Exhibit 10.8


 


DEPOSIT ACCOUNT CONTROL AGREEMENT


 


This
DEPOSIT ACCOUNT CONTROL AGREEMENT (this “Agreement”)
is entered into as of June 20, 2005, among HSBC Bank USA, National
Association, as Agent pursuant to a certain Financing Agreement (as defined
herein) (the “Secured Party”),
The Bank of New York, as Collateral Agent pursuant to a certain Second Lien
Security Agreement (as defined herein) (the “Collateral
Agent”), Rafaella Apparel Group, Inc. (the “Debtor”), and HSBC Bank USA, National
Association (the “Bank”).


 


BACKGROUND


 


The
Bank maintains for the Debtor one or more demand deposit accounts designated by
the account number or numbers indicated on the Schedule hereto. The
demand deposit account or accounts, as re-numbered or otherwise re-designated
from time to time, are referred to in this Agreement, collectively, as the “Deposit Account”.


 


In
connection with certain financing or other arrangements between (i) the
Secured Party and the Debtor including, without limitation, that certain
Financing Agreement, dated as of June 20, 2005, among the Debtor,
Verrazano, Inc. (the “Subsidiary”),
certain Guarantors, Secured Party and certain financial institutions, as
Lenders, which presently or in the future become party thereto (the “Financing Agreement”), and (ii) the
Collateral Agent and the Debtor including, without limitation, that certain
Second Lien Security Agreement, dated as of June 20, 2005, among the
Debtor, the Subsidiary and the Collateral Agent (the “Security Agreement”), the Debtor has
informed the Bank that the Debtor has granted to each of the Secured Party and
the Collateral Agent a security interest in the Deposit Account. The Secured
Party, the Collateral Agent, the Debtor and the Subsidiary have entered into an
Intercreditor Agreement, dated as of June 20, 2005 (the “Intercreditor
Agreement”), setting forth certain agreements with respect to the Collateral
(as defined therein). The Debtor is hereby requesting that the Bank enter into
this Agreement. The Bank is willing to do so upon the terms contained in this
Agreement.


 


Accordingly,
the parties agree as follows:


 


AGREEMENTS


 


1.                                       Definitions and Rules of Interpretation.


 


(a)                                  As used in this Agreement, terms defined in
the UCC of the State and not otherwise defined herein have the same meanings herein
as specified therein.


 


(b)                                 In addition, the following terms used in this
Agreement shall have the following meanings:


 


“Business Day” means (i) in the case
of a notification or other communication to be given or made to the Bank, any
day, other than a Saturday or Sunday, on which the office, branch or department
of the Bank designated in the form of Initial Instruction attached as the Exhibit hereto
is open for business and can act upon the Initial Instruction and (ii) in
the case of a notification or other communication to be given or made to the
Debtor, the Secured Party or the Collateral 


 

















 


Agent, any day, other than a
Saturday or Sunday, on which the Debtor or, as the case may be, the
Secured Party or the Collateral Agent is open for business in the location to
which the notification or other communication is to be given or made.


 


“Deposit Account” has the meaning set forth
in the “Background” portion of this Agreement and includes any funds from time
to time in the Deposit Account.


 


“Deposit Agreement” means, collectively,
the deposit account agreement and any other agreements between the Bank and the
Debtor governing the Deposit Account and any cash management or like services
provided by the Bank to the Debtor in connection with the Deposit Account, in
each case as in effect from time to time.


 


“Initial Instruction” means the first
instruction to the Bank originated by the Secured Party or the Collateral
Agent, as the case may be, directing the disposition of the funds in the
Deposit Account.


 


“Items” means all checks, drafts, money
orders, instruments, cash and other items at any time received for deposit in
the Deposit Account, and all wire transfers of funds, automated clearing house
entries, credits from a merchant card transaction and other electronic funds
transfers or other funds deposited in, credited to, or held for deposit in or
credit to the Deposit Account, or otherwise in the possession or under control
of, or in transit to, the Bank or any agent, bailee or custodian thereof, for
credit to the Deposit Account.


