ex10_1.htm


    Exhibit
10.1

    


    [Execution]

    RATIFICATION AND AMENDMENT
AGREEMENT

    


    This
RATIFICATION AND AMENDMENT AGREEMENT (the “Ratification Agreement”) dated as of
January 23, 2009, is by and among Wachovia Capital Finance Corporation
(Central), in its capacity as agent acting for and on behalf of the
parties to the Loan Agreement (as hereinafter defined) as lenders (in such
capacity, “Agent”), the parties to the Loan Agreement as lenders (each
individually a “Lender” and collectively, “Lenders”), Hartmarx Corporation, a
Delaware corporation, as Debtor and Debtor-in-Possession (“US Borrower”),
Coppley Apparel Group Limited, an Ontario corporation (“Canadian Borrower”), and
together with US Borrower, each individually, a “Borrower” and collectively,
“Borrowers”), each of the companies listed on Exhibit A hereto, each as Debtor
and Debtor-in-Possession (each, individually, a “Guarantor” and collectively,
“Guarantors”).

    


    W I T N E S S E T
H:

    


    WHEREAS,
US Borrower and each Guarantor (collectively, the “Debtors”) has commenced a
case under Chapter 11 of the Bankruptcy Code (as hereinafter defined) in the
Bankruptcy Court (as hereinafter defined) and US Borrower and each Guarantor has
retained possession of its assets and is authorized under the Bankruptcy Code to
continue the operation of its businesses as a debtor-in-possession;

    


    WHEREAS,
prior to the commencement of the Chapter 11 Cases (as hereinafter defined),
Agent and Lenders made loans and advances and provided other financial
accommodations to Borrowers secured by substantially all assets and properties
of Borrowers and Guarantors as set forth in the Existing Financing Agreements
(as hereinafter defined);

    


    WHEREAS,
the Bankruptcy Court has entered a Financing Order (as hereinafter defined)
pursuant to which, among other things, Agent and Lenders may make post-petition
loans and advances and provide other financial accommodations to Borrowers
secured by the Collateral (as hereinafter defined) as set forth in the Financing
Order and the Financing Agreements (as hereinafter defined);

    


    WHEREAS,
the Financing Order provides that as a condition to the making of such
post-petition loans, advances and other financial accommodations, Borrowers and
Guarantors shall execute and deliver this Ratification Agreement;

    


    WHEREAS,
Borrowers and Guarantors desire to reaffirm their obligations to Agent and
Lenders pursuant to the Existing Financing Agreements and acknowledge their
continuing liabilities to Agent and Lenders thereunder in order to induce Agent
and Lenders to make such post-petition loans and advances and provide such other
financial accommodations to Borrowers; and

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    


    WHEREAS,
Borrowers and Guarantors have requested that Agent and Lenders make
post-petition loans and advances and provide other financial accommodations to
Borrowers and make certain amendments to the Loan Agreement (as hereinafter
defined), and Agent and Lenders are willing to do so, subject to the terms and
conditions contained herein.

    


    NOW,
THEREFORE, in consideration of the foregoing, the mutual covenants and
agreements contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Agent, Lenders,
Borrowers and Guarantors mutually covenant, warrant and agree as
follows:

    


    1.      DEFINITIONS.

    
            1.1   Additional
Definitions.  As used herein, the following terms shall have
the respective meanings given to them below and the Loan Agreement and the other
Financing Agreements shall be deemed and are hereby amended to include, in
addition and not in limitation, each of the following definitions:

    


    (a)  “Bankruptcy
Code” shall mean the United States Bankruptcy Code, being Title 11 of the United
States Code as enacted in 1978, as the same has heretofore been or may hereafter
be amended, recodified, modified or supplemented, together with all rules,
regulations and interpretations thereunder or related thereto.

    


    (b)  “Bankruptcy
Court” shall mean the United States Bankruptcy Court or the United States
District Court for the Northern District of Illinois.

    


    (c)  “Budget”
shall mean the initial thirteen (13) week budget to be delivered to Agent in
accordance with Section 5.3(a) hereof, in form and substance satisfactory to
Agent and Required Lenders, setting forth the Projected Information for the
periods covered thereby, together with any subsequent or amended budgets thereto
and/or any updates to the initial thirteen (13) week Budget delivered to Agent
in accordance with 5.3 hereof, all in form and substance satisfactory to Agent,
in accordance with the terms and conditions hereof; provided, however, that any
subsequent or Budgets and any amendments and/or updates to the initial thirteen
(13) week Budget shall not provide for the payment or transfer of cash to
Canadian Borrower without the consent of the Required Lenders.

     

    (d)  “Cash
Management Agreement” shall mean that certain Master Cash Management Services
Agreement, dated as of January 7, 2003, by and among US Borrower, each of the
Sub Entities (as defined therein) and Bank of America, N.A., as successor to
LaSalle Bank National Association, including all supplements and amendments with
respect thereto, as in effect immediately prior to the Petition
Date.

     

    (e)  “Chapter
11 Cases” shall mean the Chapter 11 cases of US Borrower and Guarantors which
are being jointly administered under the Bankruptcy Code and are pending in the
Bankruptcy Court.

    


    (f)  “Debtors”
shall have the meaning set forth in the recitals hereto and shall include,
without limitation, their respective successors and assigns (including any
trustee or other 

     

     

    
      
        
        

      

      
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    fiduciary
hereafter appointed as its legal representative or with respect to the property
of the estate of such Person, whether under (as applicable) Chapter 11 of the
Bankruptcy Code or any subsequent Chapter 7 case, and its successor upon
conclusion of (as applicable) the Chapter 11 Case of such Person).

     

    (g)  “Eligible
Intellectual Property” shall mean all Specified Intellectual Property of any
Borrower or Borrowing Base Guarantor which is and shall continue to be
acceptable to Agent based on the criteria set forth below.  In
general, Specified Intellectual Property shall be Eligible Intellectual Property
if: (a) such Intellectual Property
is in full force and effect; (b) such Borrower or Borrowing Base Guarantor owns
the sole, full and clear title thereto; (c) such Intellectual Property is
subject to the first priority, valid and perfected security interest of Agent
and is not subject to any other
liens, claims, mortgages, assignments, licenses, security interests or
encumbrances of any nature whatsoever, except for any licenses or junior
encumbrances expressly permitted hereunder; (d) such Intellectual
Property is not presently subject to any infringement or unauthorized use or
claims that would adversely affect the fair market value thereof or the benefits
of this Agreement granted to Agent with respect thereto, including, without
limitation, the validity, priority or perfection of the security interest
granted herein or the remedies of Agent hereunder; (e) there are no facts,
events or occurrences which would impair the validity, enforceability or
usability of such Intellectual Property; (f) there are no proceedings or actions
which are threatened or pending against any third parties who purport to have a
claim, right or interest with respect to such Intellectual Property that Agent
determines in good faith could reasonably be expected to result in any material
adverse change in any such third party’s financial condition (including, without
limitation, any bankruptcy, dissolution, liquidation, reorganization or similar
proceeding), and (g) Specified Intellectual Property for which Agent shall have
received the following items, each in form and substance satisfactory to Agent:
(i) a Trademark Security Document, duly authorized, executed and delivered
by the applicable Borrowers and Borrowing Base Guarantors in favor of Agent (to
the extent not already delivered to Agent in connection with the Existing
Financing Agreements); and (ii) a written appraisal, in
form, scope and methodology acceptable to Agent and performed by an appraiser
acceptable to Agent, addressed to Agent and upon which Agent and Lenders are
expressly permitted to rely; and (iii) all consents, waivers,
acknowledgments, agreements and approvals from third parties which Agent may
deem necessary or desirable in
accordance with the policies and practices of Agent.  Any
Specified Intellectual Property which is not Eligible Intellectual Property
shall nevertheless be part of the Collateral.

    


    (h)  “Existing
Financing Agreements” shall mean the Financing Agreements (as defined in the
Existing Loan Agreement), including, without limitation, the Existing Loan
Agreement, the Existing Trademark Security Documents, and the Existing Guarantor
Documents, in each instance, as in effect immediately prior to the Petition
Date.

    


    (i)  “Existing
Guarantor Documents” shall mean, the Guarantee, dated August 30, 2002, by
certain Guarantors in favor of Agent, as heretofore amended, as in effect
immediately prior to the Petition Date.

    


    (j)  “Existing
Loan Agreement” shall mean the Loan and Security Agreement, dated August 30,
2002, by and among Agent, Lenders, Borrowers and Guarantors, as amended


     

     

     

     

    
      
        
        

      

      
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    by
Amendment No. 1 to Loan and Security Agreement, dated February 25, 2003,
Amendment No. 2 to Loan and Security Agreement, dated July 22, 2004, Amendment No. 3 to Loan and Security Agreement, dated
January 3, 2005, Amendment
No. 4 to Loan and Security Agreement, dated October 31, 2005, Amendment
No. 5 to Loan and Security Agreement dated September 29, 2006, Amendment
No. 6 to Loan and Security Agreement, dated May 26, 2007, and Amendment No. 7 to
Loan and Security Agreement, dated March 14, 2008, and otherwise as in
effect immediately prior to the Petition Date.

    


    (k)  “Existing
Trademark Security Documents” shall mean, collectively (i) the Trademark
Security Agreement, dated August 30, 2002, by US Borrower, Hart Schaffner, HMX,
Hickey, International, Jaymay, M. Wile, Consolidated, Country Miss, Direct,
Hartmarx International, Yorke and Canadian Borrower in favor of Agent, (ii) the
Trademark Security Agreement, dated July 22, 2004 by Exclusively Misook Apparel,
Inc. (f/k/a EM Acquisition Corp.) in favor of Agent, (iii) the Trademark
Security Agreement, dated October 31, 2005, by SB Acquisition Corp. in favor of
Agent, (iv) the Trademark Security Agreement, dated September 29, 2006, by
Sweater.com Apparel, Inc. in favor of Agent, (v) the Trademark Security
Agreement, dated May 26, 2007, by Zooey Apparel, Inc. in favor of Agent,
and (vi) the Trademark Security Agreement, dated March 14, 2008, by Monarchy
Group, Inc. in favor of Agent, each as heretofore amended, as in effect
immediately prior to the Petition Date.

    


    (l)  “Final
Financing Order” shall have the meaning set forth in Section 9.10
hereof.

    


    (m)  “Financing
Order” shall mean the Interim Financing Order, the Final Financing Order and
such other orders relating thereto or authorizing the granting of credit by
Agent and Lenders to Borrowers on an emergency, interim or permanent basis
pursuant to Section 364 of the Bankruptcy Code as may be issued or entered by
the Bankruptcy Court in the Chapter 11 Cases.

    


    (n)  “Guarantor
Documents” shall mean, collectively, the Existing Guarantor Documents, as
amended by this Ratification Agreement, in each instance, as the same now exists
or may hereafter be amended, modified, supplemented, extended, renewed, restated
or replaced.

    


    (o)  “Interim
Financing Order” shall have the meaning set forth in Section 9.9
hereof.

    


    (p)  “Intellectual
Property Availability” shall mean the amount of $30,000,000; provided, that, such amount may
be reduced, at Agent’s option, to reflect (a) any sales of Eligible Intellectual
Property, or (b) any other circumstance that may adversely affect the amount
that may be recovered by Agent from the sale or other disposition of the
Intellectual Property of Borrowers and Guarantors.

    


    (q)  “Material
Budget Deviation” shall have the meaning set forth in Section 5.3(c)
hereof.

     

     

    
 

    
      
        
        

      

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

    


    (s)   “Petition
Date” shall mean the date of the commencement of the Chapter 11
Cases.

