any amendments of any such existing agreements
since the date of the previous report.


5.5  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 Term 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 



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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.


5.6  Annual Reports.


(a)   Annually, within 90 days following the end of the Borrowers’
Fiscal Year, the Lead Borrower shall furnish the Term 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 5.7.


(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 Default
or Event of Default relating to the financial performance covenants imposed
pursuant to Section 5.10 had occurred during the subject Fiscal Year (or
if one or more had occurred, the facts and circumstances thereof).


5.7  Officers’ Certificates.


(a)   The Lead Borrower shall cause its Authorized Officer to certify,
in the form attached hereto as EXHIBIT 5.7 (the
“Officer’s Compliance Certificate”) in
connection with those monthly, quarterly and annual statements to be furnished
pursuant to this Agreement that:


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


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


(B)                                Material Accounting
Changes (in which event, such certificate shall include a schedule (in
reasonable detail) of the effect of each such Material Accounting Change) not
previously specifically taken into account in the determination of the
financial performance covenants imposed pursuant to Section 5.10.



 70
 









(ii)                                  No Default or Event
of Default has occurred which is continuing, or if such event has occurred, its
nature (in reasonable detail) and the steps (if any) being taken or
contemplated by the Borrowers to be taken on account thereof.


(iii)                               The Borrowers were in
compliance (or had failed to comply) as of the date of the applicable statement
with each of the financial performance covenants included in Section 5.10
hereof; such certification to be accompanied by calculations demonstrating such
compliance or failure to comply.


5.8  Inventories, Appraisals, and Audits.


(a)   The Term 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 Term Collateral Agent for which Term Collateral Agent seeks
reimbursement shall be reasonable expenses). 
No Borrower may, without the prior written consent of the Term
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 Term Collateral Agent’s reasonable
discretion, subject to reasonable coordination with the Revolving Loan
Collateral Agent so as to not cause duplication), conducted by such inventory
takers as are reasonably satisfactory to the Term Collateral Agent and
following such methodology as may be reasonably satisfactory to the Term Agent.


(i)                                     The Lead Borrower
shall provide the Term 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 Term 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 Term Collateral
Agent, in its discretion and subject to reasonable coordination with the
Revolving Loan Collateral Agent so as to not cause duplication, following the
occurrence of and during the continuance of a Default or Event of Default, may
cause 



 71
 









such additional inventories to be taken as the Term Collateral Agent
determines (each, at the expense of the Borrowers).


(c)   If the Term Agent does not receive delivery of appraisals
conducted by the Revolving Loan Agreement pursuant to the Intercreditor
Agreement, the Term Collateral Agent may obtain appraisals (at the expense of
the Borrowers) of the Borrowers’ Inventory and Real Estate in the event it
deems it reasonably necessary in its discretion.  In addition, the Term Collateral Agent may
obtain, subject to reasonable coordination with the Revolving Loan Collateral
Agent so as to not cause duplication, an appraisal of the Headquarters Facility
(at the expense of the Borrower) at any time after the Borrower incurs
additional Indebtedness secured by the Headquarters Facility in excess of $1,000,000.


(d)   If the Term Agent does not receive delivery of commercial finance
audits conducted by the Revolving Loan Agreement pursuant to the Intercreditor
Agreement, the Term Collateral Agent may conduct commercial finance audits (at
the expense of the Borrowers) in the event it deems it reasonably necessary in
its discretion.


5.9  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 Term 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 Term Agent may from
time to time reasonably request from the Lead Borrower.


(b)   The Lead Borrower may
provide the Term 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 Term 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
(5.9(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, and shall include assumptions as are
reasonably satisfactory to the Term 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 Term Agent with a final updated and
extended forecast which shall go out at least through the end of the then next
Fiscal Year and shall include a consolidated income statement, balance sheet,
and statement of cash flow, by month, and shall include assumptions as are
reasonably satisfactory to the Term Agent, each prepared in conformity with
GAAP and consistent with the Borrowers’ then current practices.


(d)   The Term 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).



 72
 









(e)   Promptly after the sending or filing thereof, as the case may be,
the Obligors shall deliver to the Term 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.


(f)    The Obligors recognize that all appraisals, inventories,
analysis, financial information, and other materials which the Term Agent may
obtain, develop, or receive with respect to the Obligors is confidential to the
Term 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.


5.10  Financial Performance Covenants.


The Borrowers shall
observe and comply with those financial performance covenants set forth on EXHIBIT 5.10 (a) certain of which covenants
are based on the Business Plan set forth on EXHIBIT
5.10 (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 Term Administrative Agent may determine
the Borrowers’ compliance with such covenants based upon financial reports and
statements provided by the Lead Borrower to the Term 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 Term Administrative
Agent.


ARTICLE VI. - Use And Collection
Of Collateral:


6.1  Use of Inventory Collateral.


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


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



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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 Term
Collateral Agent at any time in the Term 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 Default or Event of Default, the Term Collateral Agent from time to time
may verify the Receivables Collateral directly with the Borrowers’ Account
Debtors, such verification to be undertaken in keeping with commercially
reasonable commercial lending standards.


(c)   The Borrowers have no knowledge of any impairment of the validity
or collectibility of any material portion of the Accounts and the Lead Borrower
shall notify the Term 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 Term
Agent or the Revolving Loan Agent) in the event of such Borrower’s failure so
to perform.


6.5  Notification to Account Debtors.


The Term Collateral Agent
shall have the right (upon and following the occurrence and during the
continuance of any Default or Event of Default), subject to the provisions of
the Intercreditor Agreement, to notify any of the Borrowers’ Account Debtors to
make payment directly to the Term Collateral Agent and to collect all amounts
due on account of the Collateral.



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ARTICLE VII. -  CASH MANAGEMENT


7.1  Depository Accounts.


The Lead Borrower shall deliver to the Term
Collateral Agent, as a condition to the effectiveness of this Agreement, a
Blocked Account Agreement with any depository institution at which any Blocked
Account is maintained.


7.2  The Blocked Accounts.


(a)   The following “Blocked
Account(s)” have been or will be established (and are so referred to
herein):


(i)                                     Established by
each of the Obligors with each of JPMorgan Chase Bank, N.A. and Wells Fargo
Bank, N.A., 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 Borrowers have used best
efforts to cause Wachovia Bank, N.A. to enter into a Blocked Account Agreement
acceptable to the Term Collateral Agent and the Revolving Loan Collateral
Agent, Wachovia Bank, N.A. has not entered into such an agreement); or


(ii)                                  Established by each
of the Obligors with any other banks satisfactory to the Term Administrative
Agent, into which deposits from other accounts are to be directed and from
which the Obligors shall not make disbursements other than as permitted
by the Term Administrative Agent.


(b)   The contents of each account and of the Blocked Account
constitutes Collateral and Proceeds of Collateral.


(c)   The Obligors shall not establish any Blocked Account hereafter
except upon not less than thirty (30) days written notice to the Term
Collateral Agent and the delivery to the Term 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 Term
Administrative Agent).


(e)   Notwithstanding anything to the contrary contained in this Section
7.2 or elsewhere in this Agreement, each Blocked Account Agreement shall
provide (except as the Term Collateral Agent may otherwise agree in writing)
that, until Term Collateral Agent has notified (subject to the provisions of
the Intercreditor Agreement) the financial institution maintaining such Blocked
Account in writing to the contrary, 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.  Term Collateral Agent
shall be entitled, at its election, subject to the provisions of the Intercreditor




 75
 









Agreement, to give the aforementioned
notification to such financial institution at any time after the occurrence and
during the continuance of an Event of Default.


7.3  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 Term 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, another account permitted
hereunder (and, in such case, only if the funds in such account are deposited
and/or transferred to a Blocked Account or as otherwise set forth in the
Revolving Loan Agreement) or as otherwise set forth in the Revolving Loan
Agreement.


(b)   The Obligors shall cause the ACH or wire transfer to a Blocked
Account or as otherwise provided in the Revolving Loan Agreement, and after the
obligations under the Revolving Loan Agreement have been paid in full, as
designated by Term Collateral Agent (or, during any Event of Default, subject
to the terms of the Intercreditor Agreement shall permit the Term Agent to
cause such daily ACH or wire transfers to a Blocked Account), no less
frequently than weekly (and, during any Event of Default, no less frequently
than daily) of the following:


(i)                                     The contents of
each Deposit Account (other than the Blocked Accounts and Exempt DDAs (as
defined in the Revolving Loan Agreement, including any accounts agreed to be
Exempt DDAs by the Revolving Loan Agent as provided in the Revolving Loan
Agreement).  Each such transfer to be net
of any minimum balance, not to exceed $2,500 multiplied by the number of stores
from which receipts are deposited into such Deposit Account, as may be required
to be maintained in the subject Deposit Account by the bank at which such
Deposit Account is maintained.


(ii)                                  The proceeds of all
credit card charges.


Upon the Term Collateral
Agent’s request therefore, telephone advice (confirmed by written notice) shall
be provided to the Term Collateral Agent on each Business Day on which any such
transfer is made.


(c)   During any Event of Default, the Borrowers shall cause the daily
ACH or wire transfer as designated by Term Collateral Agent (or shall permit
the Term Collateral Agent to cause such daily ACH or wire transfers as
designated by Term Collateral Agent), of then entire ledger balance of each
Blocked Account, net of such minimum balance, not to exceed $2,500, as may be
required to be maintained in the Blocked Account by the depository at which the
Blocked Account is maintained.


