Exhibit 10.31


 




 





LETTER OF CREDIT AGREEMENT


by and among


THE CHILDREN’S
PLACE RETAIL STORES, INC.,


and


EACH OF ITS
SUBSIDIARIES THAT ARE SIGNATORIES HERETO


as Borrowers,


THE FINANCIAL
INSTITUTIONS NAMED HEREIN,


as Lenders,


WELLS FARGO RETAIL
FINANCE, LLC,


as Agent


and


WELLS FARGO BANK,
NATIONAL ASSOCIATION,

as Issuing Bank




 



















TABLE OF CONTENTS


	
  

  	
   

  	
   

  	
   

  	
  Page(s)

  
	
   

  	
   

  	
   

  	
   

  
	
  1.

  	
  DEFINITIONS AND CONSTRUCTION

  	
   

  	
  1

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.1

  	
  Definitions

  	
   

  	
  1

  
	
   

  	
  1.2

  	
  Accounting Terms

  	
   

  	
  12

  
	
   

  	
  1.3

  	
  Code

  	
   

  	
  12

  
	
   

  	
  1.4

  	
  Construction

  	
   

  	
  12

  
	
   

  	
  1.5

  	
  Schedules and Exhibits

  	
   

  	
  13

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
  LETTERS OF CREDIT

  	
   

  	
  13

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.1

  	
  Agreement to Cause Issuance; Amounts; Outside
  Expiration Date

  	
   

  	
  13

  
	
   

  	
  2.2

  	
  Reimbursement of Drawings

  	
   

  	
  13

  
	
   

  	
  2.3

  	
  Interest on Overdue Amounts

  	
   

  	
  14

  
	
   

  	
  2.4

  	
  Indemnification

  	
   

  	
  14

  
	
   

  	
  2.5

  	
  Costs of Letters of Credit

  	
   

  	
  14

  
	
   

  	
  2.6

  	
  Cash Collateralization

  	
   

  	
  14

  
	
   

  	
  2.7

  	
  Increased Costs

  	
   

  	
  15

  
	
   

  	
  2.8

  	
  Participations

  	
   

  	
  15

  
	
   

  	
  2.9

  	
  Notation

  	
   

  	
  16

  
	
   

  	
  2.10

  	
  Effect of Bankruptcy

  	
   

  	
  16

  
	
   

  	
  2.11

  	
  Payments

  	
   

  	
  16

  
	
   

  	
  2.12

  	
  Letter of Credit Fees: Rates, Payments, and
  Calculations

  	
   

  	
  18

  
	
   

  	
  2.13

  	
  Maintenance of Loan Account; Statements of
  Obligations

  	
   

  	
  19

  
	
   

  	
  2.14

  	
  Joint and Several Liability of Borrowers

  	
   

  	
  20

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
  CONDITIONS; TERM OF AGREEMENT

  	
   

  	
  22

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.1

  	
  Conditions Precedent to Initial Letter of Credit

  	
   

  	
  22

  
	
   

  	
  3.2

  	
  Conditions Precedent to all Letters of Credit

  	
   

  	
  23

  
	
   

  	
  3.3

  	
  Term

  	
   

  	
  23

  
	
   

  	
  3.4

  	
  Effect of Termination

  	
   

  	
  23

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
  CREATION OF SECURITY INTEREST

  	
   

  	
  24

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.1

  	
  Grant of Security Interests

  	
   

  	
  24

  
	
   

  	
  4.2

  	
  Negotiable Collateral

  	
   

  	
  24

  
	
   

  	
  4.3

  	
  Collection of Accounts, General Intangibles, and
  Negotiable Collateral

  	
   

  	
  24

  
	
   

  	
  4.4

  	
  Delivery of Additional Documentation Required

  	
   

  	
  24

  
	
   

  	
  4.5

  	
  Power of Attorney

  	
   

  	
  24

  
	
   

  	
  4.6

  	
  Right to Inspect

  	
   

  	
  25

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5.

  	
  REPRESENTATIONS AND WARRANTIES

  	
   

  	
  25

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.1

  	
  No Encumbrances

  	
   

  	
  25

  
	
   

  	
  5.2

  	
  Location of Inventory and Equipment

  	
   

  	
  25

  
	
   

  	
  5.3

  	
  Inventory Records

  	
   

  	
  25

  
	
   

  	
  5.4

  	
  Location of Chief Executive Office; FEIN

  	
   

  	
  25

  



 



 i
 









 


	
  

  	
  5.5

  	
  Due Organization and Qualification; Subsidiaries

  	
   

  	
  26

  
	
   

  	
  5.6

  	
  Due Authorization; No Conflict

  	
   

  	
  26

  
	
   

  	
  5.7

  	
  Litigation

  	
   

  	
  26

  
	
   

  	
  5.8

  	
  No Material Adverse Change

  	
   

  	
  27

  
	
   

  	
  5.9

  	
  Fraudulent Transfer

  	
   

  	
  27

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6.

  	
  AFFIRMATIVE COVENANTS

  	
   

  	
  27

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7.

  	
  NEGATIVE COVENANTS

  	
   

  	
  27

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  7.1

  	
  Indebtedness

  	
   

  	
  27

  
	
   

  	
  7.2

  	
  Liens

  	
   

  	
  28

  
	
   

  	
  7.3

  	
  Restrictions on Fundamental Changes

  	
   

  	
  28

  
	
   

  	
  7.4

  	
  Disposal of Assets

  	
   

  	
  29

  
	
   

  	
  7.5

  	
  Change Name

  	
   

  	
  29

  
	
   

  	
  7.6

  	
  Guarantee

  	
   

  	
  29

  
	
   

  	
  7.7

  	
  Nature of Business

  	
   

  	
  29

  
	
   

  	
  7.8

  	
  Prepayments and Amendments

  	
   

  	
  29

  
	
   

  	
  7.9

  	
  Change of Control

  	
   

  	
  30

  
	
   

  	
  7.10

  	
  Accounting Methods

  	
   

  	
  30

  
	
   

  	
  7.11

  	
  Advances, Investments and Loans

  	
   

  	
  30

  
	
   

  	
  7.12

  	
  Transactions with Affiliates

  	
   

  	
  31

  
	
   

  	
  7.13

  	
  Suspension

  	
   

  	
  31

  
	
   

  	
  7.14

  	
  Change in Location of Chief Executive Office;
  Inventory and Equipment with Bailees

  	
   

  	
  32

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8.

  	
  EVENTS OF DEFAULT

  	
   

  	
  32

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  9.

  	
  THE LENDER GROUP’S RIGHTS AND REMEDIES

  	
   

  	
  33

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.1

  	
  Rights and Remedies

  	
   

  	
  33

  
	
   

  	
  9.2

  	
  Remedies Cumulative

  	
   

  	
  35

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  10.

  	
  TAXES AND EXPENSES

  	
   

  	
  36

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  11.

  	
  WAIVERS; INDEMNIFICATION

  	
   

  	
  36

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  11.1

  	
  Demand; Protest; etc.

  	
   

  	
  36

  
	
   

  	
  11.2

  	
  The Lender Group’s Liability for Collateral

  	
   

  	
  36

  
	
   

  	
  11.3

  	
  Indemnification

  	
   

  	
  37

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  12.

  	
  NOTICES

  	
   

  	
  37

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  13.

  	
  CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER

  	
   

  	
  38

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  14.

  	
  DESTRUCTION OF BORROWERS’ DOCUMENTS

  	
   

  	
  39

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  15.

  	
  ASSIGNMENTS AND PARTICIPATIONS; SUCCESSORS

  	
   

  	
  39

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  15.1

  	
  Assignments and Participations

  	
   

  	
  39

  
	
   

  	
  15.2

  	
  Successors

  	
   

  	
  42

  



 



 ii
 









 


	
  16.

  	
  AMENDMENTS; WAIVERS

  	
   

  	
  42

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  16.1

  	
  Amendments and Waivers

  	
   

  	
  42

  
	
   

  	
  16.2

  	
  Replacement of Non-Consenting Lenders

  	
   

  	
  43

  
	
   

  	
  16.3

  	
  No Waivers; Cumulative Remedies

  	
   

  	
  43

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  17.

  	
  AGENT; THE LENDER GROUP

  	
   

  	
  44

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  17.1

  	
  Appointment and Authorization of Agent

  	
   

  	
  44

  
	
   

  	
  17.2

  	
  Delegation of Duties

  	
   

  	
  45

  
	
   

  	
  17.3

  	
  Liability of Agent-Related Persons

  	
   

  	
  45

  
	
   

  	
  17.4

  	
  Reliance by Agent

  	
   

  	
  45

  
	
   

  	
  17.5

  	
  Notice of Default or Event of Default

  	
   

  	
  46

  
	
   

  	
  17.6

  	
  Credit Decision

  	
   

  	
  47

  
	
   

  	
  17.7

  	
  Costs and Expenses; Indemnification

  	
   

  	
  47

  
	
   

  	
  17.8

  	
  Agent in Individual Capacity

  	
   

  	
  48

  
	
   

  	
  17.9

  	
  Successor Agent

  	
   

  	
  48

  
	
   

  	
  17.10

  	
  Withholding Tax

  	
   

  	
  48

  
	
   

  	
  17.11

  	
  Collateral Matters

  	
   

  	
  50

  
	
   

  	
  17.12

  	
  Restrictions on Actions by Lenders; Sharing of
  Payments

  	
   

  	
  50

  
	
   

  	
  17.13

  	
  Agency for Perfection

  	
   

  	
  51

  
	
   

  	
  17.14

  	
  Payments by Agent to the Lenders

  	
   

  	
  51

  
	
   

  	
  17.15

  	
  Concerning the Collateral and Related Loan Documents

  	
   

  	
  51

  
	
   

  	
  17.16

  	
  Confidentiality

  	
   

  	
  52

  
	
   

  	
  17.17

  	
  Several Obligations; No Liability

  	
   

  	
  52

  
	
   

  	
  17.18

  	
  Documentation Agent; Co-Agent

  	
   

  	
  52

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  18.

  	
  GENERAL PROVISIONS

  	
   

  	
  53

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  18.1

  	
  Effectiveness

  	
   

  	
  53

  
	
   

  	
  18.2

  	
  Section Headings

  	
   

  	
  53

  
	
   

  	
  18.3

  	
  Interpretation

  	
   

  	
  53

  
	
   

  	
  18.4

  	
  Severability of Provisions

  	
   

  	
  53

  
	
   

  	
  18.5

  	
  Counterparts; Telefacsimile Execution

  	
   

  	
  53

  
	
   

  	
  18.6

  	
  Revival and Reinstatement of Obligations

  	
   

  	
  53

  
	
   

  	
  18.7

  	
  Integration

  	
   

  	
  54

  
	
   

  	
  18.8

  	
  Parent as Agent for Borrowers

  	
   

  	
  54

  



 



 iii
 









SCHEDULES AND
EXHIBITS


	
  Schedule C-1

  	
   

  	
  Commitments

  
	
  Schedule P-1

  	
   

  	
  Permitted Liens

  
	
  Schedule 5.2

  	
   

  	
  Location of Inventory and Equipment

  
	
  Schedule 5.5

  	
   

  	
  Subsidiaries

  
	
  Schedule 5.7

  	
   

  	
  Litigation

  
	
  Schedule 7.1

  	
   

  	
  Indebtedness

  
	
  Schedule 7.11(f)

  	
   

  	
  Intercompany Indebtedness

  
	
   

  	
   

  	
   

  
	
  Exhibit A-1

  	
   

  	
  Form of Assignment and Acceptance

  



 



 iv















LETTER OF CREDIT AGREEMENT


THIS
LETTER OF CREDIT AGREEMENT (this “Agreement”),  is entered into this 28th day of June, 2007, among THE CHILDREN’S PLACE RETAIL STORES, INC., a
Delaware corporation (“Parent”) and each of Parent’s Subsidiaries
identified on the signature pages hereof (such Subsidiaries, together with
Parent, are referred to hereinafter each individually as a “Borrower”,
and individually and collectively, jointly and severally, as the “Borrowers”),
with each of its chief executive office located at 915 Secaucus Road,
Secaucus, New Jersey 07094, on the one hand, and the financial
institutions listed on the signature pages hereof (such financial institutions,
together with their respective successors and assigns, are referred to hereinafter
each individually as a “Lender” and collectively as the “Lenders”),
and WELLS FARGO RETAIL FINANCE, LLC,
a Delaware limited liability company, as Agent, WELLS FARGO BANK, NATIONAL ASSOCIATION, as Issuing Bank, on
the other hand.


1.                                DEFINITIONS
AND CONSTRUCTION.


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


“Account Debtor”
means any Person who is or who may become obligated under, with respect to, or
on account of, an Account.


“Accounts” means
all currently existing and hereafter arising accounts, contract rights,
Revolving Accounts, and all other forms of obligations owing to any Borrower
arising out of the sale or lease of goods or the rendition of services by such
Borrower, irrespective of whether earned by performance, and any and all credit
insurance, guaranties, or security therefor.


“Acquisition Agreement”
means that certain Acquisition Agreement dated October 19, 2004 entered into by
and among Hoop Holdings, LLC, Hoop Canada Holdings, Inc., Disney Enterprises,
Inc. and Disney Credit Card Services, Inc. and The Children’s Place Retail
Stores, Inc., as guarantor.


“Administrative
Borrower” has the meaning set forth in Section 18.8.


“Affiliate” means,
as applied to any Person, any other Person directly or indirectly controlling,
controlled by, or under common control with, that Person.  For purposes of this definition, “control” as
applied to any Person means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of that
Person, whether through the ownership of voting securities, by contract, or
otherwise.


“Agent” means
Wells Fargo Retail, solely in its capacity as agent for the Lenders, and shall
include any successor agent.



 1
 









“Agent-Related Persons”
means Agent, together with its Affiliates, and the officers, directors,
employees, counsel, agents, and attorneys-in-fact of Agent and such Affiliates.


“Agent’s Liens”
means the Liens granted by Borrowers or their Subsidiaries to Agent under this
Agreement or the other Loan Documents.


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


“Alabama Capital Lease”
means a capital lease for the inventory handling system of the Borrowers and/or
any of their Affiliates located at their distribution center in Fort Payne,
Alabama.


“Alabama
Sale-Leaseback Transaction” means the sale-leaseback of the Real Property
of Services Company situated at 1377 Airport Road, Fort Payne, Alabama,
pursuant to a lease on market terms.


“Assignee” has the
meaning set forth in Section 15.1.


“Assignment and
Acceptance” has the meaning set forth in Section 15.1(a) and shall
be in the form of Exhibit A-1.


“Bankruptcy Code”
means the United States Bankruptcy Code (11 U.S.C. § 101 et seq.),
as amended, and any successor statute.


“Books” means all
of Administrative Borrower’s and its Subsidiaries books and records including: ledgers;
records indicating, summarizing, or evidencing any Borrower’s properties or
assets (including the Collateral) or liabilities; all information relating to
any Borrower’s business operations or financial condition; and all computer
programs, disk or tape files, printouts, runs, or other computer prepared
information.


“Borrower” and “Borrowers”
have the respective meanings set forth in the preamble to this Agreement.


“Business Day”
means any day that is not a Saturday, Sunday, or a day on which banks in
Boston, Massachusetts, are required or permitted to be closed.


“Canadian Letter of
Credit” means any Letter of Credit caused to be issued pursuant to this Agreement
by Parent or Services Company for the purchase of inventory by Children’s Place
Canada, which shall be issued in Dollars.


“Change of Control”
shall be deemed to have occurred at such time as Parent’s existing shareholders
cease to be the “beneficial owners” (as defined in Rule 13d-3 under the
Securities Exchange Act of 1934), directly or indirectly, of more than 25% of
the total voting power of all classes of stock then outstanding of Parent
normally entitled to vote in the election of directors.



 2
 









“Children’s Place
Canada” means The Children’s Place (Canada), LP, an Ontario limited
partnership.


“Closing Date”
means June 28, 2007.


“Code” means the
Massachusetts Uniform Commercial Code.


“Collateral” means
each of the following:


(a)                                  the
Accounts,


(b)                                 the
Books,


(c)                                  the
Equipment,


(d)                                 the
General Intangibles,


(e)                                  the
Inventory,


(f)                                    the
Investment Property,


(g)                                 the
Negotiable Collateral,


(h)                                 any
money, or other assets of any Borrower that now or hereafter come into the
possession, custody, or control of the Lender Group, and


(i)                                     the
proceeds and products, whether tangible or intangible, of any of the foregoing,
including proceeds of insurance covering any or all of the Collateral, and any
and all Accounts, Books, Equipment, General Intangibles, Inventory, Investment
Property, Negotiable Collateral, money, deposit accounts, or other tangible or
intangible property resulting from the sale, exchange, collection, or other
disposition of any of the foregoing, or any portion thereof or interest
therein, and the proceeds thereof.


“Collateral”
expressly excludes any share of stock, membership interest, or other ownership
interest in and to Hoop Holdings, LLC, Hoop Retail Stores, LLC, Hoop Canada
Holdings, Inc. or Hoop Canada, Inc.


“Collateral Access
Agreement” means a landlord waiver, mortgagee waiver, bailee letter, or
acknowledgment agreement of any warehouseman, processor, lessor, consignee, or
other Person in possession of, having a Lien upon, or having rights or
interests in the Equipment or Inventory, in each case, in form and substance
reasonably satisfactory to Agent.


“Collections”
means all cash, checks, notes, instruments, and other items of payment
(including, insurance proceeds, proceeds of cash sales, rental proceeds, and
tax refunds).



 3
 









“Commitment” means,
at any time with respect to a Lender, the principal amount set forth beside
such Lender’s name under the heading “Commitment” on Schedule C-1
or on the signature page of the Assignment and Acceptance pursuant to which
such Lender became a Lender hereunder in accordance with the provisions of Section 15.1,
as such Commitment may be adjusted from time to time in accordance with the
provisions of Section 15.1 and “Commitments” means, collectively,
the aggregate amount of the commitments of all of the Lenders, which, as of the
Closing Date, shall be in the amount of sixty million dollars ($60,000,000).


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


“deems itself insecure”
means that the Person deems itself insecure in accordance with the provisions
of Section 1-208 of the Code.


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


“Disney License
Agreement” means that certain License and Conduct of Business Agreement
dated as of November 21, 2004 by and among certain subsidiaries of the
Borrowers and TDS Franchising, LLC, as modified by that certain letter
agreement dated as of June 6, 2007 by and among the Parent, Hoop Retail Stores,
LLC, Hoop Canada, Inc. and TDS Franchising, LLC, and as further amended,
modified, supplemented or restated and in effect from time to time.


“Disney Stores
Transaction” means the transaction, as a totality, comprised of the
acquisition by Hoop Holdings, LLC and Hoop Canada Holdings, Inc. of the
ownership interests in, and business and assets of, The Disney Store, LLC and
The Disney Store (Canada) Ltd., as more particularly set forth in the
Acquisition Agreement.


“Dollars or $”
means United States dollars.


“Eligible Transferee”
means (a) a commercial bank organized under the laws of the United States, or
any state thereof, and having total assets in excess of $5,000,000,000, or the
asset based lending Affiliate of such bank, (b) a commercial bank organized
under the laws of any other country which is a member of the Organization for
Economic Cooperation and Development or a political subdivision of any such
country, and having total assets in excess of $5,000,000,000, or the asset
based lending Affiliate of such bank; provided that such bank is acting through
a branch or agency located in the United States, (c) a finance company,
insurance or other financial institution, or fund that is engaged in making,
purchasing, or otherwise investing in commercial loans in the ordinary course
of its business and having total assets in excess of $500,000,000, (d) any
Affiliate (other than individuals) of an existing Lender, and (e) any other
Person approved by Agent and Parent.


“Equipment” means
all of Borrowers’ present and hereafter acquired machinery, machine tools,
motors, equipment, furniture, furnishings, fixtures, vehicles (including



 4
 









motor vehicles and
trailers), tools, parts, goods (other than consumer goods, farm products, or
Inventory), wherever located, including, (a) any interest of any Borrower
in any of the foregoing, and (b) all attachments, accessories, accessions,
replacements, substitutions, additions, and improvements to any of the
foregoing.


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


“FEIN” means
Federal Employer Identification Number.


“Fiscal Year”
means a retail year ending on the Saturday closest to January 31.


“GAAP” means
generally accepted accounting principles as in effect from time to time in the
United States, consistently applied.


“General Intangibles”
means all of Borrowers’ present and future general intangibles and other
personal property (including contract rights, rights arising under common law,
statutes, or regulations, choses or things in action, goodwill, patents, trade
names, copyrights, blueprints, drawings, purchase orders, customer lists,
monies due or recoverable from pension funds, route lists, rights to payment
and other rights under any royalty or licensing agreements, infringement
claims, computer programs, information contained on computer disks or tapes,
literature, reports, catalogs, deposit accounts, insurance premium rebates, tax
refunds, and tax refund claims), other than goods, Accounts, and Negotiable
Collateral.


“Governing Documents”
means the certificate or articles of incorporation, by-laws, or other
organizational or governing documents of any Person.


“Governmental
Authority” means any nation or government, any state or other political
subdivision thereof and any entity exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to government.


“Guaranties” means
those certain Guaranties executed by Guarantors in favor of Agent and Lenders.


“Guarantors”
means, as of the Closing Date, Twin Brook, thechildrensplace.com, inc., The
Children’s Place Canada Holdings, Inc. and The Children’s Place (Virginia),
LLC.