    


    (t)  “Post-Petition
Collateral” shall mean, collectively, all now existing and hereafter acquired
real and personal property of each Debtor's estate, wherever located, of any
kind, nature or description, including any such property in which a lien is
granted to Agent pursuant to the Financing Agreements, the Financing Order or
any other order entered or issued by the Bankruptcy Court, and shall include,
without limitation:

    


    (i)           all
of the Pre-Petition Collateral;

    


    (ii)          all
Accounts;

    


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

    


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

    


    (v)          all
Real Property and fixtures;

    


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

    


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

    


    (viii)       all
documents;

    


    (ix)         all
deposit accounts;

    


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

    


    (xi)         all
supporting obligations and all present and future liens, security interests,
rights, remedies, title and interest in, to and in respect of Receivables and
other Collateral, including (a) rights and remedies under or relating to
guaranties, contracts of suretyship, letters of credit and credit and other
insurance related to the Collateral, (b) rights of stoppage in transit,
replevin, repossession, reclamation and other rights and remedies of an unpaid
vendor, lienor or secured party, (c) goods described in invoices, documents,
contracts or instruments with respect to, or otherwise representing or
evidencing, Receivables or other Collateral, including returned, repossessed and
reclaimed goods, and (d) deposits by and property of account debtors or other
persons securing the obligations of account debtors;

     

     

    
      
        
        

      

      
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    (xii)        all
(A) investment property (including securities, whether certificated or
uncertificated, securities accounts, security entitlements, commodity contracts
or commodity accounts) and (B) monies, credit balances, deposits and other
property of Borrowers and Guarantors now or hereafter held or received by or in
transit to Agent, any Lender or their respective Affiliates or at any other
depository or other institution from or for the account of Borrowers or
Guarantors, whether for safekeeping, pledge, custody, transmission, collection
or otherwise;

    


    (xiii)       all
commercial tort claims;

    


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

    


    (xv)        all
Records;

    


    (xvi)       as
to Canadian Borrower only, a hypothec to and in favor of Canadian Lender (as
agent for itself and US Lender) to the extent of the sum of C$30,000,000 in
lawful money of Canada with interest thereon at the rate of twenty-five (25%)
percent, with respect to all of its rights and interests to the
Collateral;

    


    (xvii)      all
claims, rights, interests, assets and properties (recovered by or on behalf of
each Borrower and Guarantor or any trustee of such Borrower or Guarantor
(whether in the Chapter 11 Cases or any subsequent cases to which any of the
Chapter 11 Cases may converted), including, without limitation, all property
recovered as a result of transfers or obligations avoided or actions maintained
or taken pursuant to Sections 544, 545, 547, 548, 549, 550, 551 and 553 of the
Bankruptcy Code; and

    


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

    


    (u)  “Post-Petition
Obligations” shall mean all Obligations (as defined in the Existing Loan
Agreement) arising on and after the Petition Date and whether arising on or
after the conversion or dismissal of the Chapter 11 Cases, or before, during and
after the confirmation of any plan of reorganization in the Chapter 11 Cases,
and whether arising under or related to this Ratification Agreement, the Loan
Agreement, the Guarantor Documents, the other Financing Agreements, a Financing
Order, by operation of law or otherwise, and whether incurred by such Borrower
or Guarantor as principal, surety, endorser, guarantor or otherwise and
including, without limitation, all principal, interest, financing charges,
letter of credit fees, unused line fees, servicing fees, line increase fees,
debtor-in-possession facility fees, early termination fees, other fees,
commissions, costs, expenses and attorneys', accountants' and consultants' fees
and expenses incurred in connection with any of the foregoing.

    .

    (v)  “Pre-Petition
Collateral” shall mean, collectively, (i) all “Collateral” as such term is
defined in the Existing Loan Agreement as in effect immediately prior to the
Petition Date, (ii) all “Collateral” as such term is defined in each of the
other Existing Financing 

     

     

     

    
      
        
        

      

      
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    Agreements
as in effect immediately prior to the Petition Date, and (iii) all other
security for the Pre-Petition Obligations as provided in the Existing Loan
Agreement, the Existing Trademark Security Documents, the Existing Guarantors
Documents, and the other Existing Financing Agreements immediately prior to the
Petition Date.

    


    (w)  “Pre-Petition
Obligations” shall mean all Obligations (as such term is defined in the Existing
Loan Agreement) arising at any time before the Petition Date.

    


    (x)  “Projected
Information” shall have the meaning set forth in Section 5.3(a)
hereof.

    


    (y)  “Ratification
Agreement” shall mean this Ratification and Amendment Agreement by and among
Borrowers, Guarantors, Agent and Lenders, as the same now exists or may
hereafter be amended, modified, supplemented, extended, renewed, restated or
replaced.

    


    (z)  “Side
Letter Agreement” shall mean the letter agreement, dated as of the date of the
Ratification Agreement, among Agent, Borrowers and Guarantors, providing for
certain terms and conditions for the potential sale of all or substantially all
of the assets and properties of Borrowers and Guarantors and the retention of an
investment banker in connection therewith, as the same now exists or may
hereafter be amended, modified, supplemented, extended, renewed, restated or
replaced.

    


    (aa)  “Specified
Intellectual Property” shall mean the Trademarks and related Collateral (as each
such term is defined in the Existing Trademark Security Documents) owned by
Borrowers and Borrowing Base Guarantors commonly referred to as “Simply
Blue”, “Monarchy”, “Exclusively Misook”, “Hickey Freeman” and “Hart Schaffner
Marx” which are subject to the appraisal report, dated January 7, 2009, prepared
by Valuation Research Corporation.

    


    (bb)  “Specified
Overadvance Limit” shall mean the amount of $2,000,000; provided, that, such amount may
be increased by Agent with the consent of the Required Lenders to an amount not
to exceed $7,000,000, which consent shall be deemed given by any Lender that
either consents to any request by Agent for an increase in such amount or does
not object to any such request within forty-eight (48) hours following notice by
electronic mail from Agent to Lenders.

    


                1.2   Amendments to
Definitions.

    


    (a)  Applicable
Margin.  The definition of “Applicable Margin” set forth in
Section 1.7 of the Loan Agreement is hereby amended by deleting such Section in
its entirety and replacing it with the following:

    


    “1.7  [Intentionally
Deleted.]”

    


    (b)  Collateral.  All
references to the term “Collateral” in the Loan Agreement or the other Financing
Agreements, or any other term referring to the security for the Pre-Petition


     

     

     

    
      
        
        

      

      
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    Obligations,
shall be deemed, and each such reference is hereby amended to mean,
collectively, the Pre-Petition Collateral and the Post-Petition
Collateral.

    


    (c)  Eligible
Accounts.  The definition of “Eligible Accounts” set forth in
Section 1.46 of the Loan Agreement is hereby amended by deleting the reference
to “in each case which are and continue to be eligible based on the criteria set
forth below” and replacing it with the following:

    


    “, in
each case which are and continue to be acceptable to Agent in its sole
discretion”.

    


    (d)  Financing
Agreements.  All references to the term “Financing Agreements”
in the Loan Agreement or the other Financing Agreements shall be deemed, and
each such reference is hereby amended, to include, in addition and not in
limitation, this Ratification Agreement and all of the Existing Financing
Agreements, as ratified, assumed and adopted by each Borrower and Guarantor
pursuant to the terms hereof, as amended and supplemented hereby, the Side
Letter Agreement and the Financing Order, as each of the same now exists or may
hereafter be amended, modified, supplemented, extended, renewed, restated or
replaced.

    


    (e)  GAAP.  The
definition of GAAP set forth in Section 1.66 of the Loan Agreement is hereby
amended by deleting the exception at the end of such definition and replacing it
with the following:

    


    “except
that, for purposes of Section 9.17 hereof, GAAP shall be determined on the basis
of such principles in effect on the date of the Ratification Agreement and
consistent with those used in the preparation of the most recent audited
financial statements delivered to Agent prior to the date of the Ratification
Agreement.”

    


    (f)  Interest
Rate.  The definition of “Interest Rate” set forth in Section
1.81 of the Loan Agreement is hereby amended by deleting such Section in its
entirety and replacing it with the following:

    


    “1.81  ‘Interest
Rate’ shall mean,

    


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

    


    (i)  as
to all US Prime Rate Loans, a rate equal to five and three-quarters (53⁄4 %)
percent per annum in excess of the US Prime Rate, and

    


    (iii)  as
to Canadian Prime Rate Loans, a rate equal to five and three-quarters (53⁄4 %)
percent per annum in excess of the Canadian Prime Rate.

    


    (b)
Notwithstanding anything to the contrary contained in clause (a) of this
definition, the Interest Rate for US Prime Rate Loans and Canadian Prime Rate


     

     

    
      
        
        

      

      
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    Loans
shall be the percentage set forth above plus two (2%) percent per annum, at
Agent’s option, without notice (i) for the period (A) from and after the
effective date of termination of this Agreement until Agent and Lenders have
received full and final payment of all outstanding and unpaid Obligations which
are not contingent and cash collateral or letters of credit, as Agent may
specify, in the amounts and on the terms required under Section 13.1 hereof for
contingent Obligations (notwithstanding entry of a judgment against any Borrower
or Guarantor) and (B) from and after the date of the occurrence of an Event
of Default and for so long as such Event of Default is continuing as determined
by Agent, (ii) on Loans to US Borrower at any time outstanding in excess of the
US Borrowing Base and (iii) on Loans to Canadian Borrower at any time
outstanding in excess of the Canadian Borrowing Base (in the case of both
clauses (ii) and (iii), whether or not such excess(es) arise or are made with or
without the knowledge or consent of Agent or any Lender and whether made before
or after an Event of Default).”

    


    (g)  Inventory Loan
Limit.  The definition of “Inventory Loan Limit” set forth in
Section 1.83 of the Loan Agreement is hereby amended by deleting such Section in
its entirety and replacing it with the following:

    


    “1.83  ‘Inventory
Loan Limit’ shall mean: (a) for the period from the date of the Ratification
Agreement through and including February 27, 2009, $84,000,000, (b) for the
period from February 28, 2009 through and including March 30, 2009, $77,000,000,
and (c) from and after March 31, 2009, $72,000,000.”

    


    (h)  Loan
Agreement.  All references to the term “Loan Agreement” in the
Loan Agreement or the other Financing Agreements shall be deemed, and each such
reference is hereby amended, to mean the Existing Loan Agreement, as amended by
this Ratification Agreement and as ratified, assumed and adopted by each
Borrower and Guarantor pursuant to the terms hereof and the Financing Order, as
the same now exists or may hereafter be amended, modified, supplemented,
extended, renewed, restated or replaced.

    


    (i)  Material Adverse
Effect.  The definition of “Material Adverse Effect” set forth
in Section 1.92 of the Loan Agreement is hereby amended, to add at the end
thereof:

    


    “provided, that, the
commencement of the Chapter 11 Cases shall not constitute a Material Adverse
Effect”.

    


    (j)  Maximum
Credit.  The definition of “Maximum Credit” set forth in
Section 1.96 of the Loan Agreement is hereby amended by deleting such Section in
its entirety and replacing it with the following:

    


    “1.96  ‘Maximum
Credit’ shall mean the amount of $160,000,000.”

    


     

     

    
      
        
        

      

      
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    (k)  Obligations.  All
references to the term “Obligations” in the Loan Agreement, this Ratification
Agreement or the other Financing Agreements shall be deemed, and each such
reference is hereby amended, to mean both the Pre-Petition Obligations and the
Post-Petition Obligations.