(d)   In the event that, notwithstanding the provisions of this Section
7.3, 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 Term
Collateral Agent and shall not be commingled with any of the Obligors’ 



 76
 









other funds or deposited in any account of
the Borrowers other than as set forth herein or as instructed by the Term Collateral
Agent.


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


(i)                                     Funds paid to the
Term Agent shall be deemed to have been received on the Business Day when they
are good and collected funds, provided that
notice of such payment is available to the Term Agent by 2:00 p.m. on that
Business Day.


(ii)                                  All payments to the
Term Agent are subject to clearance and collection.


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 Term Collateral Agent, for the
benefit of the Term Agents and the Term Lenders, a continuing security interest
in and to, and assigns to the Term 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 (all of which,
together with any other property in which the Term Agent may in the future be
granted a security interest, is referred to herein as the “Collateral”):


(a)   All Accounts.


(b)   All Inventory.


(c)   All General Intangibles.


(d)   All Goods (including all Equipment).


(e)   All Chattel Paper.


(f)    All Leasehold Interests.


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


(h)   All Letter-of-Credit Rights.


(i)    All Payment Intangibles.


(j)    All Supporting Obligations.



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(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, 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
products, Proceeds, substitutions, and accessions of or to any of the foregoing.


For
the avoidance of doubt, Collateral shall at no time include any assets or
property contributed to any Approved Security-Free SERP or related
Security-Free Rabbi Trust.


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 Term Agent and shall
continue in full force and effect applicable to all Liabilities until all
Liabilities have been paid and/or satisfied in full, and the security interest
granted herein is specifically terminated in writing by a duly authorized
officer of the Term Collateral Agent.


8.3  Perfection of Security Interests.


(a)   Each of the Obligors agrees to take all action that the Term
Collateral Agent may request as a matter of nonbankruptcy law to perfect and
protect the Term Collateral Agent’s Collateral Interest in the Collateral and
for such Collateral Interest to obtain the priority therefor contemplated
hereby, including, without limitation, executing and delivering such documents
and



 78














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 Term Collateral Agent may
request.  Obligors irrevocably and
unconditionally authorize the Term Collateral Agent to file at any time and
from time to time such financing statements with respect to the Collateral
naming the Term Collateral Agent or its designee as the secured party and
Obligors as debtors, as Term 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 Term Collateral Agent promptly upon the Term Agent’s
request.  Obligors hereby authorize Term
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 Term Collateral Agent or its designee as secured
party and Obligors as debtors.


(b)   No Obligor has any Chattel Paper (whether tangible
or electronic) or instruments as of the date hereof.  In the event that any Obligor shall be
entitled to or shall receive any Chattel Paper or instrument after the date
hereof, such Obligor or the Lead Obligor shall promptly notify Term 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 Term 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 Term Collateral
Agent may from time to time specify, in each case except as Term Collateral
Agent may otherwise agree.  At Term
Collateral Agent’s option, such Obligor or the Lead Borrower shall, or Term
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 Term 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 Term
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 Term Collateral Agent
thereof in writing.  Promptly upon Term
Collateral Agent’s request, such Obligor or the Lead Borrower shall take, or
cause to 



 79
 








be taken, such actions as Term Collateral Agent may reasonably request
to give Term 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 Term
Collateral Agent, accompanied by such instruments of transfer or assignment
duly executed in blank as Term 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 Term Collateral Agent thereof and shall as Term Collateral
Agent may specify, either (A) cause the issuer to agree to comply with
instructions from Term Collateral Agent as to such securities, without further
consent of such Obligor or such nominee, or (B) arrange for Term 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)  Term 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 Term 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 Term Collateral Agent, and (C)
on or before the opening of such investment account, securities account or
other similar account 



 80
 








with a securities intermediary or commodity
intermediary, such Obligor or the Lead Borrower shall as Term Collateral Agent
may specify either (1) execute and deliver, and cause to be executed and
delivered to Term Collateral Agent, an investment property control agreement
(in form and substance acceptable to the Term 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 Term Collateral Agent to become
the entitlement holder with respect to such investment property on terms and
conditions acceptable to Term 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 Term Collateral Agent thereof in
writing.  Such Obligor or the Lead
Borrower shall immediately, as Term Collateral Agent may specify, either (i)
deliver, or cause to be delivered to Term 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 Term Collateral Agent, consenting to the
assignment of the proceeds of the letter of credit to Term Collateral Agent by
such Obligor and agreeing to make all payments thereon directly to Term
Collateral Agent or as Term Collateral Agent may otherwise direct or (ii) cause
Term Collateral Agent to become, at such Obligor’s expense, the transferee
beneficiary of the letter of credit, banker’s acceptance or similar instrument
(as the case may be).


(f)    No Obligor has any commercial tort claims as of the
date hereof.  In the event that any Obligor
shall at any time after the date hereof have any commercial tort claims, such
Obligor or the Lead Borrower shall promptly notify Term 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 Term 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 Term Collateral Agent shall be deemed to constitute such grant to Term
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 Term
Agent otherwise provided herein or otherwise arising by the execution by
Obligors of this Agreement, Term Agent is hereby irrevocably authorized from
time to time and at any time to file such financing statements naming Term
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 Term Agent’s request,
execute and deliver, or cause to be executed and delivered,  to Term Agent such other agreements,
documents and instruments as Term 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 



 81
 








(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 Term 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 Term 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 Term Collateral Agent’s security interest has not been perfected.


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


9.1                               APPOINTMENT
AS ATTORNEY-IN-FACT.


Each Obligor hereby
irrevocably constitutes and appoints the Term Collateral Agent as such Obligor’s
true and lawful attorney, with full power of substitution, following the
occurrence and during the continuance of an Event of Default, to convert the
Collateral into cash at the sole risk, cost, and expense of the Obligors, but
for the ratable benefit of the Term Collateral Agent. The rights and powers
granted the Term Collateral Agent by this appointment include but are not
limited to the right and power, following the occurrence and during the
continuance of an Event of Default, to:


(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 Term
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 Term 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
Term 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.



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(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 Term 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 Term 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 Term
Collateral Agent has had an opportunity to be heard) which determination
includes a specific finding that the subject act or omission to act had been
grossly negligent or in actual bad faith.


ARTICLE X. -  Events
of Default:


The occurrence of any
event described in this Article X respectively shall constitute an “Event of Default” herein.  Upon the occurrence of any Event of Default
described in Section 10.9, any and all Liabilities shall become due
and payable without any further act on the part of the Term Agent. Upon the
occurrence of any other Event of Default, the Term 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 Term Agent or Term
Lenders and the Obligors and instruments and papers heretofore, now or
hereafter given the Term Agent or Term Lenders.


10.1                        Failure to Pay Term Loan and other
Liabilities.


The failure by the
Obligors to pay any amount when due under the Term Loan or to pay when due (or
upon demand, if payable on demand) any other Liability.



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10.2                        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 hereof, and included in any of the following provisions hereof:




	
  Section

  	
   

  	
  Relates
  to:

  
	
   

  	
   

  	
   

  
	
  4.3(b)

  	
   

  	
  Notice of Name Change

  
	
  4.6

  	
   

  	
  Location of Collateral

  
	
  4.7

  	
   

  	
  Title to Assets

  
	
  4.8

  	
   

  	
  Indebtedness

  
	
  4.9

  	
   

  	
  Insurance Policies

  
	
  4.15

  	
   

  	
  Pay taxes

  
	
  4.20

  	
   

  	
  Dividends, Investments, Corporate Actions

  
	
  4.24

  	
   

  	
  Affiliate Transactions

  
	
  4.25

  	
   

  	
  Further Assurances

  
	
  6.1

  	
   

  	
  Use of Collateral

  
	
  Article V

  	
   

  	
  Reporting Requirements and

  Financial Performance Covenants

  
	
  Article VII

  	
   

  	
  Cash Management

  






 


10.3                        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, or 10.2 or of the Lead Borrower’s receipt of written notice from the
Term Administrative Agent of the breach of any of those Sections, to promptly,
punctually, faithfully and timely perform, discharge, or comply with any such
covenant or Liability not otherwise described in Sections 10.1, or 10.2.


10.4                        Misrepresentation.


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



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10.5                        Acceleration of Other Debt. Breach
of Lease.


(a)   The occurrence of any event of default or
acceleration of the liabilities under the Revolving Loan Agreement that has not
been waived as provided in the Revolving Loan Agreement.


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


(c)   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.


(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, except to the extent being contested in good faith and for
which adequate reserves have been established by such Obligor.


10.6                        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 Term Agent and the Obligors or instrument
given by the Obligors to the Term Agent and the expiry, without cure, of any
applicable grace period (notwithstanding that the subject Term Agent may not
have exercised all or any of its rights on account of such breach or default).


10.7                        Attachment; Judgment; Restraint of
Business.


(a)   The service of process upon the Term Agent or the
Term 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 Term Agent or the Term Lenders or such Participant.



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(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.