 


“Order or Process” means any order,
judgment, decree, injunction or legal process directing or prohibiting or
otherwise restricting the disposition of the funds in the Deposit Account.


 


“Outside Time” means, absent an earlier Outside
Time set forth on the Schedule hereto, the opening of business on
the Business Day next succeeding the Business Day on which the Initial
Instruction is actually received by the person or persons or department at the
Bank to whom or which the Initial Instruction is required under this Agreement
to be addressed. Absent an earlier Outside Time set forth on the Schedule hereto,
if the Initial Instruction is actually received by the person or persons or
department after 12:00 noon, in the time zone set forth on the Schedule hereto,
on any Business Day, the Outside Time shall be the opening of business on the
second Business Day next succeeding the Business Day on which the actual
receipt occurs.


 


“Permitted Debit” means, to the extent, in
each case, to which the Bank has a right to charge the Debtor or the Deposit
Account, or to obtain a refund or other payment from the Debtor, by contract or
applicable law therefor:


 


(i) the face amount of any Item:


 


(A) deposited into or credited to the Deposit Account, either
before or after the date of this Agreement, and returned unpaid or otherwise
uncollected or subject to an adjustment entry, whether for insufficient funds
or for any other reason and without regard to the timeliness of such return or
adjustment or the occurrence or timeliness of any other party’s notice of
nonpayment or adjustment,


 


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(B) subject to a claim against the Bank for breach of transfer,
presentment, encoding, retention, or other warranty under Federal Reserve
Regulations or Operating Circulars, clearing house rules, the UCC or other
applicable law; or


 


(C) constituting a credit to the Deposit Account from a merchant
card transaction against which a contractual demand for chargeback has been made;


 


(ii) any usual and customary service charge or fee payable to or
incurred by the Bank, including out of pocket and allocable internal legal fees
and expenses, payable or incurred in connection with the negotiation,
administration or enforcement of this Agreement,


 


(iii) any adjustment or correction of any posting or encoding
error, or


 


(iv) any other Item or amount normally chargeable by the Bank to
or against a demand deposit account or customer in the ordinary course of a
demand deposit account relationship between a bank and a customer.


 


“State” means the State of New York.


 


“UCC” means, unless the context otherwise
requires, the Uniform Commercial Code as enacted in the State or in any
other jurisdiction whose Uniform Commercial Code applies under applicable
choice of law rules.


 


“Writing” means a tangible writing
including a facsimile. If the Schedule so permits, the term also
includes an electronic record. “Written”
refers to a communication in the form of a writing.


 


(c)                                  The rules of interpretation contained in
Article 1 of the UCC of the State shall apply to the interpretation of the
provisions of this Agreement.


 


2.                                       The Debtor’s Dealings with the Deposit
Account.


 


(a)                                  Except as provided in Section 2(b), the
Debtor shall be entitled to direct the disposition of the funds in the Deposit
Account in accordance with the terms of the Deposit Agreement.


 


(b)                                 The Debtor shall no longer be entitled to
direct, and the Bank shall cease complying with instructions originated by the
Debtor to direct, the disposition of the funds in the Deposit Account from and
after (i) the Outside Time or (ii) such earlier time as the Bank in
its discretion ceases complying with the Debtor’s directions as permitted by Section 4(a)(iv).


 


3.                                       The Secured Party’s and the Collateral Agent’s
Right to Give Exclusive Instructions as to the Deposit Account.


 


(a)                                  The Bank shall comply with the Initial
Instruction, or any other instruction originated by the Secured Party or the
Collateral Agent, as the case may be, directing the disposition of the
funds in the Deposit Account, in each case without further consent of the
Debtor.


 


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(b)                                 The Bank shall follow the Initial
Instruction, or any other instruction originated by the Secured Party or the
Collateral Agent, as the case may be, directing disposition of the funds
in the Deposit Account, even if the result of following the Initial Instruction
or such other instruction is that the Bank dishonors Items presented for
payment from the Deposit Account.