    


    (l)  Reserves.  The
definition of “Reserves” set forth in Section 1.121 of the Loan Agreement is
hereby amended by deleting such definition in its entirety and replacing it with
the following::

    


    “1.21
‘Reserves’ shall mean as of any date of determination, such amounts as Agent may
from time to time establish and revise in good faith, following notice thereof
to Administrative Borrower, reducing the amount of Loans and Letter of Credit
Accommodations which would otherwise be available to any Borrower under the
lending formula(s) provided for herein:  (a) to reflect events,
conditions, contingencies or risks which, as determined by Agent in good faith,
adversely affect, or would have a reasonable likelihood of adversely affecting,
either (i) the Collateral or any other property which is security for the
Obligations, its value or the amount that might be received by Agent from the
sale or other disposition or realization upon such Collateral, or (ii) the
assets, business or prospects of any Borrower or Obligor, (ii) the business and
operations of Borrowers and Guarantors (taken as a whole) or (iii) the security
interests and other rights of Agent or Canadian Lender in the Collateral
(including the enforceability, perfection and priority thereof) or (b) to
reflect Agent's good faith belief that any collateral report or financial
information furnished by or on behalf of any Borrower or Obligor to Agent is or
may have been incomplete, inaccurate or misleading in any material respect or
(c) to reflect outstanding Letter of Credit Accommodations as provided in
Section 2.2 hereof or (d) in respect of any state of facts which Agent
determines in good faith constitutes a Default or an Event of Default or (e) to
reflect the amounts of the Priority Payables or (f) to reflect Agent’s good
faith estimate of the amount necessary to reflect changes in applicable currency
exchange rates or currency exchange markets or (g) to reflect (i) the Carve-Out
Expenses (as defined in the Financing Order), (ii) the amount of any senior
liens or claims in or against the Collateral that, in Agent’s determination,
have priority over the liens and claims of Agent and Lenders or (iii) the amount
of priority or administrative expense claims that, in Agent’s determination, may
be required to be paid by Debtors or their estates at any time during the
Chapter 11 Cases, or (h) to reflect the value of Inventory at leased locations
with respect to which the lease therefor has not been assumed commencing on the
date that is ten (10) weeks prior to the end of the one hundred twenty (120) day
lease rejection/assumption period, as such period may be extended or shortened
by the Bankruptcy Court, or (i) to reflect the value of Inventory held at any
leased location as to which there has been filed a landlord’s motion to compel
the assumption or rejection of the lease, in an amount determined by Agent, and
considering the likelihood or unlikelihood of the success of such motion on its
merits in the good faith judgment of Agent.  Without limiting the
generality of the foregoing, Reserves may, at Agent’s option, 

     

     

     

     

    
      
        
        

      

      
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    be
established to reflect: (i) dilution with respect to the Accounts (based on the
ratio of the aggregate amount of non-cash reductions in Accounts for any period
to the aggregate dollar amount of the sales of such Borrower or Guarantor for
such period) as calculated by Agent for any period which exceeds or is
reasonably anticipated to exceed five (5%) percent; (ii) a change in the
turnover, age or mix of the categories of Inventory that adversely affects the
aggregate value of all Inventory; (iii) material decreases in the percentage of
finished goods Inventory pre-sold against firm purchase orders; (iv) increases
in Inventory markdown reserves that are not otherwise accounted for in the most
recent Inventory appraisal received by Agent; (v) amounts due or to become due
to owners and lessors of premises where any Collateral is located, other than
for those locations where Agent has received a Collateral Access Agreement
reasonably acceptable to Agent, duly executed and delivered by the applicable
owner or lessor in favor of Agent, (vi) amounts due or to become due to owners
and licensors of trademarks and other Intellectual Property used by any Borrower
or Guarantor; and (vii) the amount of sales, excise or similar taxes to the
extent included in the amount of any Accounts reported to Agent.  The
amount of any Reserve established by Agent shall have a reasonable relationship
to the event, condition or other matter which is the basis for such Reserve as
determined by Agent in good faith.   To the extent that Agent
shall have established a Reserve to address an event, condition or matter in a
manner satisfactory to Agent, the percentages set forth in the definition of the
Borrowing Base shall not be reduced to address the same event, condition or
matter.”

    


    (m)  US Borrowing
Base.  The definition of “US Borrowing Base” set forth in
Section 1.131 of the Loan Agreement is hereby amended by deleting clause
(a)(i)(C) from such Section in its entirety and replacing it with the
following:

    


    “(C) the
Intellectual Property Availability”.

    


    (n)  US Loan
Limit.  The definition of “US Loan Limit” set forth in
Section 1.139 of the Loan Agreement is hereby amended by deleting such
Section in its entirety and replacing it with the following:

    


    “1.139  ‘US
Loan Limit’ shall mean the amount of $150,000,000.”

    


                1.3   Interpretation.

    


    (a)  For
purposes of this Ratification Agreement, unless otherwise defined or amended
herein, including, but not limited to, those terms used or defined in the
recitals hereto, all terms used herein shall have the respective meanings
assigned to such terms in the Loan Agreement.

    


    (b)  All
references to the terms “Agent,” and “Lenders” shall include their respective
successors and assigns.

     

    
 

    
      
        
        

      

      
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    (c)  All
references to the terms “US Borrower”, “Borrowing Base Guarantor”, “Borrowing
Base Guarantors, “Guarantor”, “Guarantors”, “Non-Borrowing Base Guarantor” and
“Non-Borrowing Base Guarantors” in the Loan Agreement or any of the other
Financing Agreements shall be deemed and each such reference is hereby amended
to mean and include (as applicable) the Debtors.

    


    (d)  All
references to commitment limits in any of the Existing Financing Agreements,
including references to the terms “Inventory Loan Limit,” Maximum Credit” and
“US Loan Limit,” shall be deemed and each such reference is hereby amended to
mean an aggregate commitment limit applicable to the Pre-Petition Obligations
and the Post-Petition Obligations combined.

    


    (e)  All
references to any term in the singular shall include the plural and all
references to any term in the plural shall include the singular unless the
context of such usage requires otherwise.

    


    (f)  All
terms not specifically defined herein which are defined in the Uniform
Commercial Code, as in effect in the State of Illinois as of the date hereof,
shall have the meaning set forth therein, except that the term “Lien” or “lien”
shall have the meaning set forth in § 101(37) of the Bankruptcy
Code.

    


    2.       ACKNOWLEDGMENT.

    


                2.1   Pre-Petition
Obligations.  Each Borrower and Guarantor hereby acknowledges,
confirms and agrees that, as of January 23, 2009, Borrowers are indebted to
Agent and Lenders in respect of all Pre-Petition Obligations in the aggregate
principal amount of US $113,567,479.32, consisting of (a) Revolving Loans
to US Borrower made pursuant to the Existing Financing Agreements in the
aggregate principal amount of US $83,184,437.84, together with interest
accrued and accruing thereon, (b) additional Loans made to US Borrower pursuant
to Section 12.8 of the Existing Loan Agreement in the aggregate principal amount
of US $7,502,166.00, together with interest accrued and accruing thereon
(the “Pre-Petition Additional Loans”), (c) Revolving Loans to Canadian Borrower
made pursuant to the Existing Financing Agreements in the aggregate principal
amount of US $7,241,234.86, together with interest accrued and accruing
thereon, (d) Letter of Credit Accommodations in the amount of
US $15,639,640.62, together with interest accrued and accruing thereon, (e)
all costs, expenses, fees (including attorneys' fees and legal expenses)
incurred in connection with the foregoing, and (f) all other charges now or
hereafter owed by Borrowers to Agent and Lenders, all of which are
unconditionally owing by Borrowers to Agent and Lenders, without offset, defense
or counterclaim of any kind, nature and description whatsoever.

    


                2.2   Guaranteed
Obligations.  Each Guarantor hereby acknowledges, confirms and
agrees that:

    


    (a)  all
obligations of such Guarantor under the Guarantor Documents are unconditionally
owing by such Guarantor to Agent and Lenders without offset, defense or
counterclaim of any kind, nature and description whatsoever, and

     

     

    
      
        
        

      

      
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    (b)  the
absolute and unconditional guarantee of the payment of the Pre-Petition
Obligations by such Guarantor pursuant to the Guarantor Documents extends to all
Post-Petition Obligations, subject only to the limitations set forth herein and
in the Guarantor Documents.

    


                2.3   Acknowledgment of Security
Interests.  Each Borrower and Guarantor hereby acknowledges,
confirms and agrees that Agent, for the benefit of itself and the other Lenders,
has and shall continue to have valid, enforceable and perfected first priority
and senior security interests in and liens upon all Pre-Petition Collateral
heretofore granted to Agent pursuant to the Existing Financing Agreements by
Borrowers and Guarantors as in effect immediately prior to the Petition Date to
secure all of the Obligations, as well as valid and enforceable first priority
and senior security interests in and liens upon all Post-Petition Collateral
granted to Agent, for the benefit of itself and the other Lenders, under the
Financing Order, or hereunder or under any of the other Financing Agreements or
otherwise granted to or held by Agent and Lenders to secure all of the
Obligations (including the Pre-Petition Obligations and the Post-Petition
Obligations), in each case, subject only to liens or encumbrances expressly
permitted by the Loan Agreement and any other liens or encumbrances expressly
permitted by the Financing Order that may have priority over the liens in favor
of Agent and Lenders.

    


                2.4   Binding Effect of
Documents.  Each Borrower and Guarantor hereby acknowledges,
confirms and agrees that: (a) each of the Existing Financing Agreements to which
it is a party was duly executed and delivered to Agent and Lenders by such
Borrower or Guarantor and each is in full force and effect as of the date
hereof, (b) the agreements and obligations of such Borrower or Guarantor
contained in the Existing Financing Agreements constitute the legal, valid and
binding obligations of such Borrower or Guarantor enforceable against it in
accordance with the terms thereof (except as may be limited by bankruptcy,
insolvency, or similar laws affecting the enforcement of creditors’ rights
generally), and such Borrower or Guarantor has no valid defense, offset or
counterclaim to the enforcement of such obligations, and (c) Agent and Lenders
are and shall be entitled to all of the rights, remedies and benefits provided
for in the Financing Agreements and the Financing Order.

    


    3.      
ADOPTION AND
RATIFICATION

    


                3.1 Each
Borrower and Guarantor hereby (a) ratifies, assumes, adopts and agrees to be
bound by all of the Existing Financing Agreements (as amended by this
Ratification Agreement and the Financing Order) to which it is a party and (b)
agrees to pay all of the Pre-Petition Obligations in accordance with the terms
of such Existing Financing Agreements, as amended by this Ratification
Agreement, and in accordance with the Financing Order.  All of the
Existing Financing Agreements (as amended by this Ratification Agreement and the
Financing Order) are hereby incorporated herein by reference and hereby are and
shall be deemed adopted and assumed in full by Borrowers and Guarantors, each as
Debtor and Debtor-in-Possession, and considered as agreements between such
Borrowers or Guarantors, on the one hand, and Agent and Lenders, on the other
hand.  Each Borrower and Guarantor hereby ratifies, restates, affirms
and confirms all of the terms and conditions of the Existing Financing
Agreements, as amended and supplemented pursuant hereto and the Financing Order,
and each Borrower and Guarantor 

     

     

     

    
      
        
        

      

      
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    agrees to
be fully bound, as Debtor and Debtor-in-Possession, by the terms of the
Financing Agreements to which such Borrower or Guarantor is a
party.

    


    4.       GRANT OF SECURITY
INTEREST.

    


    As
collateral security for the prompt performance, observance and payment in full
of all of the Obligations (including the Pre-Petition Obligations and the
Post-Petition Obligations), US Borrower and each Guarantor, each as Debtor and
Debtor-in-Possession, hereby grants, pledges and assigns to Agent, for the
benefit of itself and the other Lenders, and also confirms, reaffirms and
restates the prior grant to Agent and Lenders of, continuing security interests
in and liens upon, and rights of setoff against, all of the Collateral of such
Borrower or Guarantor, and Canadian Borrower hereby grants, pledges and assigns
to Agent and/or Canadian Lender (as applicable), and also confirms, reaffirms
and restates the prior grant to Agent and/or Canadian Lender of, continuing
security interests in and liens upon, and rights of setoff against, all of the
Collateral of such Borrower.