“Hazardous Materials”
means (a) substances that are defined or listed in, or otherwise classified
pursuant to, any applicable laws or regulations as “hazardous substances,” “hazardous
materials,” “hazardous wastes,” “toxic substances,” or any other formulation
intended to define, list, or classify substances by reason of deleterious
properties such as ignitability, corrosivity, reactivity, carcinogenicity,
reproductive toxicity, or “EP toxicity”, (b) oil, petroleum, or petroleum
derived substances, natural gas, natural gas liquids, synthetic gas, drilling
fluids, produced waters, and other wastes associated with the exploration,
development, or production of crude oil, natural gas, or geothermal resources,
(c) any flammable substances or explosives or any radioactive



 5
 









materials, and (d)
asbestos in any form or electrical equipment that contains any oil or
dielectric fluid containing levels of polychlorinated biphenyls in excess of 50
parts per million.


“Indebtedness”
means as to all of Borrowers (a) all obligations for borrowed money,
(b) all obligations evidenced by bonds, debentures, notes, or other
similar instruments and all reimbursement or other obligations in respect of
letters of credit, bankers acceptances, interest rate swaps, or other financial
products, (c) all obligations as a lessee under capital leases,
(d) all obligations or liabilities of others secured by a Lien on any
asset of a Person or its Subsidiaries, irrespective of whether such obligation
or liability is assumed, (e) all obligations to pay the deferred purchase
price of assets (other than trade payables incurred in the ordinary course of business
and repayable in accordance with customary trade practices), (f) all
obligations owing under Hedge Agreements, and (g) any obligation
guaranteeing or intended to guarantee (whether directly or indirectly
guaranteed, endorsed, co-made, discounted, or sold with recourse) any
obligation of any other Person that constitutes Indebtedness under any of
clauses (a) through (f) above.


“Indemnified
Liabilities” has the meaning set forth in Section 11.3.


“Indemnified Person”
has the meaning set forth in Section 11.3.


“Insolvency Proceeding”
means any proceeding commenced by or against any Person under any provision of
the Bankruptcy Code or under any other bankruptcy or insolvency law,
assignments for the benefit of creditors, formal or informal moratoria,
compositions, extensions generally with creditors, or proceedings seeking
reorganization, arrangement, or other similar relief.


“Intercompany Services
Agreement” means that certain Intercompany Services Agreement, dated as of
November 21, 2004 among The Disney Store, LLC, The Disney Store (Canada) Ltd.
and Services Company, as amended, supplemented, modified and/or restated and in
effect from time to time.


“Inventory” means
all present and future inventory (other than inventory of Children’s Place
Canada) in which any Borrower has any interest, including goods held for sale
or lease or to be furnished under a contract of service and all of any Borrower’s
present and future raw materials, work in process, finished goods, and packing
and shipping materials, wherever located.


“Investment Property”
means all of Borrowers’ presently existing and hereafter acquired or arising
investment property (as that term is defined in Section 9-102 of the Code).


“IRC” means the
Internal Revenue Code of 1986, as amended, and the regulations thereunder.


“Issuing Bank”
means Wells Fargo Bank, N.A.



 6
 









“L/C” means a
letter of credit issued for the account of Parent or Services Company pursuant
to this Agreement.


“L/C Disbursement”
means a payment by Issuing Bank pursuant to a Letter of Credit.


“Lender” and “Lenders”
have the respective meanings set forth in the preamble to this Agreement, and
shall include any other Person made a party to this Agreement in accordance
with the provisions of Section 15.1.


“Lender Group”
means, individually and collectively, each of the individual Lenders, Agent,
and Issuing Bank.


“Lender Group Expenses”
means all:  reasonable costs or expenses
(including taxes, and insurance premiums) required to be paid by a Borrower or
its Subsidiaries under any of the Loan Documents that are paid or incurred by
the Lender Group; reasonable fees or charges paid or incurred by the Lender
Group in connection with the Lender Group’s transactions with Borrowers,
including, fees or charges for photocopying, notarization, couriers and messengers,
telecommunication, public record searches (including tax lien, litigation, and
UCC searches and including searches with the patent and trademark office, the
copyright office, or the department of motor vehicles), filing, recording,
publication, appraisal (including periodic Collateral appraisals);
environmental audits; costs and expenses incurred by Agent in the disbursement
of funds to Borrowers (by wire transfer or otherwise); charges paid or incurred
by Agent resulting from the dishonor of checks; costs and expenses paid or
incurred by Agent to correct any default or enforce any provision of the Loan
Documents, or in gaining possession of, maintaining, handling, preserving,
storing, shipping, selling, preparing for sale, or advertising to sell the
Collateral, or any portion thereof, irrespective of whether a sale is
consummated; reasonable costs and expenses paid or incurred by the Lender Group
in examining Books; costs and expenses of third party claims or any other suit
paid or incurred by the Lender Group in enforcing or defending the Loan
Documents or in connection with the transactions contemplated by the Loan
Documents or the Lender Group’s relationship with Borrowers or any guarantor;
and the Lender Group’s reasonable attorneys fees and expenses incurred in
advising, structuring, drafting, reviewing, administering, amending,
terminating, enforcing, defending, or concerning the Loan Documents (including
attorneys fees and expenses incurred in connection with a “workout,” a “restructuring,”
or an Insolvency Proceeding concerning Borrowers or any guarantor of the
Obligations), irrespective of whether suit is brought.


“Lender-Related
Persons” means any Lender, together with its Affiliates, and the officers,
directors, employees, counsel, agents, and attorneys-in-fact of such Lender and
such Affiliates.


“Letter of Credit”
means an L/C issued pursuant to this Agreement for the purpose of providing the
primary payment mechanism in connection with the purchase of Inventory.



 7
 









“Letter of Credit Fees”
shall mean the fees payable in respect of Letters of Credit pursuant to Section
2.12.


“Letter of Credit
Outstandings” shall mean, at any time, the sum of (a) with respect to
Letters of Credit outstanding at such time, the aggregate maximum amount that
then is or at any time thereafter may become available for drawing or payment
thereunder plus (b) all amounts theretofore drawn or paid under Letters
of Credit for which the Issuing Bank has not then been reimbursed.


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


“Loan Account” has
the meaning set forth in Section 2.13.


“Loan Documents”
means this Agreement, the Letters of Credit, any note or notes executed by
Borrowers and payable to the Lender Group, and any other agreement entered
into, now or in the future, in connection with this Agreement.


“Material Adverse
Change” means (a) a material adverse change in the business,
prospects, operations, results of operations, assets, liabilities or condition
(financial or otherwise) of Borrowers and their Subsidiaries, (b) the
material impairment of a Borrower’s ability to perform its obligations under
the Loan Documents to which it is a party or of the Lender Group to enforce the
Obligations or realize upon the Collateral, (c) a material adverse effect
on the value of the Collateral or the amount that the Lender Group would be
likely to receive (after giving consideration to delays in payment and costs of
enforcement) in the liquidation of such Collateral, or (d) a material
impairment of the priority of the Lender Group’s Liens with respect to the
Collateral.


“Negotiable Collateral”
means all of Borrowers’ present and future letters of credit, notes, drafts,
instruments, certificated and uncertificated securities (including the shares
of stock of Subsidiaries of Parent (other than Hoop Holdings, LLC, Hoop Retail
Stores, LLC, Hoop Canada Holdings, Inc., or Hoop Canada, Inc.), but limited to
65% of the outstanding shares of each class of stock of any foreign Subsidiary
or any domestic Subsidiary, the sole asset of which is the stock of one or more
foreign Subsidiaries), investment property, security entitlements, documents,
personal property leases (wherein a Borrower is the lessor), chattel paper, and
Books relating to any of the foregoing.



 8
 









“Non-Consenting Lender”
has the meaning set forth in Section 16.1.


“Obligations”
means each payment required to be made by Borrowers under this Agreement in
respect of any Letter of Credit, when and as due, including payments in respect
of reimbursement of L/C Disbursements, Letter of Credit Fees, and interest
thereon (including any Letter of Credit Fees and interest that, but for the
provisions of the Bankruptcy Code, would have accrued), contingent
reimbursement obligations under any outstanding Letters of Credit, liabilities
(including all amounts charged to Borrowers’ Loan Account pursuant hereto),
obligations, fees, charges, costs, or Lender Group Expenses (including any fees
or expenses that, but for the provisions of the Bankruptcy Code, would have
accrued), lease payments, guaranties, covenants, and duties owing by Borrowers
to the Lender Group of any kind and description (whether pursuant to or
evidenced by the Loan Documents or pursuant to any other agreement between the
Lender Group and any Borrower, and irrespective of whether for the payment of
money), whether direct or indirect, absolute or contingent, due or to become
due, now existing or hereafter arising, and including any debt, liability, or
obligation owing from any Borrower to others that the Lender Group may have
obtained by assignment or otherwise, and further including all interest not
paid when due and all Lender Group Expenses that Borrowers are required to pay
or reimburse by the Loan Documents, by law, or otherwise.  Any reference in this Agreement or in the
Loan Documents to the Obligations shall include all extensions, modifications,
renewals, or alterations thereof, both prior and subsequent to any Insolvency
Proceeding.


“Originating Lender”
has the meaning set forth in Section 15.1(e).


“Parent” has the
meaning set forth in the preamble of this Agreement.


“Participant” has
the meaning set forth in Section 15.1(e).


“Permitted Liens”
means (a) Liens held by the Lender Group, (b) Liens for unpaid taxes that
either (i) are not yet due and payable or (ii) are the subject of Permitted
Protests, (c) Liens set forth on Schedule P-1, (d) the interests of
lessors under operating leases and purchase money security interests and Liens
of lessors under capital leases to the extent that the acquisition or lease of
the underlying asset is permitted under Section 7.2 and so long as the
Lien only attaches to the asset purchased or acquired and only secures the
purchase price of the asset, (e) Liens arising by operation of law in favor of
warehousemen, landlords, carriers, mechanics, materialmen, laborers, or
suppliers, incurred in the ordinary course of business of Borrowers and not in
connection with the borrowing of money, and which Liens either (i) are for sums
not yet due and payable, or (ii) are the subject of Permitted Protests, (f)
Liens arising from deposits made in connection with obtaining worker’s
compensation or other unemployment insurance, (g) Liens or deposits to secure performance
of bids, tenders, or leases (to the extent permitted under this Agreement),
incurred in the ordinary course of business of Borrowers and not in connection
with the borrowing of money, (h) Liens arising by reason of security for surety
or appeal bonds in the ordinary course of business of any Borrower, (i) Liens
of or resulting from any judgment or award that would not cause a Material
Adverse Change



 9
 









and as to which the time
for the appeal or petition for rehearing of which has not yet expired, or in
respect of which any Borrower is in good faith prosecuting an appeal or
proceeding for a review, and in respect of which a stay of execution pending
such appeal or proceeding for review has been secured, (j) with respect to any
Real Property, easements, rights of way, zoning and similar covenants and
restrictions, and similar encumbrances that customarily exist on properties of
Persons engaged in similar activities and similarly situated and that in any
event do not materially interfere with or impair the use or operation of the
Collateral by Borrowers or the value of the Lender Group’s Lien thereon or
therein, or materially interfere with the ordinary conduct of the business of
Borrowers, and (k) liens securing the Revolving Credit Agreement.


“Permitted Protest”
means the right of Borrowers to protest any Lien (other than any such Lien that
secures the Obligations), tax (other than payroll taxes or taxes that are the
subject of a United States federal tax lien), or rental payment, provided that
(a) a reserve with respect to such obligation is established on the books
of Borrowers in an amount that is reasonably satisfactory to Agent,
(b) any such protest is instituted and diligently prosecuted by Borrowers
in good faith, and (c) Agent is satisfied that, while any such protest is
pending, there will be no impairment of the enforceability, validity, or
priority of any of the Liens of the Lender Group in and to the Collateral.


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


“Pro-Rata Share”
means, with respect to a Lender, a fraction (expressed as a percentage), the
numerator of which is the amount of such Lender’s Commitment and the
denominator of which is the aggregate amount of the Commitments.


“Real Property”
means any estates or interests in real property now owned or hereafter acquired
by any Borrower.


“Reference Rate”
the rate of interest announced within Wells Fargo at its principal office in
San Francisco as its “prime rate”, with the understanding that the “prime rate”
is one of Wells Fargo’s base rates (not necessarily the lowest of such rates)
and serves as the basis upon which effective rates of interest are calculated
for those loans making reference thereto and is evidenced by the recording thereof
after its announcement in such internal publication or publications as Wells
Fargo may designate.


“Required Lenders”
means, at any time, Lenders whose Pro Rata Shares aggregate 50.1% or more of
the Commitments.


“Requirement of Law”
means, as to any Person:  (a) (i) all
statutes and regulations and (ii) court orders and injunctions, arbitrators’
decisions, and/or similar rulings, in each instance by any Governmental
Authority or arbitrator applicable to or binding upon such Person or any of
such Person’s property or to which such Person or any of such Person’s



 10
 









property is subject; and
(b) that Person’s organizational documents, by-laws and/or other instruments
which deal with corporate or similar governance, as applicable.


“Revolving Accounts”
means any Account arising from an agreement to extend credit on an ongoing
basis through the use of a device such as a credit card or the like, whether or
not subject to regulation under Federal Reserve Board Regulation Z, or any
state statute or regulation on truth-in-lending.


“Revolving Credit
Agent” means Wells Fargo Retail Finance, LLC, in its capacity as Agent
under the Revolving Credit Agreement.


“Revolving Credit
Agreement” means that certain Fifth Amended and Restated Loan and Security
Agreement dated as of June 28, 2007 between, among others, the Borrowers,
financial institutions party thereto from time to time as lenders, and Wells
Fargo Retail Finance, LLC, as Agent, as amended and in effect from time to
time.


“Seasonal Advances”
has the meaning set forth in the Revolving Credit Agreement.


“Seasonal Overadvance
Facility” has the meaning set forth in the Revolving Credit Agreement.


“Services Company”
means The Children’s Place Services Company, LLC, a Delaware limited liability
company.


“Solvent” means,
with respect to any Person on a particular date, that on such date (a) at fair
valuations, all of the properties and assets of such Person are greater than
the sum of the debts, including contingent liabilities, of such Person, (b) the
present fair salable value of the properties and assets of such Person is not
less than the amount that will be required to pay the probable liability of
such Person on its debts as they become absolute and matured, (c) such Person
is able to realize upon its properties and assets and pay its debts and other
liabilities, contingent obligations and other commitments as they mature in the
normal course of business, (d) such Person does not intend to, and does not
believe that it will, incur debts beyond such Person’s ability to pay as such
debts mature, and (e) such Person is not engaged in business or a transaction,
and is not about to engage in business or a transaction, for which such Person’s
properties and assets would constitute unreasonably small capital after giving
due consideration to the prevailing practices in the industry in which such
Person is engaged.  In computing the
amount of contingent liabilities at any time, it is intended that such
liabilities will be computed at the amount that, in light of all the facts and
circumstances existing at such time, represents the amount that reasonably can
be expected to become an actual or matured liability.


“Stock Option Issue”
shall have the meaning set forth in that certain letter agreement dated as of
December 20, 2006, as amended and in effect from time to time.


“Subsidiary” of a
Person means a corporation, partnership, limited liability company, or other
entity in which that Person directly or indirectly owns or controls the



 11
 









shares of stock or other
ownership interests having ordinary voting power to elect a majority of the
board of directors (or appoint other comparable managers) of such corporation,
partnership, limited liability company, or other entity.


“Termination Date”
has the meaning set forth in Section 3.3.


“Termination Notice”
means written notice provided by the Administrative Borrower to the Agent
setting forth the date upon which this Agreement shall terminate.


“Twin Brook” means
Twin Brook Insurance Co., Inc., a New York captive insurance company.


“Voidable Transfer”
has the meaning set forth in Section 18.6.


“Walt Disney Companies”
means TDS Franchising, LLC, a California limited liability company; Disney
Enterprises, Inc., a Delaware corporation; and Disney Credit Card Services,
Inc., a California corporation.


“Wells Fargo”
means Wells Fargo Bank, National Association.


“Wells Fargo Retail”
means Wells Fargo Retail Finance, LLC, a Delaware limited liability company.


1.2                               Accounting
Terms.  All accounting terms not
specifically defined herein shall be construed in accordance with GAAP.  When used herein, the term “financial
statements” shall include the notes and schedules thereto.  Whenever the term “Borrowers or Parent” is
used in respect of a financial covenant or a related definition, it shall be
understood to mean Parent and its Subsidiaries on a consolidated basis unless
the context clearly requires otherwise.


1.3                               Code.  Any terms used in this Agreement that are
defined in the Code shall be construed and defined as set forth in the Code
unless otherwise defined herein.


1.4                               Construction.  Unless the context of this Agreement clearly
requires otherwise, references to the plural include the singular, references
to the singular include the plural, the term “including” is not limiting, and
the term “or” has, except where otherwise indicated, the inclusive meaning
represented by the phrase “and/or.”  The
words “hereof,” “herein,” “hereby,” “hereunder,” and similar terms in this
Agreement refer to this Agreement as a whole and not to any particular
provision of this Agreement.  An Event of
Default shall “continue” or be “continuing” until such Event of Default has
been waived in writing by the requisite members of the Lender Group.  Any reference herein to the repayment in full
of the Obligations shall mean the repayment in full in cash of all Obligations
other than contingent indemnification Obligations that are not required to be
repaid or cash collateralized pursuant to the provisions of this
Agreement.  Section, subsection, clause,
schedule, and exhibit references are to this Agreement unless otherwise
specified.  Any reference in this
Agreement or in the Loan Documents to this Agreement or any of the Loan
Documents shall include all alterations, amendments, changes, extensions, modifications,
renewals, replacements, substitutions, and supplements, thereto and thereof, as
applicable.



 12
 









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


2.                                      LETTERS
OF CREDIT.


2.1                               Agreement
to Cause Issuance; Amounts; Outside Expiration Date.  Subject to the terms and conditions of this
Agreement, Issuing Bank agrees, at any time and from time to time after the
date hereof and prior to the Termination Date, to issue Letters of Credit
pursuant to this Agreement; provided, however, subject to the
limitations set forth herein, Parent or Services Company shall have the right
to cause Canadian Letters of Credit to be issued pursuant to this
Agreement.  Issuing Bank shall have no
obligation to issue a Letter of Credit if any of the following would result:


(a)                                  The aggregate amount
of:


(i)                                     Letters of Credit
Outstandings would exceed $60,000,000,


(ii)                                   the sum of all
undrawn and unreimbursed Canadian Letters of Credit issued by (x) Issuing Bank
in connection with this Agreement, and (y) the Issuing Bank under the Revolving
Credit Agreement would exceed $10,000,000 in the aggregate; or


(b)                                 the aggregate amount
of Letters of Credit Outstandings would exceed the Commitments.


Each Letter of Credit
shall have an expiry date no later than the date one hundred twenty (120) days
after the date of the issuance of such Letter of Credit.  All such Letters of Credit shall be (i) in
form and substance acceptable to Issuing Bank in its sole discretion and (ii)
in an amount not to exceed the Borrowers’ cost of the Inventory, the payment of
which is to be made pursuant to such Letters of Credit, plus the estimated
costs relating to unpaid freight charges, warehousing or storage charges,
taxes, duties, and other similar fees, costs and expenses associated with the
acquisition of Inventory that is in transit to a Borrower.


2.2                               Reimbursement
of Drawings.  If Agent notifies
Parent on or before 1:00 p.m. Boston time on any Business Day that an L/C
Disbursement has occurred, Borrowers shall reimburse Agent in an amount in
Dollars equal to such L/C Disbursement on the same Business Day.  If Agent notifies Parent after 1:00 p.m.
Boston time on any Business Day that an L/C Disbursement has occurred, Borrowers
shall reimburse Agent in an amount in Dollars equal to such L/C Disbursement by
10:00 a.m. Boston time on the then next Business Day.  Reimbursements made pursuant to this Section
2.2 shall be made by Borrowers in accordance with the terms hereof and Section
2.11(a) by paying to the Agent for the account of the Issuing Bank in an
amount equal to such L/C Disbursement as such time as required by Section
2.11(a).



 13
 









2.3                               Interest
on Overdue Amounts.  If Issuing
Bank shall make any L/C Disbursement, then, unless Borrowers shall reimburse
the Agent for the account of the Issuing Bank in full at the time required
under Sections 2.2 and 2.11(a), the unpaid amount thereof shall
bear interest, for each day from and including the date such payment is made to
but excluding the date that Borrowers reimburse for the account of the Issuing
Bank or Lenders as applicable therefor, at the rate per annum equal to the
Reference Rate.  Interest shall be
calculated on the basis of a 360 day year and actual days elapsed.


2.4                               Indemnification.  Each Borrower hereby agrees to indemnify,
save, defend, and hold the Lender Group harmless from any loss, cost, expense,
or liability, including payments made by the Lender Group, expenses, and
reasonable attorneys fees incurred by the Lender Group arising out of or in
connection with any Letter of Credit. 
Each Borrower agrees to be bound by the Issuing Bank’s regulations and
interpretations of any Letters of Credit guarantied by the Lender Group and
opened to or for Parent’s or Service Company’s account or by Agent’s
interpretations of any Letter of Credit issued by Agent to or for any Borrower’s
account, even though this interpretation may be different from such Borrower’s
own, and such Borrower understands and agrees that the Lender Group shall not
be liable for any error, negligence, or mistake, whether of omission or
commission, in following such Borrower’s instructions or those contained in the
Letter of Credit or any modifications, amendments, or supplements thereto.


2.5                               Costs
of Letters of Credit.  Notwithstanding
anything to the contrary contained in this Agreement, Borrowers shall not be
responsible for any and all charges, commissions, fees (other than the Letter
of Credit fee set forth in Section 2.12, and costs relating to any
Letter of Credit.)