 


(c)                                  Notwithstanding the foregoing clauses (a) and
(b), the Bank shall not follow an Initial Instruction or any other instruction
originated by the Collateral Agent unless the Bank shall have received prior
written notice (x) from the Secured Party that the Discharge of Senior
Indebtedness (as defined in the Intercreditor Agreement) shall have occurred or
(y) from the Collateral Agent (a “Collateral Agent Notice”) that the Standstill
Period (as defined in the Intercreditor Agreement) shall have expired and Bank
thereafter does not receive written notice from the Secured Party that it has
commenced and is dilgently pursuing the Exercise of Secured Creditor Remedies
(as defined in the Intercreditor Agreement) against all or a material portion
of the Collateral (as defined in the Intercreditor Agreement) in which case the
Bank shall thereafter not follow any Instruction originated by the Collateral
Agent unless it receives written notice from the Secured Party as provided in
clause (x) above.


 


4.                                       Exculpation of the Bank.


 


(a)                                  The Bank shall have no liability to the
Debtor, the Secured Party or the Collateral Agent, notwithstanding the Bank’s
agreement in Section 3, if the Bank in its discretion:


 


(i)                                     declines to follow the Initial Instruction
because the Initial Instruction is not in writing in the form set forth on
the Exhibit hereto, does not specify the person or persons or
department at the Bank to receive the Initial Instruction or the address of the
Bank to which the Initial Instruction is to be sent, is not otherwise
completed, or does not have attached to it a copy of this Agreement as fully
executed;


 


(ii)                                  declines to follow the Initial Instruction or
any other instruction originated by the Secured Party or the Collateral Agent,
as the case may be, directing the disposition of the funds in the Deposit
Account:


 


(A) prior to the Outside Time,


 


(B) which requires the disposition of the funds in the Deposit
Account by a method not available to the Debtor under the Deposit Agreement,


 


(C) which in the reasonable opinion of the Bank would result in
the Bank’s failure to comply with any statute, rule or regulation, or any
Order or Process, binding upon the Bank,


 


(D) to the extent requiring the disposition of the funds that are
not currently available in the Deposit Account,


 


(E) which directs the disposition of the funds in the Deposit
Account through the use of a computational or allocational formula or
procedure, or


 


(F) for which the Bank has not received evidence reasonably
required by the Bank as to the authority of the person giving the instruction
to act for the 


 


4

















 


Secured
Party or the Collateral Agent, as the case may be, except as provided in Section 4(b);


 


(iii)                               by itself or through any affiliate of the
Bank, consummates or processes any transaction involving the Deposit Account
which the Bank had started to process prior to the Outside Time; or


 


(iv)                              at any time or from time to time after the
Bank becomes aware that the Secured Party or the Collateral Agent, as the case may be,
has sent the Initial Instruction, or any other instruction to the Bank
directing the disposition of the funds in the Deposit Account, but prior to the
Outside Time, ceases complying with any directions from the Debtor, and complies
with the Initial Instruction or such other instruction notwithstanding that:


 


(A) any person or persons or the department at the Bank specified
to receive the Initial Instruction has not actually received it,


 


(B) the Initial Instruction fails to have attached to it a copy of
this Agreement as fully executed, or


 


(C) the Initial Instruction contains minor errors but otherwise
substantially complies with the form of Initial Instruction set forth on
the Exhibit hereto.


 


(b)                                 Clause (F) of Section 4(a)(ii) shall
not apply to the Initial Instruction in so far as the Initial Instruction
eliminates the Debtor’s entitlement to direct the disposition of the funds in
the Deposit Account.