10.8                        Business Failure.


Any act by, against, or
relating to any Obligor, or its property or assets, which act constitutes the
determination, by such Obligor, to initiate a program of partial or total self-liquidation;
application for, consent to, or sufferance of the appointment of a receiver,
trustee, or other person, pursuant to court action or otherwise, over all, or
any part of any  Obligor’s property; the
granting of any trust mortgage or execution of an assignment for the benefit of
the creditors of any Obligor, or the occurrence of any other voluntary or
involuntary liquidation or extension of debt agreement for any Obligor; the
offering by or entering into by any Obligor of any composition, extension, or
any other arrangement seeking relief from or extension of the debts of such
Obligor; or the initiation of any judicial or non-judicial proceeding or
agreement by, against, or including any Obligor which seeks or intends to
accomplish a reorganization or arrangement with creditors; and/or the
initiation by or on behalf of such Obligor of the liquidation or winding up of
all or any part of such  Obligor’s
business or operations.


10.9                        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.


10.10                 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.



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10.11                 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.


10.12                 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.


10.13                 Challenge to Loan Documents.


(a)   Any challenge by or on behalf of any Borrower or any
guarantor of the Liabilities to the validity of any Loan Document or the
applicability or enforceability of any Loan Document strictly in accordance
with the subject Loan Document’s terms or which seeks to void, avoid, limit, or
otherwise adversely affect any security interest created by or in any Loan
Document or any payment made pursuant thereto.


(b)   Any determination by any court or any other judicial
or government authority that any Loan Document is not enforceable strictly in
accordance with the subject Loan Document’s terms or which voids, avoids,
limits, or otherwise adversely affects any security interest created by any
Loan Document or any payment made pursuant thereto.


10.14                 Change in Control.


Any Change in Control.


10.15                 Uninsured Losses.


Any material loss,
theft, damage or destruction of any of the Collateral not fully covered
(subject to such deductibles as Term Administrative Agent and Term Lenders
shall have permitted) by insurance.


10.16                 ERISA.


A reportable event
shall occur which Term 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.



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ARTICLE XI. - Rights and
Remedies Upon Default:


Upon the occurrence of
any Event of Default described in Section 10.9 and upon Acceleration,
and at all times thereafter, the Term Agent shall have the following rights and
remedies in addition to all of the rights, remedies, powers, privileges, and
discretions available to Term Agent prior to the occurrence of an Event of
Default.


11.1                        Rights of Enforcement.


The Term Collateral Agent
shall have all of the rights and remedies of a secured party upon default under
the UCC, in addition to which the Term Collateral Agent shall have all and each
of the following rights and remedies:


(a)   To give notice to any bank at which any account or
Blocked Account is maintained and in which Proceeds of Collateral are
deposited, to turn over such Proceeds directly to the Term Collateral Agent.


(b)   To give notice to any of the Obligors’ customs
brokers to follow the instructions of the Term 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 Term 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 Term
Collateral Agent deems advisable, having due regard to compliance with any
statute or regulation which might affect, limit, or apply to the Term
Collateral Agent’s disposition of the Collateral.


(b)   The Term Collateral Agent, in the exercise of the
Term Collateral Agent’s rights and remedies upon default, may conduct one or
more going out of business sales, in the 



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Term 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 Term
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 Term 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 Term 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 Term Collateral Agent shall provide the Lead Borrower
with such notice as may be practicable under the circumstances), the Term
Collateral Agent shall give the Lead Borrower at least ten (10) days prior
written notice of the date, time, and place of any proposed public sale, and of
the date after which any private sale or other disposition of the Collateral
may be made.  The Obligors agree that
such written notice shall satisfy all requirements for notice to the Obligors
which are imposed under the UCC or other applicable law with respect to the
exercise of the Term Collateral Agent’s rights and remedies upon default.


(d)   The Term Collateral Agent or the Term 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 Term 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 Term Collateral Agent.


11.3                        Occupation of Business Location.


In connection with the
Term Collateral Agent’s exercise of the Term Collateral Agent’s rights under
this Article XI, the Term 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 Term Collateral Agent.  The
Term Collateral Agent shall not be required to remove any of the Collateral
from any such premises upon the Term Agent’s taking possession thereof, and may
render any Collateral unusable to the Obligors. 
In no event shall the Term Agent be liable to the Obligors for use or
occupancy by the Term 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 Term Collateral Agent’s exercise of
the Term Agent’s Rights and Remedies.


11.4                        Grant of Nonexclusive License.


Each Obligor hereby
grants to the Term 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 Term Collateral 



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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 Term Collateral Agent
may require the Obligors to assemble the Collateral and make it available to
the Term Collateral Agent at the Obligors’ sole risk and expense at a place or
places which are reasonably convenient to both the Term Collateral Agent and
Obligors.


11.6                        Rights and Remedies.


The rights, remedies,
powers, privileges, and discretions of the Term Agent hereunder, under any
other Loan Document or under applicable law (herein, the “Term 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 Term
Agent in exercising or enforcing any of the Term Agent’s Rights and Remedies
shall operate as, or constitute, a waiver thereof.  No waiver by the Term 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
Term Agent’s Rights or Remedies, and no express or implied agreement or
transaction of whatever nature entered into between the Term Agent and any
person, at any time, shall preclude the other or further exercise of the Term
Agent’s Rights and Remedies.  No waiver
by the Term Agent of any of the Term 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 Term
Agent’s Rights and Remedies may be exercised at such time or times and in such
order of preference as the Term Agent may determine. The Term Agent’s Rights
and Remedies may be exercised without resort or regard to any other source of
satisfaction of the Liabilities.


11.7                        Application of Proceeds.


After the
occurrence and during the continuance of any Event of Default and acceleration
of the Liabilities, all proceeds realized from any Obligor or on account of any
Collateral owned by a Obligor or any payments in respect of any Liabilities and
all proceeds of the Collateral, shall be applied, subject to the terms of the
Intercreditor Agreement, in the following order:


FIRST, ratably to
pay the Liabilities in respect of Costs of Collection, fees, indemnities and
other amounts then due to the Term Agents until paid in full;


SECOND, ratably to
pay any Costs of Collection and indemnities, and to pay any fees then due to
the Term Lenders, until paid in full;


THIRD, Pro Rata to
pay interest accrued in respect of the Liabilities until paid in full;


FOURTH, Pro Rata
to pay principal due in respect of the Term Loan until paid in full;



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FIFTH, ratably to
pay any other outstanding Liabilities until paid in full; and


SIXTH, to the Lead
Borrower or such other Person entitled thereto under applicable law.


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 Term Agent:


Bank of America,
N.A..


100 Federal Street


MA5-100-11-04


Boston, MA  02110


Attention:  Mark M. Andrew, Principal


Fax:  (617) 434-6669


With a copy to:


Riemer &
Braunstein LLP


Three Center Plaza


Boston, MA 02108


Attention:  David S. Berman, Esquire


Fax:  (617) 880-3456


If to the Obligors (other than Cave Springs, Inc.):


c/o Lead Borrower


Mothers Work, Inc.


456 North Fifth
Street


Philadelphia,
PA  19123


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



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Attention:  David G. Smith, Esquire


Fax:  (215) 981-4750


If to the Cave Springs,
Inc.:


Cave Springs, Inc.


Little Falls Centre II


2751
Centerville Road


suite 3207


Wilmington,
DE  19808


Attention:
Assistant Secretary


Fax: (302) 225-1594


With a copy to:


Mothers Work, Inc.


456 North Fifth
Street


Philadelphia,
PA  19123


Attention:  Edward M. Krell, Executive Vice
President-Chief Financial Officer


Fax: (215) 923-0975


And:


Pepper Hamilton
LLP


3000 Two Logan
Square


Eighteenth and
Arch Streets


Philadelphia,
PA  19103-2799


Attention:  David G. Smith, Esquire


Fax:  (215) 981-4750


If
to any Term Lender, to the address set forth on such Term Lender’s signature
page hereto or to any Assignment and Acceptance entered into by such Term
Lender.


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.



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(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)   Term Collateral Agent will give the Lead Borrower
notice of its intention to foreclose on its security interests by recognized
overnight express delivery.


ARTICLE XIII. - Term:


13.1                        Termination.


This Agreement and the Loan
Documents shall remain in effect until the Termination Date.


13.2                        Actions On Termination.


On the Termination Date,
the Borrowers shall pay the Term Administrative Agent (whether or not then
due), in immediately available funds, all then Liabilities including, without
limitation: any payments due on account of the indemnification obligations
included in Section 2.6(f); any accrued and unpaid Unused Fee; any
accrued and unpaid fees pursuant to the Agent Fee Letter; and all unreimbursed
costs and expenses of Term Agent for which the Borrowers are responsible,
including, without limitation, all Costs of Collection.  Until such payment, all provisions of this
Agreement, other than those contained in Article II which place an obligation
on the Term Agent to make any loans or advances or to provide financial
accommodations under the Term Loan or otherwise, shall remain in full force and
effect until all Liabilities shall have been paid in full.  The release by the Term Collateral Agent of
the Collateral Interests granted the Term Agent by the Obligors hereunder may
be upon such conditions and indemnifications as the Term Collateral Agent may
require.



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ARTICLE XIV. - General:


14.1                        Protection of
Collateral.


The Term 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 Term
Agent.