2.6                               Cash
Collateralization.  Immediately
upon the occurrence of the earlier of (i) an Event of Default or (ii) the
Termination Date, the Borrowers agree that, upon the Agent’s request, they
shall provide cash collateral to be held by Agent in an amount equal to 105% of
the Letters of Credit Outstanding, cause to be delivered to Agent releases of
all of the Lender Group’s obligations under outstanding Letters of Credit,
provide one or more back-to-back letters of credit to Agent from an issuing
bank reasonably acceptable to Agent and upon terms and conditions reasonably
acceptable to the Agent, and/or provide Agent with other security with respect
to the Letters of Credit Outstanding of a type and in an amount reasonably
acceptable to Agent.  If and to the
extent the Borrowers do not provide cash collateral, releases, back-to-back
letters of credit and/or other security in connection with the Letters of
Credit Outstandings, Agent may direct the Revolving Credit Agent to implement
reserves pursuant to Section 2.1(c) of the Revolving Credit Agreement as
permitted by Section 9.1(l) hereof. 
At Agent’s discretion, any proceeds of Collateral received by Agent
after the occurrence and during the continuation of an Event of Default shall
be held as the cash collateral required by this Section 2.6 (except to
the extent the Borrowers have provided one or more back-to-back letters of
credit or other security in accordance with the terms and conditions of this Section
2.6 or the Revolving Credit Agent has implemented reserves at the request
of Agent pursuant to Section 2.1(c) of the Revolving Credit Agreement).



 14
 









2.7                               Increased
Costs.  If by reason of (i) any
change in any applicable law, treaty, rule, or regulation or any change in the
interpretation or application by any Governmental Authority of any such
applicable law, treaty, rule, or regulation, or (ii) compliance by the Issuing
Bank or the Lender Group with any direction, request, or requirement
(irrespective of whether having the force of law) of any Governmental Authority
or monetary authority including, without limitation, Regulation D of the Board
of Governors of the Federal Reserve System as from time to time in effect (and
any successor thereto):


(i)                                     any reserve,
deposit, or similar requirement is or shall be imposed or modified in respect
of any Letters of Credit issued hereunder, or


(ii)                                  there shall be
imposed on the Issuing Bank or the Lender Group any other condition regarding
any letter of credit, or Letter of Credit, as applicable, issued pursuant
hereto;


and the result of the
foregoing is to increase, directly or indirectly, the cost to the Issuing Bank
or the Lender Group of issuing, making, guaranteeing, or maintaining any letter
of credit, or Letter of Credit, as applicable, or to reduce the amount
receivable in respect thereof by such Issuing Bank or the Lender Group, then,
and in any such case, Agent may, at any time within a reasonable period after
the additional cost is incurred or the amount received is reduced, notify
Administrative Borrower, and Borrowers shall pay on demand such amounts as the
Issuing Bank or Agent may specify to be necessary to compensate the Issuing
Bank or Agent for such additional cost or reduced receipt, together with
interest on such amount from the date of such demand until payment in full
thereof at the rate set forth in Section 2.12(a) or (b), as
applicable.  The determination by the
Issuing Bank or Agent, as the case may be, of any amount due pursuant to this Section 2.7,
as set forth in a certificate setting forth the calculation thereof in reasonable
detail, shall, in the absence of manifest or demonstrable error, be final and
conclusive and binding on all of the parties hereto.


2.8                               Participations.


(i)                                     Purchase of
Participations.  Immediately upon
issuance of any Letter of Credit in accordance with this Section 2.8,
each Lender shall be deemed to have irrevocably and unconditionally purchased
and received without recourse or warranty, an undivided interest and
participation in the credit support or enhancement provided through the Agent
to such issuer in connection with the issuance of such Letter of Credit, equal
to such Lender’s Pro Rata Share of the face amount of such Letter of Credit
(including, without limitation, all obligations of Borrowers with respect
thereto, and any security therefor or guaranty pertaining thereto).


(ii)                                  Documentation.  Upon the request of any Lender, the Agent
shall furnish to such Lender copies of any Letter of Credit, reimbursement
agreements executed in connection therewith, application for any Letter of
Credit and credit support or enhancement provided through the Agent in
connection with the issuance of any Letter of Credit, and such other
documentation as may reasonably by requested by such Lender.



 15
 









(iii)                               Obligations
Irrevocable.  The obligations of each
Lender to make payments to the Agent with respect to any Letter of Credit or
with respect to any credit support or enhancement provided through the Agent
with respect to a Letter of Credit, and the obligations of Borrowers to make
payments to the Agent, for the account of the Lenders, shall be irrevocable,
not subject to any qualification or exception whatsoever, including, without
limitation, any of the following circumstances:


(A)                              any
lack of validity or enforceability of this Agreement or any of the other
Loan Documents;


(B)                                the
existence of any claim, setoff, defense, or other right which any Borrower may
have at any time against a beneficiary named in a Letter of Credit or any
transferee of any Letter of Credit (or any Person for whom any such transferee
may be acting), any Lender, the Agent, the issuer of such Letter of Credit, or
any other Person, whether in connection with this Agreement, any Letter of
Credit, the transactions contemplated herein or any unrelated transactions
(including any underlying transactions between such Borrower or any other
Person and the beneficiary named in any Letter of Credit);


(C)                                any
draft, certificate, or any other document presented under the Letter of Credit
proving to be forged, fraudulent, invalid, or insufficient in any respect or
any statement therein being untrue or inaccurate in any respect;


(D)                               the
surrender or impairment of any security for the performance or observance of
any of the terms of any of the Loan Documents; or


(E)                                 the
occurrence of any Default or Event of Default.


2.9                               Notation.  The Agent shall record on its books the
Letter of Credit Outstandings, L/C Disbursements, Letter of Credit Fees, fees
and interest that has become due hereunder, and such books and records
constituting rebuttably presumptive evidence, absent manifest error, of the
accuracy of the information contained therein.


2.10                        Effect
of Bankruptcy.  If a case is
commenced by or against any Borrower under the Bankruptcy Code, or other
statute providing for debtor relief, then, without the approval of Required
Lenders the Lender Group shall not issue additional Letters of Credit to such
Borrower as debtor or debtor-in-possession, or to any trustee for such
Borrower, nor consent to the use of cash collateral (provided that the
applicable Loan Account shall continue to be charged, to the fullest extent
permitted by law, for accruing interest, fees, and Lender Group Expenses).


2.11                        Payments.


(a)                                  Payments by Borrowers.


(i)                                     All
payments to be made by Borrowers shall be made without set-off, recoupment,
deduction, or counterclaim, except as otherwise required by law.  All payments by Borrowers shall be made to
Agent for the account of the Issuing Bank, Lenders or Agent, as



 16
 









the case may be, at Agent’s
address set forth in Section 12, and shall be made in immediately
available funds.  All payments shall be
made no later than 1:00 p.m. (Boston time) on the date specified herein (except
for reimbursement of drawings, which shall be made in accordance with the time
periods set forth in Section 2.2). 
Any payment (other than a reimbursement of a drawing made in accordance
with Section 2.2) that is received by Agent later than 1:00 p.m. (Boston
time), at the option of Agent, shall be deemed to have been received on the
following Business Day and any applicable interest or fee shall continue to
accrue until such following Business Day.


(ii)                                  Whenever
any payment is due on a day other than a Business Day, such payment shall be
made on the following Business Day, and such extension of time shall in such
case be included in the computation of interest or fees, as the case may be.


(iii)                               Unless
Agent receives notice from Borrowers prior to the date on which any payment is
due to the Issuing Bank, Lenders that Borrowers will not make such payment in
full as and when required, Agent may assume that Borrowers have made such
payment in full to Agent on such date in immediately available funds and Agent
may (but shall not be so required), in reliance upon such assumption,
distribute to each Lender on such due date an amount equal to the amount then
due such Lender.  If and to the extent
Borrowers have not made such payment in full to Agent, each Lender shall repay
to Agent on demand such amount distributed to such Lender, together with
interest thereon at the Reference Rate for each day from the date such amount
is distributed to such Lender until the date repaid.


(b)                                 Apportionment and Application.


(i)                                     Except
as otherwise provided in the Loan Documents (including letter agreements
between Agent and individual Lenders), aggregate principal and interest
payments shall be apportioned ratably among the Lenders (according to the
unpaid principal balance of the Obligations to which such payments relate held
by each Lender) and payments of fees and expenses (other than fees or expenses
that are for Agent’s separate account, after giving effect to any letter
agreements between Agent and individual Lenders) shall be apportioned ratably
among the Lenders having a Pro Rata Share of the type of Commitment or
Obligation to which a particular fee relates. 
All payments shall be remitted to Agent and all such payments, and all
proceeds of Collateral received by Agent, shall be applied as follows:


A.                                   first,
to pay any Lender Group Expenses then due to Agent under the Loan Documents,
until paid in full,


B.                                     second,
to pay any Lender Group Expenses then due to the Lenders under the Loan
Documents, on a ratable basis, until paid in full,


C.                                     third,
to pay any fees then due to Agent (for its separate accounts, after giving
effect to any letter agreements between Agent and the individual Lenders) under
the Loan Documents until paid in full,



 17
 









D.                                    fourth,
to pay any fees then due to any or all of the Lenders (after giving effect to
any letter agreements between Agent and individual Lenders) under the Loan
Documents, on a ratable basis, until paid in full,


E.                                      fifth,
first, to pay the principal of all L/C Disbursements until paid in full,
and second, to Agent, to be held by Agent, for the ratable benefit of
those Lenders having a Commitment, as cash collateral in an amount up to 105%
of the Letter of Credit Outstandings,


F.                                      sixth,
to Borrowers (to be wired to the Designated Account) or such other Person
entitled thereto under applicable law.


(ii)                                  Agent
promptly shall distribute to each Lender, pursuant to the applicable wire
instructions received from each Lender in writing, such funds as it may be
entitled to receive.


(iii)                               In
each instance, so long as no Event of Default has occurred and is continuing,
this Section 2.11(b) shall not be deemed to apply to any payment by
Borrowers specified by Borrowers to be for the payment of specific Obligations
then due and payable (or prepayable) under any provision of this Agreement.


(iv)                              For
purposes of the foregoing, “paid in full” means payment of all amounts owing
under the Loan Documents according to the terms thereof, including loan fees,
service fees, professional fees, interest (and specifically including interest
accrued after the commencement of any Insolvency Proceeding), default interest,
interest on interest, and expense reimbursements, whether or not any of the
foregoing would be or is allowed or disallowed in whole or in part in any
Insolvency Proceeding.


(v)                                 In
the event of a direct conflict between the priority provisions of this Section 2.11
and other provisions contained in any other Loan Document, it is the intention
of the parties hereto that such priority provisions in such documents shall be
read together and construed, to the fullest extent possible, to be in concert
with each other.  In the event of any
actual, irreconcilable conflict that cannot be resolved as aforesaid, the terms
and provisions of this Section 2.11 shall control and govern.


2.12                        Letter
of Credit Fees: Rates, Payments, and Calculations.


(a)                                  Letter
of Credit Fee.  Borrowers shall pay
Agent, for the benefit of the Lender Group, a fee equal to 0.75% per annum
times the aggregate undrawn amount of all Letters of Credit outstanding as of
the end of the day.  Notwithstanding
anything to the contrary contained herein, at all times during which Seasonal Advances
are outstanding under the Seasonal Overadvance Facility, the Letter of Credit
Fee provided in Section 2.12(a) hereof shall be increased by one-quarter
of one percent (.25%) per annum.


(b)                                 Default
Rate.  Upon the occurrence and during
the continuation of an Event of Default, (i) all Obligations (except for
undrawn Letters of Credit) shall bear interest on the Daily Balance at a per
annum rate equal to 3.00% above the Reference Rate, and (ii) the



 18
 









Letter of Credit Fee provided
in Section 2.12(a) shall be increased to 3.75% per annum times the
aggregate undrawn amount of all outstanding Letters of Credit; provided,
however, the foregoing adjustments are subject to waiver by the Required
Lenders.


(c)                                  Payments.  Letter of Credit Fees payable hereunder shall
be due and payable, in arrears, on the first day of each month during the term
hereof.  Each Borrower hereby authorizes
Agent, at its option, without prior notice to such Borrower, to request the
Revolving Credit Agent to cause loans under the Revolving Credit Agreement be
made in the amount of all Letter of Credit Fees, the fees and charges provided
for in Section 2.12(a) (as and when accrued or incurred), and all
reimbursement obligations or other payments due under any Loan Document the
proceeds of such loan to be paid directly to the Agent for the account of the
Issuing Bank and Lenders hereunder as applicable.  Any Letter of Credit fees not paid when due
shall be compounded and shall thereafter accrue interest at the Default Rate.


(d)                                 Computation.  In the event the Reference Rate is changed
from time to time hereafter, the applicable rate of interest hereunder
automatically and immediately shall be increased or decreased by an amount
equal to such change in the Reference Rate. 
All interest and fees chargeable under the Loan Documents shall be
computed on the basis of a 360 day year for the actual number of days elapsed.


(e)                                  Intent
to Limit Charges to Maximum Lawful Rate. 
In no event shall the interest rate or rates payable under this
Agreement, plus any other amounts paid in connection herewith, exceed the
highest rate permissible under any law that a court of competent jurisdiction
shall, in a final determination, deem applicable.  Borrowers and the Lender Group, in executing
and delivering this Agreement, intend legally to agree upon the rate or rates
of interest and manner of payment stated within it; provided, however,
that, anything contained herein to the contrary notwithstanding, if said rate
or rates of interest or manner of payment exceeds the maximum allowable under
applicable law, then, ipso facto as of the date of this Agreement, Borrowers
are and shall be liable only for the payment of such maximum as allowed by law,
and payment received from Borrowers in excess of such legal maximum, whenever
received, shall be applied to reduce the principal balance of the Obligations
to the extent of such excess.


2.13                        Maintenance
of Loan Account; Statements of Obligations.


Agent shall
maintain an account on its books in the name of Borrowers (the “Loan Account”)
on which Borrowers will be charged with all Letter of Credit Outstandings,
Letter of Credit Fees, accrued interest, Lender Group Expenses, and any other
payment Obligations of Borrowers.   
Agent shall render statements regarding the Loan Account to
Administrative Borrower, including Letter of Credit Outstandings, Letter of
Credit Fees, principal, interest, fees, and including an itemization of all
charges and expenses constituting the Lender Group Expenses owing, and such
statements shall be conclusively presumed to be correct and accurate and
constitute an account stated between Administrative Borrower and the Lender
Group unless, within 30 days after receipt thereof by Administrative Borrower,
Administrative Borrower shall deliver to Agent written objection thereto
describing the error or errors contained in any such statements.



 19
 









2.14                        Joint
and Several Liability of Borrowers.


(a)                                  Each
Borrower is accepting joint and several liability hereunder and under the other
Loan Documents in consideration of the financial accommodations to be provided
by the Agent and the Lenders under this Agreement, for the mutual benefit,
directly and indirectly, of each Borrower and in consideration of the
undertakings of the other Borrowers to accept joint and several liability for
the Obligations.


(b)                                 Each
Borrower, jointly and severally, hereby irrevocably and unconditionally
accepts, not merely as a surety but also as a co-debtor, joint and several
liability with the other Borrowers, with respect to the payment and performance
of all of the Obligations (including, without limitation, any Obligations
arising under this Section 2.14), it being the intention of the
parties hereto that all the Obligations shall be the joint and several
obligations of each Person composing Borrowers without preferences or
distinction among them.


(c)                                  If
and to the extent that any of Borrowers shall fail to make any payment with
respect to any of the Obligations as and when due or to perform any of the
Obligations in accordance with the terms thereof, then in each such event the
other Persons composing Borrowers will make such payment with respect to, or
perform, such Obligation.


(d)                                 The
Obligations of each Person composing Borrowers under the provisions of this Section 2.14
constitute the absolute and unconditional, full recourse Obligations of each
Person composing Borrowers enforceable against each such Borrower to the full
extent of its properties and assets, irrespective of the validity, regularity
or enforceability of this Agreement or any other circumstances whatsoever.


(e)                                  Except
as otherwise expressly provided in this Agreement, each Person composing
Borrowers hereby waives notice of acceptance of its joint and several
liability, notice of any Letters of Credit issued under or pursuant to this
Agreement, notice of the occurrence of any Default, Event of Default, or of any
demand for any payment under this Agreement, notice of any action at any time
taken or omitted by Agent or Lenders under or in respect of any of the
Obligations, any requirement of diligence or to mitigate damages and,
generally, to the extent permitted by applicable law, all demands, notices and
other formalities of every kind in connection with this Agreement (except as
otherwise provided in this Agreement). 
Each Person composing Borrowers hereby assents to, and waives notice of,
any extension or postponement of the time for the payment of any of the
Obligations, the acceptance of any payment of any of the Obligations, the
acceptance of any partial payment thereon, any waiver, consent or other action
or acquiescence by Agent or Lenders at any time or times in respect of any
default by any Person composing Borrowers in the performance or satisfaction of
any term, covenant, condition or provision of this Agreement, any and all other
indulgences whatsoever by Agent or Lenders in respect of any of the
Obligations, and the taking, addition, substitution or release, in whole or in
part, at any time or times, of any security for any of the Obligations or the
addition, substitution or release, in whole or in part, of any Person composing
Borrowers.  Without limiting the
generality of the foregoing, each Borrower assents to any other action or delay
in acting or failure to act on the part of any Agent or Lender with respect to
the failure by any Person composing Borrowers to comply with any of its
respective Obligations, including, without limitation, any failure strictly or
diligently to assert any right or to pursue any remedy or to comply fully with
applicable laws or regulations thereunder, which might, but for the provisions



 20
 









of this Section 2.14
afford grounds for terminating, discharging or relieving any Person composing
Borrowers, in whole or in part, from any of its Obligations under this Section 2.14,
it being the intention of each Person composing Borrowers that, so long as any
of the Obligations hereunder remain unsatisfied, the Obligations of such Person
composing Borrowers under this Section 2.14 shall not be discharged
except by performance and then only to the extent of such performance.  The Obligations of each Person composing
Borrowers under this Section 2.14 shall not be diminished or
rendered unenforceable by any winding up, reorganization, arrangement,
liquidation, reconstruction or similar proceeding with respect to any Person
composing Borrowers or any Agent or Lender. 
The joint and several liability of the Persons composing Borrowers
hereunder shall continue in full force and effect notwithstanding any
absorption, merger, amalgamation or any other change whatsoever in the name,
constitution or place of formation of any of the Persons composing Borrowers or
any Agent or Lender.


(f)                                    Each
Person composing Borrowers represents and warrants to Agent and Lenders that
such Borrower is currently informed of the financial condition of Borrowers and
of all other circumstances which a diligent inquiry would reveal and which bear
upon the risk of nonpayment of the Obligations. 
Each Person composing Borrowers further represents and warrants to Agent
and Lenders that such Borrower has read and understands the terms and
conditions of the Loan Documents.  Each
Person composing Borrowers hereby covenants that such Borrower will continue to
keep informed of Borrowers’ financial condition, the financial condition of
other guarantors, if any, and of all other circumstances which bear upon the
risk of nonpayment or nonperformance of the Obligations.


(g)                                 The
provisions of this Section 2.14 are made for the benefit of the
Agent, the Lenders and their respective successors and assigns, and may be
enforced by it or them from time to time against any or all of the Persons
composing Borrowers as often as occasion therefor may arise and without
requirement on the part of any such Agent, Lender, successor or assign first to
marshal any of its or their claims or to exercise any of its or their rights
against any of the other Persons composing Borrowers or to exhaust any remedies
available to it or them against any of the other Persons composing Borrowers or
to resort to any other source or means of obtaining payment of any of the
Obligations hereunder or to elect any other remedy.  The provisions of this Section 2.14
shall remain in effect until all of the Obligations shall have been paid in
full or otherwise fully satisfied.  If at
any time, any payment, or any part thereof, made in respect of any of the
Obligations, is rescinded or must otherwise be restored or returned by any
Agent or Lender upon the insolvency, bankruptcy or reorganization of any of the
Persons composing Borrowers, or otherwise, the provisions of this Section 2.14
will forthwith be reinstated in effect, as though such payment had not been
made.


(h)                                 Each
of the Persons composing Borrowers hereby agrees that it will not enforce any
of its rights of contribution or subrogation against the other Persons
composing Borrowers with respect to any liability incurred by it hereunder or
under any of the other Loan Documents, any payments made by it to the Agent or
the Lenders with respect to any of the Obligations or any collateral security therefor
until such time as all of the Obligations have been paid in full in cash.  Any claim which any Borrower may have against
any other Borrower with respect to any payments to any Agent or Lender
hereunder or under any other Loan Documents are hereby expressly made
subordinate and junior in right of payment, without limitation as to



 21
 









any increases in the
Obligations arising hereunder or thereunder, to the prior payment in full in
cash of the Obligations and, in the event of any insolvency, bankruptcy, receivership,
liquidation, reorganization or other similar proceeding under the laws of any
jurisdiction relating to any Borrower, its debts or its assets, whether
voluntary or involuntary, all such Obligations shall be paid in full in cash
before any payment or distribution of any character, whether in cash,
securities or other property, shall be made to any other Borrower therefor.