    


    5.       ADDITIONAL REPRESENTATIONS,
WARRANTIES AND COVENANTS.

    


    In
addition to the continuing representations, warranties and covenants heretofore
and hereafter made by Borrowers and Guarantors to Agent and Lenders, whether
pursuant to the Financing Agreements or otherwise, and not in limitation
thereof, each Borrower and Guarantor hereby represents, warrants and covenants
to Agent and Lenders the following (which shall survive the execution and
delivery of this Ratification Agreement), the truth and accuracy of which, or
compliance with, to the extent such compliance does not violate the terms and
provisions of the Bankruptcy Code, shall be a continuing condition of the making
of Loans by Agent and Lenders:

     

                5.1   Financing
Order.  The Interim Financing Order (and, following the
expiration of the Interim Financing Period defined therein, the Final Financing
Order) has been duly entered, is valid, subsisting and continuing and has not
been vacated, modified, reversed on appeal, or vacated or modified by any order
of the Bankruptcy Court (other than as consented to by Agent) and is not subject
to any pending appeal or stay or other action by the Bankruptcy Court which
impairs or prevents the enforcement of any provision contained
therein.

    


                5.2   Use of
Proceeds.  Notwithstanding anything to the contrary set forth
in Section 6.6 of the Loan Agreement, (a) all Loans and Letter of Credit
Accommodations provided by Agent or any Lender to Borrowers pursuant to the
Financing Orders, the Loan Agreement or otherwise, shall be used by Borrowers
for general operating and working capital purposes in the ordinary course of
business of Borrowers in accordance with the Budget pursuant to Section 5.3 of
this Ratification Agreement, and (b) unless authorized by the Bankruptcy Court
and approved by Agent in writing, no portion of any administrative expense claim
or other claim relating to the Chapter 11 Cases shall be paid with the proceeds
of Loans or Letter of Credit Accommodations provided by Agent and Lenders to
Borrowers, other than those administrative expense claims and other claims
relating to the Chapter 11 Cases directly attributable to the operation of the
business of any Borrower or Guarantor in the ordinary course of such business in
accordance with the Financing Agreements and the Budget.

     

     

    
      
        
        

      

      
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            5.3   Budget.

    


    (a)  Borrowers
have prepared and delivered to Agent an initial thirteen (13) week
Budget.  The initial thirteen (13) week Budget has been thoroughly
reviewed by Borrowers and their management and sets forth for the periods
covered thereby: (i) the projected weekly operating cash receipts for each week
commencing with the week ending January 30, 2009, (ii) the projected weekly
operating cash disbursements for each week commencing with the week ending
January 30, 2009, (iii) the projected aggregate principal amount of outstanding
Loans and Letter of Credit Accommodations for each week commencing with the week
ending January 30, 2009, and (iv) the projected weekly amounts of Loans and
Letter of Credit Accommodations available to Borrowers under the terms,
conditions and formulae of the Loan Agreement for each week commencing with the
week ending January 30, 2009 (collectively, the “Projected
Information”).   The initial thirteen (13) week Budget shall not
be amended or modified without the prior approval of Agent and the Required
Lenders. By no later than 8:00 a.m. (Central time) on the Wednesday of each week
commencing on February 4, 2009, Borrowers shall prepare and deliver to Agent an
updated Budget by adding Projection Information for the week immediately
following the last week in the then current Budget.  The Budget, as
updated in accordance with the terms hereof, shall be thoroughly reviewed by
Borrowers and their management and set forth for the periods covered thereby the
Projected Information for each week covered by such Budget.

    


    (b)  By
no later than 8:00 a.m. (Central time) on the Wednesday of each week commencing
on February 6, 2009, Borrowers shall furnish to Agent and Lenders, in form and
substance satisfactory to Agent, a report that sets forth for the immediately
preceding week a detailed comparison of the actual cash receipts, cash
disbursements, loan balance and loan availability to the Projected Information
for such weekly periods set forth in the Budget on a cumulative, weekly
roll-forward basis, together with a certification from the chief financial
officer of US Borrower that no Material Budget Deviation has
occurred.

    


    (c)  Each
Borrower acknowledges, confirms and agrees that commencing with the trailing two
(2) week period ending on February 6, 2009, the trailing three (3) week period
ending on February 13, 2009, and for the trailing three (3) week period ending
on the Friday of each week thereafter: (2) the actual aggregate weekly cash
receipts during such period for all line items in the Budget shall not be less
than ninety (90%) percent of the projected aggregate weekly cash receipts during
such period for all such line items in the Budget, (3) the actual aggregate
weekly cash disbursements for “employee related expenses”, “inventory related
expenses”, “overhead related expenses” (as each such term is defined in the
Budget) and all other expenses (taken as a whole) during such period shall not
be greater than one hundred ten (110%) percent of the projected aggregate weekly
cash disbursements for each such category of expenses set forth in the Budget
during such period, and (4) the actual aggregate weekly cash disbursements for
all line items in the Budget during such period shall not be greater than one
hundred ten (110%) percent of the projected aggregate weekly cash disbursements
for all such line items set forth in the Budget during such period.

     

     

    
      
        
        

      

      
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    (d)  Each
Borrower and Guarantor hereby confirms, acknowledges and agrees that (i) a
failure to maintain the minimum or maximum, as applicable, deviations in the
Budget as set forth in Section 5.3(c) hereof shall constitute a material
deviation from the Budget and an additional Event of Default (each, a “Material
Budget Deviation”) and (ii)  the failure to deliver any Budget or any
reports with respect to any Budget, in form and substance satisfactory to Agent,
as provided in Section 5.3(a) hereof shall constitute an Event of
Default.  Notwith-standing any approval by Agent or any Lender of the
initial thirteen (13) week Budget or any subsequent or amended Budgets, Agent
and Lenders will not, and shall not be required to, provide any Loans or Letter
of Credit Accommodations to Borrowers pursuant to the Budget, but shall only
provide Loans and Letters of Credit in accordance with the terms and conditions
set forth in the Loan Agreement as amended by this Ratification Agreement, the
other Financing Agreements and the Financing Order.  Agent and Lenders
are relying upon the Borrowers’ delivery of, and compliance with, the Budget in
accordance with this Section 5.3 in determining to enter into the post-petition
financing arrangements provided for herein.

     

                5.4   Retention of Investment
Banker.  Within
twenty five (25) days following the Petition Date, Debtors shall retain,
subject to the approval of the Bankruptcy Court and on terms and conditions
acceptable to Agent, an investment banker acceptable to Agent (the “Investment
Banker”) to assist Debtors with, among other things, the marketing and potential
sale of substantially all the assets of Debtors on the terms and conditions set
forth in the Side Letter Agreement.

     

             5.5  
Retention of Chief
Restructuring Officer.

     

    (a)  Within
ten (10) days of the Petition Date, Borrowers and Guarantors shall retain,
subject to the terms and conditions of an employment agreement, and shall
continue to retain at all times during which the Obligations remain outstanding,
FTI Palladium Partners or such other Person acceptable to Agent as their chief
restructuring officer (the “CRO”), at the sole cost and expense of Borrowers, on
terms and conditions acceptable to Agent, and subject to approval of the
Bankruptcy Court (to the extent such approval is required by the Bankruptcy
Court).  The CRO shall assume in all respects the management of the
businesses and properties of Borrowers and Guarantors and shall, among other
things, assist Borrowers and Guarantors in the preparation of and compliance
with, on an ongoing basis, the Budget and compliance with the terms and
conditions set forth in the Financing Agreements.  The CRO shall
report directly to the Board of Directors of each Borrower and
Guarantor.

     

    (b)  Each
Borrower and Guarantor hereby irrevocably authorizes and directs the CRO to consult with Agent and to
share with Agent and Lenders all budgets, records, projections, financial
information, reports and other information prepared by or in the possession of the
CRO relating to the Collateral or the financial condition or operations
of the businesses of Borrowers and Guarantors.  Each Borrower and
Guarantor agrees to provide the CRO with complete access to and supervision over
all of the books and records of such Borrower and Guarantor, all of premises of
such Borrower and Guarantor and to all management and employees of such Borrower
and Guarantor as and when deemed necessary by the CRO.

     

    (c)  Borrowers
and Guarantors shall not amend, modify or terminate the retention agreement with
the CRO without the prior written consent of Agent.  Borrowers and


     

     

     

    
      
        
        

      

      
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    Guarantors
acknowledge and agree that Borrowers and Guarantors shall cause the CRO to keep
Agent and Lenders (i) fully informed of the progress of the business and
operations of Borrowers and Guarantors and respond fully to any inquiries of
Agent and Lenders regarding the business and operations of Borrowers and
Guarantors and (ii) communicate and fully cooperate with Agent and Lenders and
share all information with Agent and Lenders regarding Borrowers and Guarantors,
and the business and operations of Borrowers and Guarantors.

     

    (d)  If
the CRO resigns, Borrowers and Guarantors shall immediately notify Agent in
writing and provide Agent with a copy of any notice of resignation immediately
upon the sending of such notice by such CRO.  Any replacement or
successor CRO shall be acceptable to Agent and shall be retained pursuant to a
new retention agreement on terms and conditions acceptable to Agent within five
(5) Business Days immediately following the notice of resignation of the
resigning CRO.

     

                5.6   Sale of
Assets.  In connection with achieving their objectives with
respect to the potential sale of all or substantially all of their assets and
properties, Debtors hereby covenant and agree to comply with the terms and
conditions of the Side Letter Agreement.  The Side Letter Agreement
shall remain and be treated by the parties thereto as confidential, provided,
that, the Side Letter Agreement shall be filed with the Bankruptcy Court, under
seal, and shall be made available to Persons only on a need-to-know basis as
reasonably determined by the parties to the Side Letter Agreement and so long as
the recipient thereof agrees (on terms and conditions acceptable to the parties
to the Side Letter Agreement) to treat the Side Letter Agreement as strictly
confidential.

     

                5.7   Retention of
Consultants.  Agent and Lenders shall have the right to retain
financial, restructuring and/or liquidation consultants at any time to advise
Agent and Lenders in connection with the operation and management of the
businesses of Borrowers and Guarantors and the conduct of the sales of the
assets of Borrowers and Guarantors contemplated hereby and by the Side Letter
Agreement.  Borrowers and Guarantors hereby agree to cooperate fully
with all such consultants and to share with such consultants, in addition to
Agent, all budgets, records, projections, financial information, reports and
other information relating to the Collateral, the financial condition or
operations of the businesses of the Borrowers and Guarantors, and the progress
and results of any sales of the assets of Borrowers and
Guarantors.  Borrowers and Guarantors agree to provide such
consultants with complete access to all of their respective books and records,
all of their respective premises and all of their respective officers, employees
and other personnel as and when deemed necessary by such
consultants.

     

                5.8   Cash
Management.  Borrowers and Guarantors shall promptly provide
Agent and Bank of America, N.A., in its capacity as depository bank under
certain Deposit Account Control Agreements (in such capacity, “BofA”), with
evidence, in form and substance satisfactory to Agent and BofA, that (a) the
Deposit Account Control Agreements and other deposit account arrangements
provided for under Section 6.3 of the Loan Agreement have been ratified and
amended by the parties thereto, or their respective successors in interest, in
form and substance satisfactory to Agent and BofA, to reflect the commencement
of the Chapter 11 Cases, (b) each Debtor, as Debtor and Debtor-in-Possession, is
the successor in interest to such Debtor, (c) the Obligations include both the
Pre-Petition Obligations and the Post-Petition Obligations, (d) the Collateral
includes both the Pre-Petition Collateral and the Post-Petition Collateral as


     

     

     

     

    
      
        
        

      

      
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    provided
for herein, and (e) BofA may setoff against any accounts maintained by Borrowers
and Guarantors with BofA for amounts owed to BofA under the Cash Management
Agreement in an amount not to exceed $200,000.  Except to the extent
otherwise directed by an Order of the Bankruptcy Court, BofA and other the
Lenders shall continue to enjoy the rights and remedies afforded them under the
Deposit Account Control Agreements and other bank account agreements entered
into prior to the Petition Date among Borrowers, Guarantors and Lenders,
including but not limited to the right to charge back returned items to the bank
accounts subject to such agreements or to setoff for overdrafts in the
accounts.  Borrowers and Guarantors shall continue to perform their
obligations under the terms of the Deposit Account Control Agreements and such
other bank account agreements, including their obligations to pay or honor any
bank fees in connection with the accounts subject to such
agreements.