 


(c)                                  The Bank shall have no liability to the
Debtor, the Secured Party or the Collateral Agent under this Agreement:


 


(i)                                     for wrongful dishonor of any Items on account
of its following the Initial Instruction or any other instruction originated by
the Secured Party or the Collateral Agent, as the case may be, directing
disposition of the funds in the Deposit Account,


 


(ii)                                  for any claim, loss, cost or expense
resulting from the Bank’s failure to comply or delay in complying with the
Initial Instruction, any other instruction or any other provision of this
Agreement on account of any computer malfunction, interruption of communication
facilities, labor difficulties, acts of God, war, terrorist attacks, or other
causes, in each case beyond the Bank’s reasonable control,


 


(iii)                               for any other claim, loss, cost or expense
except to the extent directly caused by the gross negligence or willful
misconduct of the Bank, or


 


(iv)                              for any indirect, special, consequential or
punitive damages.


 


(d)                                 The Bank shall have no fiduciary duties under
this Agreement to the Secured Party, the Collateral Agent or the Debtor,
whether as trustee, agent or otherwise. The Bank shall have no duties to the
Secured Party or the Collateral Agent except as expressly set forth in this
Agreement. As to the Debtor, and notwithstanding anything to the contrary in the
Deposit 


 


5

















 


Agreement, the Bank shall
have no duty to inquire into or determine (i) the existence or
enforceability of the Debtor’s obligations to the Secured Party or the
Collateral Agent, as applicable, (ii) whether the Debtor’s obligations to
the Secured Party or the Collateral Agent, as applicable, are in default or (iii) whether
the Secured Party or the Collateral Agent, as applicable, is entitled, under
any separate agreement between the Debtor and the Secured Party or the
Collateral Agent, as applicable, to give the Initial Instruction or any other
instruction originated by the Secured Party or the Collateral Agent, as
applicable, directing disposition of the funds in the Deposit Account.


 


5.                                       Indemnification.


 


(a)                                  The Debtor agrees to indemnify the Bank from
and to hold the Bank harmless against any and all claims, losses, and
reasonable costs or expenses (other than to the extent directly caused by the
gross negligence or willful misconduct of the Bank) that the Bank may sustain
or incur arising out of, or otherwise related to, this Agreement.


 


(b)                                 The Secured Party agrees to indemnify the
Bank from and to hold the Bank harmless against (i) any and all claims,
losses, and reasonable costs or expenses (other than to the extent directly
caused by the gross negligence or willful misconduct of Bank) that Bank may sustain
or incur in acting upon the Initial Instruction or any other instruction
originated by the Secured Party directing the disposition of the funds in the
Deposit Account and which the Bank believes in good faith to be from the
Secured Party and (ii) any loss incurred by the Bank in respect of any
Permitted Debit for which there are insufficient funds in the Deposit Account
or for which the Bank otherwise does not have recourse to the Deposit Account
(it being understood, as set forth below, that at no time shall the Collateral
Agent have any obligation under this Article 5).


 


(c)                                  Costs or expenses of a party, for purposes of
Sections 5(a) and (b), include any reasonable out of pocket fees and
expenses incurred or payable by the party.


 


(d)                                 The Secured Party’s liability under clause (ii) of
Section 5(b) shall be limited to the extent of any funds transferred
from the Deposit Account as a result of the Bank’s acting upon instructions
originated by the Secured Party as to the disposition of the funds in the
Deposit Account, plus the amount of any funds which, but for collection
enforcement actions taken by the Secured Party, would have been received by the
Bank, for deposit to the Deposit Account, from the Debtor’s account debtors and
other persons liable on the Secured Party’s collateral. Any demand by the Bank
for indemnification under clause (ii) of Section 5(b) must be
made within the number of days following the termination of this Agreement set
forth on the Schedule hereto.


 


(e)                                  As a condition to the Bank’s making any claim
for indemnity against the Secured Party under Section 5(b), the Bank must
first have made a demand on the Debtor under Section 5(a) with
respect to the claim, and the Debtor shall not have satisfied the claim within
a period of 15 days following the Bank’s demand upon the Debtor. The foregoing
provision shall not apply if the Bank is enjoined, stayed or prohibited by
operation of law from making the demand upon the Debtor.


 


(f)                                    The Collateral Agent shall at no time have
any obligation under this Article 5, even after it has given instructions
with respect to the Deposit Account in accordance with Article 3 hereof.


 


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6.                                       The Bank’s Recourse to the Deposit Account.


 


(a)                                  Except for amounts referred to in Section 6(b) and
so long as this Agreement remains in effect, the Bank hereby (i) subordinates
any security interest, lien or other encumbrance that the Bank may at
any time have against or in the Deposit Account to the Secured Party’s and the
Collateral Agent’s respective security interests therein, and (ii) except
with the Secured Party’s and the Collateral Agent’s prior written consent,
agrees not to exercise any right of recoupment, setoff or debit that the Bank may at
any time have against or in the Deposit Account. The subordination referred to
in the foregoing clause (i) shall not apply to any security interest that
the Bank has in an Item under UCC Article 4 as a collecting bank.


 


(b)                                 Notwithstanding Section 6(a), the Bank
at any time may, and is expressly permitted by this Agreement to, set off and
charge against the Deposit Account the amount of any Permitted Debit,
regardless of any agreement of the Debtor to compensate the Bank by means of
balances in the Deposit Account.


 


7.                                       Representations and Warranties of the Bank.


 


(a)                                  The Bank represents and warrants to the
Secured Party and the Collateral Agent that (i) the Bank is an organization
engaged in the business of banking, (ii) the Bank maintains the Deposit
Account in the ordinary course of the Bank’s business and (iii) the Debtor
is the Bank’s sole customer with respect to the Deposit Account.


 


(b)                                 The Bank represents and warrants to the
Secured Party and the Collateral Agent that the Bank has not entered into any
currently effective agreement with any other person under which the Bank is or
will be obligated to comply with instructions originated by any person other
than the Secured Party, the Collateral Agent or the Debtor directing the
disposition of the funds in the Deposit Account. The Bank covenants with the
Secured Party and the Collateral Agent that the Bank shall not, during the term
of this Agreement, enter into any agreement with any other person under which
the Bank is or will be obligated to comply with instructions originated by any
other person other than the Secured Party, the Collateral Agent or the Debtor
directing the disposition of the funds in the Deposit Account.


 


8.                                       Deposit Account Information; Order or Process.


 


(a)                                  If the Secured Party or the Collateral Agent
so requests (whether as a single or standing request), the Bank shall send to
the Secured Party and/or the Collateral Agent, as applicable, a copy of each
periodic account statement relating to the Deposit Account furnished in the
ordinary course by the Bank to the Debtor. The Bank’s liability for failure to
send any such account statement shall not exceed the cost of the Bank’s
providing the account statement.


 


(b)                                 The Debtor authorizes the Bank to provide to
the Secured Party and to the Collateral Agent any additional information
concerning the Deposit Account that the Bank may agree to provide to the
Secured Party or the Collateral Agent, as applicable, at such party’s request.


 


(c)                                  In the event that an Order or Process is
served upon the Bank by a party other than the Debtor, the Secured Party or the
Collateral Agent, the Bank shall notify the Secured Party and the Collateral
Agent thereof concurrently with any notification of the Order or Process
provided by the Bank to the Debtor. In any event, to the extent not prohibited
by applicable law, 


 


7

















 


the Bank shall promptly
notify the Secured Party and the Collateral Agent of the Order or Process
promptly following such time as the person or persons or the department at the
Bank specified to receive the Initial Instruction has been notified of the
Order or Process and the Order or Process has been identified by that person or
persons or department as pertaining to the Deposit Account and the rights of
the Secured Party or the Collateral Agent, as applicable, under this Agreement.


 


9.                                       Termination; Closure of the Deposit Account.


 


(a)                                  This Agreement may not be terminated by
the Debtor without the prior written consent of the Secured Party and the
Collateral Agent, and notice to the Bank given jointly by the Debtor, the
Secured Party and the Collateral Agent.


 


(b)                                 This Agreement may be terminated jointly
by the Secured Party and the Collateral Agent at any time by notice to the Bank
and the Debtor; this Agreement may not be terminated by either the Secured
Party or the Collateral Agent except with the prior written consent of the
other party.


 


(c)                                  This Agreement may be terminated by the
Bank upon 30 days’ prior written notice to the Secured Party, the Collateral
Agent and the Debtor.


 


(d)                                 The termination of this Agreement shall not
affect any rights created or obligations incurred under this Agreement prior to
the termination. The provisions of Articles 4 and 5 shall survive the
termination of this Agreement with respect to any actions taken or omitted
before the termination of this Agreement.


 


(e)                                  The Bank may close the Deposit Account (i) immediately
upon notice to the Secured Party, the Collateral Agent and the Debtor in the
event of (x) the Bank’s reasonable suspicion that the Deposit Account is being
used for a fraudulent or illegal purpose or (y) receipt of a Collateral Agent
Notice, (ii) upon five Business Days’ prior notice to the Secured Party,
the Collateral Agent and the Debtor in the event that the Debtor is in material
breach of the Deposit Agreement or this Agreement and (iii) otherwise upon
30 days’ prior notice to the Secured Party, the Collateral Agent and the
Debtor.


 


(f)                                    Upon termination of this Agreement or the
closure of the Deposit Account, the Bank shall remit to, or hold at the
direction of, the Secured Party (or, if the Bank shall have received a
Collateral Agent Notice, not more than 15 days following the receipt of such
Collateral Agent Notice, the Collateral Agent), any funds then in the Deposit
Account. The Collateral Agent shall be entitled to receive direction from the
Debtor to establish any account that may be necessary to receive the funds
in the Deposit Account on behalf of the Collateral Agent.


 


10.                                 Communications.


 


(a)                                  All notices, instructions and other
communications under this Agreement shall be in writing and shall be delivered
by hand or overnight courier service, mailed by certified or registered mail,
or sent by facsimile. to the party addressee. If the Schedule permits
a writing to include an electronic record, a notice, instruction or other
communication under this Agreement, other than the Initial Instruction, may be
sent by email.


 


(b)                                 For a notice, instruction or other
communication under this Agreement to be effective, it must be delivered or
sent, (i) in the case of the Initial Instruction, to the Bank at the 


 


8

















 


address of the Bank and to
the person or persons or department indicated on the Exhibit hereto
and (ii) in other cases, to the party to receive the notice, instruction
or other communication at its address indicated below the party’s signature to
this Agreement, in each case subject to any change in address provided in Section 10(c).


 


(c)                                  The Bank may at any time communicate to
the Secured Party and the Collateral Agent a change in the person or persons or
department to whom or which the Initial Instruction is required to be
addressed. and any party may communicate to the other parties a change in
its address to which notices, instructions and other communications under this
Agreement shall be sent.


 


(d)                                 All notices, instructions and other
communications under this Agreement given in accordance with the provisions of
this Agreement shall be effective when received.


 


11.                                 Successors and Assigns.


 


(a)                                  This Agreement shall inure to the benefit of,
and be binding upon, the parties hereto and their respective successors and permitted
assigns or other transferees. Any voluntary transfer of a party’s rights or
duties under this Agreement shall be permitted as provided in this Section.
However, any other transfer by a party of its rights and obligations under this
Agreement shall be void without the written consent of the other parties.


 


(b)                                 The Debtor may transfer any of its
rights or duties under this Agreement only with the prior written consent of
the Secured Party, the Collateral Agent and the Bank.


 


(c)                                  The Bank may transfer its rights and
duties under this Agreement to a transferee to which, whether by contract or
operation of law, the Bank transfers substantially all of its rights and duties
under the Deposit Agreement. No such transfer of rights or duties by the Bank
shall be binding upon the Secured Party, the Collateral Agent or the Debtor
unless and until the Bank or the transferee has notified the Secured Party, the
Collateral Agent and the Debtor of the transfer. The notification shall include
the identity of the transferee and the transferee’s address for purposes of
providing the Initial Instruction and other communications under this Agreement
and shall state that the transferee is entitled to the benefit of the Bank’s
rights and has assumed all of the Bank’s duties under this Agreement. If
requested by the Secured Party, the Collateral Agent or the Debtor, the Bank or
the transferee shall provide reasonable proof of the transfer. At such time as
the transfer has become binding on the Secured Party, the Collateral Agent and
the Debtor, the transferring Bank shall be relieved of its obligations under
this Agreement accruing from and after that time.


 


(d)                                 Either the Secured Party or the Collateral may transfer
its rights and duties under this Agreement to (i) a transferee to which,
whether by contract or operation of law, the Secured Party or the Collateral
Agent, as applicable, transfers substantially all of its rights and duties
under the financing or other arrangements between the Secured Party or the
Collateral Agent, as applicable, and the Debtor for which the Deposit Account
acts as collateral security or (ii) if the Secured Party or the Collateral
Agent is acting as a trustee, indenture trustee, agent, collateral agent, or
other representative in whose favor a security interest is created or provided
for, a transferee which is a successor trustee, indenture trustee, agent,
collateral agent, or other representative. Notwithstanding the foregoing, in no
event shall the duty to indemnify under Article 5 be assumed by any
successor trustee, indenture trustee, agent, collateral agent, or other
representative succeeding the Collateral Agent. No such transfer of rights or
duties by the 


 


9

















 


Secured Party or the
Collateral Agent, as applicable, shall be binding upon the Secured Party, the
Collateral Agent, the Bank or the Debtor unless and until the Secured Party or
the Collateral Agent, as applicable, or the transferee has notified the
non-transferring Secured Party or Collateral Agent, as applicable, and the
Debtor of the transfer and the Bank has consented in writing to the transfer,
such consent not to be unreasonably withheld or delayed. The notification shall
include the identity of the transferee and the transferee’s address for
purposes of providing communications under this Agreement and shall state that
the transferee is entitled to the benefit of the Secured Party’s or the
Collateral Agent’s rights, as applicable, and has assumed all of the Secured
Party’s or the Collateral Agent’s duties, as applicable, under this Agreement.
If requested by the Bank, the Debtor or the non-transferring Secured Party or
Collateral Agent, the Secured Party or the Collateral Agent, as applicable, or
the transferee shall provide reasonable proof of the transfer. At such time as
the transfer has become binding on the Bank, the Debtor and the
non-transferring Secured Party or Collateral Agent, the transferring Secured
Party or Collateral Agent, as applicable, shall be relieved of its obligations
under this Agreement accruing from and after that time.


 


12.                                 Entire Agreement; Relation to Other
Agreements.


 


(a)                                  This Agreement constitutes the entire
agreement of the parties with respect to the subject matter hereof and
supersedes all previous and contemporaneous negotiations, understandings and
agreements in respect thereof, all of which have become merged and finally
integrated into this Agreement.


 


(b)                                 In the event of any conflict between this
Agreement and the Deposit Agreement or any other agreement between the Bank and
the Debtor relating to the Deposit Account, the terms of this Agreement shall
control. However, this Agreement shall not derogate from any claim or defense
which the Bank may have against the Debtor under the Deposit Agreement or
other agreement.


 


(c)                                  This Agreement does not amend or otherwise
modify any of the agreements between or among the Debtor, the Secured Party and
the Collateral Agent or provide any rights for the Debtor to direct the
disposition of the funds in the Deposit Account in contravention of any of the
agreements between or among the Debtor, the Secured Party and the Collateral
Agent.


 


13.                                 Governing Law, Depositary Bank’s
Jurisdiction; Consent to Jurisdiction and Waiver of Jury Trial.


 


(a)                                  Except as otherwise required by Article 9
of the UCC, this Agreement shall be governed by and construed in accordance
with the laws of the State without giving effect to any conflict of laws which
would require the application of the law other than the State.


 


(b)                                 The Deposit Agreement is hereby amended to
provide that, for purposes of part 3 of Article 9 of the UCC, the
Bank’s jurisdiction is the jurisdiction set forth on the Schedule hereto.


 


(c)                                  Each party hereto agrees that any suit for
the enforcement of this Agreement may be brought in the courts of the
State or any federal court sitting in the State and consents to the
non-exclusive jurisdiction of such court. Each party hereto waives any
objection that it may now or hereafter have to the venue of any such suit
or any such court or that such suit is brought in an inconvenient court.


 


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(d)                                 TO THE EXTENT PERMITTED BY
APPLICABLE LAW, EACH PARTY HEREBY WAIVES ALL RIGHTS TO TRIAL BY JURY IN ANY
ACTION, CLAIM OR PROCEEDING (INCLUDING ANY COUNTERCLAIM) OF ANY TYPE ARISING
OUT OF OR DIRECTLY OR INDIRECTLY RELATING TO THIS AGREEMENT, ANY RIGHTS OR
OBLIGATIONS HEREUNDER OR THE BREACH, PERFORMANCE OR ENFORCEMENT OF SUCH RIGHTS
OR OBLIGATIONS.


 


14.                                 Miscellaneous.


 


(a)                                  Section headings in this Agreement are
for convenience of reference only, are not part of this Agreement, and
shall not affect the construction of, or be taken into consideration in
interpreting, this Agreement.


 


(b)                                 No amendment or modification of this
Agreement or waiver of any right hereunder shall be binding on any party hereto
unless it is in writing and is signed by each of the parties affected thereby.


 


(c)                                  In the event any one or more of the
provisions contained in this Agreement should be held invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein shall not in any way be affected or
impaired thereby, it being understood that the invalidity of an affected
provision in a particular jurisdiction shall not in and of itself affect the
validity of such provision in any other jurisdiction.


 


(d)                                 Each of this Agreement and the Schedule may be
executed in multiple counterparts, and all of such counterparts taken together
shall constitute one and the same instrument. Each fully executed counterpart of
this Agreement or the Schedule shall be a duplicate original.
Transmission by facsimile of an executed counterpart of this Agreement or
the Schedule shall constitute due and sufficient delivery of such
counterpart.


 


(e)                                  The parties hereto have participated jointly
in the negotiation and drafting of this Agreement. In the event that an
ambiguity or question of intent or interpretation arises, this Agreement shall
be construed as if drafted jointly by the parties hereto, and no presumption or
burden of proof shall arise favoring or disfavoring any party by virtue of the
authorship of any provisions of this Agreement.


 


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11

















 


IN
WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date
first above written.


 


RAFAELLA APPAREL GROUP, INC.


 


 


	
  By:

  	
  /s/ Glenn Palmer

  	
   

  



Name: Glenn Palmer


Title: Chief Executive
Officer


Address:


 


Attention:


Facsimile Number:


Electronic mail address (to
be used if the Schedule so permits):


 


HSBC BANK USA, NATIONAL
ASSOCIATION, as Agent


 


 


	
  By:

  	
  /s/ Douglas Talaterro

  	
   

  



Name: Douglas Talaterro


Title: Senior Vice President


Address:


 


Attention:


Facsimile Number:


Electronic mail address (to
be used if the Schedule so permits):


 


HSBC BANK USA, NATIONAL
ASSOCIATION


 


 


	
  By:

  	
  /s/ Lisa H. Augustus

  	
   

  



Name: Lisa H. Augustus


Title: Vice President


Address:


 


Attention:


Facsimile Number:


Electronic mail address (to
be used if the Schedule so permits):


 


 


THE BANK OF NEW YORK, as
Collateral Agent


 


 


	
  By:

  	
  /s/ Beata Hryniewicka

  	
   

  



Name: Beata Hryniewicka


Title: Assistant Treasurer


Address:        101
Barclay St. 8W

New York, New York 10286


 


Attention:


Facsimile Number:


Electronic mail address (to
be used if the Schedule so permits