(i)                                     Each
of the Persons composing Borrowers hereby agrees that, after the occurrence and
during the continuance of any Default or Event of Default, the payment of any
amounts due with respect to the Indebtedness owing by any Borrower to any other
Borrower is hereby subordinated to the prior payment in full in cash of the
Obligations.  Each Borrower hereby agrees
that after the occurrence and during the continuance of any Default or Event of
Default, such Borrower will not demand, sue for or otherwise attempt to collect
any Indebtedness of any other Borrower owing to such Borrower until the
Obligations shall have been paid in full in cash.  If, notwithstanding the foregoing sentence,
such Borrower shall collect, enforce or receive any amounts in respect of such
Indebtedness, such amounts shall be collected, enforced and received by such
Borrower as trustee for the Agent, and such Borrower shall deliver any such
amounts to Agent for application to the Obligations in accordance with this
Agreement.


3.                                      CONDITIONS;
TERM OF AGREEMENT.


3.1                               Conditions
Precedent to Initial Letter of Credit. 
The obligation of the Lender Group to issue the initial Letter of Credit
is subject to the fulfillment, to the satisfaction of Agent and its counsel, of
each of the following conditions on or before the Closing Date:


(a)                                  the
Closing Date shall occur on or before June 28, 2007;


(b)                                 Agent
shall have received and filed financing statements;


(c)                                  Agent
shall have received the Guaranties, duly executed, and each such document shall
be in full force and effect;


(d)                                 Agent
shall have received a certificate from the Secretary or Assistant Secretary of
each Borrower and Guarantor attesting to the resolutions of such Borrower’s and
Guarantor’s Board of Directors authorizing its execution, delivery, and
performance of this Agreement and the other Loan Documents to which such
Borrower and Guarantor is a party and authorizing specific officers of such
Borrower and Guarantor to execute the same;


(e)                                  Agent
shall have received copies of each Borrower’s and Guarantor’s Governing
Documents, as amended, modified, or supplemented on or before the Closing Date,
certified by the Secretary or Assistant Secretary of each Borrower and
Guarantor;


(f)                                    Agent
shall have received a certificate of status with respect to each Borrower and
Guarantor, dated within 10 days of the Closing Date, such certificate to be
issued by the appropriate officer of the jurisdiction of organization of each
Borrower and Guarantor, which certificate shall indicate that such Borrower and
Guarantor is in good standing in such jurisdiction;



 22
 









(g)                                 Agent
shall have received an opinion of Borrowers’ and Guarantors’ counsel in form
and substance satisfactory to Agent in its sole discretion;


(h)                                 All
other documents and legal matters in connection with the transactions
contemplated by this Agreement shall have been delivered, executed, or recorded
and shall be in form and substance satisfactory to Agent and its counsel; and


(i)                                     The
Agent shall have entered into an Intercreditor Agreement with the Revolving
Credit Agent on terms reasonably acceptable to the Agent.


3.2                               Conditions
Precedent to all Letters of Credit. 
The following shall be conditions precedent to issuance of any Letter of
Credit hereunder:


(a)                                  the
representations and warranties contained in this Agreement and the other Loan
Documents shall be true and correct in all material respects on and as of the
date of such extension of credit, as though made on and as of such date (except
to the extent that such representations and warranties relate solely to an
earlier date);


(b)                                 except
for good faith disputes between a Borrower and landlords, no Default or Event
of Default shall have occurred and be continuing on the date of the issuance of
such Letter of Credit, nor shall either result from the issuance thereof;


(c)                                  no
injunction, writ, restraining order, or other order of any nature prohibiting,
directly or indirectly, the extending of such credit shall have been issued and
remain in force by any Governmental Authority against any Borrower, the Lender
Group or any of their Affiliates;


(d)                                 the
amount of any requested Letter of Credit, together with all Letter of Credit Outstandings,
shall not exceed the Commitments; and


(e)                                  this
agreement shall not have been terminated in accordance with Section 3.3.


3.3                               Term.  This Agreement shall terminate upon the
earliest of: (i) the date set forth in the Termination Notice, which date shall
be no earlier than two (2) Business Days after the latest expiry date of any
Letters of Credit; (ii) the date on which the Agent or the Agent, at the
direction of the Required Lenders, has given the Administrative Borrower notice
of termination; or (iii) the date on which the Revolving Credit Agreement
terminates or expires (the “Termination Date”).


3.4                               Effect
of Termination.  On the earlier
of the Termination Date or receipt by the Agent of the Termination Notice, the
Issuing Bank’s commitment to issue new Letters of Credit and the Lenders’
obligations to buy participations in the Letters of Credit shall immediately
terminate without notice or demand.  On
the Termination Date, to the extent the Borrowers have not provided cash
collateral, releases, one or more back-to-back letters of credit and/or other
security reasonably acceptable to the Agent as contemplated by the first
sentence of Section 2.6, the Agent may direct the Revolving Credit Agent
to implement reserves pursuant to Section 2.1(c) of the Revolving Credit
Agreement as permitted by Section 9.1(l) hereof.



 23
 









4.                                      CREATION
OF SECURITY INTEREST.


4.1                               Grant
of Security Interests.  Each
Borrower hereby grants to Agent for the benefit of the Lender Group a
continuing security interest in all currently existing and hereafter acquired
or arising Collateral in order to secure prompt repayment of any and all
Obligations and in order to secure prompt performance by such Borrower of each
of its covenants and duties under the Loan Documents.  The security interests of Agent for the
benefit of the Lender Group in the Collateral shall attach to all Collateral
without further act on the part of the Lender Group or Borrowers.  Anything contained in this Agreement or any
other Loan Document to the contrary notwithstanding, and other than:
(a) sales of Inventory to buyers in the ordinary course of business,
(b) sales of Equipment in any 12 month period having an aggregate net book
value of $500,000 with the proceeds being applied to the debt due pursuant to
the Revolving Credit Agreement, and (c) sale or disposal of Collateral (other
than Inventory) in connection with the closing of Borrowers’ stores, Borrowers
have no authority, express or implied, to dispose of any item or portion of the
Collateral.


4.2                               Negotiable
Collateral.  In the event that
any Collateral, including proceeds, is evidenced by or consists of Negotiable
Collateral, Borrowers, immediately upon the request of Agent, shall endorse and
deliver physical possession of such Negotiable Collateral to the Agent.


4.3                               Collection
of Accounts, General Intangibles, and Negotiable Collateral.  Upon the occurrence of an Event of Default,
Agent or Agent’s designee may (a) notify customers or Account Debtors of
any Borrower that the Accounts, General Intangibles, or Negotiable Collateral
have been assigned to Agent for the benefit of the Lender Group or that Agent
for the benefit of the Lender Group has a security interest therein, and
(b) collect the Accounts, General Intangibles, and Negotiable Collateral
directly and charge the collection costs and expenses to the Loan Account.


4.4                               Delivery
of Additional Documentation Required. 
At any time upon the request of Agent, Borrowers shall execute and
deliver to Agent all financing statements, continuation financing statements,
fixture filings, security agreements, pledges, assignments, control agreements,
endorsements of certificates of title, applications for title, affidavits,
reports, notices, schedules of accounts, letters of authority, and all other
documents that Agent reasonably may request, in form satisfactory to Agent, to
perfect and continue perfected the Liens of the Lender Group in the Collateral,
and in order to fully consummate all of the transactions contemplated hereby
and under the other the Loan Documents.


4.5                               Power
of Attorney.  Each Borrower
hereby irrevocably makes, constitutes, and appoints Agent (and any of Agent’s
officers, employees, or agents designated by Agent) as such Borrower’s true and
lawful attorney, with power to (a) if any Borrower refuses to, or fails
timely to execute and deliver any of the documents described in Section 4.4,
sign the name of such Borrower on any of the documents described in Section
4.4, (b) at any time that an Event of Default has occurred and is
continuing or the Lender Group deems itself insecure, sign such Borrower’s name
on any invoice or bill of lading relating to any Account, drafts against
Account Debtors, schedules and assignments of Accounts, verifications of
Accounts, and notices to Account Debtors, (c) send requests for
verification of Accounts, (d) endorse such Borrower’s



 24
 









name on any
Collection item that may come into the Lender Group’s possession, (e) at
any time that an Event of Default has occurred and is continuing or the Lender
Group deems itself insecure, notify the post office authorities to change the
address for delivery of such Borrower’s mail to an address designated by Agent,
to receive and open all mail addressed to such Borrower, and to retain all mail
relating to the Collateral and forward all other mail to such Borrower,
(f) at any time that an Event of Default has occurred and is continuing or
the Lender Group deems itself insecure, make, settle, and adjust all claims
under Borrowers’ policies of insurance and make all determinations and decisions
with respect to such policies of insurance, and (g) at any time that an Event
of Default has occurred and is continuing or Agent deems itself insecure,
settle and adjust disputes and claims respecting the Accounts directly with
Account Debtors, for amounts and upon terms that Agent determines to be
reasonable, and Agent may cause to be executed and delivered any documents and
releases that Agent determines to be necessary. 
The appointment of Agent as each Borrower’s attorney, and each and every
one of Agent’s rights and powers, being coupled with an interest, is
irrevocable until all of the Obligations have been fully and finally repaid and
performed and the Lender Group’s obligation to extend credit hereunder is
terminated.


4.6                               Right
to Inspect.  Agent (through any
of its officers, employees, or agents), shall have the right, from time to time
hereafter to inspect Books and to check, test, and appraise the Collateral in
order to verify Borrowers’ financial condition or the amount, quality, value,
condition of, or any other matter relating to, the Collateral.


5.                                      REPRESENTATIONS
AND WARRANTIES.  In order to induce
the Lender Group to enter into this Agreement, each Borrower makes the
following representations and warranties which shall be true, correct, and
complete in all respects as of the date hereof, and shall be true, correct, and
complete in all respects as of the Closing Date, and at and as of the date of
the issuance of each Letter of Credit made thereafter, as though made on and as
of the date of such Letter of Credit (except to the extent that such
representations and warranties relate solely to an earlier date) and such
representations and warranties shall survive the execution and delivery of this
Agreement:


5.1                               No
Encumbrances.  Each Borrower has
good and indefeasible title to the Collateral, free and clear of Liens except
for Permitted Liens.


5.2                               Location
of Inventory and Equipment.  The
Inventory (other than Inventory in transit) and Equipment are not stored with a
bailee, warehouseman, or similar party (without Agent’s prior written consent)
and are located only at the locations identified on Schedule 5.2 or
otherwise permitted by Section 6.11 of the Revolving Credit
Agreement.


5.3                               Inventory
Records.  Each Borrower keeps
correct and accurate records itemizing and describing the kind, type, quality
and quantity of its Inventory and each Borrower’s cost therefor in accordance
with the retail method of accounting.


5.4                               Location
of Chief Executive Office; FEIN. 
The chief executive office of Borrowers is located at the address
indicated in the preamble to this Agreement and Parent’s FEIN is 31-1241495 and
Services Company’s FEIN is 20-0850965.



 25
 









5.5                               Due
Organization and Qualification; Subsidiaries.


(a)                                  Each
Borrower is duly organized and existing and in good standing under the laws of
the jurisdiction of its incorporation and qualified and licensed to do business
in, and in good standing in, any state where the failure to be so licensed or
qualified reasonably could be expected to cause a Material Adverse Change.


(b)                                 Set
forth on Schedule 5.5 is a complete and accurate list of each
Borrower’s direct and indirect Subsidiaries, showing: (i) the jurisdiction of
their incorporation; (ii) the number of shares of each class of common and
preferred stock authorized for each of such Subsidiaries; and (iii) the number
and the percentage of the outstanding shares of each such class owned directly
or indirectly by the applicable Borrower. 
All of the outstanding capital stock of each such Subsidiary has been
validly issued and is fully paid and non-assessable.


(c)                                  Except
as set forth on Schedule 5.5, no capital stock (or any securities,
instruments, warrants, options, purchase rights, conversion or exchange rights,
calls, commitments or claims of any character convertible into or exercisable
for capital stock) of any direct or indirect Subsidiary of any Borrower is
subject to the issuance of any security, instrument, warrant, option, purchase
right, conversion or exchange right, call, commitment or claim of any right,
title, or interest therein or thereto.


5.6                               Due
Authorization; No Conflict.  (a) The execution and delivery by each
Borrower of each Loan Document to which it is a party; each Borrower’s
consummation of the transactions contemplated by such Loan Documents; each
Borrower’s performance under those of the Loan Documents to which it is a
party:


(i)                                     Has
been duly authorized by all necessary action.


(ii)                                  Does
not, and will not, contravene in any material respect any provision of any
Requirement of Law or obligation of that Borrower.


(iii)                               Will
not result in the creation or imposition of, or the obligation to create or
impose, any Lien upon any assets of that Borrower pursuant to any Requirement
of Law or obligation, except pursuant to the Loan Documents.


(b)                                 The
Loan Documents have been duly executed and delivered by each Borrower and are
the legal, valid and binding obligations of each Borrower, enforceable against
each Borrower in accordance with their respective terms.


5.7                               Litigation.  Except as set forth on Schedule 5.7,
there are no actions or proceedings pending by or against Borrowers before any
court or administrative agency and Borrowers do not have knowledge or belief of
any pending, threatened, or imminent litigation, governmental investigations,
or claims, complaints, actions, or prosecutions involving Borrowers or any
guarantor of the Obligations, except for: (a) ongoing collection matters in
which Borrowers are the plaintiff; and (b) current matters that, if decided
adversely to Borrowers, would not materially impair the prospect of repayment
of the Obligations or materially impair the value or priority of the Lender
Group’s security interests in the Collateral.



 26















5.8                         No
Material Adverse Change.  All
financial statements relating to Borrowers or any guarantor of the Obligations
that have been delivered by Borrowers to the Lender Group have been prepared in
accordance with GAAP (except as may be directly impacted by the Stock Option
Issue and, in the case of unaudited financial statements, for the lack of
footnotes and being subject to year-end audit adjustments) and fairly present
Borrowers’ (or such guarantor’s, as applicable) financial condition as of the
date thereof and Borrowers’ results of operations for the period then
ended.  There has not been a Material
Adverse Change with respect to Borrowers (or such guarantor, as applicable)
since the date of the latest financial statements submitted to the Lender Group
on or before the Closing Date.


5.9                               Fraudulent
Transfer.


(a)                                  Each
Borrower and each Subsidiary of a Borrower is Solvent.


(b)                                 No
transfer of property is being made by any Borrower or any Subsidiary of a
Borrower and no obligation is being incurred by any Borrower or any Subsidiary
of a Borrower in connection with the transactions contemplated by this
Agreement or the other Loan Documents with the intent to hinder, delay, or
defraud either present or future creditors of Borrowers or their Subsidiaries.


6.                                      AFFIRMATIVE
COVENANTS.  Each Borrower covenants
and agrees that, so long as any credit hereunder shall be available and until
full and final payment of the Obligations, 
Borrowers shall comply with each and every affirmative covenant set
forth in the Revolving Credit Agreement, each of which is hereby incorporated
by reference.  Delivery by the Borrowers
to the Revolving Credit Agent of any financial statements, reports, or
certificates in connection with the Revolving Credit Agreement shall be deemed
delivery to the Agent hereunder. 


7.                                      NEGATIVE
COVENANTS.  Each Borrower covenants
and agrees that, so long as any credit hereunder shall be available and until
full and final payment of the Obligations, Borrowers will not do any of the
following:


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


(a)                                  Indebtedness
evidenced by this Agreement;


(b)                                 Indebtedness
set forth in Schedule 7.1;


(c)                                  Indebtedness
secured by Permitted Liens;


(d)                                 refinancings,
renewals, or extensions of Indebtedness permitted under clauses (b) and (c) of
this Section 7.1 (and continuance or renewal of any Permitted Liens
associated therewith) so long as: (i) the terms and conditions of such
refinancings, renewals, or extensions do not materially impair the prospects of
repayment of the Obligations by Borrowers, (ii) the net cash proceeds of such
refinancings, renewals, or extensions do not result in an increase in the
aggregate principal amount of the Indebtedness so refinanced, renewed, or
extended, (iii) such refinancings, renewals, refundings, or extensions do not
result in a shortening



 27
 









of the average weighted
maturity of the Indebtedness so refinanced, renewed, or extended, and (iv) to
the extent that Indebtedness that is refinanced was subordinated in right of
payment to the Obligations, then the subordination terms and conditions of the
refinancing Indebtedness must be at least as favorable to the Lender Group as
those applicable to the refinanced Indebtedness;


(e)                                  leases,
whether operating leases or capital leases of existing or after acquired
Equipment, including, without limitation, the Alabama Capital Lease;


(f)                                    Indebtedness
subordinated to the Obligations on terms and conditions satisfactory to Agent;


(g)                                 intercompany
Indebtedness between and among Borrowers and Guarantors, which Indebtedness
shall (i) be evidenced by such documentation as Agent may reasonably require,
(ii) constitute “Collateral” under this Agreement, (iii) be on terms (including
subordination terms) reasonably acceptable to Agent, and (iv) be otherwise
permitted under the provisions of Section 7.11;


(h)                                 any
liability or obligation of any Borrower to any other Borrower or to any
Affiliate of any Borrower, and any liability or obligation of any Affiliate of
any Borrower to any Borrower or to any other Affiliate of any Borrower, to
reimburse or share the costs of any services or third party expenses in
accordance with the terms of the Intercompany Services Agreement or any similar
intercompany cost-sharing agreement or arrangement, provided  that
no Default or Event of Default then exists or would arise therefrom;  


(i)                                     Indebtedness
incurred pursuant to the Revolving Credit Agreement; and


(j)                                     Indebtedness
incurred in connection with the Alabama Sale-Leaseback Transaction.


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


7.3                               Restrictions
on Fundamental Changes.  Without
Required Lenders’ prior written consent, enter into any merger, consolidation,
reorganization, or recapitalization, or reclassify its capital stock, or
liquidate, wind up, or dissolve itself (or suffer any liquidation or
dissolution), provided  that Borrowers shall be permitted to
liquidate or dissolve Twin Brook at any time upon prior written notice to
Agent, provided  further that before, or within three (3) Business
Days after, the liquidation or dissolution of Twin Brook, Twin Brook shall have
contributed all of its assets to Parent and Parent shall have caused the former
assets of Twin Brook, including, without limitation, the equity interests in Services
Company, to be pledged to Agent for the benefit of the Lender Group.  In the event of any liquidation or
dissolution of Twin Brook in accordance with the preceding sentence, Twin Brook
will automatically cease to be a Guarantor hereunder.



 28
 









7.4                               Disposal
of Assets.  Convey, sell, lease, assign,
transfer, or otherwise dispose of, in one transaction or a series of
transactions, all or any substantial portion of Borrowers’ properties or assets
other than (a) sales of Inventory to buyers in the ordinary course of Borrowers’
business as currently conducted, (b) sales of Equipment having a fair
market value, in the aggregate, of up to $500,000 in any Fiscal Year, (c)
distributions or transfers of some or all of the assets of Twin Brook to
Parent, provided  that before, or within three (3) Business Days
after, any such distribution or transfer, Parent shall have caused the assets
so distributed to be pledged to Agent for the benefit of the Lender Group, and
(d) as long as no Default or Event of Default then exists or would arise
therefrom, (x) the Alabama Sale-Leaseback Transaction, provided  that
such sale is made for fair market value and the Agent shall have received from
the purchaser of the Real Property subject to the Alabama Sale-Leaseback
Transaction a Collateral Access Agreement substantially in the form attached to
the Revolving Credit Agreement as Exhibit G-1, subject to such changes
requested by the purchaser of the Real Property subject to the Alabama
Sale-Leaseback Transaction as shall be reasonably acceptable to the Agent, and
(y) the Alabama Capital Lease, provided  that the Agent shall have
received from the lessor under the Alabama Capital Lease a Collateral Access
Agreement substantially in the form attached to the Revolving Credit Agreement
as Exhibit H-1, subject to such changes requested by the lessor under
the Alabama Capital Lease as shall be reasonably acceptable to the Agent.


7.5                               Change
Name.  Change any Borrower’s
name, FEIN, corporate structure (within the meaning of Section 9-402(7)
of the Code), state or organization or identity, or add any new fictitious
name.


7.6                               Guarantee.  Guarantee or otherwise become in any
way liable with respect to the obligations of any third Person except (i) by
endorsement of instruments or items of payment for deposit to the account of
Borrowers or which are transmitted or turned over to Agent; (ii) guarantee and
indemnification obligations to the Walt Disney Companies in accordance with the
Acquisition Agreement and the TCP Guaranty and Commitment (as defined in the
Acquisition Agreement); and (iii) indemnification obligations to the Walt
Disney Companies pursuant to the Disney License Agreement (as to which, the
Borrowers are subject to the restrictions set forth in Section 7.16, below).


7.7                               Nature
of Business.  Make any change in
the principal nature of Borrower’s business, other than in connection with the
consummation of the Disney Stores Transaction.


7.8                               Prepayments
and Amendments.


(a)                                  Except
in connection with a refinancing permitted by Section 7.1(d), prepay,
redeem, retire, defease, purchase, or otherwise acquire any Indebtedness owing
to any third Person, other than the Obligations in accordance with this
Agreement, and


(b)                                 Directly
or indirectly, amend, modify, alter, increase, or change any of the terms or
conditions of any agreement, instrument, document, indenture, or other writing
evidencing or concerning Indebtedness permitted under Sections 7.1(b),
(c), or (d).



 29
 









7.9                               Change
of Control.  Except for transfers
of shares by Parent’s existing shareholders to members of their immediate
family, cause, permit, or suffer, directly or indirectly, any Change of
Control.


7.10                        Accounting
Methods.  Modify or change
its method of accounting or enter into, modify, or terminate any agreement
currently existing, or at any time hereafter entered into with any third party
accounting firm or service bureau for the preparation or storage of Borrowers’
accounting records without said accounting firm or service bureau agreeing to
provide Agent information regarding the Collateral or Borrowers’ financial
condition.  Each Borrower waives the
right to assert a confidential relationship, if any, it may have with any
accounting firm or service bureau in connection with any information requested
by Agent pursuant to or in accordance with this Agreement, and agrees that
Agent may contact directly any such accounting firm or service bureau in order
to obtain such information.