14.2                        Publicity.


The Term 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 Term 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 Term Agent and the Term 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 Term
Agent or Term Lenders assigns or transfers its rights under this Agreement
pursuant to Article XVI hereof, the assignee shall thereupon succeed to and
become vested with all rights, powers, privileges, and duties of such assignor
hereunder and such assignor shall thereupon be discharged and relieved from its
duties and obligations hereunder.


14.4                        Severability.


Any determination that
any provision of this Agreement or any application thereof is invalid, illegal,
or unenforceable in any respect in any instance shall not affect the validity,
legality, or enforceability of such provision in any other instance, or the
validity, legality, or enforceability of any other provision of this Agreement.


14.5                        Amendments; Course of Dealing.


(a)   This Agreement and the other Loan Documents
incorporate all discussions and negotiations between the Obligors, the Term
Agent and the Term 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 Term Agent or Term 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.


(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 Term 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
Term Agent then by a duly authorized officer thereof) except as otherwise
provided in Section 15.14 hereof.  



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Any modification, amendment, or waiver provided by the Term
Administrative Agent shall be in reliance upon all representations and
warranties theretofore made to the Term 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 Term 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 Term 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
Term Agent.


14.7                        Application of Proceeds.


The proceeds of any
collection, sale, or disposition of the Collateral, or of any other payments
received hereunder, shall be applied towards the Liabilities in such order and
manner as the Term Administrative Agent determines in its sole discretion,
consistent, however, with the provisions of this Agreement.  The Obligors shall remain liable for any
deficiency remaining following such application.


14.8                        Increased Costs.


If the Term
Administrative Agent or Term 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 Term
Agent or Term 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 Term Agent or Term
Lenders could have achieved but for such adoption, change or compliance (taking
into consideration the Term Agent’s or Term Lenders’ policies with respect to
capital adequacy) by a material amount, then from time to time, after
submission by the Term Administrative Agent or Term 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 Term Agent or Term Lenders, as applicable, such
additional amount or amounts (“Capital
Adequacy Charge”) as will compensate the Term Agent or Term Lenders
for such reduction, such Capital Adequacy Demand to be made with reasonable
promptness following such determination. 
A certificate of the Term Administrative Agent or Term 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 Term Agent or Term Lenders, and the 



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method by which such
amount was determined.  In determining
such amount, the Term Administrative Agent or Term Lenders may use any
reasonable averaging and attribution method, applied on a non-discriminatory
basis.


14.9                        Costs and Expenses of the Term Agent
and Term Lenders.


The Borrowers shall pay
from time to time on demand all Costs of Collection and all reasonable costs,
expenses, and disbursements of (including reasonable attorneys’ fees and
expenses) which are incurred by the Term Agent 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 Term Agent and all reasonable costs and expenses
(including reasonable attorney’s fees and expenses) incurred by the Term
Lenders to the Term Lenders’ Special Counsel, following the occurrence of any
Event of Default.


(b)   The Borrowers authorize the Term Administrative
Agent to pay all such fees and expenses. 
All such fees and expenses shall constitute Liabilities hereunder.


(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 Term 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 Term Agent or the Term Lenders may be reproduced by the Term Agent or Term
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.



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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 Term Agent may elect in the Term Agent’s sole
discretion.  By execution and delivery of
this Agreement, each Borrower, for itself and in respect of its property,
accepts, submits, and consents generally and unconditionally, to the
jurisdiction of the aforesaid courts.


(b)   Each Obligor WAIVES
personal service of any and all process upon it, and irrevocably consents to
the service of process out of any of the aforementioned courts in any such
action or proceeding by the mailing of copies thereof by certified mail,
postage prepaid, to Lead Borrower at Lead Borrower’s address for notices as
specified herein, such service to become effective five (5) Business Days after
such mailing.


(c)   Each Obligor WAIVES
any objection based on forum non conveniens and any objection to venue of any
action or proceeding instituted under any of the Loan Documents and consents to
the granting of such legal or equitable remedy as is deemed appropriate by the
Court.


(d)   Nothing herein shall affect the right of the Term
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 Term Agent, the Term Lenders,
and any Participant and any of their respective agents, employees, officers, or
representatives (each, an “Indemnified Person”),
harmless of and from any claim brought or threatened against any Indemnified
Person by any Borrower, any guarantor or endorser of the Liabilities, or any
other Person (as well as from reasonable attorneys’ fees, expenses, and
disbursements in connection therewith) on account of the Term Agent’s or any Term Lender’s relationship with any Obligor or
any other guarantor or endorser of the Liabilities (each of which claims
which may be defended, compromised, settled, or pursued by such Indemnified
Person with counsel of its selection, but at the expense of the Obligors;
provided that, absent a conflict of interest, Term Lenders other than the Term
Agent shall be entitled only to one counsel for all such Term Lenders) other
than any claim as to which a final determination is made in a judicial
proceeding (in which the Term Agent,
Term 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 Term Agent
or Term Lenders in favor of the Obligors, other than a 



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termination, release, or
discharge duly executed on behalf of the Term Agent or Term 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 360 day year and actual days
elapsed.


(b)   Words in the singular include
the plural and words in the plural include the singular.


(c)   Any reference, herein, to a
circumstance or event’s having “more than a de
minimis adverse effect” and any similar reference is to a
circumstance or event which (x) in a well-managed enterprise, would receive the
active attention of senior management with a view towards it being reversed or
remedied; or (y) if not reversed or remedied, could reasonably be expected to
lead to its becoming a material adverse effect.


(d)   Cross references to Sections in
this Agreement begin with the Article in which that Section appears and then
the Section to which reference is made. (For example, a reference to “Section
5.6” is to subsection 6, which appears in Article V of this Agreement).


(e)   Titles, headings (indicated by
being underlined or shown in Small Capitals) and any Table of Contents
are solely for convenience of reference; do not constitute a part of the
instrument in which included; and do not affect such instrument’s meaning,
construction, or effect.


(f)    The words “includes” and “including”
are not limiting.


(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.



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(k)   The word “or” is not exclusive.


(l)    Any reference to a Person’s “knowledge”
(or words of similar import) are to such Person’s knowledge assuming that such
Person has undertaken reasonable and diligent investigation with respect to the
subject of such “knowledge” (whether or not such investigation has actually
been undertaken).


(m)  Terms which are defined in one
section of any Loan Document are used with such definition throughout the instrument
in which so defined.


(n)   The symbol “$” refers to United
States Dollars.


(o)   Unless limited by reference to
a particular Section or provision, any reference to “herein”, “hereof”, or “within”
is to the entire Loan Document in which such reference is made.


(p)   References to “this Agreement”
or to any other Loan Document is to the subject instrument as amended to the
date on which application of such reference is being made.


(q)   Except as otherwise
specifically provided, all references to time are to Boston time.


(r)    In the determination of any
notice, grace, or other period of time prescribed or allowed hereunder:


(i)                                     Unless otherwise
provided (I) the day of the act, event, or default from which the designated
period of time begins to run shall not be included and the last day of the
period so computed shall be included unless such last day is not a Business
Day, in which event the last day of the relevant period shall be the then next
Business Day and (II) the period so computed shall end at 5:00 p.m. on the
relevant Business Day.


(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 14.15 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.



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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 Term Agent and that they cover all assets of each Borrower.


(c)   All Collateral Interests
created in favor of the Term 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 Term
Agent and, to the extent provide herein, the Term Lenders, in connection with
such Person’s relationship(s) with the Obligors shall be borne by the Obligors.


14.16                 Participations.


The Term Agent or Term
Lenders may sell participations to one or more financial institutions (a “Participant”) of all or a portion of the
Term Agent’s or Term Lenders’ rights and obligations under this Agreement,
provided, however, that except with the consent of the Borrowers (which may not
be unreasonably withheld or delayed), the only
rights granted to the participant pursuant to such participation arrangements
with respect to waivers, amendments or modifications of the Loan Documents
shall be the rights to approve waivers, amendments or modifications that would
reduce the principal of or the interest rate on any Loans, extend the term or
increase the amount of the Term Loan due to such Term Lender as it relates to
such participant, increase the availability of Loans 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 Term Agent or Term Lenders from the Term Agent’s or Term 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 Term Agent,
Term 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 Term Agent, Term 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 Term
Agent; provided that no Term Lender shall exercise any right of set off
pursuant hereto without the prior written consent of the Term Administrative
Agent.  If any Lender shall, by
exercising any right of setoff or counterclaim or otherwise, obtain payment in
respect of any principal of, interest on, or other amounts with respect to, any
of the Liabilities resulting in such Lender’s receiving payment of a proportion
of the aggregate amount of such Liabilities greater than its Pro Rata share
thereof as provided herein (including as in contravention of the priorities of
payment set forth in Section 11.7), then the Lender receiving



 100















such greater proportion shall (a) notify the Term
Administrative Agent of such fact, and (b) purchase (for cash at face value)
participations in the Liabilities of the other Lenders, or make such other
adjustments as shall be equitable, so that the benefit of all such payments
shall be shared by the Lenders ratably and in the priorities set forth in
Section 11.7, provided that if any such participations or
subparticipations are purchased and all or any portion of the payment giving
rise thereto is recovered, such participations or subparticipations shall be
rescinded and the purchase price restored to the extent of such recovery,
without interest.


14.18                 Pledges To Federal Reserve Banks.


Nothing included in this
Agreement shall prevent or limit the Term Agent or Term Lenders, from pledging
all or any portion of that Term Agent’s or Term Lenders’ interest and rights
under this Agreement to any funding source of such Term Agent or Term Lender or
to the extent that the Term Agent or Term Lenders is subject to any of the
twelve Federal Reserve Banks organized under §4 of the Federal Reserve Act (12
U.S.C. §341), provided, however,
neither such pledge nor the enforcement thereof shall release the Term Agent or
Term 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 Term Agent and Term 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 Term Agent and Term
Lenders, in establishing the facilities contemplated hereby and in providing
loans and other financial accommodations to or for the account of the Borrowers
as provided herein, whether not or in the future, is relying on such waivers.


(b)   EACH
BORROWER, AND EACH SUCH GUARANTOR, ENDORSER, AND SURETY RESPECTIVELY WAIVES THE
FOLLOWING:


(i)                                     Except
as otherwise specifically required hereby, notice of non-payment, demand,
presentment, protest and all forms of demand and notice, both with respect to
the Liabilities and the Collateral.


(ii)                                  Except
as otherwise specifically required hereby, the right to notice and/or hearing
prior to the Term Agent’s exercising of the Term Agent’s rights upon default.



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(iii)                               THE
RIGHT TO A JURY IN ANY TRIAL OF ANY CASE OR CONTROVERSY IN WHICH THE  TERM AGENT OR TERM LENDER IS OR BECOMES A
PARTY (WHETHER SUCH CASE OR CONTROVERSY IS INITIATED BY OR AGAINST THE TERM
AGENT OR TERM LENDER OR IN WHICH THE TERM AGENT OR TERM 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
TERM AGENT OR TERM 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 Term Agent
or Term 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 Term Agent may permit or require that
any of the documents, certificates, forms, deliveries or other communications,
authorized, required or contemplated by this Agreement or the Loan Documents,
be submitted to the Term 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 Term Agent,
and “Approved Electronic Form”
means an Electronic Form that has been approved in writing by the Term Agent
(which approval has not been revoked or modified by the Term Agent) and sent to
the Borrowers in an Approved Electronic Form Notice.  Except as otherwise specifically provided in
the applicable Approved Electronic Form Notice, any submissions made in an
applicable Approved Electronic Form shall have the same force and effect that
the same submissions would have had if they had been submitted in any other
applicable form authorized, required or contemplated by this Agreement or the
Loan Documents.



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14.23                 Joint Obligor Provisions.


(a)   Each
Obligor represents to the Term Agent and Term Lenders that it is an integral
part of a consolidated enterprise, and that each Obligor 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 Obligors.


(b)   Each
Obligor is, and at all times shall be, jointly and severally liable for each
and every one of the Liabilities hereunder, regardless of which Obligor
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 Obligor’s Liabilities are independent
obligations and are absolute and unconditional. 
Each Obligor, 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 Obligor for any reason other than
payment in full.  Each Obligor also
waives any defense to such Liabilities that it may have as a result of the Term
Agent’s election of or failure to exercise any right, power, or remedy, including,
without limitation, the failure to proceed first against such other Obligor or
any security it holds for such other Obligor’s Liabilities under any Loan
Document, if any.  Without limiting the
generality of the foregoing, each Obligor expressly waives all demands and
notices whatsoever (except for any demands or notices, if any, that such
Obligor expressly is entitled to receive pursuant to the terms of any Loan
Document), and agrees that the Term Agent may, without notice (except for such
notice, if any, as such Obligor expressly is entitled to receive pursuant to
the terms of any Loan Document) and without releasing the liability of such
Obligor, extend for the benefit of any other Obligor 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 Obligor, and may
proceed against each Obligor, directly and independently of any other Obligor,
as such obligee may elect in accordance with this Agreement.


(c)   Each
Obligor acknowledges that the Liabilities of such Obligor undertaken herein or
in the other Loan Documents, and the grants of security interests and liens by
such Obligor to secure Liabilities of the other Obligor could be construed to
consist, at least in part, of the guaranty of Liabilities of the other Obligor
and, in full recognition of that fact, each Obligor consents and agrees as
hereinafter set forth in the balance of this Section 14.23.  The consents, waivers, and agreements of the
Obligors that are contained in the balance of this Section 14.23 are
intended to deal with the suretyship aspects of the transactions evidenced by
the Loan Documents (to the extent that a Obligor may be deemed a guarantor or
surety for the Liabilities of another Obligor) and thus are intended to be
effective and applicable only to the extent that any Obligor has agreed to
answer for the Liabilities of another Obligor or has granted a lien or security
interest in Collateral to secure the Liabilities of another Obligor.  Conversely, the consents, waivers, and
agreements of the Obligors that are contained in the balance of this Section
14.23 shall not be applicable to the direct Liabilities of a Obligor with
respect to credit extended directly to such Obligor, and shall not be applicable
to security interests or liens on Collateral of a Obligor given to directly
secure direct Liabilities of such Obligor where no aspect of guaranty or
suretyship is involved.  Each Obligor
consents and agrees that the Term 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 



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Obligors, and without affecting the enforceability or continuing
effectiveness hereof as to such Obligor, 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
Obligor, 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 Term Lenders in their sole
and absolute discretion may determine; (g) release any other Person
(including, without limitation, any other Obligor) from any personal liability
with respect to the Liabilities or any part thereof, (h) with respect to
any Person other than such Obligor (including, without limitation, any other
Obligor), settle, release on terms satisfactory to the Term Lenders or by
operation of applicable laws or otherwise liquidate or enforce any Liabilities
and any security therefor or guaranty thereof in any manner, consent to the
transfer of any security and bid and purchase at any sale; or (i) consent
to the merger, change or any other restructuring or termination of the
corporate or partnership existence of any other Obligor 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
Obligor 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 Term
Agent may enforce the Loan Documents independently as to each Obligor and independently
of any other remedy the Term Agent at any time may have or hold in connection
with the Liabilities, and it shall not be necessary for the Term Agent to
marshal assets in favor of any Obligor 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 Obligor expressly waives any right to require the Term Agent to
marshal assets in favor of any Obligor or any other Person or to proceed
against any other Obligor or any Collateral provided by any Person, and agrees
that the Term Agent may proceed against Obligors or any Collateral in such
order as they shall determine in their sole and absolute discretion, subject to
the terms hereof.


(e)   The
Term Agent may file a separate action or actions against any Obligor, 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 Obligor agrees, for
itself, that the Term Agent and any other Obligor, or any Affiliate of any
other Obligor (other than such Obligor 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 Obligor of the Loan Documents.



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(f)    The
Term 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 Term 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 Term 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 Term 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 Obligor and whether or not any other Obligor shall have any
personal liability with respect thereto.


(g)   To
the maximum extent permitted by applicable law, each Obligor, 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 Obligor with respect to the Liabilities or with respect to
the enforceability of the Term 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 Obligor (other
than by reason of the full payment and performance of all Liabilities),
(d) any failure of the Term Agent to give notice of sale or other
disposition of Collateral to any other Obligor or any other Person other than
such waiving Obligor, or any defect in any notice that may be given to any
other Obligor for any other Person other than such waiving Obligor, 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 Term 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 Obligor or by any other
Person other than such waiving Obligor, including any failure of the Term 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 Term Agent or others that directly or indirectly results in or aids the
discharge or release of any other Obligor, or the Liabilities of any other
Obligor, 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 Term Lenders to any Obligor under any Loan Document
remains in effect, no Obligor shall have any right of subrogation,
contribution, reimbursement or 



 105
 









indemnity, and each Obligor expressly waives any right to enforce any
remedy that the Term 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 Term Agent.  Except to the extent expressly provided for
in any Loan Document, each Obligor 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
Obligor hereby agrees to keep each other Obligor 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 Obligor 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 Obligor, and of the ability of
each other Obligor to perform its Liabilities under the Loan Documents, and in
particular as to any adverse developments with respect to any thereof.  Each Obligor hereby agrees, in light of the
foregoing mutual covenants to inform each other, and to keep themselves and
each other informed as to such matters, that the Term Agent shall have no duty
to inform any Obligor of any information pertaining to the business, affairs,
finances, or financial condition of any other Obligor, or pertaining to the
ability of any other Obligor 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 Obligors to continue to be
jointly and severally liable for, or to provide Collateral for, Liabilities of
one or more of the other Obligors.  To
the fullest extent permitted by applicable law, each Obligor hereby expressly
waives any duty of the Term Agent to inform any Obligor of any such information.


(i)    Obligors
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 Obligors otherwise may have against other
Obligors, the Term 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.


14.24                 Confidentiality.


(a)   Obligors
and each Term 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 Term
Agent in the administration of the credit facility contemplated by this
Agreement.



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(ii)                                  Proprietary
forms and formats utilized by any Term Agent in providing reports to the Term
Lenders pursuant hereto, which forms or formats are not of general currency.


(b)           Term Agent and each Term Lender will
maintain, as confidential (other than to their respective attorneys, agents,
funding sources, 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 Term Agent or
such Term 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 Term
Agent, any Term 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.


14.25                 Intercreditor Agreement


The Obligors, the Term
Agents, and the Term Lenders acknowledge that the exercise of certain of the
Term Agents’ rights and remedies hereunder may be subject to, and restricted
by, the provisions of the Intercreditor Agreement.  Nothing contained in the Intercreditor
Agreement shall be deemed to modify any of the provisions of this Agreement and
the other Loan Documents, which, as among the Obligors, the Term Agents, and
the Term Lenders shall remain in full force and effect.


ARTICLE XV. - the Term
Agent


15.1                        Appointment and Authority.


(a)   Each
of the Term Lenders hereby irrevocably appoints Bank of America, N.A. to act on
its behalf as the Term Administrative Agent hereunder and under the other Loan 



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Documents and authorizes the Term Administrative Agent to take such
actions on its behalf and to exercise such powers as are delegated to the Term
Administrative Agent by the terms hereof or thereof, together with such actions
and powers as are reasonably incidental thereto.  The provisions of this Article are solely for
the benefit of the Term Administrative Agent and the Term Lenders, and no
Obligor or any Subsidiary thereof shall have rights as a third party
beneficiary of any of such provisions.


(b)   Each
of the Term Lenders hereby irrevocably appoints Bank of America, N.A. as Term
Collateral Agent and authorizes the Term Collateral Agent to act as the agent
of such Term Lender for purposes of acquiring, holding and enforcing any and
all Liens on Collateral granted by any of the Obligors to secure any of the
Liabilities, together with such powers and discretion as are reasonably incidental
thereto.  In this connection, the Term
Collateral Agent, as “collateral agent” and any co-agents, sub-agents and
attorneys-in-fact appointed by the Term Collateral Agent pursuant to Section
15.5 for purposes of holding or enforcing any Lien on the Collateral (or
any portion thereof) granted under the Collateral Documents, or for exercising
any rights and remedies thereunder at the direction of the Term Collateral
Agent), shall be entitled to the benefits of all provisions of this Article
XV and Article XIV, as though such co-agents, sub-agents and
attorneys-in-fact were the “collateral agent” under the Loan Documents, as if
set forth in full herein with respect thereto.


15.2                        Rights as a Term Lender.


The Persons serving as
the Term Agents hereunder shall have the same rights and powers in their
capacity as a Term Lender as any other Term Lender and may exercise the same as
though they were not the Term Administrative Agent or the Term Collateral Agent
and the term “Term Lender” or “Term Lenders” shall, unless otherwise expressly
indicated or unless the context otherwise requires, include the Person serving
as the Term Administrative Agent or the Term Collateral Agent hereunder in its
individual capacity.  Such Person and its
Affiliates may accept deposits from, lend money to, act as the financial
advisor or in any other advisory capacity for and generally engage in any kind
of business with the Loan Parties or any Subsidiary or other Affiliate thereof
as if such Person were not the Term Administrative Agent or the Term Collateral
Agent hereunder and without any duty to account therefor to the Term Lenders.


15.3                        Exculpatory provisions.


The Term Agents shall not
have any duties or obligations except those expressly set forth herein and in
the other Loan Documents.  Without
limiting the generality of the foregoing, the Term Agents:


(a)   shall
not be subject to any fiduciary or other implied duties, regardless of whether
an Event of Default has occurred and is continuing;


(b)   shall
not have any duty to take any discretionary action or exercise any
discretionary powers, except discretionary rights and powers expressly
contemplated hereby or by the other Loan Documents that the Term Administrative
Agent or the Term Collateral Agent, 



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as applicable, is required to exercise as directed in writing by the
Required Lenders (or such other number or percentage of the Term Lenders as
shall be expressly provided for herein or in the other Loan Documents), provided
that no Term Agent shall be required to take any action that, in its respective
opinion or the opinion of its counsel, may expose such Term Agent to liability
or that is contrary to any Loan Document or applicable law; and


(c)   shall
not, except as expressly set forth herein and in the other Loan Documents, have
any duty to disclose, and shall not be liable for the failure to disclose, any
information relating to any Obligor or any of its Affiliates that is
communicated to or obtained by the Person serving as the Term Administrative
Agent, the Term Collateral Agent or any of its Affiliates in any capacity.


No Term Agent shall be
liable for any action taken or not taken by it (i) with the consent or at the
request of the Required Lenders (or such other number or percentage of the Term
Lenders as shall be necessary, or as such Term Agent shall believe in good
faith shall be necessary) or (ii) in the absence of its own gross negligence or
willful misconduct as determined by a final and non-appealable judgment of a
court of competent jurisdiction.  The
Term Agents shall not be deemed to have knowledge of any Event of Default
unless and until notice describing such Event of Default is given to such Term
Agent by the Obligors or a Term Lender.


The Term Agents
shall not be responsible for or have any duty to ascertain or inquire into (i)
any statement, warranty or representation made in or in connection with this
Agreement or any other Loan Document, (ii) the contents of any certificate,
report or other document delivered hereunder or thereunder or in connection
herewith or therewith, (iii) the performance or observance of any of the
covenants, agreements or other terms or conditions set forth herein or therein
or the occurrence of any Event of Default, (iv) the validity, enforceability,
effectiveness or genuineness of this Agreement, any other Loan Document or any
other agreement, instrument or document or the creation, perfection or priority
of any Lien purported to be created hereby or by any other Loan Document, (v)
the value or the sufficiency of any Collateral, or (vi) the satisfaction of any
condition set forth in Article III or elsewhere herein, other than to
confirm receipt of items expressly required to be delivered to the Term Agents.


15.4                        Reliance by Term Agents.


Each Term Agent shall be
entitled to rely upon, and shall not incur any liability for relying upon, any
notice, request, certificate, consent, statement, instrument, document or other
writing (including, but not limited to, any electronic message, Internet or
intranet website posting or other distribution) believed by it to be genuine
and to have been signed, sent or otherwise authenticated by the proper
Person.  Each Term Agent also may rely
upon any statement made to it orally or by telephone and believed by it to have
been made by the proper Person, and shall not incur any liability for relying
thereon.  In determining compliance with
any condition hereunder to the making of a Loan that by its terms must be
fulfilled to the satisfaction of a Term Lender, the Term Administrative Agent
may presume that such condition is satisfactory to such Term Lender unless the
Term Administrative Agent shall have received written notice to the contrary
from such Term Lender prior to the making of such Loan.  Each Term Agent may consult with 



 109
 









legal counsel (who may be
counsel for any Obligor), independent accountants and other experts selected by
it, and shall not be liable for any action taken or not taken by it in
accordance with the advice of any such counsel, accountants or experts.


15.5                        Delegation of Duties.


Each Term Agent may
perform any and all of its duties and exercise its rights and powers hereunder
or under any other Loan Document by or through any one or more sub-agents
appointed by such Term Agent.  Each Term
Agent and any such sub-agent may perform any and all of its duties and
exercise its rights and powers by or through their respective Affiliates or the
partners, directors, officers, employees, agents and advisors of such Person
and of such Person’s Affiliates (the “Related
Parties”).  The exculpatory
provisions of this Article shall apply to any such sub-agent and to the
Related Parties of the Term Agents and any such sub-agent, and shall
apply to their respective activities in connection with the syndication of the
credit facilities provided for herein as well as activities as such Term Agent.


15.6                        Resignation of Term Agents.


Either Term Agent may at
any time give written notice of its resignation to the Term Lenders and the
Lead Borrower.  Upon receipt of any such
notice of resignation, the Required Lenders shall have the right, in
consultation with the Lead Borrower, to appoint a successor, which shall be a
bank with an office in the United States, or an Affiliate of any such bank with
an office in the United States.  If no such
successor shall have been so appointed by the Required Lenders and shall have
accepted such appointment within 30 days after the retiring Term Agent gives
notice of its resignation, then the retiring Term Agent may on behalf of the
Term Lenders, appoint a successor Term Administrative Agent or Term Collateral
Agent, as applicable, meeting the qualifications set forth above; provided
that if the Term Administrative Agent or the Term Collateral Agent shall notify
the Lead Borrower and the Term Lenders that no qualifying Person has accepted
such appointment, then such resignation shall nonetheless become effective in
accordance with such notice and (1) the retiring Term Agent shall be
discharged from its duties and obligations hereunder and under the other Loan
Documents (except that in the case of any Collateral held by the Term
Collateral Agent on behalf of the Term Lenders under any of the Loan Documents,
the retiring Term Collateral Agent shall continue to hold such collateral
security until such time as a successor Term Collateral Agent is appointed) and
(2) all payments, communications and determinations provided to be made
by, to or through the Term Administrative Agent shall instead be made by or to
each Term Lender directly, until such time as the Required Lenders appoint a
successor Term Administrative Agent as provided for above in this Section.  Upon the acceptance of a successor’s
appointment as Term Administrative Agent or Term Collateral Agent, as
applicable, hereunder, such successor shall succeed to and become vested with
all of the rights, powers, privileges and duties of the retiring (or retired)
Term Agent, and the retiring Term Agent shall be discharged from all of its
duties and obligations hereunder or under the other Loan Documents (if not
already discharged therefrom as provided above in this Section).  The fees payable by the Borrowers to a
successor Term Administrative Agent shall be the same as those payable to its
predecessor unless otherwise agreed between the Lead 



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Borrower and such
successor.  After the retiring Term Agent’s
resignation hereunder and under the other Loan Documents, the provisions of
this Article shall continue in effect for the benefit of such retiring Term
Agent, its sub-agents and their respective Related Parties in respect of
any actions taken or omitted to be taken by any of them while the retiring Term
Agent was acting as Term Administrative Agent or Term Collateral Agent
hereunder.


15.7                        Non-Reliance on Term Administrative
Agent and Other Term Lenders.


Each Term Lender
acknowledges that it has, independently and without reliance upon the Term
Agents or any other Term Lender or any of their Related Parties and based on
such documents and information as it has deemed appropriate, made its own
credit analysis and decision to enter into this Agreement.  Each Term Lender also acknowledges that it
will, independently and without reliance upon the Term Agents or any other Term
Lender or any of their Related Parties and based on such documents and
information as it shall from time to time deem appropriate, continue to make
its own decisions in taking or not taking action under or based upon this
Agreement, any other Loan Document or any related agreement or any document
furnished hereunder or thereunder. 
Except as provided in Section 15.10, the Term Agents shall not
have any duty or responsibility to provide any Term Lender with any other
credit or other information concerning the affairs, financial condition or
business of any Obligor that may come into the possession of the Term Agents.


15.8                        Collateral and Guaranty Matters.


The Credit Parties
irrevocably authorize the Term Agents, at their option and in their discretion:


(a)   to
release any Lien on any property granted to or held by the Term Collateral
Agent under any Loan Document (i) upon payment in full of all Liabilities
(other than contingent indemnification obligations for which no claim has been
asserted), (ii) that is sold or otherwise transferred or to be sold or to be
transferred as part of or in connection with any sale or other transfer
permitted hereunder or under any other Loan Document, (iii) to the extent
provided in the Intercreditor Agreement, or (iv) if approved, authorized or
ratified in writing by the Required Lenders;


(b)   to
subordinate any Lien on any property granted to or held by the Term Collateral
Agent under any Loan Document to the holder of any Lien on such property that
is permitted by clause (g) of the definition of Permitted Encumbrances; and


(c)   to
release any Guarantor from its obligations under the Guaranty if such Person
ceases to be a Subsidiary as a result of a transaction permitted hereunder.


Upon request by any Term
Agent at any time, the Required Lenders will confirm in writing such Term Agent’s
authority to release or subordinate its interest in particular types or 



 111
 









items of property, or to
release any Guarantor from its obligations under the Guaranty pursuant to this Section
15.8.  In each case as specified in
this Section 15.8, the Term Agents will, at the Obligors’ expense,
execute and deliver to the applicable Obligor such documents as such Obligor
may reasonably request to evidence the release of such item of Collateral from
the assignment and security interest granted under the Loan Documents or to
subordinate its interest in such item, or to release such Guarantor from its
obligations under the Guaranty, in each case in accordance with the terms of
the Loan Documents and this Section 15.8.


15.9                        Notice of Transfer.


The Term Agents may deem
and treat a Term Lender party to this Agreement as the owner of such Term
Lender’s portion of the Obligations for all purposes, unless and until, and
except to the extent, an Assignment and Acceptance shall have become effective
as set forth in Section 16.3.


15.10                 Reports and Financial Statements.


By signing this
Agreement, each Term Lender:


(a)   is
deemed to have requested that the Term Administrative Agent furnish such Term
Lender, promptly after they become available, copies of all financial
statements required to be delivered by the Lead Borrower hereunder and all
commercial finance examinations and appraisals of the Collateral received by
the Term Agents (collectively, the “Reports”);


(b)   expressly
agrees and acknowledges that the Term Administrative Agent makes no
representation or warranty as to the accuracy of the Reports, and shall not be
liable for any information contained in any Report;


(c)   expressly
agrees and acknowledges that the Reports are not comprehensive audits or
examinations, that the Term Agents or any other party performing any audit or
examination will inspect only specific information regarding the Obligors and
will rely significantly upon the Obligors’ books and records, as well as on
representations of the Obligors’ personnel;


(d)   agrees
to keep all Reports confidential in accordance with the provisions of Section
14.24 hereof; and


(e)   without
limiting the generality of any other indemnification provision contained in
this Agreement, agrees: (i) to hold the Term Agents and any such other Term
Lender preparing a Report harmless from any action the indemnifying Term Lender
may take or conclusion the indemnifying Term Lender may reach or draw from any
Report in connection with any Loan that the indemnifying Term Lender has made
or may make to the Borrowers, or the indemnifying Term Lender’s participation
in, or the indemnifying Term Lender’s purchase of, a Loan or Loans; and (ii) to
pay and protect, and indemnify, defend, and hold the Term Agents 



 112
 









and any such other Term Lender preparing a Report harmless from and
against, the claims, actions, proceedings, damages, costs, expenses, and other
amounts (including attorney costs) incurred by the Term Agents and any such
other Term Lender preparing a Report as the direct or indirect result of any
third parties who might obtain all or part of any Report through the indemnifying
Term Lender.


15.11                 Agency for Perfection.


Each Term Lender hereby
appoints each other Term Lender as agent for the purpose of perfecting Liens
for the benefit of the Term Agents and the Term Lenders, in assets which, in
accordance with Article 9 of the UCC or any other applicable law of the United
States can be perfected only by possession. 
Should any Term Lender (other than the Term Agents) obtain possession of
any such Collateral, such Term Lender shall notify the Term Agents thereof,
and, promptly upon the Term Collateral Agent’s request therefor shall deliver
such Collateral to the Term Collateral Agent or otherwise deal with such
Collateral in accordance with the Term Collateral Agent’s instructions.


15.12                 Indemnification of Term Agents.


The Term Lenders agree to
indemnify the Term Agents (to the extent not reimbursed by the Obligors and
without limiting the obligations of Obligors hereunder), ratably according to
their respective Pro Rata shares, from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever that may be imposed
on, incurred by, or asserted against any Term Agent in any way relating to or
arising out of this Agreement or any other Loan Document or any action taken or
omitted to be taken by any Term Agent in connection therewith; provided,
that no Term Lender shall be liable for any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements resulting from such Term Agent’s gross negligence or
willful misconduct as determined by a final and nonappealable judgment of a
court of competent jurisdiction.


15.13                 Relation among Term Lenders.


The Term Lenders are not
partners or co-venturers, and no Term Lender shall be liable for the acts or
omissions of, or (except as otherwise set forth herein in case of the Term
Agents) authorized to act for, any other Term Lender.


15.14                 Action by Term Agents; Consents;
Waivers; Amendments.


(a)   Except as otherwise specifically provided in this Agreement, each
Term Agent may take any action with respect to the credit facility contemplated
by the Loan Documents as that Term Agent determines to be appropriate within
its area of responsibility and authority as set forth in this Article XV, provided, however, that such Term
Agent  is not under any affirmative 



 113
 









obligation to
take any action which it is not required by this Agreement or the Loan
Documents specifically to so take.


(b)   Except as specifically provided in the following Sections of this
Agreement, whenever a Loan Document or this Agreement  provides that action may be taken or omitted
to be taken in a Term Agent’s discretion, that Term Agent shall have the sole
right to take, or refrain from taking, such action without, and
notwithstanding, any vote of the Term Lenders:


(c)   The consent of the Required Lenders is required for the amendment
of, or waiver of compliance with, any provision of the Loan Documents or of
this Agreement, other than as specifically provided in this Agreement.


(d)   None of the following may take place without the consent of all
Term Lenders:


(i)                                     An
increase in any Term Lender’s Dollar Commitment or Commitment Percentage.


(ii)                                  A
decrease in any interest rate or fee payable to the Term Lenders on account of
the Term Loan.


(iii)                               An
extension of the Maturity Date or any other date on which a scheduled payment
of principal, interest or fees is due in respect to the Term Loan.


(iv)                              A
forgiveness of all or any portion of the principal, interest or fees due and
payable to the Term Lenders.


(v)                                 Any
change in the definition of “Required Lenders”.


(vi)                              Any
release or subordination of the Term Agent’s interest in more than a de minimus
portion of the Collateral not otherwise required or provided for in the Loan
Documents or to facilitate a Liquidation.


(e)   No action, amendment, or waiver of compliance with, any provision
of the Loan Documents or of this Agreement 
which affects an Term Agent in its capacity as such may be undertaken
without the written consent of such Term Agent, no action referenced herein
which affects the rights, duties, obligations, or liabilities of an Term Agent
shall be effective without the written consent of that Term Agent, and no
reduction of any fee due an Term Agent shall be effective without the written
consent of such Term Agent.


(f)    Notwithstanding any other provision of this Agreement, except to
the extent otherwise provided herein, no single Term Lender independently may
exercise any right of action 



 114
 









or enforcement against or with respect to the
Obligors, including, without limitation, any right of set-off, except with the
consent of the Term Collateral Agent.


15.15                 Non-Consenting Term Lender.


(a)   In the event that a Term Lender does not provide its consent to a
proposal by the Term Administrative Agent to take action which requires consent
under this Article XV (such Term Lender, a “Non-Consenting Lender”), then one or more Term Lenders who
provided consent to such action or the Lead Borrower (so long as no Default or
Event of Default has occurred and is continuing) may require the assignment,
without recourse and in accordance with the procedures outlined in Article XVI
below, of the Non-Consenting Lender’s Pro Rata share of the Term Loan hereunder
on three (3) days written notice to the Term Administrative Agent and to the
Non-Consenting Lender.


(b)   At the end of such three (3) days, the Term Lenders who have given
such written notice shall transfer the following to the Non-Consenting Lender
(in the case in which the Borrowers have theretofore furnished a Term Note to
the Non-Consenting Lender), only if the Non-Consenting Lender delivers written
confirmation of the assignment of its Pro Rata share of the Term Loan to
another Term Lender that is not a Non-Consenting Lender (a “Consenting Lender”) to the Term Administrative Agent in form
and substance satisfactory to Term Administrative Agent:


(i)                                     Such
Non-Consenting Lender’s Pro Rata share of the principal and interest of the
Term Loan to the date of such assignment;


(ii)                                  All
fees due to the Non-Consenting Lender to the date of such assignment; and


(iii)                               Any
out-of-pocket costs and expenses for which the Non-Consenting
Lender is entitled to reimbursement from the Borrowers.


(c)   In the event that the Non-Consenting Lender fails to deliver to
the Term Administrative Agent written confirmation of the assignment of its Pro
Rata share of the Term Loan to the Consenting Lenders, if any, then:


(i)                                     The
amount otherwise to be transferred to the Non-Consenting Lender shall be
transferred to the Term Administrative Agent and held by the Term
Administrative Agent, without interest, to be turned over to the Non-Consenting
Lender upon delivery of the Term Note held by that Non-Consenting Lender;


(ii)                                  The
Non-Consenting Lenders shall cease to have any further interest in the Term
Loan;



 115
 









(iii)                               The
Non-Consenting Lender shall cease to be a “Term Lender”; and


(iv)                              The
Term Lender(s) which have transferred the amount to the Term Administrative
Agent as described above shall have succeeded to all rights and become subject
to all of the obligations of the Non-Consenting Lender as “Term Lender”.


(d)           In the event that more than one (1) Term Lender wishes to
require such assignment, and unless such Term Lender agrees to an alternate
distribution, the Non-Consenting Lender’s Pro Rata share of the Term Loan
hereunder shall be divided among such Term Lenders, Pro Rata based upon their
respective Commitment Percentages, with the Term Administrative Agent
coordinating such transaction.


(e)   The Term Administrative Agent shall coordinate the transfer of the
Non-Consenting Lender’s Commitment Percentages as provided in this Section
15.15  provided, however, no
processing fee otherwise to be paid as provided in Section 16.2 shall be
due under such circumstances.


ARTICLE XVI. - assignment by
Term Lenders.


16.1                        Assignments and Assumptions.


(a)  Except
as provided herein, each Term Lender (in this Section16.1, an “Assigning Lender”) may assign to one or more Eligible
Assignees (in this Section 16.1, each an “Assignee
Lender”) all or a portion of that Term Lender’s interests, rights
and obligations under this Agreement and the Loan Documents and the same
portion of the Loans at the time owing to it, and of the note held by the
Assigning Lender, provided that:


(i)                                     in
the case of an Assigning Lender:


(A)                              The
Term Administrative Agent shall have given its prior written consent to such
assignment, not to be unreasonably withheld (except that no such consent shall
be required in connection with any assignment to another Term Lender or to an
Affiliate of a Term Lender).


(B)                                Each
such assignment shall be of a constant, and not a varying, percentage of all
the rights and obligations under this Agreement of Assigning Lenders.


(C)                                Each
such assignment shall be in an amount not less than  $1,000,000.00.



 116
 









16.2                        Assignment Procedures


This Section 16.2
describes the procedures to be followed in connection with an assignment
effected pursuant to this Article XVI and permitted by Section 16.1.


(a)   The parties to such an assignment shall execute and deliver to the
Term Administrative Agent an Assignment and Acceptance substantially in the
form of EXHIBIT 16.2,
annexed hereto (an “Assignment and Acceptance”).


(b)           The Assigning Lender shall deliver to the Term
Administrative Agent, with such Assignment and Acceptance, the Note held by the
subject Assigning Lender and the Term Administrative Agent’s processing fee of
$5,000.00, provided, however, no
such processing fee shall be due where the Assigning Lender is one of the Term
Lenders at the initial execution of this Agreement or where the Assignee Lender
is an Affiliate of the Assignor Lender.


(c)           The Term Administrative Agent shall maintain a copy of
each Assignment and Acceptance delivered to it and a register or similar list
(the “Register”) for
the recordation of the names and addresses of the Term Lenders and of the
Commitment Percentage and Dollar Commitment of each Term Lender. The Register
shall be available for inspection by the Term Lenders at any reasonable time
and from time to time upon reasonable prior notice.  In the absence of manifest error, the entries
in the Register shall be conclusive and binding on all Term Lenders.  The Term Administrative Agent and the Term
Lenders may treat each Person whose name is recorded in the Register as a “Term
Lender” hereunder for all purposes of this Agreement.


(d)   The Assigning Lender and Assignee Lender, directly between
themselves, shall make all appropriate adjustments in payments for periods
prior to the effective date of an Assignment and Assumption.


16.3                        Effect of Assignment.


(a)   From and after the effective date specified in an Assignment and
Acceptance which has been executed, delivered, and recorded (which effective
date the Term Administrative Agent may delay by up to five (5) Business Days
after the delivery of such Assignment and Acceptance):


(i)                                     The
Assignee Lender:


(A)                              Shall
be a party to this Agreement and the Loan Documents (and to any amendments
thereof) as fully as if the Assignee Lender had executed each.


(B)                                Shall
have the rights of a Term Lender hereunder, except in the case in which the
Assigning Lender is a Term Lender, in which case the Assignee Lender shall have
the rights of a Term Lender hereunder to the extent of the amount of the 



 117
 









outstanding
Term Loan assigned by such Assignment and Acceptance.


(ii)                                  The
Assigning Lender shall be released from the Assigning Lender’s obligations
under this Agreement and the Loan Documents, except in the case in which the
Assigning Lender is a Term Lender, in which case the Assignee Lender shall be
released from its obligations under this Agreement and the Loan Documents to
the extent of the amount of the outstanding Term Loan assigned by such
Assignment and Acceptance.


(iii)                               The
Term Administrative Agent shall undertake to obtain and distribute replacement
Notes to the subject Assigning Lender and Assignee Lender.


(b)   By executing and delivering an Assignment and Acceptance, the
parties thereto confirm to and agree with each other and with all parties to this
Agreement as to those matters which are set forth in the subject Assignment and
Acceptance.


[REMAINDER OF PAGE
INTENTIONALLY BLANK]



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Signature Page to Term 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

  



 



 119















Signature Page to Term Loan and
Security Agreement


	
   

  	
   

  	
  BANK OF AMERICA, N.A., as

  
	
   

  	
   

  	
  Term Administrative Agent and Term

  
	
   

  	
   

  	
  Collateral Agent

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   /s/ Tamisha
  Eason

  
	
   

  	
   

  	
  Name:

  	
   Tamisha Eason

  
	
   

  	
   

  	
  Title:

  	
   Vice
  President

  



 



 1
 









Signature
Page to Term Loan and Security Agreement


	
   

  	
   

  	
  BANK OF AMERICA, N.A., as
  a Term 

  
	
   

  	
   

  	
  Lender

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   /s/ Christine
  Hutchinson

  
	
   

  	
   

  	
  Name:

  	
   Christine
  Hutchinson

  
	
   

  	
   

  	
  Title:

  	
   Vice
  President

  



 



 2
 









Signature
Page to Term Loan and Security


Agreement


	
   

  	
   

  	
                                            ,
  as a Term 

  
	
   

  	
   

  	
  Lender

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Print Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Address:  

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Attention:  

  	
   

  
	
   

  	
   

  	
  Fax No.:  

  	
   

  
									



 



 3















EXHIBIT
5.10(a)


Financial
Covenants


This Exhibit is
attached to and made part of that certain Term Loan and Security Agreement
between Bank of America, N.A., as Term Administrative Agent, Term Collateral
Agent, and Term Lender, the other Term 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 Term Loan and Security Agreement.


1)  Consolidated
Leverage Ratio


The Borrowers
shall maintain a Consolidated Leverage Ratio not to exceed the ratios set forth
below:


	
  Period

  	
   

  	
  Maximum Consolidated Leverage Ratio

  
	
  For each fiscal quarter ending from and after the
  Closing Date through and including the fiscal quarter ending on September 30,
  2010

  	
   

  	
  3.50 to 1.00

  
	
   

  	
   

  	
   

  
	
  For each fiscal quarter ending from and after the
  fiscal quarter ending December 31, 2010 through the Maturity Date

  	
   

  	
  3.25 to1.00

  



 


2)  Consolidated Interest
Coverage Ratio


The Borrowers
shall maintain a Consolidated Interest Coverage Ratio of not less than the
ratios set forth below:


	
  Period

  	
   

  	
  Minimum Consolidated Interest Coverage

  Ratio

  
	
  For each fiscal quarter ending from and after the
  Closing Date through and including the fiscal quarter ending on September 30,
  2010

  	
   

  	
  2.25 to 1.00

  
	
   

  	
   

  	
   

  
	
  For each fiscal quarter ending from and after the
  fiscal quarter ending December 31, 2010 through the Maturity Date

  	
   

  	
  2.50 to 1.00

  



 



 1