     

                5.9   ERISA.   Each
Borrower and Guarantor hereby represents and warrants with, to and in favor of
Agent and Lenders that (a) there are no liens, security interests or
encumbrances upon, in or against any assets or properties of any Borrower or
Guarantor arising under ERISA, whether held by the Pension Benefit Guaranty
Corporation (the “PBGC”) or the contributing sponsor of, or a member of the
controlled group thereof, any pension benefit plan of any Borrower or Guarantor
and (b) no notice of lien has been filed by the PBGC (or any other Person)
pursuant to ERISA against any assets or properties of any Borrower or
Guarantor.

    


                5.10 Information
Certificate.  Within twenty (20) days following the date
hereof, Borrowers and Guarantors shall deliver to Agent, in form and substance
satisfactory to Agent, an updated Information Certificate for Borrowers and
Guarantors, duly authorized, executed and delivered by each Borrower and
Guarantor.

    


                5.11 Pledge of Canadian Borrower
Stock.  Within seven (7) days following the date hereof,
Borrowers and Guarantors shall deliver to Agent (a) a Pledge and Security
Agreement, in form and substance satisfactory to Agent, by US Borrower in favor
of Agent providing for the pledge of sixty-five (65%) percent of the shares of
Capital Stock of Canadian Borrower, which agreement shall be duly authorized,
executed and delivered by US Borrower, and (b) originals of the stock
certificates (if any) representing such shares, together with stock powers duly
executed in blank with respect thereto (if applicable).  The pledge of
the remaining shares of the Capital Stock of Canadian Borrower shall be
addressed in the Final Order.

    


    6.      DIP FACILITY
FEE.

    


    Borrowers
shall pay to Agent, for the account of Lenders (to the extent and in accordance
with the arrangements between Agent and each Lender), a debtor-in-possession
financing facility fee, in the amount of $800,000, on account of the financing
provided by Agent and Lenders to Borrowers in the Chapter 11 Cases, which fee
shall be fully earned and due and payable on the date hereof.  Agent
may, at its option, charge the debtor-in-possession financing facility directly
to the loan account of Borrowers maintained by Agent.

    


    7.      AMENDMENTS TO LOAN
AGREEMENT.

    


                7.1   Loans.  Section
2.1 of the Loan Agreement is hereby amended by adding the following new
subsection (e) at the end of such Section:

     

     

     

    
      
        
        

      

      
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    “(e)  Notwithstanding
anything to the contrary in this Section 2.1, (i) on the effective date of the
Ratification Agreement, all of the Pre-Petition Additional Loans (as defined in
Section 2.1 of the Ratification Agreement) shall automatically be deemed to
constitute Prime Rate Loans based on Intellectual Property Availability and
shall no longer be deemed to constitute Loans under Section 12.8 of the Loan
Agreement, and (ii) at all times during which the then outstanding principal
amount of the Loans equals or is less than the amount of Intellectual Property
Availability, all Loans shall be deemed to constitute Prime Rate Loans based on
Intellectual Property Availability, and at any time that the then outstanding
principal amount of the Loans exceeds the amount of Intellectual Property
Availability, all Loans in excess of the amount of Intellectual Property
Availability shall be deemed to constitute Prime Rate Loans (other than Prime
Rate Loans based on Intellectual Property Availability).”

     

                7.2   Letter of Credit
Fee.  Section 2.2(b) of the Loan Agreement is hereby amended by deleting the reference
therein to “one and three-quarters (1.75%) percent” and replacing it with “five and
three-quarters (53⁄4 %) percent”.

    


                7.3   Limits and
Sublimits.  Section 2 of the Loan Agreement is hereby amended
by adding the following new Section 2.5 at the end of such Section:

    


    “2.5  Limits and
Sublimits.  All limits and sublimits set forth in this
Agreement, and any formula or other provision to which a limit or sublimit may
apply, shall be determined on an aggregate basis considering together both the
Pre-Petition Obligations and the Post-Petition Obligations.”

    


                7.4   
Eurodollar Rate
Loans. Notwithstanding anything to the contrary contained in the Loan
Agreement, including, without limitation, Sections 3.1(b) and (c) thereof,
effective as of the date hereof:

    


    (a)  Borrowers
shall not request and Lenders shall not make any Eurodollar Rate
Loans;

    


    (b)  the
Interest Rate in respect of all Loans made on or after the date hereof shall be
the Interest Rate applicable to Prime Rate Loans;

    


    (c)  Borrowers
shall not request that any Eurodollar Rate Loans outstanding prior to the date
hereof continue for any additional Interest Period; and

    


    (d)  Borrowers
shall not request that any Prime Rate Loans be converted to Eurodollar Rate
Loans and Agent shall not be obligated to convert any such Prime Rate Loans to
Eurodollar Rate Loans;

    


    provided, however, that the
provisions of the Loan Agreement applicable to Eurodollar Rate Loans shall
remain in effect with respect to any Loans for which Borrowers had elected to be


     

     

     

     

    
      
        
        

      

      
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    treated
as a Eurodollar Rate Loan prior to the Petition Date until the end of the
then-applicable Interest Period.

    


                7.5   Unused Line
Fee.  Section
3.2(a) of the Loan Agreement is hereby amended by deleting such Section in its
entirety and replacing it with the following:

     

    “(a)  US
Borrower shall pay to Agent, for the ratable benefit of Lenders, monthly an
unused line fee at a rate equal to .375% per annum calculated upon the amount by
which the Maximum Credit exceeds the average daily principal balance of the
outstanding Loans and Letter of Credit Accommodations during the immediately
preceding month (or part thereof) while this Agreement is in effect and for so
long thereafter as any of the Obligations are outstanding.  Such fee
shall be payable on the first day of each month in arrears.”

     

                7.6   Grant of
Security Interest.  Section 5.1(b) of
the Loan Agreement is hereby amended by deleting such Section in its entirety
and replacing it with the following:

     

    “(b)  [Intentionally
Deleted].”

     

                7.7   Payments.  Section
6.4(c) of the Loan Agreement is hereby amended by inserting the following
immediately prior to the period at the end of such Section:

     

    “and (v)
at all times, an amount of the Loans up to the amount of the Intellectual
Property Availability shall be deemed to constitute Prime Rate Loans based on
Intellectual Property Availability, and any Loans in excess of the amount
of Intellectual Property Availability shall be deemed to constitute Prime Rate
Loans (other than Prime Rate Loans based on Intellectual Property
Availability)”.

     

                7.8   Collateral
Reporting.

     

    (a)  Section 7.1(a)(i) of the Loan Agreement
is hereby amended by deleting the reference to “as soon as possible after
the end of other every week (but in any event by the close of business in
Chicago on the third (3rd)
Business Day after the end of each such period), or in the event that the
aggregate amount of the Excess Availability of Borrowers is less than
$25,000,000, at Agent’s option, as soon as possible after the end of each week
(but in any event by the close of business in Chicago on the third (3rd)
Business Day after the end of each such period),” and replacing it with the
following:

    


    “as soon as possible after the
end of each week (but in any event by the close of business in Chicago on the
third (3rd)
Business Day after the end of each week), or more frequently as Agent may
request,”.

     

    (b)  Section 7.1(a)(ii) of the Loan Agreement
is hereby amended by deleting the reference to “on a monthly basis or in
the event that the aggregate amount of the Excess Availability of Borrowers is
less than $25,000,000 or a Default or Event of Default shall exist or have
occurred and be continuing, in each case at Agent’s option, as soon as possible
after the end of each week,” and
replacing it with the following:

     

     

    
      
        
        

      

      
        20

        
          

        

      

      
        
        

      

    

    


    “as soon as possible after the
end of each week (but in any event by the close of business in Chicago on the
third (3rd)
Business Day after the end of each week), or more frequently as Agent may
request,”.

     

                7.9   
Inventory
Covenants.  Section 7.3(d) of the Loan Agreement is hereby
amended by deleting such Section in its entirety and replacing it with
the following:

     

    “(d)
upon Agent's request, Borrowers
shall, at their expense, no more than four (4) times in any twelve (12) month period,
but at any time or times as Agent may request on or after an Event of Default
and for so long as the same is continuing, deliver or cause to be delivered to
Agent written appraisals as to the Inventory in form, scope and methodology
acceptable to Agent and by an appraiser acceptable to Agent, addressed to Agent
and Lenders and upon which Agent and Lenders are expressly permitted to rely
(provided, that, any appraisal requested at such time
as an Event of Default exists or has occurred and is continuing shall not be
considered for purposes of the limitation on the number of appraisals provided
for herein);”

     

                7.10  Right to
Cure.  Section 7.6 of the Loan Agreement is hereby amended by
deleting such Section in its entirety and replacing it with the
following:

     

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

    


                7.11  Intellectual Property
Covenants.  Section 7 of the Loan Agreement is hereby amended
by inserting the following Section immediately following Section
7.7:

     

    “7.8  Intellectual Property
Covenants.  

     

    With
respect to the Intellectual Property, in addition to and not in limitation of
the covenants set forth in the 

     

     

     

    
      
        
        

      

      
        21

        
          

        

      

      
        
        

      

    

     

     

     

           Trademark Security
Documents, upon Agent's request, Borrowers shall, at their expense, no more than
two (2) times in any six (6) month period, but at any time or times as Agent may
request upon the occurrence and during the continuance of an Event of Default,
deliver or cause to be delivered to Agent written appraisals as to the
Intellectual Property in form, scope and methodology acceptable to Agent and by
an appraiser acceptable to Agent, addressed to Agent and Lenders and upon which
Agent and Lenders are expressly permitted to rely.”

     

                7.12  Financial Statements and
Other Information.

    


    (a)  Section
9.6(a) of the Loan Agreement is hereby amended by deleting in its entirety the
proviso appearing at the end of the second sentence of such
Section.

    


    (b)  Section
9.6 of the Loan Agreement is hereby amended by adding the following new
subsection (e) to the end of such Section:

    


    “(e)  Each
Borrower and Guarantor shall provide Agent and Lenders with copies of all
financial reports, schedules and other materials and information at any time
furnished by or on behalf of any Borrower or Guarantor to the Bankruptcy Court,
the U.S. Trustee, any creditors’ committee or such Borrower’s or Guarantor’s
shareholders, concurrently with the delivery thereof.”

    


                7.13  Sale of Assets,
Etc.  Notwithstanding anything to the contrary contained in
Section 9.7(b) of the Loan Agreement or any other provision of the Loan
Agreement or any of the other Financing Agreements, Borrowers and Guarantors
shall not directly or indirectly sell, transfer, lease, encumber, return or
otherwise dispose of any portion of the Collateral or any other assets of
Borrowers and Guarantors, including, without limitation, assume, reject or
assign any leasehold interest or enter into any agreement to return Inventory to
vendor, whether pursuant to Section 546 of the Bankruptcy Code or otherwise,
without the prior written consent of Agent and the Required Lenders (and no such
consent shall be implied, from any other action, inaction or acquiescence by
Agent or any Lender) except for sales of Borrowers' and Guarantors' Inventory in
the ordinary course of their business.

    


                7.14  Indebtedness.  Notwithstanding
anything to the contrary contained in Section 9.9 of the Loan Agreement or any
other provision of the Loan Agreement or any of the other Financing Agreements,
Borrowers and Guarantors shall
not, and shall not permit any Subsidiary to, incur, create, assume, become or be
liable in any manner with respect to, or permit to exist, any new Indebtedness,
or guarantee, assume, endorse, or otherwise become responsible for (directly or
indirectly), any new Indebtedness, performance, obligations or dividends of any
other Person, without in each case the prior written consent of Agent and
the Required Lenders (and no such consent shall be implied, from any other
action, inaction or acquiescence by Agent or any Lender), except to the extent
set forth in the Budget.

    


                7.15  Loans, Investments,
Etc.  Notwithstanding anything to the contrary contained in
Section 9.10 of the Loan Agreement or any other provision of the Loan Agreement
or any of the other Financing Agreements, each Borrower and Guarantor shall not,
and shall not permit any Subsidiary to, directly or indirectly, make any loans
or advance money or property to 

     

     

    
      
        
        

      

      
        22

        
          

        

      

      
        
        

      

    

     

    any
person, or invest in (by capital contribution, dividend or otherwise) or
purchase or repurchase the Capital Stock or Indebtedness or all or a substantial
part of the assets or property of any person, or form or acquire any
Subsidiaries, or agree to do any of the foregoing, without in each case the prior
written consent of Agent and the Required Lenders (and no such consent shall be
implied, from any other action, inaction or acquiescence by Agent or any
Lender), except to the extent set forth in the Budget.

    


                7.16  Dividends and
Redemptions.  Notwithstanding anything to the contrary
contained in Section 9.11 of the Loan Agreement or any other provision of the
Loan Agreement or any of the other Financing Agreements, each Borrower and
Guarantor shall not, directly or indirectly, declare or pay any dividends on
account of any shares of class of any Capital Stock of such Borrower or
Guarantor now or hereafter outstanding, or set aside or otherwise deposit or
invest any sums for such purpose, or redeem, retire, defease, purchase or
otherwise acquire any shares of any class of Capital Stock (or set aside or
otherwise deposit or invest any sums for such purpose) for any consideration or
apply or set apart any sum, or make any other distribution (by reduction of
capital or otherwise) in respect of any such shares or agree to do any of the
foregoing, without in each case
the prior written consent of Agent and the Required Lenders (and no such
consent shall be implied, from any other action, inaction or acquiescence by
Agent or any Lender).

    


                7.17  Minimum Excess
Availability.  Section 9.17 of the Loan Agreement is hereby
amended by deleting such Section in its entirety and replacing it with the
following:

    


    “9.17  Minimum Excess
Availability.  US Borrower shall maintain at all times Excess
Availability in an amount of not less than the greater of (a)
eighty-five (85%) percent of the amount of Excess Availability projected in
the then applicable Budget and (b) $10,000,000.”

    


                7.18  Events of
Default.

    


    (a)  Section
10.1(a) of the Loan Agreement is hereby amended by deleting such Section in its
entirety and replacing it with the following:

    


    “(a) (i)
any Borrower fails to pay any of the Obligations when due or (ii) any
Borrower or Obligor fails to perform any of the covenants contained in Sections
9.4, 9.13, 9.14, 9.15, and 9.16 of this Agreement and such failure shall
continue for ten (10) days; provided, that, such ten (10)
day period shall not apply in the case of: (A) any failure to observe any such
covenant which is not capable of being cured at all or within such ten (10) day
period or which has been the subject of a prior failure within a three (3) month
period or (B) an intentional breach by any Borrower or Obligor of any such
covenant or (iii) any Borrower or Obligor fails to perform any of the terms,
covenants, conditions or provisions contained in this Agreement or any of the
other Financing Agreements other than those described in Sections 10.1(a)(i) and
10.1(a)(ii) above;”

     

    (b)  Section
10.1(c) of the Loan Agreement is hereby amended by deleting such Section in its
entirety and replacing it with the following:

     

     

     

    
      
        
        

      

      
        23

        
          

        

      

      
        
        

      

    

    


    “(c)  any
Obligor revokes or terminates or purports to revoke or terminate or fails to
perform any of the terms, covenants, conditions or provisions of any guarantee
or other Financing Agreement in favor of Agent or any Lender;”.

    


    (c)  Section
10.1(f) of the Loan Agreement is hereby amended by (i) deleting the reference to
“forty-five (45) days” and replacing it with “thirty (30) days” and (ii)
deleting each reference to “any Borrower or Guarantor” and replacing it with
“any Obligor (other than Debtors)”.

    


    (d)  Section
10.1(g) of the Loan Agreement is hereby amended by deleting each reference to
“any Borrower or Guarantor” and replacing it with “any Obligor (other than
Debtors)”.

    


    (e)  Section
10.1(i) of the Loan Agreement is hereby amended by deleting clause (iii) from
such Section in its entirety and replacing it with the following:

    


    “(iii)  any security interest
provided for herein or in any of the other Financing Agreements shall cease to
be a valid and perfected
priority security interest in any of the Collateral purported to be subject
thereto (except as otherwise permitted herein or therein)”.

    


    (f)  Section
10.1 of the Loan Agreement is hereby amended by (i) deleting the reference to
the word “or” at the end of subsection (m) of such Section, (ii) replacing the
period appearing at the end of subsection (n) of such Section with a semicolon,
and (iii) adding the following to the end of such Section:

    


    “(o)  the occurrence of any
condition or event which permits Agent or any Lender to exercise any of the
rights and remedies set forth in the Financing Order, including, without
limitation, any Event of Default (as defined in the Financing
Order);

    


    (p)  the termination or
non-renewal of the Financing Agreements as provided for in the Financing
Order;

    


    (q) any Borrower or Guarantor suspends
or discontinues or is enjoined by any court or Governmental Authority from
continuing to conduct all or any material part of its business, or a trustee,
receiver or custodian is appointed for any Borrower or Guarantor, or any of
their respective properties;

    


    (r)  any act, condition or
event occurring after the Petition Date that has or would reasonably expect to
have a Material Adverse Effect;

    


    (s)  the conversion of any
Chapter 11 Case to a case under Chapter 7 of the Bankruptcy Code;

     

     

    
      
        
        

      

      
        24

        
          

        

      

      
        
        

      

    

    


    (t)  the dismissal of any
Chapter 11 Case or any subsequent Chapter 7 case, either voluntarily or
involuntarily or the termination, suspension or modification of the stay of
proceedings in the Chapter 11 Cases, either voluntarily or involuntarily;
or

    


    (u)  the grant of a lien on
or other interest in any property of any Borrower or Guarantor other than a lien
or encumbrance permitted by Section 9.8 hereof or by the Financing Order or an
administrative expense claim other than such administrative expense claim
permitted by the Financing Order or this Ratification Agreement by the grant of
or allowance by the Bankruptcy Court which is superior to or ranks in parity
with Agent’s and Lenders’ security interests in or liens upon the Collateral or
their Superpriority Claim (as defined in the Financing Order);

    


    (v)  the Financing Order
shall be reversed, revoked, remanded, stayed, rescinded, vacated, modified in a
manner that is adverse or could reasonably be expected to be adverse to the
interests of Agent or any Lenders, or amended on appeal or by the Bankruptcy
Court without the prior written consent of Agent (and no such consent shall be
implied from any other authorization or acquiescence by Agent or any
Lender);

    


    (w)  the appointment of a
trustee pursuant to Sections 1104(a)(1) or 1104(a)(2) of the Bankruptcy
Code;

    


    (x)  the appointment of an
examiner with expanded powers pursuant to Section 1104(a) of the Bankruptcy
Code;

    


    (y)  the filing of a plan of
reorganization or liquidation by or on behalf of any Borrower or Guarantor, to
which Agent and Lenders have not consented in writing, which does not provide
for payment in full of all Obligations on the effective date thereof in
accordance with the terms and conditions contained herein;

    


    (z) the confirmation of any plan of
reorganization or liquidation in the Chapter 11 Case of any Borrower or
Guarantor, to which Agent and Lenders have not consented to in writing, which
does not provide for payment in full of all Obligations on the effective date
thereof in accordance with the terms and conditions contained
herein;

    


    (aa) any
Borrower or Obligor makes an assignment for the benefit of creditors, makes or
sends notice of a bulk transfer or calls a meeting of its creditors or principal
creditors in connection with a moratorium or adjustment of the Indebtedness due
to them; or

     

     

    
      
        
        

      

      
        25

        
          

        

      

      
        
        

      

    

    


    (bb)  the
Final Financing Order shall not have been entered by the Bankruptcy Court, and
become effective, within thirty (30) days of the Petition Date.”

    


                7.19  Governing Law; Choice of
Forum; Service of Process; Jury Trial Waiver.   Section
11.1(a) of the Loan Agreement is hereby amended by adding the following at the
end of such Section:

    


    “except
to the extent that the provisions of the Bankruptcy Code are applicable and
specifically conflict with the foregoing.”

    


                7.20  Additional
Loans.  Section 12.8 of the Loan Agreement is hereby amended by
deleting the reference to “$10,000,000” and replacing it with “the Specified
Overadvance Limit”.

    


                7.21  Special Agent
Advances.  Section 12.11(a)(ii) of the Loan Agreement is hereby
amended by deleting the reference to “$10,000,000” and replacing it with “the
Specified Overadvance Limit”.

    


                7.22  Term.  Section
13.1(a) of the Loan Agreement is hereby amended by deleting the first sentence
of such Section in its entirety and replacing it with the
following:

    


    “This
Agreement and the other Financing Agreements shall become effective as of the
date set forth on the first page hereof and shall continue in full force and
effect for a term ending on the earlier to occur of (i) July 1, 2009,
(ii) the confirmation of a plan of reorganization or liquidation for any
Debtor in the Chapter 11 Cases, (iii) the closing of any sale or sales of
Collateral consummated in accordance with the terms and conditions contained in
this Agreement and the other Financing Agreements that result in the payment in
full of all Obligations in accordance with the terms and conditions contained in
this Agreement and the other Financing Agreements or (iv) the last termination
date set forth in the Interim Financing Order, unless the Final Financing Order
has been entered prior to such date, and in such event, then the last
termination date set forth in the Final Financing Order (the earlier to occur of
clauses (i), (ii) and (iii) referred to herein as the “Maturity Date”); provided, that, this Agreement
and all other Financing Agreements must be terminated
simultaneously.”

    


                7.23  Notices.  Section
13.3 of the Loan Agreement is hereby amended by adding that any notices,
requests and demands also be sent to the following parties:

     

     

    
      	 	
              to
      any Borrower or Guarantor:

            	
              Hartmarx
      Corporation

              101 North Wacker
      Drive

              Chicago, Illinois
      60606

              Attention: Executive Vice
      President and Chief Financial Officer

              Telecopy No. (312)
      855-3799

               

            


    

     

     

    
      
        
        

      

      
        26

        
          

        

      

      
        
        

      

    

     

     

     

    


    
      
        
          	 	
                  with
      a copy to

                	
                  Hartmarx
      Corporation

                  101
      North Wacker Drive

                  Chicago,
      Illinois 60606

                  Attention:
      General Counsel

                  Telecopy No. (312)
      357-5807

                   

                
	 	
                  with
      a copy to:

                	
                  Skadden,
      Arps, Slate, Meagher & Flom LLP

                  333
      West Wacker Drive

                  Chicago,
      IL  60606

                  Attention:  George
      N. Panagakis, Esq.

                  Telecopy
      No.: 312-407-8586

                   

                
	 	
                  If
      to Agent:

                	
                  Wachovia
      Capital Finance Corporation (Central)

                  150
      South Wacker Drive, Suite 2200

                  Chicago,
      Illinois 60606-4401

                  Attention:
      Portfolio Manager

                  Telecopy
      No.: 312-332-0424

                   

                
	 	
                  with
      a copy to:

                	
                  Otterbourg,
      Steindler, Houston & Rosen, P.C.

                  230
      Park Avenue

                  New
      York, New York  10169

                  Attn:
      Jonathan N. Helfat, Esq.

                  Telecopy
      No.: (212) 682-6104

                


        

      

    

    


    8.      RELEASE.

     

                8.1   Release of Pre-Petition
Claims.

    


    (a)  Upon
the earlier of (i) the entry of the Final Financing Order, or (ii) the
entry of an Order extending the term of the Interim Financing Order beyond
thirty (30) calendar days after the date of the Interim Financing Order, in
consideration of the agreements of Agent and Lenders contained herein and the
making of any Loans by Agent and Lenders, each Borrower and Guarantor, pursuant
to the Loan Agreement, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, on behalf of itself and
its respective successors, assigns, and other legal representatives, hereby
absolutely, unconditionally and irrevocably releases, remises and forever
discharges Agent, each Lender and their respective successors and assigns, and
their present and former shareholders, affiliates, subsidiaries, divisions,
predecessors, directors, officers, attorneys, employees and other
representatives (Agent, each Lender and all such other parties being hereinafter
referred to collectively as the “Releasees” and individually as a “Releasee”),
of and from all demands, actions, causes of action, suits, covenants, contracts,
controversies, agreements, promises, sums of money, accounts, bills, reckonings,
damages and any and all other claims, counterclaims, defenses, rights of
set-off, demands and liabilities whatsoever (individually, a “Pre-Petition
Released Claim” and collectively, “Pre-Petition Released Claims”) of every name
and nature, known or unknown, suspected or unsuspected, both at law and in
equity, which any Borrower or Guarantor, or any of their respective successors,
assigns, or other legal representatives may now 

     

     

    
      
        
        

      

      
        27

        
          

        

      

      
        
        

      

    

     

    or
hereafter own, hold, have or claim to have against the Releasees or any of them
for, upon, or by reason of any nature, cause or thing whatsoever which arises at
any time on or prior to the day and date of this Ratification Agreement,
including, without limitation, for or on account of, or in relation to, or in
any way in connection with the Loan Agreement, as amended and supplemented
through the date hereof, and the other Financing Agreements.

    


    (b)  Upon
the earlier of (i) the entry of the Final Financing Order or (ii) the entry of
an Order extending the term of the Interim Financing Order beyond thirty (30)
calendar days after the date of the Interim Financing Order, each Borrower and
Guarantor, on behalf of itself and its successors, assigns, and other legal
representatives, hereby absolutely, unconditionally and irrevocably, covenants
and agrees with each Releasee that it will not sue (at law, in equity, in any
regulatory proceeding or otherwise) any Releasee on the basis of any
Pre-Petition Released Claim released, remised and discharged by each Borrower
and Guarantor pursuant to this Section 8.1.  If any Borrower or
Guarantor violates the foregoing covenant, Borrowers and Guarantors agree to
pay, in addition to such other damages as any Releasee may sustain as a result
of such violation, all attorneys' fees and costs incurred by any Releasee as a
result of such violation.

    


                8.2   Release of Post-Petition
Claims. Upon (a) the receipt by Agent, on behalf of itself and the other
Lenders, of payment in full of all Obligations in cash or other immediately
available funds, plus cash collateral or other collateral security acceptable to
Agent to secure any Obligations that survive or continue beyond the termination
of the Financing Agreements, and (b) the termination of the Financing Agreements
(the “Payment Date”), in consideration of the agreements of Agent and Lenders
contained herein and the making of any Loans by Agent and Lenders, each Borrower
and Guarantor hereby covenants and agrees to execute and deliver in favor of
Agent and Lenders a valid and binding termination and release agreement, in form
and substance satisfactory to Agent.  If any Borrower or Guarantor
violates such covenant, Borrowers and Guarantors agree to pay, in addition to
such other damages as any Releasee may sustain as a result of such violation,
all attorneys' fees and costs incurred by any Releasee as a result of such
violation.

    


                8.3   Releases
Generally.

    


    (a)  Each
Borrower and Guarantor understands, acknowledges and agrees that the releases
set forth above in Sections 8.1 and 8.2 hereof  may be pleaded as a
full and complete defense and may be used as a basis for an injunction against
any action, suit or other proceeding which may be instituted, prosecuted or
attempted in breach of the provisions of such releases.

    


    (b)  Each
Borrower and Guarantor agrees that no fact, event, circumstance, evidence or
transaction which could now be asserted or which may hereafter be discovered
shall affect in any manner the final and unconditional nature of the releases
set forth in Section 8.1 hereof and, when made, Section 8.2 hereof.

     

     

    
      
        
        

      

      
        28

        
          

        

      

      
        
        

      

    

    


    9.       CONDITIONS
PRECEDENT.

    


    In
addition to any other conditions contained herein or the Loan Agreement, as in
effect immediately prior to the Petition Date, with respect to the Loans and
other financial accommodations available to Borrowers (all of which conditions,
except as modified or made pursuant to this Ratification Agreement shall remain
applicable to the Loans and be applicable to other financial accommodations
available to Borrowers), the following are conditions to Agent's and Lenders'
obligation to extend further loans, advances or other financial accommodations
to Borrowers pursuant to the Loan Agreement:

    


                9.1   Agent
shall have received, in form and substance satisfactory to Agent, this
Ratification Agreement and all of the other Financing Agreements to be delivered
in connection herewith, duly authorized, executed and delivered by each Borrower
and Guarantor;

    


                9.2   Agent
shall have received from Borrowers and Guarantors all financial information,
projections, budgets, business plans, cash flows and such other information as
Agent and Lenders shall have reasonably requested from Borrowers and
Guarantors;

    


                9.3   as of
the Petition Date, the Existing Financing Agreements shall not have been
terminated;

     

                9.4   no
trustee, examiner with expanded powers or receiver or the like shall have been
appointed or designated with respect to any Borrower or Guarantor, as Debtor and
Debtor-in-Possession, or its respective business, properties and assets and no
motion or proceeding shall be pending seeking such relief;

    


                9.5   the
Interim Financing Order or other Orders of the Bankruptcy Court shall ratify and
amend the Blocked Account Agreement and deposit account arrangements of
Borrowers and Guarantors to reflect the commencement of the Chapter 11 Cases,
that each Debtor, as Debtor and Debtor-in-Possession, is the successor in
interest to such Borrower or Guarantor, as the case may be, that the Obligations
include both the Pre-Petition Obligations and the Post-Petition Obligations,
that the Collateral includes both the Pre-Petition Collateral and the
Post-Petition Collateral as provided for in this Ratification
Agreement;

    


                9.6   the
execution or delivery to Agent and Lenders of all other Financing Agreements,
and other agreements, documents and instruments which, in the good faith
judgment, of Agent are necessary or appropriate

    


                9.7   the
implementation of the terms of this Ratification Agreement and the other
Financing Agreements, as modified pursuant to this Ratification Agreement, all
of which contains provisions, representations, warranties, covenants and Events
of Default, as are satisfactory to Agent and its counsel;

    


                9.8  
satisfactory review by counsel for Agent of legal issues attendant to the
post-petition financing transactions contemplated hereunder;

    


                9.9   each
Borrower and Guarantor shall comply in full with the notice and other
requirements of the Bankruptcy Code and the applicable Bankruptcy Rules with
respect to any relevant Financing Order in a manner acceptable to Agent and its
counsel, and an Interim 

     

     

     

    
      
        
        

      

      
        29

        
          

        

      

      
        
        

      

    

    Financing
Order shall have been entered by the Bankruptcy Court (the “Interim Financing
Order”), in form and substance satisfactory to Agent, authorizing the secured
financing under the Financing Agreements as ratified and amended hereunder on
the terms and conditions set forth in this Ratification Agreement and, among
other things, modifying the automatic stay, authorizing and granting the senior
security interest in liens in favor of Agent and Lenders described in this
Ratification Agreement and in the Financing Order, and granting super-priority
expense claims to Agent and Lenders with respect to all obligations due Agent
and Lenders.  The Interim Financing Order shall authorize
post-petition financing under the terms set forth in this Ratification Agreement
in an amount acceptable to Agent and Lenders, in their sole discretion, and it
shall contain such other terms or provisions as Agent and its counsel shall
require;

    


                9.10  with
respect to further credit after expiration of the Interim Financing Order, on or
before the expiration of the Interim Financing Order, the Bankruptcy Court shall
have entered a Final Financing Order authorizing the secured financing on the
terms and conditions set forth in this Ratification Agreement, granting to Agent
and Lenders the senior security interests and liens described above and
super-priority administrative expense claims described above (except as
otherwise specifically provided in the Interim Financing Order), and modifying
the automatic stay and other provisions required by Agent and its counsel
(“Final Financing Order”).  Neither Agent nor any Lender shall provide
any Loans (or other financial accommodations) other than those authorized under
the Interim Financing Order unless, on or before the expiration of the Interim
Financing Order, the Final Financing Order shall have been entered, and there
shall be no appeal or other contest with respect to either the Interim Financing
Order or the Final Financing Order and the time to appeal to contest such order
shall have expired;

    


                9.11  other
than the voluntary commencement of the Chapter 11 Cases, no material impairment
of the priority of Agent's and Lenders' security interests in the Collateral
shall have occurred from the date of the latest field examinations of Agent and
Lenders to the Petition Date; and

    


                9.12  no
Event of Default shall have occurred or be existing under any of the Existing
Financing Agreements, as modified pursuant hereto, and assumed by Borrowers and
Guarantors.

    


    10.     MISCELLANEOUS.

    


                10.1  Amendments and
Waivers.  Neither this Ratification Agreement nor any other
instrument or document referred to herein or therein may be changed, waived,
discharged or terminated orally, but only by an instrument in writing signed by
the party against whom enforcement of the change, waiver, discharge or
termination is sought.

    


                10.2  Further
Assurances.  Each Borrower and Guarantor shall, at its expense,
at any time or times duly execute and deliver, or shall use its best efforts to
cause to be duly executed and delivered, such further agreements, instruments
and documents, including, without limitation, additional security agreements,
collateral assignments, UCC or PPSA financing statements or amendments or
continuations thereof, landlord's or mortgagee's waivers of liens 

     

     

     

    
      
        
        

      

      
        30

        
          

        

      

      
        
        

      

    

     

    and
consents to the exercise by Agent and Lenders of all the rights and remedies
hereunder, under any of the other Financing Agreements, any Financing Order or
applicable law with respect to the Collateral, and do or use its best efforts to
cause to be done such further acts as may be reasonably necessary or proper in
Agent's opinion to evidence, perfect, maintain and enforce the security
interests of Agent and Lenders, and the priority thereof, in the Collateral and
to otherwise effectuate the provisions or purposes of this Ratification
Agreement, any of the other Financing Agreements or the Financing
Order.  Upon the request of Agent, at any time and from time to time,
each Borrower and Guarantor shall, at its cost and expense, do, make, execute,
deliver and record, register or file updates to the filings of Agent and Lenders
with respect to the Intellectual Property with the United States Patent and
Trademark Office, the financing statements, mortgages, deeds of trust, deeds to
secure debt, and other instruments, acts, pledges, assignments and transfers (or
use its best efforts to cause the same to be done) and will deliver to Agent and
Lenders such instruments evidencing items of Collateral as may be requested by
Agent.  Upon the request of Agent, at any time and from time to time,
Borrowers and Guarantors shall, at their cost and expense deliver to Agent any
financial information, projections, budgets, business plans, cash flows and such
other information as Agent shall reasonably request.

    


                10.3  Headings.  The
headings used herein are for convenience only and do not constitute matters to
be considered in interpreting this Ratification Agreement.

    


                10.4  Counterparts.  This
Ratification Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original, but all of which shall together
constitute one and the same agreement.  In making proof of this
Ratification Agreement, it shall not be necessary to produce or account for more
than one counterpart thereof signed by each of the parties
hereto.  Delivery of an executed counterpart of this Ratification
Agreement by telefacsimile shall have the same force and effect as delivery of
an original executed counterpart of this Ratification Agreement.  Any
party delivering an executed counterpart of this Ratification Agreement by
telefacsimile also shall deliver an original executed counterpart of this
Ratification Agreement, but the failure to deliver an original executed
counterpart shall not affect the validity, enforceability, and binding effect of
this Ratification Agreement as to such party or any other party.

    


                10.5  Additional Events of
Default.  The parties hereto acknowledge, confirm and agree
that the failure of any Borrower or Guarantor to comply with any of the
covenants, conditions and agreements contained herein or in any other agreement,
document or instrument at any time executed by such Borrower or Guarantor in
connection herewith shall constitute an Event of Default under the Financing
Agreements.

    


                10.6  Costs and
Expenses.  In addition to and not in limitation of the
provisions of Section 9.21 of the Loan Agreement, Borrowers shall pay to Agent
on demand all costs and expenses that Agent and Lenders shall pay or incur in
connection with the negotiation, preparation, consummation, administration,
enforcement, and termination of this Ratification Agreement, the other Financing
Agreements or the Financing Order, including, without limitation: (a) reasonable
attorneys' and paralegals' fees and disbursements of counsel to, and reasonable
fees and expenses of consultants, accountants and other professionals retained
by, Agent and Lenders; (b) costs and expenses (including reasonable attorneys'
and paralegals' fees 

     

     

     

     

    
      
        
        

      

      
        31

        
          

        

      

      
        
        

      

    

     

    and
disbursements) for any amendment, supplement, waiver, consent, or subsequent
closing in connection with this Ratification Agreement, the other Financing
Agreements, the Financing Order, and the transactions contemplated hereby and
thereby; (c) taxes, fees and other charges for recording any agreements or
documents with any Governmental Authority, and the filing of UCC or PPSA
financing statements and continuations, and other actions to perfect, protect,
and continue the security interests and liens of Agent in the Collateral; (d)
sums paid or incurred to pay any amount or take any action required of Borrowers
and Guarantors under the Financing Agreements or the Financing Order that
Borrowers and Guarantors fail to pay or take; (e) costs of appraisals,
inspections and verifications of the Collateral and including travel, lodging,
and meals for inspections of the Collateral and the Debtors’ operations by Agent
or its agents and to attend court hearings or otherwise in connection with the
Chapter 11 Cases; (f) costs and expenses of preserving and protecting the
Collateral; (g) all out-of-pocket expenses and costs heretofore and from time to
time hereafter incurred by Agent during the course of periodic field
examinations of the Collateral and Debtors' operations, plus a per diem charge
at the rate of $1,000 per person per day for Agent’s examiners in the field and
office; provided, that, so long as no
Default or Event of Default shall exist or have occurred and be continuing,
Debtors shall not be required to pay such per diem charge for more than four (4)
such field examinations in any twelve (12) month period (and any field
examinations conducted at such time as a Default or Event of Default shall exist
or have occurred and be continuing shall not be deemed to constitute a field
examination for purposes of such limitation); and (h) costs and expenses
(including attorneys' and paralegals' fees and disbursements) paid or incurred
to obtain payment of the Obligations, enforce the security interests and liens
of Agent and Lenders, sell or otherwise realize upon the Collateral, and
otherwise enforce the provisions of this Ratification Agreement, the other
Financing Agreements or the Financing Order, or to defend any claims made or
threatened against Agent or any Lender arising out of the transactions
contemplated hereby (including, without limitation, preparations for and
consultations concerning any such matters).  The foregoing shall not
be construed to limit any other provisions of the Financing Agreements regarding
costs and expenses to be paid by Borrowers.  All sums provided for in
this Section shall be part of the Obligations, shall be payable on demand, and
shall accrue interest after demand for payment thereof at the highest rate of
interest then payable under the Financing Agreements.  Agent is hereby
irrevocably authorized to charge any amounts payable hereunder directly to any
account maintained by Agent with respect to any Borrower or
Guarantor.

    


                10.7  Effectiveness.  This
Ratification Agreement shall become effective upon the execution hereof by Agent
and Lenders and the entry of the Interim Financing Order.

    


                10.8  Governing
Law.  The validity, interpretation and enforcement of this
Agreement and any dispute arising out of the relationship between the parties
hereto, whether in contract, tort, equity or otherwise, shall be governed by the
internal laws of the State of Illinois but excluding any principles of conflicts
of law or other rule of law that would cause the application of the law of any
jurisdiction other than the laws of the State of Illinois unless otherwise
expressly provided in a Financing Agreement, except to the extent that the
provisions of the Bankruptcy Code are applicable and specifically conflict with
the foregoing.

    


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        32

        
          

        

      

      
         


      

    


    IN
WITNESS WHEREOF, the parties hereto have caused this Ratification Agreement to
be duly executed as of the day and year first above written.

     

     

    
      


      
        
          
            
              
                
                  	 
      	
                          AGENT AND
      LENDERS

                        
	 
      	 
      
	 
      	
                          WACHOVIA
      CAPITAL FINANCE 

                          CORPORATION
      (CENTRAL), as Agent 

                          and
      as Lender

                        
	 
      	 
      
	 
      	
                          By:

                        	 /s/ Anthony
      Vizgirda
	 
      	
                          Name:    
      Anthony Vizgirda

                        
	 
      	
                          Title:       
      Director

                        
	 
      	 
      
	 
      	
                          BANK
      OF AMERICA, N.A.,

                          as
      a Lender

                        
	 
      	 
      
	 
      	
                          By:

                        	 /s/
      illegible
	 
      	
                          Name:    
      illegible

                        
	 
      	
                          Title:       
      Sennior Vice President

                        
	 
      	 
      
	 
      	
                          JPMORGAN
      BUSINESS CREDIT CORP., as a Lender

                        
	 
      	 
      
	 
      	
                          By:

                        	 /s/ Christopher D.
      Zawie
	 
      	
                          Name:    
      Christopher D. Zawie

                        
	 
      	
                          Title:       
      Senior Vice President

                        
	 
      	 
      
	 
      	
                          WELLS
      FARGO FOOTHILL, LLC,

                          as
      a Lender

                        
	 
      	 
      
	 
      	
                          By:

                        	 /s/ Yelena
      Kravchuk
	 
      	
                          Name:    
      Yelena Kravchuk

                        
	 
      	
                          Title:        
      Vice President

                        
	 
      	 
      
	 
      	
                          WEBSTER
      BUSINESS CREDIT,

                          as
      a Lender

                        
	 
      	 
      
	 
      	
                          By:

                        	 /s/ Julian
      Vigder
	 
      	
                          Name:    
      Julian Vigder

                        
	 
      	
                          Title:       
      AVP

                        


                

              

            

          

        

      

      


      


      


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                        THE
      CIT GROUP/COMMERCIAL SERVICES, INC., as a Lender

                      
	 
      	 
      
	 
      	
                        By:

                      	 /s/ Samuel
      Addison
	 
      	
                        Name:    
      Samuel Addison

                      
	 
      	
                        Title:       
      Assistant Vice President

                      
	 
      	 
      
	 
      	
                        UPS
      CAPITAL CORPORATION, as a Lender

                      
	 
      	 
      
	 
      	
                        By:

                      	 /s/ Mike
      O'Neal
	 
      	
                        Name:    
      Mike O'Neal

                      
	 
      	
                        Title:       
      Senior Credit Officer

                      
	 
      	 
      
	 
      	
                        RZB
      FINANCE LLC, as a Lender

                      
	 
      	 
      
	 
      	
                        By:

                      	 /s/ Christoph
      Hoedl
	 
      	
                        Name:    
      Christoph Hoedl

                      
	 
      	
                        Title:       
      Group Vice President

                      
	 
      	 
      
	 
      	
                        By:

                      	 /s/ John A.
      Valiska
	 
      	
                        Name:    
      John A. Valiska

                      
	 
      	
                        Title:       
      First Vice
President

                      


              

            

          

        

      

    

     

     

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                      BORROWERS

                    
	 
      	 
      	 
      
	 
      	
                      HARTMARX
      CORPORATION, as Debtor 

                      and
      Debtor-in-Possession

                    
	 
      	 
      	 
      
	 
      	
                      By:

                    	
                      /s/
      Glenn R. Morgan

                    
	 
      	
                      Name:

                    	
                      Glenn
      R. Morgan

                    
	 
      	
                      Title:

                    	
                      Executive
      Vice President and Chief Financial Officer

                    
	 
      	 
      	 
      
	 
      	
                      COPPLEY
      APPAREL GROUP LIMITED

                    
	 
      	 
      	 
      
	 
      	
                      By:

                    	
                      /s/
      Glenn R. Morgan

                    
	 
      	
                      Name:

                    	
                      Glenn
      R. Morgan

                    
	 
      	
                      Title:

                    	
                      Vice
      President

                    
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	
                      GUARANTORS

                    
	 
      	 
      	 
      
	 
      	
                      EACH
      OF THE COMPANIES LISTED ON 

                      EXHIBIT
      A HERETO, each as Debtor and Debtor-in-Possession

                    
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	
                      By:

                    	
                      /s/
      Glenn R. Morgan

                    
	 
      	
                      Name:

                    	
                      Glenn
      R. Morgan

                    
	 
      	
                      Title:

                    	
                      Vice
      President of each such
company

                    


            

          

        

      

    

     

    
 

    


    



    
      
         


      

      
         


        
          

        

      

      
         


      

    


    EXHIBIT
A

    TO

    RATIFICATION
AND AMENDMENT AGREEMENT

    


    Guarantors


     

    


      
        	
                Anniston
      Sportswear Corporation

              	 
      	
                Robert’s
      International Corporation

              
	
                Consolidated
      Apparel Group, Inc.

              	 
      	
                SALHOLD,
      Inc.

              
	
                Direct
      Route Marketing Corporation

              	 
      	
                Seaford
      Clothing Co.

              
	
                Hart
      Schaffner & Marx

              	 
      	
                Society
      Brand, Ltd.

              
	
                Hickey-Freeman
      Co., Inc.

              	 
      	
                Sweater.com
      Apparel, Inc.

              
	
                HMX
      Sportswear, Inc.

              	 
      	
                TAG
      Licensing, Inc.

              
	
                International
      Women’s Apparel, Inc.

              	 
      	
                Tailored
      Trend, Inc.

              
	
                Jaymar-Ruby,
      Inc.

              	 
      	
                Thorngate
      Uniforms, Inc.

              
	
                HMX
      Luxury, Inc.

              	 
      	
                Trade
      Finance International Limited

              
	
                Monarchy
      Group, Inc., formerly known as M Acquisition Corp.

              	 
      	
                Winchester
      Clothing Company

              
	
                M.
      Wile & Company, Inc.

              	 
      	
                Yorke
      Shirt Corporation

              
	
                National
      Clothing Company, Inc.

              	 
      	
                Zooey
      Apparel, Inc

              
	
                Simply Blue Apparel, Inc.,
      formerly known as SB Acquisition Corp.

              	 
      	 
      
	
                Universal
      Design Group, Ltd.

              	 
      	 
      
	
                Briar,
      Inc.

              	 
      	 
      
	
                Chicago
      Trouser Company, Ltd.

              	 
      	 
      
	
                C.
      M. Clothing, Inc.

              	 
      	 
      
	
                C.
      M. Outlet Corp.

              	 
      	 
      
	
                Country
      Miss, Inc.

              	 
      	 
      
	
                Country
      Suburbans, Inc.

              	 
      	 
      
	
                E-Town
      Sportswear Corporation

              	 
      	 
      
	
                Fairwood-Wells,
      Inc.

              	 
      	 
      
	
                Gleneagles,
      Inc.

              	 
      	 
      
	
                Handmacher
      Fashions Factory Outlet, Inc.

              	 
      	 
      
	
                Handmacher-Vogel,
      Inc.

              	 
      	 
      
	
                Hartmarx
      International, Inc.

              	 
      	 
      
	
                Hart
      Services, Inc.

              	 
      	 
      
	
                Thos.
      Heath Clothes, Inc.

              	 
      	 
      
	
                Higgins,
      Frank & Hill, Inc.

              	 
      	 
      
	
                Hoosier
      Factories, Incorporated

              	 
      	 
      
	
                HSM
      University, Inc.

              	 
      	 
      
	
                Intercontinental
      Apparel, Inc.

              	 
      	 
      
	
                JRSS,
      Inc.

              	 
      	 
      
	
                Kuppenheimer
      Men’s Clothiers Dadeville, Inc.

              	 
      	 
      
	
                NYC
      Sweaters, Inc.

              	 
      	 
      
	
                106
      Real Estate Corp.

              	 
      	 
      
	
                Robert
      Surrey, Inc.