7.11                        Advances,
Investments and Loans.  Make any
investment except:


(a)                                  investments
in cash and cash equivalents and equity investments in Subsidiaries in an
amount not to exceed $1,000,000 in the aggregate in any Fiscal Year, (including
not more than $750,000 to Twin Brook in any Fiscal Year);


(b)                                 so
long as no Event of Default shall have occurred and be continuing, or would
occur as a consequence thereof, Parent and its Subsidiaries may (i) make
loans and advances to employees for moving and travel expenses and other
similar expenses, in each case incurred in the ordinary course of business, and
(ii) make other loans and advances to directors, officers, employees and
vendors, (A) so long as, as of the end of each of the three months preceding
such loan or advance and on such date after taking into account the particular
loan or advance and (B) such loans and advances in the aggregate shall not
exceed, $6,000,000 outstanding at any one time;


(c)                                  investments
in existence on the date hereof and so long as no Event of Default shall have
occurred and be continuing, or would occur as a consequence thereof,
extensions, renewals, modifications, restatements or replacements thereof so
long as the aggregate dollar amount of all such extensions, renewals,
modifications, restatements, or replacements does not exceed the amount of such
investments in existence on the date hereof; 


(d)                                 so
long as no Event of Default shall have occurred and be continuing, or would
occur as a consequence thereof, Parent may make loans and advances to its
Subsidiaries in the aggregate amount of $5,000,000 outstanding at any one time;


(e)                                  so
long as no Event of Default shall have occurred and be continuing, or would
occur as a consequence thereof, Parent may make investments in Hoop Holdings,
LLC, Hoop Retail Stores, LLC and/or Hoop Canada, Inc. (i) solely for the
purpose of payment or financing of Capital Expenditures and/or reimbursement
for Capital Expenditures made by Hoop Holdings, LLC, Hoop Retail Stores, LLC
and/or Hoop Canada, Inc. in the then current Fiscal Year, which are required to
be made pursuant to the Disney License Agreement, and (ii) other investments or
capital contributions which are required to be made pursuant to the TCP
Guaranty



 30
 









and Commitment (as each of
those terms is defined in the Acquisition Agreement); provided  that
the aggregate amount of the investments made pursuant to clause (i) of this Section
7.11(e) in any Fiscal Year shall not exceed the amount set forth for such
Fiscal Year in the second table in Section 7.19(b) of the Revolving
Credit Agreement; provided  further that in no event shall the
aggregate amount of the investments made pursuant to clauses (i) and (ii) of
this Section 7.11(e) exceed $175,000,000.00 in the aggregate during the
term of the Revolving Credit Agreement or any extensions or renewals thereof; provided
further that the Borrowers shall provide the Agent with such
documentation as the Agent shall reasonably request from time to time to
evidence any Capital Expenditures being financed and/or reimbursed by means of
the investments made pursuant to clause (i) of this Section 7.11(e); provided
further that investments in Hoop Canada, Inc. made pursuant to this Section
7.11(e) shall not exceed $12,500,000 in the aggregate during the term of
this Agreement or any extensions or renewals thereof;


(f)                                    intercompany
loans and advances or other intercompany Indebtedness (i) existing on the date
hereof and described on Schedule 7.11(f) hereof, (ii) hereafter made by
any Borrower to any other Borrower or Guarantor, or (iii) hereafter made by any
Guarantor to any Borrower or any other Guarantor, provided  that
such intercompany loans, advances or other intercompany Indebtedness shall (x)
be evidenced by such documentation as Agent may reasonably require, (y)
constitute “Collateral” under this Agreement, and (z) be on terms (including
subordination terms) reasonably acceptable to Agent; and


(g)                                 intercompany
loans and advances or other intercompany Indebtedness permitted by Section
7.1(h).


7.12                        Transactions
with Affiliates.   Directly or
indirectly enter into or permit to exist any material transaction with any
Affiliate of any Borrower except for: 
(a) transactions that are in the ordinary course of such Borrower’s
business, upon fair and reasonable terms, that are fully disclosed to Agent,
and that are no less favorable to such Borrower than would be obtained in arm’s
length transaction with a non-Affiliate; (b) the employment agreement between
Parent and Ezra Dabah; (c) transactions in connection with the Disney Stores
Transaction, as otherwise contemplated by, and specified in this Agreement; (d)
payment of insurance premiums to Twin Brook in an amount not to exceed $750,000
in any Fiscal Year; (e) transactions between Parent and Services Company in the
ordinary course of business; and (f) (i) any intercompany Indebtedness
permitted by Section 7.1(g), (ii) any intercompany loans and advances or
other intercompany Indebtedness permitted by Sections 7.11(f) or 7.11(g),
and (iii) any investments permitted by Section 7.11(e).


7.13                        Suspension.  Suspend or go out of a
substantial portion of their business.



 31
 









7.14                        Change
in Location of Chief Executive Office; Inventory and Equipment with Bailees.  Relocate its chief executive office to a new
location without providing 30 days prior written notification thereof to Agent
and so long as, at the time of such written notification, Borrowers provide any
financing statements or fixture filings necessary to perfect and continue
perfected the Agent’s Lien (for the benefit of the Lender Group) and also
provides to Agent a Collateral Access Agreement with respect to such new
location.  The Inventory and Equipment
shall not at any time now or hereafter be stored with a bailee, warehouseman,
or similar party without Agent’s prior written consent.


8.                                      EVENTS
OF DEFAULT.  Any one or more of the
following events shall constitute an event of default (each, an “Event of
Default”) under this Agreement:


(a)                                  If
any Borrower fails to pay when due and payable or when declared due and
payable, any portion of the Obligations (whether of L/C Disbursements,
principal, interest, Letter of Credit Fees (including any interest or Letter of
Credit Fees which, but for the provisions of the Bankruptcy Code, would have
accrued on such amounts), fees and charges due the Lender Group, reimbursement
of Lender Group Expenses, or other amounts constituting Obligations);


(b)                                 If
any Borrower fails or neglects to perform, keep, or observe any term,
provision, condition, covenant, or agreement contained in this Agreement, in
any of the Loan Documents, or in any other present or future agreement among
Borrowers and the Lender Group; provided, however, that Borrowers’ failure or
neglect to comply with Article 6 hereof shall not constitute an Event of
Default hereunder unless such failure or neglect continues for five days or
more.


(c)                                  If
there is a material impairment of the prospect of repayment of any portion of
the Obligations owing to the Lender Group or a material impairment of the value
or priority of the Lender Group’s security interests in the Collateral;


(d)                                 If
any material portion of Borrowers’ properties or assets is attached, seized,
subjected to a writ or distress warrant, or is levied upon, or comes into the
possession of any third Person;


(e)                                  If
an Insolvency Proceeding is commenced by any Borrower;


(f)                                    If
an Insolvency Proceeding is commenced against any Borrower and any of the
following events occur: (a) such Borrower consents to the institution of
the Insolvency Proceeding against it; (b) the petition commencing the
Insolvency Proceeding is not timely controverted; (c) the petition commencing
the Insolvency Proceeding is not dismissed within 45 calendar days of the date
of the filing thereof; provided, however, that, during the
pendency of such period, the Lender Group shall be relieved of its obligation
to extend credit hereunder; (d) an interim trustee is appointed to take
possession of all or a substantial portion of the properties or assets of, or
to operate all or any substantial portion of the business of, such Borrower; or
(e) an order for relief shall have been issued or entered therein;


(g)                                 If
any Borrower is enjoined, restrained, or in any way prevented by court order
from continuing to conduct all or any material part of its business affairs;



 32
 









(h)                                 If
a notice of Lien, levy, or assessment is filed of record with respect to any of
any Borrower’s properties or assets by the United States Government, or any
department, agency, or instrumentality thereof, or by any state, county,
municipal, or governmental agency, or if any taxes or debts owing at any time
hereafter to any one or more of such entities becomes a Lien, whether choate or
otherwise, upon any of any Borrower’s properties or assets and the same is not
paid on the payment date thereof;


(i)                                     If
(a) an action or proceeding is brought against any Borrower which is reasonably
likely to be decided adversely to such Borrower, and such adverse decision
would materially impair the prospect of repayment of the Obligations or
materially impair the value or priority of the Lender Group’s security
interests in the Collateral, or (b) if a judgment or other claim in excess of
$500,000 becomes a lien or encumbrance upon any material portion of any
Borrower’s properties or assets and shall remain outstanding 30 days or longer;


(j)                                     If
there is a default in an agreement involving Indebtedness of $500,000, or more,
or any material agreement to which any Borrower is a party with one or more
third Persons resulting in a right by such third Persons, irrespective of
whether exercised, to accelerate the maturity of such Borrower’s obligations
thereunder;


(k)                                  If
any Borrower makes any payment on account of Indebtedness that has been
contractually subordinated in right of payment to the payment of the
Obligations, except to the extent such payment is permitted by the terms of the
subordination provisions applicable to such Indebtedness;


(l)                                     If
any material misstatement or misrepresentation exists now or hereafter in any
warranty, representation, statement, or report made to the Lender Group by any
Borrower or any officer, employee, agent, or director of any Borrower, or if
any such warranty or representation is withdrawn;


(m)                               If
the obligation of any guarantor under its guaranty or other third Person under
any Loan Document is limited or terminated by operation of law or by the
guarantor or other third Person thereunder, or any such guarantor or other
third Person becomes the subject of an Insolvency Proceeding; or


(n)                                 If
any “Event of Default” occurs under the Revolving Credit Agreement, (other than
any such “Event of Default” that has been waived in writing by the Revolving
Credit Agent and the “Required Lenders” under the Revolving Credit Agreement).


9.                                      THE
LENDER GROUP’S RIGHTS AND REMEDIES.


9.1                               Rights
and Remedies.  


Upon the occurrence, and during the continuation, of
an Event of Default Agent may, or, at the request of the Required Lenders shall,
pursuant to Sections 17.4 and 17.5, without notice of its
election and without demand, do any one or more of the following, all of which
are authorized by Borrowers:



 33
 









(a)                                  Declare
all Obligations, whether evidenced by this Agreement, by any of the other Loan
Documents, or otherwise, immediately due and payable;


(b)                                 Settle
or adjust disputes and claims directly with Account Debtors for amounts and
upon terms which Agent considers advisable, and in such cases, Agent will
credit Borrowers’ Loan Account with only the net amounts received by Agent in
payment of such disputed Accounts after deducting all Lender Group Expenses
incurred or expended in connection therewith;


(c)                                  Cause
Borrowers to hold all returned Inventory in trust for the Lender Group, segregate
all returned Inventory from all other property of Borrowers or in Borrowers’
possession and conspicuously label said returned Inventory as the property of
the Lender Group;


(d)                                 Without
notice to or demand upon Borrowers or any guarantor, make such payments and do
such acts as Agent considers necessary or reasonable to protect its security
interests in the Collateral.  Each
Borrower agrees to assemble the Collateral if Agent so requires, and to make
the Collateral available to Agent as Agent may designate.  Each Borrower authorizes Agent to enter the
premises where the Collateral is located, to take and maintain possession of
the Collateral, or any part of it, and to pay, purchase, contest, or compromise
any encumbrance, charge, or Lien that in Agent’s determination appears to
conflict with the Liens of Agent (for the benefit of the Lender Group) in the
Collateral and to pay all expenses incurred in connection therewith.  With respect to any of Borrowers’ owned or
leased premises, Borrowers hereby grant Agent a license to enter into
possession of such premises and to occupy the same, without charge, for up to
120 days in order to exercise any of the Lender Group’s rights or remedies
provided herein, at law, in equity, or otherwise;


(e)                                  Without
notice to Borrowers (such notice being expressly waived), and without
constituting a retention of any collateral in satisfaction of an obligation
(within the meaning of Section 9-505 of the Code), set off and apply to the
Obligations any and all (i) balances and deposits of Borrowers held by the
Lender Group, or (ii) indebtedness at any time owing to or for the credit or
the account of Borrowers held by the Lender Group;


(f)                                    Hold,
as cash collateral, any and all balances and deposits of Borrowers held by the
Lender Group to secure the full and final repayment of all of the Obligations;


(g)                                 Ship,
reclaim, recover, store, finish, maintain, repair, prepare for sale, advertise
for sale, and sell (in the manner provided for herein) the Collateral.  Agent is hereby granted a license or other
right to use, without charge, Borrowers’ labels, patents, copyrights, rights of
use of any name, trade secrets, trade names, trademarks, service marks, and
advertising matter, or any property of a similar nature, as it pertains to the
Collateral, in completing production of, advertising for sale, and selling any
Collateral and Borrowers’ rights under all licenses and all franchise
agreements shall inure to the Lender Group’s benefit;


(h)                                 Sell
the Collateral at either a public or private sale, or both, by way of one or
more contracts or transactions, for cash or on terms, in such manner and at
such places



 34
 









(including Borrowers’ premises)
as Agent determines is commercially reasonable. 
It is not necessary that the Collateral be present at any such sale;


(i)                                     Agent
shall give notice of the disposition of the Collateral as follows:


(A)                              Agent
shall give Administrative Borrower and each holder of a security interest in
the Collateral who has filed with Agent a written request for notice, a notice
in writing of the time and place of public sale, or, if the sale is a private
sale or some other disposition other than a public sale is to be made of the
Collateral, then the time on or after which the private sale or other
disposition is to be made;


(B)                                The
notice shall be personally delivered or mailed, postage prepaid, to
Administrative Borrower as provided in Section 12, at least 10 days
before the date fixed for the sale, or at least 10 days before the date on or
after which the private sale or other disposition is to be made; no notice
needs to be given prior to the disposition of any portion of the Collateral
that is perishable or threatens to decline speedily in value or that is of a
type customarily sold on a recognized market. 
Notice to Persons other than Borrowers claiming an interest in the
Collateral shall be sent to such addresses as they have furnished to Agent;


(C)                                If
the sale is to be a public sale, Agent also shall give notice of the time and
place by publishing a notice one time at least 10 days before the date of the
sale in a newspaper of general circulation in the county in which the sale is
to be held;


(j)                                     Agent
may credit bid and purchase at any public sale; 


(k)                                  Any
deficiency that exists after disposition of the Collateral as provided above
will be paid immediately by Borrowers. 
Any excess will be returned, without interest and subject to the rights
of third Persons, by Agent to Borrowers;


(l)                                     In
accordance with Section 2.1(c) of the Revolving Credit Agreement, to the extent
the Borrowers have not provided cash collateral, releases, back-to-back letters
of credit and/or other security reasonably acceptable to the Agent as
contemplated by the first sentence of Section 2.6 hereof, Agent may
provide notice to the Revolving Credit Agent of the occurrence of an Event of
Default and instruct the Revolving Credit Agent to implement reserves under the
Revolving Credit Agreement in an amount up to the Letter of Credit Outstandings
hereunder.


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



 35
 









10.                               TAXES
AND EXPENSES.  If Borrowers fail to
pay any monies (whether taxes, assessments, insurance premiums, or, in the case
of leased properties or assets, rents or other amounts payable under such
leases) due to third Persons, or fails to make any deposits or furnish any
required proof of payment or deposit, all as required under the terms of this
Agreement, then, to the extent that Agent determines that such failure by
Borrowers could result in a Material Adverse Change, in its discretion and
without prior notice to Borrowers, Agent may do any or all of the
following:  (a) make payment of the
same or any part thereof; or (b) obtain and maintain insurance policies, and
take any action with respect to such policies as Agent deems prudent.  Any such amounts paid by Agent shall
constitute Lender Group Expenses.  Any
such payments made by Agent shall not constitute an agreement by the Lender
Group to make similar payments in the future or a waiver by the Lender Group of
any Event of Default under this Agreement. 
Agent need not inquire as to, or contest the validity of, any such
expense, tax, or Lien and the receipt of the usual official notice for the
payment thereof shall be conclusive evidence that the same was validly due and
owing.


11.                               WAIVERS;
INDEMNIFICATION.


11.1                        Demand;
Protest; etc.  Each Borrower
waives demand, protest, notice of protest, notice of default or dishonor,
notice of payment and nonpayment, nonpayment at maturity, release, compromise,
settlement, extension, or renewal of accounts, documents, instruments, chattel
paper, and guarantees at any time held by the Lender Group on which such
Borrower may in any way be liable.


11.2                        The
Lender Group’s Liability for Collateral.  So long as the Lender Group complies with its
obligations, if any, under Section 9-207 of the Code, the Lender Group shall
not in any way or manner be liable or responsible for:  (a) the safekeeping of the Collateral; (b)
any loss or damage thereto occurring or arising in any manner or fashion from
any cause; (c) any diminution in the value thereof; or (d) any act or default
of any carrier, warehouseman, bailee, forwarding agency, or other Person.  All risk of loss, damage, or destruction of
the Collateral shall be borne by Borrowers.



 36
 









11.3                        Indemnification.  Each Borrower shall pay, indemnify, defend,
and hold each Agent-Related Person, each Lender, each Participant, and each of
their respective officers, directors, employees, counsel, agents, and
attorneys-in-fact (each, an “Indemnified Person”) harmless (to the fullest
extent permitted by law) from and against any and all claims, demands, suits,
actions, investigations, proceedings, and damages, and all reasonable attorneys
fees and disbursements and other costs and expenses actually incurred in
connection therewith (as and when they are incurred and irrespective of whether
suit is brought), at any time asserted against, imposed upon, or incurred by
any of them in connection with or as a result of or related to the execution,
delivery, enforcement, performance, and administration of this Agreement and
any other Loan Documents or the transactions contemplated herein, and with
respect to any investigation, litigation, or proceeding related to this
Agreement, any other Loan Document, or the use of the proceeds of the credit
provided hereunder (irrespective of whether any Indemnified Person is a party
thereto), or any act, omission, event or circumstance in any manner related
thereto (all the foregoing, collectively, the “Indemnified Liabilities”).  Each Borrower shall have no obligation to any
Indemnified Person under this Section 11.3 with respect to any
Indemnified Liability that a court of competent jurisdiction finally determines
to have resulted from the gross negligence or willful misconduct of such
Indemnified Person.  This provision shall
survive the termination of this Agreement and the repayment of the Obligations.


12.                               NOTICES.  Unless otherwise provided in this Agreement,
all notices or demands by any party relating to this Agreement or any other
Loan Document shall be in writing and (except for financial statements and
other informational documents which may be sent by first-class mail, postage
prepaid) shall be personally delivered or sent by registered or certified mail
(postage prepaid, return receipt requested), overnight courier, or
telefacsimile to Administrative Borrower or to Agent, as the case may be, at
its address set forth below:


	
  If to Administrative Borrower:

  	
   

  	
  THE
  CHILDREN’S PLACE RETAIL STORES, INC.

  915 Secaucus Road

  Secaucus, New Jersey 07094

  Attn:    Chief Financial Officer

  Fax No. 201.558.2837

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  THE
  CHILDREN’S PLACE RETAIL STORES, INC.

  915 Secaucus Road

  Secaucus, New Jersey 07094

  Attn:    General Counsel

  Fax No. 201.558.2840

  
	
   

  	
   

  	
   

  
	
  with copies to:

  	
   

  	
  STROOCK
  & STROOCK & LAVAN LLP

  180 Maiden Lane

  New York, New York 10038

  Attn:    Jeffrey S. Lowenthal, Esq.

  Fax No. 212.806.6006

  
	
   

  	
   

  	
   

  
	
  If to Agent or the Lender

  Group in case

  	
   

  	
  WELLS
  FARGO RETAIL FINANCE, LLC

  One Boston Place

  



 



 37
 









 


	
  of Agent:

  	
   

  	
  Suite 1800

  Boston, Massachusetts 02108

  Attn:    Michele Ayou

  Fax No. 617.523.4027

  
	
   

  	
   

  	
   

  
	
  with copies to:

  	
   

  	
  RIEMER
  & BRAUNSTEIN LLP

  Three Center Plaza

  Boston, Massachusetts 02108

  Attn:    Kevin J. Simard, Esq.

  Fax No. 617 880 3456

  



 


The parties hereto
may change the address at which they are to receive notices hereunder, by
notice in writing in the foregoing manner given to the other.  All notices or demands sent in accordance
with this Section 12, other than notices by Agent in connection with Sections
9-611 or 9-620 of the Code, shall be deemed received on the earlier of the date
of actual receipt or three days after the deposit thereof in the mail.  Borrowers acknowledge and agree that notices
sent by Agent in connection with Sections 9-611 or 9-620 of the Code shall
be deemed sent when deposited in the mail or personally delivered, or, where
permitted by law, transmitted by telefacsimile or other similar method set
forth above.


13.                               CHOICE
OF LAW AND VENUE; JURY TRIAL WAIVER.  THE
VALIDITY OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS (UNLESS EXPRESSLY
PROVIDED TO THE CONTRARY IN ANOTHER LOAN DOCUMENT), THE CONSTRUCTION,
INTERPRETATION, AND ENFORCEMENT HEREOF AND THEREOF, AND THE RIGHTS OF THE
PARTIES HERETO AND THERETO WITH RESPECT TO ALL MATTERS ARISING HEREUNDER OR
THEREUNDER OR RELATED HERETO OR THERETO SHALL BE DETERMINED UNDER, GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF
MASSACHUSETTS.  THE PARTIES AGREE THAT
ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH THIS AGREEMENT AND THE
OTHER LOAN DOCUMENTS SHALL BE TRIED AND LITIGATED ONLY IN THE STATE AND FEDERAL
COURTS LOCATED IN THE COUNTY OF SUFFOLK, COMMONWEALTH OF MASSACHUSETTS OR, AT
THE SOLE OPTION OF THE LENDER GROUP, IN ANY OTHER COURT IN WHICH THE LENDER
GROUP SHALL INITIATE LEGAL OR EQUITABLE PROCEEDINGS AND WHICH HAS SUBJECT
MATTER JURISDICTION OVER THE MATTER IN CONTROVERSY.  EACH BORROWER AND EACH MEMBER OF THE LENDER
GROUP WAIVES, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, ANY RIGHT EACH MAY
HAVE TO ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT TO VENUE TO
THE EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION 13.  EACH BORROWER AND EACH MEMBER OF THE LENDER
GROUP HEREBY WAIVES ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE
OF ACTION BASED UPON OR ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE



 38
 









TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING
CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW
OR STATUTORY CLAIMS.  EACH BORROWER AND
EACH MEMBER OF THE LENDER GROUP REPRESENTS THAT IT HAS REVIEWED THIS WAIVER AND
EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING
CONSULTATION WITH LEGAL COUNSEL.  IN THE
EVENT OF LITIGATION, A COPY OF THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT
TO A TRIAL BY THE COURT.


14.                               DESTRUCTION
OF BORROWERS’ DOCUMENTS.  All
documents, schedules, invoices, agings, or other papers delivered to Agent may
be destroyed or otherwise disposed of by Agent four months after they are
delivered to or received by Agent, unless Administrative Borrower requests, in
writing, the return of said documents, schedules, or other papers and makes
arrangements, at Borrowers’ expense, for their return.


15.                               ASSIGNMENTS
AND PARTICIPATIONS; SUCCESSORS.


15.1                        Assignments
and Participations.


(a)                                  Any
Lender may, with the written consent of Agent (and, if no Event of Default then
exists and is continuing, the Administrative Borrower (each such consent shall
not be unreasonably withheld or delayed)) assign and delegate to one or more
Eligible Transferees (each an “Assignee”) all, or any ratable part, of the
Obligations, the Commitments, and the other rights and obligations of such
Lender hereunder and under the other Loan Documents, in a minimum amount of
$5,000,000; provided, however, that Borrowers and Agent may
continue to deal solely and directly with such Lender in connection with the
interest so assigned to an Assignee until (i) written notice of such
assignment, together with payment instructions, addresses, and related
information with respect to the Assignee, shall have been given to
Administrative Borrower and Agent by such Lender and the Assignee;
(ii) such Lender and its Assignee shall have delivered to Administrative
Borrower and Agent a fully executed Assignment and Acceptance (“Assignment and
Acceptance”) in the form of Exhibit A-1; and (iii) the assignor Lender or
Assignee has paid to Agent for Agent’s sole and separate account a processing
fee in the amount of $5,000.  Anything
contained herein to the contrary notwithstanding, the consent of Agent and
Administrative Borrower shall not be required (and payment of any fees shall
not be required) if (i) such assignment is in connection with any merger,
consolidation, sale, transfer, or other disposition of all or any substantial
portion of the business or loan portfolio of the assigning Lender, or (ii) such
assignment is to an Affiliate of the assigning Lender.


(b)                                 From
and after the date that Agent notifies the assignor Lender that it has received
a fully executed Assignment and Acceptance and payment of the above-referenced
processing fee, (i) the Assignee thereunder shall be a party hereto and,
to the extent that rights and obligations hereunder have been assigned to it
pursuant to such Assignment and Acceptance, shall have the rights and
obligations of a Lender under the Loan Documents, and (ii) the assignor
Lender shall, to the extent that rights and obligations hereunder and under the
other Loan Documents have been assigned by it pursuant to such Assignment and
Acceptance, relinquish its



 39
 









rights and be released from its
obligations under this Agreement (and in the case of an Assignment and
Acceptance covering all or the remaining portion of an assigning Lender’s
rights and obligations under this Agreement and the other Loan Documents, such
Lender shall cease to be a party hereto and thereto), and such assignment shall
effect a novation between Borrowers and the Assignee.


(c)                                  By
executing and delivering an Assignment and Acceptance, the assigning Lender
thereunder and the Assignee thereunder confirm to and agree with each other and
the other parties hereto as follows: 
(1) other than as provided in such Assignment and Acceptance, such
assigning Lender makes no representation or warranty and assumes no responsibility
with respect to any statements, warranties, or representations made in or in
connection with this Agreement or the execution, legality, validity,
enforceability, genuineness, sufficiency, or value of this Agreement or any
other Loan Document furnished pursuant hereto; (2) such assigning Lender makes
no representation or warranty and assumes no responsibility with respect to the
financial condition of Borrowers or any guarantor or the performance or
observance by Borrowers or any guarantor of any of its obligations under this
Agreement or any other Loan Document furnished pursuant hereto; (3) such
Assignee confirms that it has received a copy of this Agreement, together with
such other documents and information as it has deemed appropriate to make its own
credit analysis and decision to enter into such Assignment and Acceptance; (4)
such Assignee will, independently and without reliance upon Agent, such
assigning Lender, or any other Lender, and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under this Agreement; (5) such
Assignee appoints and authorizes Agent to take such action as agent on its
behalf and to exercise such powers under this Agreement as are delegated to
Agent by the terms hereof, together with such powers as are reasonably
incidental thereto; and (6) such Assignee agrees that it will perform in
accordance with their terms all of the obligations which by the terms of this
Agreement are required to be performed by it as a Lender.


(d)                                 Immediately
upon each Assignee’s making its processing fee payment under the Assignment and
Acceptance, this Agreement shall be deemed to be amended to the extent, but
only to the extent, necessary to reflect the addition of the Assignee and the
resulting adjustment of the Commitments of the Assignor and Assignee arising
therefrom.  The Commitment allocated to
each Assignee shall reduce such Commitment of the assigning Lender pro tanto.


(e)                                  Any
Lender may at any time, with the written consent of Agent, which consent shall
not be unreasonably withheld, (and, if no Event of Default then exists and is
continuing, the Administrative Borrower (whose consent shall not be
unreasonably withheld)) sell to one or more Persons (a “Participant”)
participating interests in the Obligations, the Commitment, and the other
rights and interests of that Lender (the “Originating Lender”) hereunder and
under the other Loan Documents; provided, however, that (i) the
Originating Lender’s obligations under this Agreement shall remain unchanged,
(ii) the Originating Lender shall remain solely responsible for the performance
of such obligations, (iii) Borrowers and Agent shall continue to deal
solely and directly with the Originating Lender in connection with the
Originating Lender’s rights and obligations under this Agreement and the other
Loan Documents, (iv) no Originating Lender shall transfer or grant any
participating interest under



 40
 









which the Participant has the
sole and exclusive right to approve any amendment to, or any consent or waiver
with respect to, this Agreement or any other Loan Document, except to the
extent such amendment to, or consent or waiver with respect to this Agreement
or of any other Loan Document would (A) extend the final maturity date of the
Obligations hereunder in which such Participant is participating; (B) reduce
the interest rate applicable to the Obligations hereunder in which such
Participant is participating; (C) release all or a material portion of the
Collateral (except to the extent expressly provided herein or in any of the
Loan Documents) supporting the Obligations hereunder in which such Participant
is participating; (D) postpone the payment of, or reduce the amount of, the
interest or fees hereunder in which such Participant is participating; or (E)
change the amount or due dates of scheduled principal repayments or prepayments
or premiums in respect of the Obligations hereunder in which such Participant
is participating; and (v) all amounts payable by Borrowers hereunder shall be
determined as if such Originating Lender had not sold such participation;
except that, if amounts outstanding under this Agreement are due and unpaid, or
shall have been declared or shall have become due and payable upon the
occurrence of an Event of Default, each Participant shall be deemed to have the
right of set-off in respect of its participating interest in amounts owing
under this Agreement to the same extent as if the amount of its participating
interest were owing directly to it as a Lender under this Agreement; provided,
however, that no Participant may exercise any such right of setoff
without the notice to and consent of Agent. 
The rights of any Participant shall only be derivative through the
Originating Lender with whom such Participant participates and no Participant
shall have any direct rights as to the other Lenders, Agent, Borrowers, the
Collections, the Collateral, or otherwise in respect of the Letters of
Credit.  No Participant shall have the
right to participate directly in the making of decisions by the Lenders among
themselves.  The provisions of this Section 15.1(e)
are solely for the benefit of the Lender Group, and Borrowers shall have no
rights as a third party beneficiary of any of such provisions.


(f)                                    In
connection with any such assignment or participation or proposed assignment or
participation, a Lender may disclose to a third party all documents and
information which it now or hereafter may have relating to Borrowers or
Borrowers’ business.


(g)                                 Notwithstanding
any other provision in this Agreement, (i) any Lender may at any time create a
security interest in, or pledge, all or any portion of its rights under and
interest in this Agreement in favor of any Federal Reserve Bank in accordance
with Regulation A of the FRB or U.S. Treasury Regulation 31 CFR §203.14, and
such Federal Reserve Bank may enforce such pledge or security interest in any
manner permitted under applicable law and the Administrative Borrower shall
have no right to consent thereto, and (ii) the Agent shall not be entitled to
consent to any assignment or participation arising as a result of the acquisition
of a Lender or all or any portion of its loan portfolio by any other Person.



 41















15.2        Successors.  This Agreement shall bind and inure to the
benefit of the respective successors and assigns of each of the parties; provided,
however, that Borrowers may not assign this Agreement or any rights or
duties hereunder without the Lenders’ prior written consent and any prohibited
assignment shall be absolutely void. No consent to assignment by the Lenders
shall release Borrowers from their Obligations. A Lender may assign this
Agreement and its rights and duties hereunder pursuant to Section 15.1
and, except as expressly required pursuant to Section 15.1, no
consent or approval by Borrowers is required in connection with any such
assignment.


16.          AMENDMENTS; WAIVERS.


16.1        Amendments and Waivers.


No amendment or
waiver of any provision of this Agreement or any other Loan Document, and no
consent with respect to any departure by Borrowers therefrom, shall be
effective unless the same shall be in writing and signed by the Required
Lenders (or by Agent at the written request of the Required Lenders) and
Borrowers and then any such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given; provided,
however, that no such waiver, amendment, or consent shall, unless in writing
and signed by all the Lenders and Borrowers and acknowledged by Agent, do any
of the following:


(a)           increase or extend the Commitment of any
Lender;


(b)           increase the aggregate Commitments;


(c)           postpone or delay any date fixed by this
Agreement or any other Loan Document for any payment of L/C Disbursement,
principal, Letter of Credit Fees, interest, fees, or other amounts due to the
Lenders (or any of them) hereunder or under any other Loan Document;


(d)           reduce the principal of, or the rate of
interest specified herein on, any L/C Disbursement, or any Letter of Credit
Fees or other fees or other amounts payable hereunder or under any other Loan
Document;


(e)           change the percentage of the Commitments,
which is required for the Lenders or any of them to take any action hereunder;


(f)            Amend Section 3.3;


(g)           amend this Section or any provision of the
Agreement providing for consent or other action by all Lenders;


(h)           release Collateral other than as permitted
by Section 17.11;


(i)            change the definition of “Required Lenders”;


(j)            release any Borrower from any Obligation
for the payment of money; or



 42
 









(k)           amend any of the provisions of Article 17;


and, provided
further, that no amendment, waiver or consent shall, unless in writing
and signed by Agent, affect the rights or duties of Agent under this Agreement
or any other Loan Document. The foregoing notwithstanding, any amendment,
modification, waiver, consent, termination, or release of or with respect to
any provision of this Agreement or any other Loan Document that relates only to
the relationship of the Lender Group among themselves, and that does not affect
the rights or obligations of Borrowers, shall not require consent by or the
agreement of Borrowers.


If any Lender does not Consent (a “Non-Consenting
Lender”) to a proposed amendment, waiver, consent or release with respect
to any Loan Document that requires the consent of such Lender or the Required
Lenders, Administrative Borrower may replace such Non-Consenting Lender in
accordance with Section 16.2; provided  that such
amendment, waiver, consent or release can be effected as a result of the
assignment contemplated by Section 16.2 (together with all other such
assignments required by Administrative Borrower to be made pursuant to this
paragraph).


16.2        Replacement of
Non-Consenting Lenders.  If any
Lender is a Non-Consenting Lender, then the Borrowers may, at their sole
expense and effort, upon notice to such Lender and Agent, require such Lender
to assign and delegate, without recourse (in accordance with and subject to the
restrictions contained in, and consents required by, Section 15.1), all
of its interests, rights and obligations under this Agreement and the related
Loan Documents to an Eligible Transferee selected by Borrowers (with the
consent of Agent, such consent not to be unreasonably withheld or delayed) that
shall assume such obligations (which Eligible Transferee may be another Lender,
if a Lender accepts such assignment), provided  that:


(a)           the Borrowers shall have paid to Agent the
assignment fee specified in Section 15.1(a);


(b)           such Lender shall have received payment of
an amount equal to such Lender’s Pro-Rata Share of the outstanding principal of
all Obligations, accrued interest thereon, accrued fees and all other amounts
payable to it hereunder and under the other Loan Documents from the assignee
(to the extent of such outstanding principal and accrued interest and fees) or
the Borrowers (in the case of all other amounts); and


(c)           such assignment does not conflict with
applicable laws.


A Lender shall not be required to make any such
assignment or delegation if, prior thereto, as a result of a waiver by such
Lender or otherwise, the circumstances entitling the Borrowers to require such
assignment and delegation cease to apply.


16.3        No Waivers; Cumulative
Remedies.  No failure by Agent or
any Lender to exercise any right, remedy, or option under this Agreement, any
other Loan Document, or any present or future supplement hereto or thereto, or
in any other agreement between or among Borrowers and Agent and/or any Lender, or
delay by Agent or any Lender in exercising the same, will operate as a waiver
thereof. No waiver by Agent or any Lender will be effective 



 43
 









unless it is in
writing, and then only to the extent specifically stated. No waiver by Agent or
the Lenders on any occasion shall affect or diminish Agent’s and each Lender’s
rights thereafter to require strict performance by Borrowers of any provision
of this Agreement. Agent’s and each Lender’s rights under this Agreement and
the other Loan Documents will be cumulative and not exclusive of any other
right or remedy which Agent or any Lender may have.


17.          AGENT; THE LENDER GROUP.


17.1        Appointment and
Authorization of Agent.


Each Lender hereby
designates and appoints Wells Fargo Retail as its Agent under this Agreement and
the other Loan Documents and each Lender hereby irrevocably authorizes Agent to
take such action on its behalf under the provisions of this Agreement and each
other Loan Document and to exercise such powers and perform such duties as are
expressly delegated to it by the terms of this Agreement or any other Loan
Document, together with such powers as are reasonably incidental thereto. Agent
agrees to act as such on the express conditions contained in this
Article 17. The provisions of this Article 17 are solely for the
benefit of Agent and the Lenders, and Borrowers shall not have any rights as a
third party beneficiary of any of the provisions contained herein; provided,
however, that the provisions of Sections 17.10, 17.11, and 17.17(d)
also shall be for the benefit of Borrowers. Any provision to the contrary
contained elsewhere in this Agreement or in any other Loan Document
notwithstanding, Agent shall not have any duties or responsibilities, except
those expressly set forth herein, nor shall Agent have or be deemed to have any
fiduciary relationship with any Lender, and no implied covenants, functions,
responsibilities, duties, obligations, or liabilities shall be read into this
Agreement or any other Loan Document or otherwise exist against Agent. Except
as expressly otherwise provided in this Agreement, Agent shall have and may use
its sole discretion with respect to exercising or refraining from exercising
any discretionary rights or taking or refraining from taking any actions which
Agent is expressly entitled to take or assert under or pursuant to this
Agreement and the other Loan Documents. Without limiting the generality of the
foregoing, or of any other provision of the Loan Documents that provides rights
or powers to Agent, Lenders agree that Agent shall have the right to exercise
the following powers as long as this Agreement remains in effect:  (a) maintain, in accordance with its
customary business practices, ledgers and records reflecting the status of the
Letters of Credit, L/C Disbursements, the Collateral, the Collections, and
related matters; (b) execute and/or file any and all financing or similar
statements or notices, amendments, renewals, supplements, documents,
instruments, proofs of claim for Lenders, notices and other written agreements
with respect to the Loan Documents; (c) exclusively receive, apply, and
distribute the Collections as provided in the Loan Documents; (d) open and
maintain such bank accounts and lock boxes as Agent deems necessary and
appropriate in accordance with the Loan Documents for the foregoing purposes
with respect to the Collateral and the Collections; (e) perform, exercise, and
enforce any and all other rights and remedies of the Lender Group with respect
to Borrowers, the Collateral, the Collections, or otherwise related to any of
same as provided in the Loan Documents; and (f) incur and pay such Lender Group
Expenses as Agent may deem necessary or appropriate for the performance and
fulfillment of its functions and powers pursuant to the Loan Documents.



 44
 









17.2        Delegation of Duties.  Except as otherwise provided in this
Section, Agent may execute any of its duties under this Agreement or any other
Loan Document by or through agents, employees, or attorneys-in-fact and shall
be entitled to advice of counsel concerning all matters pertaining to such
duties. Agent shall not be responsible for the negligence or misconduct of any
agent or attorney-in-fact that it selects as long as such selection was made in
compliance with this Section and without gross negligence or willful misconduct.
The foregoing notwithstanding, Agent shall not make any material delegation of
duties to subagents or non-employee delegees without the prior written consent
of Required Lenders (it being understood that routine delegation of such administrative
matters as filing financing statements, or conducting appraisals or audits, is
not viewed as a material delegation that requires prior Required Lender
approval).


17.3        Liability of
Agent-Related Persons.  None of
the Agent-Related Persons shall (i) be liable for any action taken or omitted
to be taken by any of them under or in connection with this Agreement or any
other Loan Document or the transactions contemplated hereby (except for its own
gross negligence or willful misconduct), or, (ii) be responsible in any manner
to any of the Lenders for any recital, statement, representation or warranty
made by Borrowers, or any Subsidiary or Affiliate of Borrowers, or any officer
or director thereof, contained in this Agreement or in any other Loan Document,
or in any certificate, report, statement, or other document referred to or
provided for in, or received by Agent under or in connection with, this
Agreement or any other Loan Document, or the validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement or any other Loan
Document, or for any failure of Borrowers or any other party to any Loan
Document to perform its obligations hereunder or thereunder. No Agent-Related
Person shall be under any obligation to any Lender to ascertain or to inquire
as to the observance or performance of any of the agreements contained in, or
conditions of, this Agreement or any other Loan Document, or to inspect the
properties, books, or records of Borrowers, or any of Borrowers’ Subsidiaries
or Affiliates.


17.4        Reliance by Agent.  Agent shall be entitled to rely, and
shall be fully protected in relying, upon any writing, resolution, notice,
consent, certificate, affidavit, letter, telegram, facsimile, telex, or
telephone message, statement or other document or conversation believed by it
to be genuine and correct and to have been signed, sent, or made by the proper
Person or Persons, and upon advice and statements of legal counsel (including
counsel to Borrowers or counsel to any Lender), independent accountants, and
other experts selected by Agent. Agent shall be fully justified in failing or
refusing to take any action under this Agreement or any other Loan Document
unless it shall first receive such advice or concurrence of the Required
Lenders or all Lenders, as applicable, and until such instructions are
received, Agent shall act, or refrain from acting, as it deems advisable so
long as it is not grossly negligent or guilty of willful misconduct. If Agent
so requests, it shall first be indemnified to its reasonable satisfaction by
Lenders against any and all liability and expense which may be incurred by it
by reason of taking or continuing to take any such action. Agent shall in all
cases be fully protected in acting, or in refraining from acting, under this
Agreement or any other Loan Document in accordance with a request or consent of
the Required Lenders or all Lenders, as applicable, and such request and any
action taken or failure to act pursuant thereto shall be binding upon all of
the Lenders.



 45
 









17.5        Notice of Default or
Event of Default.  Agent shall
not be deemed to have knowledge or notice of the occurrence of any Default or
Event of Default, except with respect to defaults in the payment of principal,
interest, fees, and expenses required to be paid to Agent for the account of
Agent or the Lenders, except with respect to actual knowledge of the existence
of an Overadvance, and except with respect to Defaults and Events of Default of
which Agent has actual knowledge, unless Agent shall have received written
notice from a Lender or a Borrower referring to this Agreement, describing such
Default or Event of Default, and stating that such notice is a “notice of
default.”  Agent promptly will notify the
Lenders of its receipt of any such notice or of any Event of Default of which
Agent has, or is deemed to have, actual knowledge. If any Lender obtains actual
knowledge of any Event of Default, such Lender promptly shall notify the other
Lenders and Agent of such Event of Default. Each Lender shall be solely
responsible for giving any notices to its Participants, if any. Subject to Section
17.4, Agent shall take such action with respect to such Default or Event of
Default as may be requested by the Required Lenders; provided, however,
that:


(a)           At all times, Agent may propose and, with
the consent of Required Lenders (which shall not be unreasonably withheld and
which shall be deemed to have been given by a Lender unless such Lender has
notified Agent to the contrary in writing within three days of notification of
such proposed actions by Agent) exercise, any remedies on behalf of the Lender
Group; and


(b)           At all times, once Required Lenders or all
Lenders, as the case may be, have approved the exercise of a particular remedy
or pursuit of a course of action, Agent may, but shall not be obligated to,
make all administrative decisions in connection therewith or take all other
actions reasonably incidental thereto (for example, if the Required Lenders
approve the foreclosure of certain Collateral, Agent shall not be required to
seek consent for the administrative aspects of conducting such sale or handling
of such Collateral).



 46
 









17.6        Credit Decision.  Each Lender acknowledges that none of the
Agent-Related Persons has made any representation or warranty to it, and that
no act by Agent hereinafter taken, including any review of the affairs of
Borrowers and their Subsidiaries or Affiliates, shall be deemed to constitute
any representation or warranty by any Agent-Related Person to any Lender. Each
Lender represents to Agent that it has, independently and without reliance upon
any Agent-Related Person and based on such documents and information as it has
deemed appropriate, made its own appraisal of and investigation into the
business, prospects, operations, property, financial and other condition, and
creditworthiness of Borrowers and any other Person (other than the Lender
Group) party to a Loan Document, and all applicable bank regulatory laws
relating to the transactions contemplated hereby, and made its own decision to
enter into this Agreement and to extend credit to Borrowers. Each Lender also
represents that it will, independently and without reliance upon any
Agent-Related Person and based on such documents and information as it shall
deem appropriate at the time, continue to make its own credit analysis,
appraisals, and decisions in taking or not taking action under this Agreement
and the other Loan Documents, and to make such investigations as it deems
necessary to inform itself as to the business, prospects, operations, property,
financial and other condition, and creditworthiness of Borrowers, and any other
Person (other than the Lender Group) party to a Loan Document. Except for
notices, reports, and other documents expressly herein required to be furnished
to the Lenders by Agent, Agent shall not have any duty or responsibility to
provide any Lender with any credit or other information concerning the
business, prospects, operations, property, financial and other condition, or
creditworthiness of Borrowers, and any other Person party to a Loan Document
that may come into the possession of any of the Agent-Related Persons.


17.7        Costs and Expenses;
Indemnification.  Agent may incur
and pay Lender Group Expenses to the extent Agent deems reasonably necessary or
appropriate for the performance and fulfillment of its functions, powers, and
obligations pursuant to the Loan Documents, including without limiting the
generality of the foregoing, but subject to any requirements of the Loan
Documents that it obtain any applicable consents or engage in any required
consultation, court costs, reasonable attorneys fees and expenses, costs of
collection by outside collection agencies and auctioneer fees and costs of
security guards or insurance premiums paid to maintain the Collateral, whether
or not Borrowers are obligated to reimburse Agent or Lenders for such expenses
pursuant to this Agreement or otherwise. Agent is authorized and directed to
deduct and retain sufficient amounts from Collections to reimburse Agent for
such out-of-pocket costs and expenses prior to the distribution of any amounts
to Lenders. In the event Agent is not reimbursed for such costs and expenses
from Collections, each Lender hereby agrees that it is and shall be obligated
to pay to or reimburse Agent for the amount of such Lender’s Pro Rata Share
thereof. Whether or not the transactions contemplated hereby are consummated,
the Lenders shall indemnify upon demand the Agent-Related Persons (to the
extent not reimbursed by or on behalf of Borrowers and without limiting the
obligations of Borrowers to do so), according to their Pro Rata Shares, from
and against any and all Indemnified Liabilities; provided, however,
that no Lender shall be liable for the payment to the Agent-Related Persons of
any portion of such Indemnified Liabilities resulting solely from such Person’s
gross negligence, bad faith, or willful misconduct. Without limitation of the
foregoing, each Lender shall reimburse Agent upon demand for its ratable share
of any costs or out-of-pocket expenses (including attorney fees and expenses)
incurred by Agent in connection with the preparation, 



 47
 









execution,
delivery, administration, modification, amendment, or enforcement (whether
through negotiations, legal proceedings or otherwise) of, or legal advice in
respect of rights or responsibilities under, this Agreement, any other Loan
Document, or any document contemplated by or referred to herein, to the extent
that Agent is not reimbursed for such expenses by or on behalf of Borrowers. The
undertaking in this Section 17.7 shall survive the payment of all
Obligations hereunder and the resignation or replacement of Agent.


17.8        Agent in Individual
Capacity.  Wells Fargo Retail and
its Affiliates may make loans to, issue letters of credit for the account of,
accept deposits from, acquire equity interests, in and generally engage in any
kind of banking, trust, financial advisory, underwriting, or other business
with Borrowers and its Subsidiaries and Affiliates and any other Person party
to any Loan Documents as though Wells Fargo Retail were not Agent hereunder
without notice to or consent of the Lenders. The Lenders acknowledge that,
pursuant to such activities, Wells Fargo Retail and its Affiliates may receive
information regarding Borrowers or their Affiliates and any other Person party
to any Loan Documents that is subject to confidentiality obligations in favor
of Borrowers or such other Person and that prohibit the disclosure of such
information to the Lenders, and the Lenders acknowledge that, in such
circumstances (and in the absence of a waiver of such confidentiality
obligations, which waiver Agent will use its reasonable best efforts to
obtain), Agent shall be under no obligation to provide such information to
them.


17.9        Successor Agent.  Agent may resign as Agent following notice of
such resignation (“Notice”) to the Lenders and Administrative Borrower, and
effective upon the appointment of and acceptance of such appointment by, a
successor Agent. If Agent resigns under this Agreement, the Required Lenders
shall appoint any Lender or Eligible Transferee as successor Agent for the
Lenders. If no successor Agent is appointed within 30 days of such retiring
Agent’s Notice, Agent may appoint a successor Agent, after consulting with the
Lenders and Administrative Borrower. In any such event, upon the acceptance of
its appointment as successor Agent hereunder, such successor Agent shall
succeed to all the rights, powers and duties of the retiring Agent and the term
“Agent” shall mean such successor Agent and the retiring Agent’s appointment,
powers, and duties as Agent shall be terminated. After any retiring Agent’s
resignation hereunder as Agent, the provisions of this Section 17
shall inure to its benefit as to any actions taken or omitted to be taken by it
while it was Agent under this Agreement.


17.10      Withholding Tax.


(a)           If any Lender is a “foreign corporation,
partnership or trust” within the meaning of the IRC and such Lender claims
exemption from, or a reduction of, U.S. withholding tax under Sections 1441 or
1442 of the IRC, such Lender agrees with and in favor of Agent and Borrowers,
to deliver to Agent and Borrowers:


(i)            if such Lender claims an exemption from, or
a reduction of, withholding tax under a United States tax treaty, properly completed
IRS Forms W-8BEN before the payment of any interest in the first calendar year
and before the payment of any interest in each third succeeding calendar year
during which interest may be paid under this Agreement;



 48
 









(ii)           if such Lender claims that interest paid
under this Agreement is exempt from United States withholding tax because it is
effectively connected with a United States trade or business of such Lender,
two properly completed and executed copies of IRS Form W-8ECI before the
payment of any interest is due in the first taxable year of such Lender and in
each succeeding taxable year of such Lender during which interest may be paid
under this Agreement, and IRS Form W-9; and


(iii)          such other form or forms as may be required
under the IRC or other laws of the United States as a condition to exemption
from, or reduction of, United States withholding tax.


Such Lender agrees
to promptly notify Agent and Borrowers of any change in circumstances which
would modify or render invalid any claimed exemption or reduction.


(b)           If any Lender claims exemption from, or
reduction of, withholding tax under a United States tax treaty by providing IRS
Form W-8BEN and such Lender sells, assigns, grants a participation in, or
otherwise transfers all or part of the Obligations of Borrowers, such Lender
agrees to notify Agent and Borrowers of the percentage amount in which it is no
longer the beneficial owner of Obligations of Borrowers to such Lender. To the
extent of such percentage amount, Agent and Borrowers will treat such Lender’s
IRS Form W-8BEN as no longer valid.


(c)           If any Lender claiming exemption from United
States withholding tax by filing IRS Form W-8ECI with Agent sells, assigns,
grants a participation in, or otherwise transfers all or part of the Obligations
of Borrowers to such Lender, such Lender agrees to undertake sole
responsibility for complying with the withholding tax requirements imposed by
Sections 1441 and 1442 of the IRC.


(d)           If any Lender is entitled to a reduction in
the applicable withholding tax, Agent may withhold from any interest payment to
such Lender an amount equivalent to the applicable withholding tax after taking
into account such reduction. If the forms or other documentation required by
subsection (a) of this Section are not delivered to Agent, then Agent may
withhold from any interest payment to such Lender not providing such forms or
other documentation an amount equivalent to the applicable withholding tax.


(e)           If the IRS or any other Governmental
Authority of the United States or other jurisdiction asserts a claim that Agent
or Borrowers did not properly withhold tax from amounts paid to or for the
account of any Lender (because the appropriate form was not delivered, was not
properly executed, or because such Lender failed to notify Agent and Borrowers
of a change in circumstances which rendered the exemption from, or reduction
of, withholding tax ineffective, or for any other reason) such Lender shall
indemnify Agent and Borrowers fully for all amounts paid, directly or indirectly,
by Agent or Borrowers as tax or otherwise, including penalties and interest,
and including any taxes imposed by any jurisdiction on the amounts payable to
Agent or Borrowers under this Section, together with all costs and expenses
(including attorneys fees and expenses). The obligation of the Lenders under
this subsection shall survive the payment of all Obligations and the
resignation of Agent.



 49
 









17.11      Collateral Matters.


(a)           The Lenders hereby irrevocably authorize
Agent, to release any Lien on any Collateral (i) upon the termination of the
Commitments and payment and satisfaction in full by Borrowers of all
Obligations; and upon such termination and payment Agent shall deliver to
Administrative Borrower, at Administrative Borrower’s sole cost and expense,
all UCC termination statements and any other documents necessary to terminate
the Loan Documents and release the Liens with respect to the Collateral; (ii)
constituting property being sold or disposed of if a release is required or
desirable in connection therewith and if Administrative Borrower certifies to
Agent that the sale or disposition is permitted under Section 7.4 of this
Agreement or the other Loan Documents (and Agent may rely conclusively on any
such certificate, without further inquiry); (iii) constituting property in
which Borrowers owned no interest at the time the Lien was granted or at any
time thereafter; or (iv) constituting property leased to Borrowers under a
lease that has expired or been terminated in a transaction permitted under this
Agreement. Except as provided above, Agent will not release any Lien on any
Collateral without the prior written authorization of the Lenders. Upon request
by Agent or Administrative Borrower at any time, the Lenders will confirm in
writing Agent’s authority to release any such Liens on particular types or
items of Collateral pursuant to this Section 17.11; provided, however,
that (i) Agent shall not be required to execute any document necessary to
evidence such release on terms that, in Agent’s opinion, would expose Agent to
liability or create any obligation or entail any consequence other than the
release of such Lien without recourse, representation, or warranty, and (ii)
such release shall not in any manner discharge, affect or impair the Obligations
or any Liens (other than those expressly being released), upon (or obligations
of Borrowers in respect of) all interests retained by Borrowers, including, the
proceeds of any sale, all of which shall continue to constitute part of the
Collateral.


(b)           Agent shall have no obligation whatsoever to
any of the Lenders to assure that the Collateral exists or is owned by
Borrowers, is cared for, protected, or insured or has been encumbered, or that
the Liens of the Agent (for the benefit of the Lender Group) have been properly
or sufficiently or lawfully created, perfected, protected, or enforced or are
entitled to any particular priority, or to exercise at all or in any particular
manner or under any duty of care, disclosure, or fidelity, or to continue exercising,
any of the rights, authorities and powers granted or available to Agent
pursuant to any of the Loan Documents, it being understood and agreed that in
respect of the Collateral, or any act, omission or event related thereto,
subject to the terms and conditions contained herein, Agent may act in any
manner it may deem appropriate, in its sole discretion given Agent’s own
interest in the Collateral in its capacity as one of the Lenders and that Agent
shall have no other duty or liability whatsoever to any Lender as to any of the
foregoing, except as otherwise provided herein.


17.12      Restrictions on Actions
by Lenders; Sharing of Payments.


(a)           Each of the Lenders agrees that it shall
not, without the express consent of Agent, and that it shall, to the extent it
is lawfully entitled to do so, upon the request of Agent, set off against the
Obligations any amounts owing by such Lender to Borrowers or any accounts of
Borrowers now or hereafter maintained with such Lender. Each of the Lenders
further agrees that it shall not, unless specifically requested to do so by
Agent, take or cause to be taken any 



 50
 









action, including the commencement of any legal or equitable
proceedings, to foreclose any Lien on, or otherwise enforce any security
interest in, any of the Collateral the purpose of which is, or could be, to
give such Lender any preference or priority against the other Lenders with
respect to the Collateral.


(b)           Subject to Section 17.8, if, at any
time or times any Lender shall receive (i) by payment, foreclosure, setoff, or
otherwise, any proceeds of Collateral or any payments with respect to the
Obligations of Borrowers to such Lender arising under, or relating to, this
Agreement or the other Loan Documents, except for any such proceeds or payments
received by such Lender from Agent pursuant to the terms of this Agreement, or
(ii) payments from Agent in excess of such Lender’s Pro Rata Share of all such
distributions by Agent, such Lender shall promptly (1) turn the same over to
Agent, in kind, and with such endorsements as may be required to negotiate the
same to Agent, or in same day funds, as applicable, for the account of all of
the Lenders and for application to the Obligations in accordance with the
applicable provisions of this Agreement, or (2) purchase, without recourse or
warranty, an undivided interest and participation in the Obligations owed to
the other Lenders so that such excess payment received shall be applied ratably
as among the Lenders in accordance with their Pro Rata Shares; provided,
however, that if all or part of such excess payment received by the
purchasing party is thereafter recovered from it, those purchases of
participations shall be rescinded in whole or in part, as applicable, and the
applicable portion of the purchase price paid therefor shall be returned to
such purchasing party, but without interest except to the extent that such
purchasing party is required to pay interest in connection with the recovery of
the excess payment.


17.13      Agency for Perfection.  Agent and each Lender hereby appoints
each other Lender as agent for the purpose of perfecting the Liens of the
Lender Group in assets which, in accordance with Article 9 of the UCC can be
perfected only by possession. Should any Lender obtain possession of any such
Collateral, such Lender shall notify Agent thereof, and, promptly upon Agent’s
request therefor shall deliver such Collateral to Agent or in accordance with
Agent’s instructions.


17.14      Payments by Agent to the
Lenders.  All payments to be made
by Agent to the Lenders shall be made by bank wire transfer or internal
transfer of immediately available funds pursuant to the instructions set forth
on Schedule C-1, or pursuant to such other wire transfer
instructions as each party may designate for itself by written notice to Agent.
Concurrently with each such payment, Agent shall identify whether such payment
(or any portion thereof) represents Letter of Credit Fees, principal, premium
or interest or otherwise.


17.15      Concerning the Collateral
and Related Loan Documents.  Each
member of the Lender Group authorizes and directs Agent to enter into this
Agreement and the other Loan Documents relating to the Collateral, for the
ratable benefit (subject to Section 4.1) of the Lender Group. Each
member of the Lender Group agrees that any action taken by Agent, Required
Lenders, or all Lenders, as applicable, in accordance with the terms of this
Agreement or the other Loan Documents relating to the Collateral and the
exercise by Agent, Required Lenders, or all Lenders, as applicable, of their
respective powers set forth therein or herein, together with such other powers
that are reasonably incidental thereto, shall be binding upon all of the
Lenders.



 51
 









17.16      Confidentiality.  By signing this Agreement, each Lender
agrees to keep all material information obtained by it pursuant to the
requirements of this Agreement in accordance with its reasonable customary
procedures for handling confidential information; it being understood and
agreed by Borrowers that in any event such Lender may make disclosures (i)
reasonably required by any bona fide potential or actual Assignee, transferee,
or Participant in connection with any contemplated or actual assignment or
transfer by such Lender of an interest herein or any participation interest in
such Lender’s rights hereunder, (ii) of information that has become public by
disclosures made by Persons other than such Lender, its Affiliates, assignees,
transferees, or participants, (iii) as required or requested by any court,
governmental or administrative agency, pursuant to any subpoena or other legal
process, or by any law, statute, regulation, or court order, or (iv) to
examiners, auditors, and investigators having regulatory authority over such
Lender; provided, however, that, unless prohibited by applicable
law, statute, regulation, or court order, such Lender shall notify
Administrative Borrower of any request by any court, governmental or
administrative agency, or pursuant to any subpoena or other legal process, for
disclosure of any non-public material information pursuant to clause (iii) of
this Section 17.16 concurrent with, or where practicable, prior to the
disclosure thereof.


17.17      Several Obligations; No
Liability.  Notwithstanding that
certain of the Loan Documents now or hereafter may have been or will be
executed only by or in favor of Agent in its capacity as such, and not by or in
favor of the Lenders, any and all obligations on the part of Agent (if any) to
issue any Letter of Credit shall constitute the several (and not joint) obligations
of the respective Lenders on a ratable basis, according to their respective
Commitments, to issue Letters of Credit provided that the Letter of Credit
Outstanding does not exceed the amount of their respective Commitments. Nothing
contained herein shall confer upon any Lender any interest in, or subject any
Lender to any liability for, or in respect of, the business, assets, profits,
losses, or liabilities of any other Lender. Each Lender shall be solely
responsible for notifying its Participants of any matters relating to the Loan
Documents to the extent any such notice may be required, and no Lender shall
have any obligation, duty, or liability to any Participant of any other Lender.
Except as provided in Section 17.7, no member of the Lender Group shall
have any liability for the acts of any other member of the Lender Group. No
Lender shall be responsible to Borrowers or any other Person for any failure by
any other Lender to fulfill its obligations to issue Letters of Credit, nor to
advance for it or on its behalf in connection with its Commitment, nor to take
any other action on its behalf hereunder or in connection with the financing
contemplated herein.


17.18      Documentation Agent;
Co-Agent.


Notwithstanding
the provisions of this Agreement or any of the other Loan Documents, Wachovia
Capital Finance Corporation (New England) (in its capacity as Documentation
Agent, as opposed to its capacity as a Lender), and LaSalle Retail Finance, a
division of LaSalle Business Credit LLC (in its capacity as Co-Agent, as
opposed to its capacity as a Lender) shall have no powers, rights, duties,
responsibilities, or liabilities with respect to this Agreement and the other
Loan Documents, nor shall Wachovia Capital Finance Corporation (New England) or
LaSalle Retail Finance, a division of LaSalle Business Credit LLC have or be
deemed to have any fiduciary relationship with any Lender.



 52
 









18.          GENERAL PROVISIONS.


18.1        Effectiveness.


This Agreement
shall be binding and deemed effective when executed by Borrowers and the Lender
Group.


18.2        Section Headings.  Headings and numbers have been set forth
herein for convenience only. Unless the contrary is compelled by the context,
everything contained in each section applies equally to this entire Agreement.


18.3        Interpretation.   Neither this Agreement nor any uncertainty or
ambiguity herein shall be construed or resolved against the Lender Group or
Borrowers, whether under any rule of construction or otherwise. On the
contrary, this Agreement has been reviewed by all parties and shall be
construed and interpreted according to the ordinary meaning of the words used
so as to fairly accomplish the purposes and intentions of all parties hereto.


18.4        Severability of
Provisions.  Each provision of
this Agreement shall be severable from every other provision of this Agreement
for the purpose of determining the legal enforceability of any specific
provision.


18.5        Counterparts;
Telefacsimile Execution.   This
Agreement may be executed in any number of counterparts and by different
parties on separate counterparts, each of which, when executed and delivered,
shall be deemed to be an original, and all of which, when taken together, shall
constitute but one and the same Agreement. Delivery of an executed counterpart
of this Agreement by telefacsimile shall be equally as effective as delivery of
an original executed counterpart of this Agreement. Any party delivering an
executed counterpart of this Agreement by telefacsimile also shall deliver an
original executed counterpart of this Agreement but the failure to deliver an
original executed counterpart shall not affect the validity, enforceability,
and binding effect of this Agreement.


18.6        Revival and
Reinstatement of Obligations.  If
the incurrence or payment of the Obligations by Borrowers or any guarantor of
the Obligations or the transfer by any or all of such parties to the Lender
Group of any property of either or both of such parties should for any reason
subsequently be declared to be void or voidable under any state or federal law
relating to creditors’ rights, including provisions of the Bankruptcy Code
relating to fraudulent conveyances, preferences, and other voidable or
recoverable payments of money or transfers of property (collectively, a “Voidable
Transfer”), and if the Lender Group is required to repay or restore, in whole
or in part, any such Voidable Transfer, or elects to do so upon the reasonable
advice of its counsel, then, as to any such Voidable Transfer, or the amount
thereof that the Lender Group is required or elects to repay or restore, and as
to all reasonable costs, expenses, and attorneys fees of the Lender Group
related thereto, the liability of Borrowers or such guarantor automatically
shall be revived, reinstated, and restored and shall exist as though such
Voidable Transfer had never been made.



 53
 









18.7        Integration.  This Agreement, together with the other Loan
Documents, reflects the entire understanding of the parties with respect to the
transactions contemplated hereby and shall not be contradicted or qualified by
any other agreement, oral or written, before the date hereof.


18.8        Parent as Agent for
Borrowers.  Each Borrower hereby
irrevocably appoints Parent as the borrowing agent and attorney-in-fact for all
Borrowers (the “Administrative Borrower”) which appointment shall remain in
full force and effect unless and until Agent shall have received prior written
notice signed by each Borrower that such appointment has been revoked and that
another Borrower has been appointed Administrative Borrower. Each Borrower
hereby irrevocably appoints and authorizes the Administrative Borrower (i) to
provide Agent with all notices with respect to Letters of Credit obtained for
the benefit of any Borrower and all other notices and instructions under this
Agreement and (ii) to take such action as the Administrative Borrower deems
appropriate on its behalf to obtain Letters of Credit and to exercise such
other powers as are reasonably incidental thereto to carry out the purposes of
this Agreement. It is understood that the handling of the Loan Account and
Collateral of Borrowers in a combined fashion, as more fully set forth herein,
is done solely as an accommodation to Borrowers in order to utilize the
collective borrowing powers of Borrowers in the most efficient and economical
manner and at their request, and that Lender Group shall not incur liability to
any Borrower as a result hereof. Each Borrower expects to derive benefit,
directly or indirectly, from the handling of the Loan Account and the
Collateral in a combined fashion since the successful operation of each
Borrower is dependent on the continued successful performance of the integrated
group. To induce the Lender Group to do so, and in consideration thereof, each
Borrower hereby jointly and severally agrees to indemnify each member of the
Lender Group and hold each member of the Lender Group harmless against any and
all liability, expense, loss or claim of damage or injury, made against the
Lender Group by any Borrower or by any third party whosoever, arising from or
incurred by reason of (a) the handling of the Loan Account and Collateral of
Borrowers as herein provided, (b) the Lender Group’s relying on any
instructions of the Administrative Borrower, or (c) any other action taken by
the Lender Group hereunder or under the other Loan Documents, except that
Borrowers will have no liability to the relevant Agent-Related Person or
Lender-Related Person under this Section 18.8 with respect to any
liability that has been finally determined by a court of competent jurisdiction
to have resulted solely from the gross negligence or willful misconduct of such
Agent-Related Person or Lender-Related Person, as the case may be.


[Remainder of this page intentionally left blank]



 54















IN WITNESS WHEREOF, the
parties hereto have caused this Agreement to be executed as of the date set
forth in the first paragraph of this Agreement.


	
  

  	
  THE CHILDREN’S PLACE RETAIL

  STORES, INC., a Delaware corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
  Susan Riley

  
	
   

  	
  Title:

  	
  Executive Vice President -

  
	
   

  	
   

  	
  Finance and Administration

  
	
   

  	
   

  	
   

  
	
   

  	
  THE CHILDREN’S PLACE SERVICES

  COMPANY LLC, a Delaware limited

  liability company

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
  Susan Riley

  
	
   

  	
  Title:

  	
  Senior Vice President, Chief

  
	
   

  	
   

  	
  Financial Officer and Treasurer

  
	
   

  	
   

  	
   

  
	
   

  	
  WELLS FARGO RETAIL FINANCE,

  LLC, as Agent and as a Lender

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
  Michele Ayou

  
	
   

  	
  Title:

  	
  Vice President

  
	
   

  	
   

  
	
   

  	
  WELLS FARGO BANK, N.A., as
  Issuing

  Bank

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
							



 



 S-1
 









 


	
  

  	
  WACHOVIA CAPITAL FINANCE

  CORPORATION (NEW ENGLAND), as

  Documentation Agent and as a Lender

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  LASALLE RETAIL FINANCE,

  
	
   

  	
  a Division of LaSalle Business Credit, LLC,

  
	
   

  	
  as Agent for Standard Federal Bank

  National Association, as Co-Agent and as a 

  Lender

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  JPMORGAN CHASE BANK, N.A., as
  a

  Lender

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  CITICORP USA, INC., as a
  Lender

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  HSBC BANK USA, NATIONAL

  ASSOCIATION, as a Lender

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
					



 



 S-2















SCHEDULE
C-1


COMMITMENTS


	
  1.

  	
   

  	
  Wells Fargo Retail
  Finance, LLC

  	
   

  	
  $

  	
  18,600,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
   

  	
  Wachovia Capital
  Finance Corporation (New England)

  	
   

  	
  $

  	
  12,000,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
   

  	
  LaSalle
  Retail Finance, a division of LaSalle Business Credit, LLC, as Agent for
  Standard Federal Bank National Association

  	
   

  	
  $

  	
  12,000,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
   

  	
  JPMorgan Chase Bank,
  N.A.

  	
   

  	
  $

  	
  6,000,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5.

  	
   

  	
  Citicorp USA, Inc.

  	
   

  	
  $

  	
  6,000,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6.

  	
   

  	
  HSBC Bank USA, National
  Association

  	
   

  	
  $

  	
  5,400,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total

  	
   

  	
   

  	
   

  	
  $

  	
  60,000,000

  	
   

  



 



 C-1















EXHIBIT
A-1


FORM OF
ASSIGNMENT AND ACCEPTANCE


This ASSIGNMENT AND
ACCEPTANCE (this “Assignment and Acceptance”) dated as of                         ,
200     is made between                                   
(the “Assignor”) and                                   
(the “Assignee”).


RECITALS


A.            The Assignor is party
to that certain Letter of Credit Agreement, dated as of June 28, 2007 (as
amended, amended and restated, modified, supplemented or renewed from time to
time, the “Loan Agreement”), among The Children’s Place Retail Stores,
Inc. and The Children’s Place Services Company LLC (“Borrowers”), the several
financial institutions from time to time party thereto (including the Assignor,
collectively, the “Lenders”), Wells Fargo Retail Finance LLC, a Delaware
limited liability company, as agent for the Lenders (the “Agent”).  Any terms defined in the Loan Agreement and
not defined in this Assignment and Acceptance are used herein as defined in the
Loan Agreement;


B.            [The Assignor has
acquired a participation in the Agent’s liability under Letters of Credit in an
aggregate outstanding principal amount of $                        
(the “L/C Obligations”)] [No Letters of Credit are outstanding under the
Loan Agreement]; and


C.            The Assignor wishes to
assign to the Assignee [part of the] [all] rights and obligations of the
Assignor under the Loan Agreement in respect of its Commitment, [together with
a corresponding portion of each of its outstanding L/C Obligations,] in an
amount equal to $                  
(the “Assigned Amount”) on the terms and subject to the conditions set
forth herein and the Assignee wishes to accept assignment of such rights and to
assume such obligations from the Assignor on such terms and subject to such
conditions.


NOW THEREFORE, in consideration
of the foregoing and the mutual agreements contained herein, the parties hereto
agree as follows:


1.             Assignment and
Acceptance.


(a)           Subject to the terms and conditions of this
Assignment and Acceptance, (i) the Assignor hereby sells, transfers, delegates,
and assigns to the Assignee, and (ii) the Assignee hereby purchases, assumes
and undertakes from the Assignor, without recourse and without representation
or warranty (except as provided in this Assignment and Acceptance)   %
(the “Assignee’s Percentage Share”) of (A) the Commitment [and the L/C
Obligations] of the Assignor and (B) all related rights, benefits, obligations,
liabilities and indemnities of the Assignor under and in connection with the
Loan Agreement and the other Loan Documents.


[If appropriate, add
paragraph specifying payment to Assignor by Assignee of outstanding principal
of, accrued interest on, and fees with respect to, L/C Obligations assigned.]



 A-1-1
 









(b)           With effect on and after the Effective Date
(as defined in Section 5 hereof), the Assignee shall be a party to the Loan
Agreement and succeed to all of the rights and be obligated to perform all of
the obligations of a Lender under the Loan Agreement, including the
requirements concerning confidentiality (if any) and the payment of
indemnification to the Agent, with a Commitment in an amount equal to the
Assigned Amount.  The Assignee agrees
that it will perform in accordance with their terms all of the obligations
which by the terms of the Loan Agreement are required to be performed by it as
a Lender.  It is the intent of the
parties hereto that the Commitment of the Assignor shall, as of the Effective
Date, be reduced by an amount equal to the Assigned Amount and the Assignor
shall relinquish its rights and be released from its obligations under the Loan
Agreement to the extent such obligations have been assumed by the Assignee; provided,
however, the Assignor shall not relinquish the rights under the Loan
Agreement to the extent such rights relate to the time prior to the Effective
Date.


(c)           After giving effect to the assignment and
assumption set forth herein, on the Effective Date the Assignee’s Commitment
will be $             .


(d)           After giving effect to the assignment and
assumption set forth herein, on the Effective Date the Assignor’s Commitment
will be $             .


2.             Payments.


(a)           As consideration for the sale, assignment
and transfer contemplated in Section 1 hereof, the Assignee shall pay to the
Assignor on the Effective Date in immediately available funds an amount equal
to $              ,
representing the Assignee’s Percentage Share of the principal amount of all L/C
Outstandings.


(b)           The [Assignor] [Assignee] further agrees to
pay to the Agent a processing fee in the amount of                                       
($              ),
as specified in Section 15.1(a) of the Loan Agreement.


3.             Reallocation of
Payments.


Any interest, fees and
other payments accrued to the Effective Date with respect to the Commitment [,]
[and] and L/C Obligations shall be for the account of the Assignor.  Any interest, fees and other payments accrued
on and after the Effective Date with respect to the Assigned Amount shall be
for the account of the Assignee.  Each of
the Assignor and the Assignee agrees that it will hold in trust for the other
party any interest, fees and other amounts which it may receive to which the
other party is entitled pursuant to the preceding sentence and pay to the other
party any such amounts which it may receive promptly upon receipt.


4.             Independent Credit
Decision.


The Assignee (a)
acknowledges that it has received a copy of the Loan Agreement and the
Schedules and Exhibits thereto, together with copies of the most recent
financial statements referred to in Section 6.3 of the Loan Agreement,
and such other documents and information as it has deemed appropriate to make
its own credit and legal analysis 



 A-1-2
 









and decision to enter
into this Assignment and Acceptance; and (b) agrees that it will, independently
and without reliance upon the Assignor, the Agent or any other Lender and based
on such documents and information as it shall deem appropriate at the time,
continue to make its own credit and legal decisions in taking or not taking
action under the Loan Agreement.


5.             Effective Date;
Notices.


(a)           As between the Assignor and the Assignee,
the effective date for this Assignment and Acceptance (the “Effective Date”)
shall be the later of: (i)                         ,
and (ii) the first day on which the following conditions precedent have been
satisfied:


(i)            Assignment and Acceptance shall be executed
and delivered by the Assignor and the Assignee;


(ii)           the consent of the Agent required for an
effective assignment of the Assigned Amount by the Assignor to the Assignee
under Section 15.1(a) of the Loan Agreement shall have been duly
obtained and shall be in full force and effect as of the Effective Date;


(iii)          the Assignee shall pay to the Assignor all
amounts due to the Assignor under this Assignment and Acceptance;


(iv)          the processing fee referred to in Section
2(b) hereof and in Section 15.1 of the Loan Agreement in the amount
of                                               
($            ),
shall have been paid to the Agent; and


(v)           the Assignor shall have assigned and the
Assignee shall have assumed a percentage equal to the Assignee’s Percentage
Share of the rights and obligations of the Assignor under the Loan Agreement.


(b)           Promptly following the execution of this
Assignment and Acceptance, the Assignor shall deliver to the Administrative
Borrower and the Agent for acknowledgement by the Agent, a Notice of Assignment
[substantially] in the form attached hereto as Schedule 1.


6.             Agent.


[(a)]         The Assignee hereby
appoints and authorizes the Agent to take such action as agent on its behalf
and to exercise such powers under the Loan Agreement as are delegated to the
Agent by the Lenders pursuant to the terms of the Loan Agreement.


[INCLUDE ONLY IF ASSIGNOR
IS AGENT] [(b)  The Assignee shall assume
no duties or obligations held by the Assignor in its capacity as Agent under
the Loan Agreement.]



 A-1-3
 









7.             Withholding Tax.


The Assignee (a)
represents and warrants to the Lenders, the Agent and the Borrowers that under
applicable law and treaties no tax will be required to be withheld by the
Lenders with respect to any payments to be made to the Assignee hereunder, (b)
agrees to furnish (if it is organized under the laws of any jurisdiction other
than the United States or any State thereof) to the Agent and the Borrowers
prior to the time that the Agent or the Borrowers are required to make any
payment of principal, interest or fees hereunder, duplicate executed originals
of either U.S. Internal Revenue service Form 4224 or U.S. Internal Revenue
Service Form 1001 (wherein the Assignee claims entitlement to the benefits of a
tax treaty that provides for a complete exemption from U.S. federal income
withholding tax on all payments hereunder) and agrees to provide new Forms 4224
or 1001 upon the expiration of any previously delivered form or comparable
statements in accordance with all applicable U.S. laws and regulations and
amendments thereto, duly executed and completed by the Assignee, and (c) agrees
to comply with all applicable U.S. laws and regulations with regard to such
withholding tax exemption.


8.             Representations
and Warranties.


(a)           The Assignor represents and warrants that
(i) it is the legal and beneficial owner of the interest being assigned by it
hereunder and that such interest is free and clear of any lien or other adverse
claim; (ii) it is duly organized and existing and it has the full power and
authority to take, and has taken, all action necessary to execute and deliver
this Assignment and Acceptance and any other documents required or permitted to
be executed or delivered by it in connection with this Assignment and Acceptance
and to fulfill its obligations hereunder; (iii) no notices to, or consents,
authorizations or approvals of, any person are required (other than any already
given or obtained) for its due execution, delivery and performance of this
Assignment and Acceptance, and apart from any agreements or undertakings or
filings required by the Loan Agreement, no further action by, or notice to, or
filing with, any person is required of it for such execution, delivery or
performance; and (iv) this Assignment and Acceptance has been duly executed and
delivered by it and constitutes the legal, valid and binding obligation of the
Assignor, enforceable against the Assignor in accordance with the terms hereof,
subject, as to enforcement, to bankruptcy, insolvency, moratorium,
reorganization and other laws of general application relating to or affecting
creditors’ rights and to general equitable principles.


(b)           The Assignor makes no representation or
warranty and assumes no responsibility with respect to any statements, warranties
or representations made in or in connection with the Loan Agreement or the
execution, legality, validity, enforceability, genuineness, sufficiency or
value of the Loan Agreement or any other instrument or document furnished
pursuant thereto.  The Assignor makes no
representation or warranty in connection with, and assumes no responsibility
with respect to, the financial condition of the Borrowers, or the performance
or observance by the Borrowers, of any of its obligations under the Loan
Agreement or any other instrument or document furnished in connection
therewith.


(c)           The Assignee represents and warrants that
(i) it is duly organized and existing and is an Eligible Transferee and it has
full power and authority to take, and has taken, all action necessary to
execute and deliver this Assignment and Acceptance and any other 



 A-1-4
 









documents required or permitted to be executed or delivered by it in
connection with this Assignment and Acceptance, and to fulfill its obligations
hereunder; (ii) no notices to, or consents, authorizations or approvals of, any
person are required (other than any already given or obtained) for its due
execution, delivery and performance of this Assignment and Acceptance; and
apart from any agreements or undertakings or filings required by the Loan
Agreement, no further action by, or notice to, or filing with any person is
required of it for such execution, delivery or performance; (iii) this
Assignment and Acceptance has been duly executed and delivered by it and
constitutes the legal, valid and binding obligation of the Assignee,
enforceable against the Assignee in accordance with the terms hereof, subject,
as to enforcement, to bankruptcy, insolvency, moratorium, reorganization and
other laws of general application relating to or affecting creditors’ rights
and to general equitable principles.


9.             Further Assurances.


The Assignor and the
Assignee each hereby agrees to execute and deliver such other instruments, and
take such other action, as either party may reasonably request in connection
with the transactions contemplated by this Assignment and Acceptance, including
the delivery of any notices or other documents or instruments to the
Administrative Borrower or the Agent, which may be required in connection with
the assignment and assumption contemplated hereby.


10.           Miscellaneous.


(a)           Any amendment or waiver of any provision of
this Assignment and Acceptance shall be in writing and signed by the parties
hereto.  No failure or delay by either
party hereto in exercising any right, power or privilege hereunder shall
operate as a waiver thereof and any waiver of any breach of the provisions of
this Assignment and Acceptance shall be without prejudice to any rights with
respect to any other or further breach thereof.


(b)           All payments made hereunder shall be made
without any set-off or counterclaim.


(c)           The Assignor and the Assignee shall each pay
its own costs and expenses incurred in connection with the negotiation,
preparation, execution and performance of this Assignment and Acceptance.


(d)           This Assignment and Acceptance may be
executed in any number of counterparts, each of which shall be an original, but
all of which shall together constitute one and the same agreement.


(e)           THIS ASSIGNMENT AND ACCEPTANCE SHALL BE
DEEMED TO HAVE BEEN MADE IN THE STATE OF CALIFORNIA AND SHALL BE GOVERNED BY
AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF SUCH STATE, EXCEPT THAT NO
DOCTRINE OF CHOICE OF LAW SHALL BE USED TO APPLY THE LAWS OF ANY OTHER STATE OR
JURISDICTION.  The Assignor and Assignee
each agrees that, in addition to any other courts that may have jurisdiction
under applicable laws or rules, any action or proceeding to enforce or arising
out of this Assignment 



 A-1-5
 









and Acceptance may be commenced in the Superior Court of the State of
California for Los Angeles County, or in the United States District Court for
the Central District of California, and the Assignor and Assignee each consents
and submits in advance to such jurisdiction and agrees that venue will be
proper in such courts on any such matter. 
Each party to this Assignment and Acceptance hereby irrevocably waives,
to the fullest extent it may effectively do so, the defense of an inconvenient
forum to the maintenance of such action or proceeding.


(f)            THE ASSIGNOR AND THE ASSIGNEE EACH HEREBY
WAIVES TRIAL BY JURY, RIGHTS OF SETOFF, AND THE RIGHT TO IMPOSE COUNTERCLAIMS
IN ANY LITIGATION IN ANY COURT WITH RESPECT TO, IN CONNECTION WITH, OR ARISING
OUT OF THIS ASSIGNMENT AND ACCEPTANCE, THE LOAN AGREEMENT, ANY RELATED
DOCUMENTS AND AGREEMENTS OR ANY COURSE OF CONDUCT, COURSE OF DEALING, OR
STATEMENTS (WHETHER ORAL OR WRITTEN) DELIVERED PURSUANT HERETO OR THERETO, OR
ANY OTHER CLAIM OR DISPUTE HOWSOEVER ARISING, BETWEEN THE ASSIGNOR AND THE
ASSIGNEE.  THE ASSIGNOR AND THE ASSIGNEE
EACH CONFIRMS THAT THE FOREGOING WAIVERS ARE INFORMED AND FREELY MADE.



 A-1-6
 









[Other provisions to be
added as may be negotiated between the Assignor and the Assignee, provided that
such provisions are not inconsistent with the Loan Agreement.]


IN WITNESS WHEREOF, the
Assignor and the Assignee have caused this Assignment and Acceptance to be
executed and delivered by their duly authorized officers as of the date first
above written.


	
  

  	
  

  	
  [ASSIGNOR]

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
  Address:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  [ASSIGNEE]

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
  Address:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
						



 



 A-1-7














SCHEDULE
1

NOTICE OF ASSIGNMENT AND ACCEPTANCE


                    ,
200  


Wells Fargo Retail
Finance, LLC

One Boston Place, Suite 1800

Boston, Massachusetts  02108


Attn:  


[Name and Address of
Borrowers]


Ladies and Gentlemen:


We refer to the Letter of
Credit Agreement, dated as of June 28, 2007 (as amended, amended and restated,
modified, supplemented or renewed from time to time, the “Letter of Credit
Agreement”), among The Children’s Place Retail Stores, Inc. and The
Children’s Place Services Company, LLC (“Borrowers”), the several
financial institutions from time to time party thereto (collectively, the “Lenders”),
and Wells Fargo Retail Finance LLC, as agent for the Lenders (the “Agent”).
Terms defined in the Letter of Credit Agreement are used herein as therein
defined.


1.             We hereby give you notice of, and
request your consent to, the assignment by             
(the “Assignor”) to                                 
(the “Assignee”) of           %
of the right, title and interest of the Assignor in and to the Letter of Credit
Agreement (including, without limitation, the right, title and interest of the
Assignor in and to the Commitments of the Assignor[,] [and] all outstanding
loans made by the Assignor [and the Assignor’s participation in the Letters of
Credit]) pursuant to the Assignment and Acceptance Agreement attached hereto
(the “Assignment and Acceptance”). Before giving effect to such
assignment, the Assignor’s Commitment is $                  [,]
[and] the aggregate amount of its participation in L/C Obligations is $                      ].


2.             The Assignee agrees that, upon
receiving the consent of the Agent to such assignment, the Assignee will be
bound by the terms of the Letter of Credit Agreement as fully and to the same
extent as if the Assignee were the Lender originally holding such interest in
the Loan Agreement.


3.             The following administrative
details apply to the Assignee:


(A)          Notice Address:


Assignee name:                                                                  


Address:                                                                             


                                                                                           











(B)           Payment Instructions:


Account No.:                                                                                              


At:                                                                                                


Reference:                                                                                                                   


Attention:                                                                                                                    


4.             You are entitled to rely upon the
representations, warranties and covenants of each of the Assignor and Assignee
contained in the Assignment and Acceptance.


IN
WITNESS WHEREOF, the Assignor and the Assignee have caused
this Notice of Assignment and Acceptance to be executed by their respective
duly authorized officials, officers or agents as of the date first above
mentioned.


Very truly yours,


	
  

  	
  [NAME
  OF ASSIGNOR]

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  [NAME
  OF ASSIGNEE]

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
					



 











ACKNOWLEDGED AND, TO THE
EXTENT REQUIRED, CONSENTED TO:


	
  THE CHILDREN’S PLACE RETAIL

  
	
  STORES, INC., a Delaware corporation,

  
	
  as Administrative Borrower

  
	
   

  
	
  By:

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  
	
   

  
	
  ACKNOWLEDGED AND ASSIGNMENT

  
	
   

  
	
  CONSENTED TO:

  
	
   

  
	
  WELLS FARGO RETAIL FINANCE, LLC,

  
	
  a Delaware limited liability company, as Agent

  
	
   

  
	
  By:

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  
	
  Title: