Exhibit 10.30




 





 


FIFTH
AMENDED AND RESTATED

LOAN AND SECURITY AGREEMENT


dated as of June 28, 2007


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,


and


WELLS FARGO RETAIL
FINANCE, LLC,


as Agent


WACHOVIA CAPITAL FINANCE
CORPORATION (NEW ENGLAND),


 


as Documentation Agent


and


LASALLE RETAIL FINANCE, A DIVISION OF LASALLE BUSINESS
CREDIT, LLC


as
Co-Agent


 




 





















TABLE OF CONTENTS


	
   

  	
   

  	
   

  	
  Page(s)

  
	
   

  	
   

  	
   

  	
   

  
	
  1.

  	
  DEFINITIONS AND CONSTRUCTION

  	
   

  	
  1

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.1

  	
  Definitions

  	
   

  	
  1

  
	
   

  	
  1.2

  	
  Accounting Terms

  	
   

  	
  21

  
	
   

  	
  1.3

  	
  Code

  	
   

  	
  21

  
	
   

  	
  1.4

  	
  Construction

  	
   

  	
  21

  
	
   

  	
  1.5

  	
  Schedules and Exhibits

  	
   

  	
  22

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
  LOAN AND TERMS OF PAYMENT

  	
   

  	
  22

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.1

  	
  Revolving Advances

  	
   

  	
  22

  
	
   

  	
  2.2

  	
  Letters of Credit

  	
   

  	
  29

  
	
   

  	
  2.3

  	
  Intentionally Omitted

  	
   

  	
  32

  
	
   

  	
  2.4

  	
  Intentionally Omitted

  	
   

  	
  32

  
	
   

  	
  2.5

  	
  Payments

  	
   

  	
  32

  
	
   

  	
  2.6

  	
  Overadvances

  	
   

  	
  35

  
	
   

  	
  2.7

  	
  Interest and Letter of Credit Fees: Rates, Payments,
  and Calculations

  	
   

  	
  35

  
	
   

  	
  2.8

  	
  Collection of Accounts

  	
   

  	
  37

  
	
   

  	
  2.9

  	
  Crediting Payments; Application of Collections

  	
   

  	
  37

  
	
   

  	
  2.10

  	
  Designated Account

  	
   

  	
  37

  
	
   

  	
  2.11

  	
  Maintenance of Loan Account; Statements of
  Obligations

  	
   

  	
  38

  
	
   

  	
  2.12

  	
  Fees

  	
   

  	
  38

  
	
   

  	
  2.13

  	
  LIBOR Rate Loans

  	
   

  	
  39

  
	
   

  	
  2.14

  	
  Illegality

  	
   

  	
  40

  
	
   

  	
  2.15

  	
  Requirements of Law

  	
   

  	
  40

  
	
   

  	
  2.16

  	
  Indemnity

  	
   

  	
  42

  
	
   

  	
  2.17

  	
  Joint and Several Liability of Borrowers

  	
   

  	
  42

  
	
   

  	
  2.18

  	
  Increase in Maximum Amount and Commitments

  	
   

  	
  45

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
  CONDITIONS; TERM OF AGREEMENT

  	
   

  	
  46

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.1

  	
  Conditions Precedent to the Initial Advance and the
  Initial Letter of Credit

  	
   

  	
  46

  
	
   

  	
  3.2

  	
  Conditions Precedent to all Advances and all Letters
  of Credit

  	
   

  	
  47

  
	
   

  	
  3.3

  	
  Intentionally Omitted

  	
   

  	
  48

  
	
   

  	
  3.4

  	
  Term

  	
   

  	
  48

  
	
   

  	
  3.5

  	
  Effect of Termination

  	
   

  	
  48

  
	
   

  	
  3.6

  	
  Early Termination by Borrowers

  	
   

  	
  48

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
  CREATION OF SECURITY INTEREST

  	
   

  	
  49

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.1

  	
  Grant of Security Interests

  	
   

  	
  49

  
	
   

  	
  4.2

  	
  Negotiable Collateral

  	
   

  	
  49

  
	
   

  	
  4.3

  	
  Collection of Accounts, General Intangibles, and
  Negotiable Collateral

  	
   

  	
  49

  
	
   

  	
  4.4

  	
  Delivery of Additional Documentation Required

  	
   

  	
  49

  
	
   

  	
  4.5

  	
  Power of Attorney

  	
   

  	
  50

  
	
   

  	
  4.6

  	
  Right to Inspect

  	
   

  	
  50

  




 i
 









 


	
  5.

  	
  REPRESENTATIONS AND WARRANTIES

  	
   

  	
  50

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.1

  	
  No Encumbrances

  	
   

  	
  50

  
	
   

  	
  5.2

  	
  Eligible Accounts

  	
   

  	
  50

  
	
   

  	
  5.3

  	
  Eligible Inventory

  	
   

  	
  51

  
	
   

  	
  5.4

  	
  Equipment

  	
   

  	
  51

  
	
   

  	
  5.5

  	
  Location of Inventory and Equipment

  	
   

  	
  51

  
	
   

  	
  5.6

  	
  Inventory Records

  	
   

  	
  51

  
	
   

  	
  5.7

  	
  Location of Chief Executive Office; FEIN

  	
   

  	
  51

  
	
   

  	
  5.8

  	
  Due Organization and Qualification; Subsidiaries

  	
   

  	
  51

  
	
   

  	
  5.9

  	
  Due Authorization; No Conflict

  	
   

  	
  52

  
	
   

  	
  5.10

  	
  Litigation

  	
   

  	
  52

  
	
   

  	
  5.11

  	
  No Material Adverse Change

  	
   

  	
  52

  
	
   

  	
  5.12

  	
  Fraudulent Transfer

  	
   

  	
  52

  
	
   

  	
  5.13

  	
  Employee Benefits

  	
   

  	
  53

  
	
   

  	
  5.14

  	
  Environmental Condition

  	
   

  	
  53

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6.

  	
  AFFIRMATIVE COVENANTS

  	
   

  	
  53

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.1

  	
  Accounting System and Schedules

  	
   

  	
  53

  
	
   

  	
  6.2

  	
  Financial Statements, Reports, Certificates

  	
   

  	
  54

  
	
   

  	
  6.3

  	
  Tax Returns

  	
   

  	
  55

  
	
   

  	
  6.4

  	
  Borrowing Base Certificate

  	
   

  	
  55

  
	
   

  	
  6.5

  	
  Store Openings and Closings and Rents Reports

  	
   

  	
  55

  
	
   

  	
  6.6

  	
  Title to Equipment

  	
   

  	
  55

  
	
   

  	
  6.7

  	
  Maintenance of Equipment

  	
   

  	
  56

  
	
   

  	
  6.8

  	
  Taxes

  	
   

  	
  56

  
	
   

  	
  6.9

  	
  Insurance

  	
   

  	
  56

  
	
   

  	
  6.10

  	
  No Setoffs or Counterclaims

  	
   

  	
  56

  
	
   

  	
  6.11

  	
  Location of Inventory and Equipment

  	
   

  	
  57

  
	
   

  	
  6.12

  	
  Compliance with Laws

  	
   

  	
  57

  
	
   

  	
  6.13

  	
  Employee Benefits

  	
   

  	
  57

  
	
   

  	
  6.14

  	
  Leases

  	
   

  	
  58

  
	
   

  	
  6.15

  	
  Restatement of Financial Statements

  	
   

  	
  58

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7.

  	
  NEGATIVE COVENANTS

  	
   

  	
  58

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  7.1

  	
  Indebtedness

  	
   

  	
  58

  
	
   

  	
  7.2

  	
  Liens

  	
   

  	
  59

  
	
   

  	
  7.3

  	
  Restrictions on Fundamental Changes

  	
   

  	
  59

  
	
   

  	
  7.4

  	
  Disposal of Assets

  	
   

  	
  60

  
	
   

  	
  7.5

  	
  Change Name

  	
   

  	
  60

  
	
   

  	
  7.6

  	
  Guarantee

  	
   

  	
  60

  
	
   

  	
  7.7

  	
  Nature of Business

  	
   

  	
  60

  
	
   

  	
  7.8

  	
  Prepayments and Amendments

  	
   

  	
  60

  
	
   

  	
  7.9

  	
  Change of Control

  	
   

  	
  61

  
	
   

  	
  7.10

  	
  Consignments

  	
   

  	
  61

  
	
   

  	
  7.11

  	
  Distributions

  	
   

  	
  61

  
	
   

  	
  7.12

  	
  Accounting Methods

  	
   

  	
  61

  



 



 ii
 









 


	
   

  	
  7.13

  	
  Advances, Investments and Loans

  	
   

  	
  61

  
	
   

  	
  7.14

  	
  Transactions with Affiliates

  	
   

  	
  62

  
	
   

  	
  7.15

  	
  Suspension

  	
   

  	
  63

  
	
   

  	
  7.16

  	
  Use of Proceeds

  	
   

  	
  63

  
	
   

  	
  7.17

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

  	
   

  	
  63

  
	
   

  	
  7.18

  	
  No Prohibited Transactions Under ERISA

  	
   

  	
  63

  
	
   

  	
  7.19

  	
  Financial Covenants

  	
   

  	
  64

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8.

  	
  EVENTS OF DEFAULT

  	
   

  	
  66

  
	
   

  	
   

  	
   

  	
   

  
	
  9.

  	
  THE LENDER GROUP’S RIGHTS AND REMEDIES

  	
   

  	
  67

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.1

  	
  Rights and Remedies

  	
   

  	
  67

  
	
   

  	
  9.2

  	
  Remedies Cumulative

  	
   

  	
  69

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  10.

  	
  TAXES AND EXPENSES

  	
   

  	
  69

  
	
   

  	
   

  	
   

  	
   

  
	
  11.

  	
  WAIVERS; INDEMNIFICATION.

  	
   

  	
  70

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  11.1

  	
  Demand; Protest; etc.

  	
   

  	
  70

  
	
   

  	
  11.2

  	
  The Lender Group’s Liability for Collateral

  	
   

  	
  70

  
	
   

  	
  11.3

  	
  Indemnification

  	
   

  	
  70

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  12.

  	
  NOTICES

  	
   

  	
  71

  
	
   

  	
   

  	
   

  	
   

  
	
  13.

  	
  CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER

  	
   

  	
  72

  
	
   

  	
   

  	
   

  	
   

  
	
  14.

  	
  DESTRUCTION OF BORROWERS’ DOCUMENTS

  	
   

  	
  72

  
	
   

  	
   

  	
   

  	
   

  
	
  15.

  	
  ASSIGNMENTS AND PARTICIPATIONS; SUCCESSORS

  	
   

  	
  73

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  15.1

  	
  Assignments and Participations

  	
   

  	
  73

  
	
   

  	
  15.2

  	
  Successors

  	
   

  	
  75

  
	
   

  	
   

  	
   

  	
   

  
	
  16.

  	
  AMENDMENTS; WAIVERS

  	
   

  	
  75

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  16.1

  	
  Amendments and Waivers

  	
   

  	
  75

  
	
   

  	
  16.2

  	
  Replacement of Non-Consenting Lenders

  	
   

  	
  77

  
	
   

  	
  16.3

  	
  No Waivers; Cumulative Remedies

  	
   

  	
  77

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  17.

  	
  AGENT; THE LENDER GROUP

  	
   

  	
  77

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  17.1

  	
  Appointment and Authorization of Agent

  	
   

  	
  77

  
	
   

  	
  17.2

  	
  Delegation of Duties

  	
   

  	
  78

  
	
   

  	
  17.3

  	
  Liability of Agent-Related Persons

  	
   

  	
  79

  
	
   

  	
  17.4

  	
  Reliance by Agent

  	
   

  	
  79

  
	
   

  	
  17.5

  	
  Notice of Default or Event of Default

  	
   

  	
  79

  
	
   

  	
  17.6

  	
  Credit Decision

  	
   

  	
  80

  
	
   

  	
  17.7

  	
  Costs and Expenses; Indemnification

  	
   

  	
  80

  
	
   

  	
  17.8

  	
  Agent in Individual Capacity

  	
   

  	
  81

  
	
   

  	
  17.9

  	
  Successor Agent

  	
   

  	
  81

  
	
   

  	
  17.10

  	
  Withholding Tax

  	
   

  	
  82

  



 



 iii
 









 


	
   

  	
  17.11

  	
  Collateral Matters

  	
   

  	
  83

  
	
   

  	
  17.12

  	
  Restrictions on Actions by Lenders; Sharing of
  Payments

  	
   

  	
  84

  
	
   

  	
  17.13

  	
  Agency for Perfection

  	
   

  	
  85

  
	
   

  	
  17.14

  	
  Payments by Agent to the Lenders

  	
   

  	
  85

  
	
   

  	
  17.15

  	
  Concerning the Collateral and Related Loan Documents

  	
   

  	
  85

  
	
   

  	
  17.16

  	
  Field Audits and Examination Reports;
  Confidentiality; Disclaimers by Lenders; Other Reports and Information

  	
   

  	
  85

  
	
   

  	
  17.17

  	
  Several Obligations; No Liability

  	
   

  	
  86

  
	
   

  	
  17.18

  	
  Documentation Agent; Co-Agent

  	
   

  	
  87

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  18.

  	
  GENERAL PROVISIONS

  	
   

  	
  87

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  18.1

  	
  Effectiveness

  	
   

  	
  87

  
	
   

  	
  18.2

  	
  Section Headings

  	
   

  	
  87

  
	
   

  	
  18.3

  	
  Interpretation

  	
   

  	
  87

  
	
   

  	
  18.4

  	
  Severability of Provisions

  	
   

  	
  87

  
	
   

  	
  18.5

  	
  Counterparts; Telefacsimile Execution

  	
   

  	
  88

  
	
   

  	
  18.6

  	
  Revival and Reinstatement of Obligations

  	
   

  	
  88

  
	
   

  	
  18.7

  	
  Integration

  	
   

  	
  88

  
	
   

  	
  18.8

  	
  Parent as Agent for Borrowers

  	
   

  	
  88

  
	
   

  	
  18.9

  	
  Acknowledgment and Restatement of Existing Loan Agreement

  	
   

  	
  89

  



 



 iv
 









SCHEDULES AND
EXHIBITS


	
  Schedule C-1

  	
   

  	
  Commitments on Closing Date

  	
   

  	
   

  
	
  Schedule E-1

  	
   

  	
  Eligible Inventory Locations

  	
   

  	
   

  
	
  Schedule P-1

  	
   

  	
  Permitted Liens

  	
   

  	
   

  
	
  Schedule 3.1

  	
   

  	
  Collateral Access Agreements

  	
   

  	
   

  
	
  Schedule 5.8

  	
   

  	
  Subsidiaries

  	
   

  	
   

  
	
  Schedule 5.10

  	
   

  	
  Litigation

  	
   

  	
   

  
	
  Schedule 5.13

  	
   

  	
  ERISA Benefit Plans

  	
   

  	
   

  
	
  Schedule 5.14

  	
   

  	
  Environmental Condition

  	
   

  	
   

  
	
  Schedule 6.11

  	
   

  	
  Location of Inventory and Equipment

  	
   

  	
   

  
	
  Schedule 7.1

  	
   

  	
  Indebtedness

  	
   

  	
   

  
	
  Schedule 7.13(f)

  	
   

  	
  Intercompany Indebtedness

  	
   

  	
   

  
	
  Schedule 18.9(e)(i)

  	
   

  	
  L/C Demand Facility Letters of Credit

  	
   

  	
   

  
	
  Schedule 18.9(e)(ii)

  	
   

  	
  L/Cs Remaining under Fifth Amended and Restated Loan
  and Security Agreement

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Exhibit A-1

  	
   

  	
  Form of Assignment and Acceptance

  	
   

  	
   

  
	
  Exhibit B-1

  	
   

  	
  Business Plan for Fiscal Year Ending on or about
  January 31, 2008

  	
   

  	
   

  
	
  Exhibit C-1

  	
   

  	
  Form of Compliance Certificate

  	
   

  	
   

  
	
  Exhibit D-1

  	
   

  	
  Form of Borrowing Base Certificate

  	
   

  	
   

  
	
  Exhibit E-1

  	
   

  	
  Form of Customs Broker Agreement

  	
   

  	
   

  
	
  Exhibit F-1

  	
   

  	
  Form of Collateral Access Agreement for Alabama
  Sale-Leaseback Transaction

  	
   

  	
   

  
	
  Exhibit G-1

  	
   

  	
  Form of Collateral Access Agreement for Alabama
  Capital Lease

  	
   

  	
   

  



 



 v















FIFTH AMENDED AND
RESTATED


LOAN AND SECURITY AGREEMENT


THIS
FIFTH AMENDED AND RESTATED LOAN AND SECURITY 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, WACHOVIA CAPITAL FINANCE
CORPORATION (NEW ENGLAND), a Massachusetts corporation, as
Documentation Agent, and LASALLE RETAIL
FINANCE, A DIVISION OF LASALLE BUSINESS CREDIT, LLC, as Co-Agent, on
the other hand.


RECITALS


A.                                   Parent
and Wells Fargo Retail Finance, LLC and certain other Lenders are parties to
that certain Fourth Amended and Restated Loan and Security Agreement effective
as of October 31, 2004 (as amended, the “Existing Loan Agreement”).


B.                                     Borrowers,
Agent, Documentation Agent, and Lenders desire to amend and restate in its
entirety the Existing Loan Agreement.


The parties agree that
the Existing Loan Agreement is amended and restated as follows:


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 any
Borrower, irrespective of whether earned by performance, and any and all credit
insurance, guaranties, or security therefor.


“ACH Transactions”
means any cash management or related services (including the Automated Clearing
House processing of electronic funds transfers through the direct Federal
Reserve Fedline system) provided by a Bank Product Provider for the account of
Administrative Borrower or its Subsidiaries.



 1
 









“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.


“Adjusted LIBOR Rate”
means, with respect to each Interest Period for any LIBOR Rate Loan, the rate
per annum (rounded upwards, if necessary, to the next whole multiple of 1/16 of
1% per annum) determined by dividing (a) the LIBOR Rate for such Interest
Period by (b) a percentage equal to (i) 100% minus (ii) the Reserve
Percentage.  The Adjusted LIBOR Rate
shall be adjusted on and as of the effective day of any change in the Reserve
Percentage.


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


“Advances” means
the Revolving Advances and Seasonal Advances.


“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.


“Agent Advance”
has the meaning set forth in Section 2.1(i).


“Agent Loan” has
the meaning set forth in Section 2.1(h).


“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 Account”
has the meaning set forth in Section 2.8.


“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.



 2
 









“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.


“Amendment Fee” is
defined in the Fee Letter.


“Applicable Prepayment
Premium” means, as of any date of determination, an amount equal to (a) at
any time prior to June 28, 2008, 0.50% times the sum of the Maximum Amount, and
(b) at all times on or after June 28, 2008, there shall not be any
prepayment premium.


“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.


“Authorized Person”
means any officer or other authorized employee of a Borrower.


“Availability”
means, as of the date of determination, the result (so long as such result is a
positive number) of (a) the lesser of (i) the Borrowing Base or (ii) the
Maximum Amount, plus (b) Qualified Cash, minus (c) the Revolving
Facility Usage, minus (d) the Seasonal Overadvance Facility Usage.


“Average Excess
Availability” means, for the subject period, the aggregate of the amount of
Availability on each day in the subject period, divided by the number of days
in the subject period.


“Average Unused
Portion of Maximum Amount” means, as of any date of determination,
(a) an amount equal to the Maximum Amount, less (b) the
average Daily Balance of Obligations that were outstanding during the
immediately preceding month.


“Bank Product”
means any financial accommodation extended to Administrative Borrower or its
Subsidiaries by a Bank Product Provider (other than pursuant to this Agreement)
including but not limited to: (a) credit cards, (b) credit card processing
services, (c) debit cards, (d) purchase cards, (e) ACH Transactions, (f) cash
management, including controlled disbursement, accounts or services, or (g)
transactions under Hedge Agreements.


“Bank Product
Agreements” means those agreements entered into from time to time by
Administrative Borrower or its Subsidiaries with a Bank Product Provider in
connection with the obtaining of any of the Bank Products.


“Bank Product
Obligations” means all obligations, liabilities, contingent reimbursement
obligations, fees, and expenses owing by Administrative Borrower or its
Subsidiaries to any Bank Product Provider pursuant to or evidenced by the Bank
Product Agreements and irrespective of whether for the payment of money,
whether direct or



 3
 









indirect, absolute or
contingent, due or to become due, now existing or hereafter arising, and
including all such amounts that Administrative Borrower or its Subsidiaries are
obligated to reimburse to Agent or any member of the Lender Group as a result
of Agent or such member of the Lender Group purchasing participations from, or
executing indemnities or reimbursement obligations to, a Bank Product Provider
with respect to the Bank Products provided by such Bank Product Provider to
Administrative Borrower or its Subsidiaries.


“Bank Product Provider”
means the Agent, the Lenders, Wells Fargo Bank, National Association, or any of
their respective Affiliates.


“Bank Product Reserve”
means, as of any date of determination, the amount of reserves that Agent has
established (based upon the Bank Product Providers’ reasonable determination of
the credit exposure in respect of the Bank Products) in respect of Bank
Products then provided or outstanding.


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


“Benefit Plan”
means a “defined benefit plan” (as defined in Section 3(35) of ERISA) for which
any Borrower, any Subsidiary of any Borrower, or any ERISA Affiliate has been
an “employer” (as defined in Section 3(5) of ERISA) within the past six years.


“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.


“Borrowing” means
a borrowing hereunder consisting of Advances made on the same day by the
Lenders, or by Agent in the case of an Agent Loan or an Agent Advance.


“Borrowing Base”
has the meaning set forth in Section 2.1(a).


“Borrowing Base
Certificate” is defined in Section 6.4.


“Business Day”
means (a) any day that is not a Saturday, Sunday, or a day on which banks in
Boston, Massachusetts, are required or permitted to be closed, and (b) with
respect to all notices, determinations, fundings and payments in connection
with the LIBOR Rate or LIBOR Rate Loans, any day that is a Business Day
pursuant to clause (a) above and that is also a day on which trading in Dollars
is carried on by and between banks in the London interbank market.



 4
 









“Business Plan”
means (a) Parent’s and its Subsidiaries’ business plan for the Fiscal Year
ending on or about January 31, 2008 attached hereto as Exhibit B-1,
together with any amendment, modification, or revision to such business plan
approved by Agent, and (b) the Parent’s and its Subsidiaries’ business plan for
each subsequent Fiscal Year provided by Administrative Borrower to Agent in
accordance with the terms of Section 6.2 hereof, together with any
amendment, modification, or revision to any such business plan approved by
Agent.


“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.


“Capital Expenditures”
means the expenditure of funds or the incurrence of liabilities which may be
capitalized in accordance with GAAP, as then in effect as of the date of any
relevant determination.  If at any time a
change in GAAP or accounting method is implemented by the Borrowers which would
be applicable to accounting periods ending subsequent to February 3, 2007, the
testing of compliance by the Borrowers with any financial performance covenant
relating to Capital Expenditures shall be made as if no such accounting change
in GAAP or accounting method had been made (other than any such accounting
change specifically mentioned herein and taken into account in the setting of
any such covenant).


“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.


“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,



 5
 









(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).


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


“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.


“Commitment Increase”
is defined in Section 2.18.


“Commitment Increase
Date” is defined in Section 2.18.


“Commitment Increase
Fee” is defined in the Fee Letter.



 6
 









“Compliance Certificate”
means a certificate substantially in the form of Exhibit C-1 and
delivered by the chief accounting officer of Parent to Agent.


“Consolidated”
means, when used to modify a financial term, test, statement, or report of a
Person, the application or preparation of such term, test, statement or report
(as applicable) based upon the consolidation, in accordance with GAAP, of the
financial condition or operating results of such Person and its Subsidiaries.


“Consolidated EBITDA”
means, at any date of determination, an amount equal to the Consolidated Net
Income of the Loan Parties on a Consolidated basis for the most recently
completed Measurement Period, plus (a) the following to the extent deducted in
calculating such Consolidated Net Income: (i) Consolidated Interest Charges,
(ii) the provision for Federal, state, local and foreign income taxes, (iii)
depreciation and amortization expense and (iv) other non-recurring expenses
reducing such Consolidated Net Income which do not represent a cash item in such
period or any future period (in each case of or by the Loan Parties for such
Measurement Period), minus (b) the following to the extent included in
calculating such Consolidated Net Income: (i) Federal, state, local and foreign
income tax credits and (ii) all non-cash items increasing Consolidated Net
Income (in each case of or by the Loan Parties for such Measurement Period),
all as determined on a Consolidated basis in accordance with GAAP.


“Consolidated Interest
Charges” means, for any Measurement Period, the sum of (a) all interest,
premium payments, debt discount, fees, charges and related expenses in
connection with borrowed money (including capitalized interest) or in
connection with the deferred purchase price of assets, in each case to the extent
treated as interest in accordance with GAAP, (b) all interest paid or payable
with respect to discontinued operations and (c) the portion of rent expense
with respect to such period under capital lease obligations that is treated as
interest in accordance with GAAP, in each case of or by the Loan Parties for
the most recently completed Measurement Period, all as determined on a
Consolidated basis in accordance with GAAP.


“Consolidated Net
Income” means, as of any date of determination, the net income of the Loan
Parties for the most recently completed Measurement Period, all as determined
on a Consolidated basis in accordance with GAAP, provided, however, that there
shall be excluded (a) extraordinary gains and extraordinary losses for such
Measurement Period, (b) the income (or loss) of such Person during such
Measurement Period in which any other Person has a joint interest, except to
the extent of the amount of cash dividends or other distributions actually paid
in cash to such Person during such period, (c) the income (or loss) of such
Person during such Measurement Period and accrued prior to the date it becomes
a Subsidiary of a Person or any of such Person’s Subsidiaries or is merged into
or consolidated with a Person or any of its Subsidiaries or that Person’s
assets are acquired by such Person or any of its Subsidiaries, and (d) the
income of any direct or indirect Subsidiary of a Person to the extent that the
declaration or payment of dividends or similar distributions by that Subsidiary
of that income is not at the time permitted by operation of the terms of its
Governing Documents or any agreement, instrument, judgment, decree, order,
statute, rule or governmental regulation



 7
 









applicable to that
Subsidiary, except that the Parent’s equity in any net loss of any such
Subsidiary for such Measurement Period shall be included in determining
Consolidated Net Income.


“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.


“Defaulting Lender”
has the meaning set forth in Section 2.1(g)(ii).


“Defaulting Lenders
Rate” means the Reference Rate for the first three days from and after the
date the relevant payment is due and thereafter at the interest rate then applicable
to Advances.


“Designated Account”
means account number 20-3024941126-6 of Administrative Borrower maintained with
Administrative Borrower’s Designated Account Bank, or such other deposit
account of Administrative Borrower (located within the United States) which has
been designated, in writing and from time to time, by Administrative Borrower
to Agent.


“Designated Account
Bank” means Wachovia National Bank, whose office is located at 100 Fidelity
Plaza, North Brunswick, New Jersey 08905 and whose ABA number is 021200025.


“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.


“Documentation Agent”
means Wachovia Capital Finance Corporation (New England), a Massachusetts
corporation, solely in its capacity as Documentation Agent.


“Dollars or $”
means United States dollars.



 8
 









“Eligible Accounts”
means under Five (5) business day accounts due on a non-recourse basis
from major credit card processors (which, if due on account of a private label
credit card program, are deemed in the discretion of the Agent to be eligible).


“Eligible Inventory”
means Inventory consisting of first quality finished goods held for sale in the
ordinary course of the Borrowers’ business (other than inventory of Children’s
Place Canada), that is reasonably acceptable to Agent in all respects, that is
located at a Borrower’s premises identified on Schedule E-1 or that is
in transit to a Borrower if: (a) title to such Inventory has been transferred
to such Borrower, (b) the Inventory is insured to Agent’s reasonable
satisfaction and (c) documentation regarding such Inventory is reasonably
acceptable to Agent, and such Inventory strictly complies with all of
Borrowers’ representations and warranties to the Lender Group.  If Eligible Inventory is in transit to a
Borrower and has been acquired pursuant to a Letter of Credit, the Letter of
Credit must have been drawn upon. 
Eligible Inventory shall not include slow moving Inventory (as
determined in Agent’s reasonable business judgment based upon industry
practices), or obsolete items, restrictive or custom items, raw materials, work-in-process,
components that are not part of finished goods, spare parts, packaging and
shipping materials, supplies used or consumed in a Borrower’s business,
Inventory subject to a security interest or lien in favor of any third Person,
bill and hold goods, Inventory that is not subject to Agent’s perfected
security interests, defective goods (except for minor defects that do not
affect saleability), “seconds,” and Inventory acquired on consignment.


“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 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.



 9
 









“ERISA” means the
Employee Retirement Income Security Act of 1974, 29 U.S.C. §§ 1000 et seq.,
amendments thereto, successor statutes, and regulations or guidance promulgated
thereunder.


“ERISA Affiliate”
means any trade or business (whether or not incorporated) which, within the
meaning of Section 414 of the IRC, is: 
(i) under common control with any Borrower; (ii) treated, together with
any Borrower, as a single employer; (iii) treated as a member of an affiliated
service group of which any Borrower is also treated as a member; or (iv) is
otherwise aggregated with any Borrower for purposes of the employee benefits
requirements listed in IRC Section 414(m)(4).


“ERISA Event”
means (a) a Reportable Event with respect to any Benefit Plan or Multiemployer
Plan, (b) the withdrawal of any Borrower, any of its Subsidiaries or ERISA
Affiliates from a Benefit Plan during a plan year in which it was a
“substantial employer” (as defined in Section 4001(a)(2) of ERISA), (c) the
providing of notice of intent to terminate a Benefit Plan in a distress
termination (as described in Section 4041(c) of ERISA), (d) the institution by
the PBGC of proceedings to terminate a Benefit Plan or Multiemployer Plan, (e)
any event or condition (i) that provides a basis under Section 4042(a)(1), (2),
or (3) of ERISA for the termination of, or the appointment of a trustee to
administer, any Benefit Plan or Multiemployer Plan, or (ii) that may result in
termination of a Multiemployer Plan pursuant to Section 4041A of ERISA, (f) the
partial or complete withdrawal within the meaning of Sections 4203 and 4205 of
ERISA, of any Borrower, any of its Subsidiaries or ERISA Affiliates from a
Multiemployer Plan, or (g) providing any security to any Plan under Section
401(a)(29) of the IRC by any Borrower or its Subsidiaries or any of their ERISA
Affiliates.


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


“Existing Loan
Agreement” has the meaning set forth in the recitals to this Agreement.


“Fee Letter” means
that certain Fee Letter dated as of even date herewith entered into by and
between the Agent and the Borrowers, as amended and in effect from time to time.


“FEIN” means
Federal Employer Identification Number.


“Fiscal Month”
means months computed on the retail basis of four weeks, five weeks and four
weeks per fiscal quarter.


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


“Funding Date”
means the date on which a Borrowing occurs.


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



 10
 









“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 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.


“Hedge Agreement”
means any and all agreements, or documents now existing or hereafter entered
into by Administrative Borrower or its Subsidiaries that provide for an
interest rate, credit, commodity or equity swap, cap, floor, collar, forward
foreign exchange transaction, currency swap, cross currency rate swap, currency
option, or any combination of, or option with respect to, these or similar
transactions, for the purpose of hedging Administrative Borrower’s or its
Subsidiaries’ exposure to fluctuations in interest or exchange rates, loan,
credit exchange, security or currency valuations or commodity prices.



 11
 









“Increased Maximum
Amount” is defined in Section 2.18.


“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.


“Interest Period”
means, for any LIBOR Rate Loan, the period commencing on the Business Day such
LIBOR Rate Loan is disbursed or continued, or on the Business Day on which a
Reference Rate Loan is converted to such LIBOR Rate Loan, and ending on the
date that is one, two or three months thereafter, as selected by Administrative
Borrower and notified to Agent as provided in Sections 2.13(a) and (b).


“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.


“Inventory Reserves”
means reserves (determined from time to time by Agent in its discretion) for
(a) the estimated costs relating to unpaid freight charges, warehousing or
storage charges, taxes, duties, and other similar unpaid costs associated with
the



 12
 









acquisition of Eligible
Inventory that is in transit to a Borrower, plus (b) the estimated
reclamation claims of unpaid sellers of Inventory sold to Borrowers.


“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.


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


“L/C Demand Facility”
means that certain $60,000,000 letter of credit facility established by Wells
Fargo Retail Finance, LLC and certain other financial institutions providing
for the issuance of commercial letters of credit for the account of the
Borrowers pursuant to the terms of the L/C Demand Facility Letter of Credit
Agreement.


“L/C Demand Facility
Letter of Credit” means any letter of credit issued pursuant to the L/C
Demand Facility Letter of Credit Agreement for the purpose of providing the
primary payment mechanism in connection with the purchase of inventory.


“L/C Demand Facility
Letter of Credit Agreement” means that certain Letter of Credit Agreement
dated as of June 28, 2007 between, among others, the Borrowers, the 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.


“L/C Guaranty”
means a guaranty of payment with respect to letters of credit issued by an
issuing bank for the account of Parent or Services Company pursuant to this
Agreement.


“L/C Sublimit”
means $100,000,000.00, unless increased in accordance with Section 2.18
below (but in no event greater than $130,000,000.00).


“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 and Agent.


“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



 13
 









(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.  Notwithstanding anything to the
contrary set forth herein, the foregoing shall be subject to the limitations
set forth in Section 2.12(e).


“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 or an L/C Guaranty, as the context requires, issued pursuant to
this Agreement.


“LIBOR Rate”
means, with respect to the Interest Period for a LIBOR Rate Loan, the interest
rate per annum (rounded upwards, if necessary, to the next whole multiple of
1/16 of 1% per annum) at which United States dollar deposits are offered to
Wells Fargo (or its Affiliates) by major banks in the London interbank market
(or other LIBOR Rate market selected by Agent) on or about 11:00 a.m. (Boston
time) two Business Days prior to the commencement of such Interest Period in
amounts comparable to the amount of the LIBOR Rate Loans requested by and
available to Borrowers in accordance with this Agreement.


“LIBOR Rate Loans”
means any Advance (or any portion thereof) made or outstanding hereunder during
any period when interest on such Advance (or portion thereof) is payable based
on the Adjusted LIBOR Rate.


“LIBOR Rate Margin”
means 1.00%, and commencing with July 29, 2007 and at the end of each fiscal
quarter thereafter, the following levels corresponding to the following amounts
of Average Excess Availability for the immediately preceding fiscal quarter:



 14
 









 


	
  Average Excess Availability

  	
   

  	
  LIBOR Rate Margin

  	
   

  
	
  Greater than $40,000,000

  	
   

  	
  1.00

  	
  %

  
	
  Equal to or less than $40,000,000 and greater than
  $15,000,000

  	
   

  	
  1.25

  	
  %

  
	
  Less than or
  equal to $15,000,000

  	
   

  	
  1.50

  	
  %

  



 


“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 2.11.


“Loan Documents”
means this Agreement, the Bank Products Agreements, the Letters of Credit, the
Lockbox Agreements, 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.


“Loan Parties”
means, collectively, the Borrowers and the Guarantors.


“Lockbox Account”
shall mean a depositary account established pursuant to one of the Lockbox
Agreements.


“Lockbox Agreements”
means those certain Lockbox Operating Procedural Agreements and those certain
Depository Account Agreements, in form and substance satisfactory to Agent,
each of which is among Administrative Borrower, Agent, and one of the Lockbox
Banks.


“Lockbox Banks”
means Wachovia National Bank, or any replacement bank chosen by Borrowers and
acceptable to Agent.


“Lockboxes” has
the meaning set forth in Section 2.8.


“Material Adverse
Change” means (a) a material adverse change in the business,
prospects, operations, results of operations, assets, liabilities or condition
(financial or



 15
 









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.


“Maturity Date”
has the meaning set forth in Section 3.4.


“Maximum Amount”
means (i) $100,000,000.00, unless increased in accordance with Section 2.18
below (but in no event greater than $130,000,000.00), plus (ii) during the
Seasonal Overadvance Period, the Seasonal Overadvance Amount.


“Measurement Period”
means, at any date of determination, the most recently completed twelve Fiscal
months of the Parent.


“Multiemployer Plan”
means a “multiemployer plan” (as defined in Section 4001(a)(3) of ERISA)
to which Parent, any of its Subsidiaries, or any ERISA Affiliate has
contributed, or was obligated to contribute, within the past six years.


“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.


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


“NRLV” means at
any time of determination thereof, the ratio, expressed as a percentage, of the
net retail liquidation value of Borrowers’ Inventory divided by the retail
value of such Inventory, all as set forth in the most recent appraisal
delivered to, and approved by Agent.


“Obligations”
means (a) all loans, Advances, debts, principal, interest (including any
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



 16
 









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, and
(b) all Bank Product Obligations. 
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).


“Overadvance” has
the meaning set forth in Section 2.6.


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


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


“PBGC” means the
Pension Benefit Guaranty Corporation as defined in Title IV of ERISA, or any
successor thereto.


“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 7.1 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 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



 17














Group’s Lien thereon or
therein, or materially interfere with the ordinary conduct of the business of
Borrowers, and (k) liens securing the L/C Demand Facility.


“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.


“Plan” means any
employee benefit plan, program, or arrangement maintained or contributed to by
any Borrower or with respect to which it may incur liability.


“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.


“Qualified Cash”
means, as of any date of determination, the amount of unrestricted cash of the
Borrowers that is (a) deposited in an account of the Borrowers maintained with
the Agent, which account is subject to a valid, enforceable and first priority
perfected security interest in favor of the Agent pursuant to a control
agreement, in form and substance satisfactory to the Agent, providing that,
among other things, no amounts may be withdrawn or disbursed from the account
to any Person without the prior written consent of the Agent, and (b) not
subject to any Lien, except in favor of the Agent.


“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.


“Reference Rate Loans”
means any advance (or portion thereof) made or outstanding hereunder during any
period when interest on such Advance is payable based on the Reference Rate.



 18
 








“Reportable Event”
means any of the events described in Section 4043(c) of ERISA or the
regulations thereunder other than a Reportable Event as to which the provision
of 30 days notice to the PBGC is waived under applicable regulations.


“Required Lenders”
means, at any time, Lenders whose Pro Rata Shares aggregate 50.1% or more of
the Commitments; provided, however, that in connection with the
providing of consent for (i) payment by the Borrowers of any of their
indemnification obligations to the Walt Disney Companies, as set forth in Section
7.16, below, Required Lenders shall mean Lenders whose Pro Rata Shares
aggregate 66 2/3% or more of the Commitments, and (ii) postponement of the time
for repayment of the Seasonal Overadvance Facility, Required Lenders shall mean
all of the Lenders, unanimously.


“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 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.


“Reserve Percentage”
for any Interest Period means, as of the date of determination thereof, the
maximum percentage (rounded upward, if necessary to the nearest 1/100th of 1%),
as determined by Agent (or its Affiliates) in accordance with its (or their)
usual procedures (which determination shall be conclusive in the absence of
manifest error), that is in effect on such date as prescribed by the Board of
Governors of the Federal Reserve System for determining the reserve
requirements (including supplemental, marginal, and emergency reserve
requirements) with respect to eurocurrency funding (currently referred to as
“eurocurrency liabilities”) having a term equal to such Interest Period by
Agent or its Affiliates.


“Retiree Health Plan”
means an “employee welfare benefit plan” within the meaning of Section 3(1)
of ERISA that provides benefits to individuals after termination of their
employment, other than as required by Section 601 of ERISA.


“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 Advances”
has the meaning set forth in Section 2.1(a).


“Revolving Facility
Usage” means, as of any date of determination, the aggregate amount of
Revolving Advances and undrawn or unreimbursed Letters of Credit outstanding.


“Seasonal Advances”
has the meaning set forth in Section 2.1(b).



 19
 








“Seasonal Overadvance
Amount” means up to $20,000,000.00 at any one time outstanding.


“Seasonal Overadvance
Conditions” means, at the time of any request for a Seasonal Advance under
the Seasonal Overadvance Facility, that (a) no Default or Event of Default then
exists or would arise as a result of the making of such Seasonal Advance, and
(b) the Loan Parties’ Consolidated EBITDA, on a trailing twelve (12) month
basis based upon the most recent financial statements furnished, and as
projected on a pro-forma basis for the remainder of the Seasonal Overadvance
Period then in effect, will be equal to or greater than $130,000,000.00.  Simultaneously with any request for a
Seasonal Advance under the Seasonal Overadvance Facility, the Borrowers shall
deliver to the Agent evidence of satisfaction of the conditions contained in
clause (b) above on a basis reasonably satisfactory to the Agent.


“Seasonal Overadvance
Facility” means a permanent facility to be maintained by the Lenders for
the benefit of the Borrowers during the Seasonal Overadvance Period in an
amount up to the Seasonal Overadvance Amount, as set forth in Section 2.1(b).  Advances under the Seasonal Overadvance
Facility shall be available to the Borrowers if, and only if, the Borrowers
have satisfied the Seasonal Overadvance Conditions.


“Seasonal Overadvance
Facility Usage” means, as of any date of determination, the aggregate
amount of Seasonal Advances outstanding.


“Seasonal Overadvance
Period” means the period from July 1st through October 31st of
each year during the term of this Agreement.


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


“Settlement” has
the meaning set forth in Section 2.1(j)(i).


“Settlement Date”
has the meaning set forth in Section 2.1(j)(i).


“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



 20
 








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 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.


“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 and other than any Bank
Product Obligations that, at such time, are allowed by the applicable Bank
Product Provider to remain outstanding and are not required to be repaid or
cash collateralized pursuant to the provisions of this Agreement.  Section, subsection, clause,



 21
 








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.


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


2.                                      LOAN
AND TERMS OF PAYMENT.


2.1                               Revolving
Advances.


(a)                                  Amounts.  Subject to the terms and conditions of this
Agreement, each Lender agrees to make advances (“Revolving Advances”) to
the Borrowers in an amount at any one time outstanding not to exceed such
Lender’s Pro Rata Share of an amount equal to the lesser of (i) the Maximum
Amount (other than with respect to the Seasonal Overadvance Amount) less the
sum of (A) the principal balance of all Revolving Advances then outstanding and
(B) the aggregate amount of all undrawn or unreimbursed Letters of Credit, or
(ii) the Borrowing Base less the sum of (A) the principal balance of all
Revolving Advances then outstanding and (B) the aggregate amount of all undrawn
or unreimbursed Letters of Credit.  For
purposes of this Agreement, “Borrowing Base” as of any date of determination,
shall mean the result of:


(i)                                     90% of Eligible
Accounts, plus


(ii)                                  30% of the retail
value of Borrowers’ Eligible Inventory, not to exceed 90% of the NRLV of
Borrowers’ gross Inventory for months other than June through November of each
year and 95% of the NRLV of Borrowers’ gross Inventory for the months of June
through November of each year; plus


(iii)                               an amount equal to 70%
of the Borrowers’ cost of Inventory to be acquired pursuant to outstanding
Commercial Letters of Credit (except that Inventory acquired pursuant to
Canadian Letters of Credit shall not be included in this Section).  Such Commercial Letters of Credit must not
allow partial draws unless such draws are for finished goods Inventory
concurrently transferred to a Borrower, and draws thereunder must require
documentation reflecting the transfer of title to such Borrower (in form and
substance satisfactory to Agent) of first quality finished goods Inventory
conforming to such Borrower’s contract with the seller; less


(iv)                              the aggregate amount of
reserves, if any, established by Agent under Sections 2.1(c), 6.14
and 10.


(b)                                 Seasonal
Overadvance Facility.  Subject to the
terms and conditions of this Agreement, in addition to the Revolving Advances
to be made pursuant to Section 2.1(a), above, the Lenders  agree to make advances (“Seasonal Advances”) (on a
pro rata basis in accordance with Schedule C-1), to the Borrowers in an
amount at any one time outstanding not to exceed an amount equal to the
Seasonal Overadvance Amount less the aggregate amount of all Seasonal
Advances outstanding under the Seasonal Overadvance Facility.



 22
 








(i)                                     The Seasonal
Overadvance Facility shall be in place, effective, and available to the
Borrowers for the making of Seasonal Advances thereunder during the Seasonal
Overadvance Period.


(ii)                                  Advances under the
Seasonal Overadvance Facility shall be made upon request by the Borrowers, in
accordance with Section 2.1(e), below, and shall be available in up to
four (4) tranches, in the minimum amount of $5,000,000.00 each.


(iii)                               Seasonal Advances under
the Seasonal Overadvance Facility shall be secured by the Collateral and shall
constitute Advances and Obligations hereunder.


(iv)                              All Obligations
outstanding under the Seasonal Overadvance Facility shall be paid in full in
immediately available funds, without demand, notice, or protest, on or before
5:00 p.m. (Boston time) on the last day of the Seasonal Overadvance Period then
in effect.


(c)                                  Reserves.  Anything to the contrary in this Section
2.1 notwithstanding, the Agent may (i) reduce the advance rates based upon
Eligible Accounts and Eligible Inventory without declaring an Event of Default
if it determines in its reasonable business judgment that there has occurred a
Material Adverse Change; and (ii) establish reserves (including Inventory Reserves)
against the Borrowing Base in such amounts as Agent in its reasonable judgment
(from the perspective of an asset-based lender) shall deem necessary or
appropriate, including reserves on account of (y) sums that Borrowers are
required to pay (such as taxes, assessments, insurance premiums, or, in the
case of leased assets, rents or other amounts payable under such leases) and
has failed to pay under any section of this Agreement or any other Loan
Document and (z) without duplication of the foregoing, amounts owing by
Borrowers to any Person to the extent secured by a Lien on, or trust over, any
of the Collateral, which Lien or trust, in the reasonable determination of
Agent (from the perspective of an asset-based lender), would be likely to have
a priority superior to the Liens of Agent (such as landlord liens, ad valorem
taxes, or sales taxes where given priority under applicable law) in and to such
item of the Collateral.  Without limiting
the foregoing, upon the earlier of (i) the occurrence of an event of default
under the L/C Demand Facility or (ii) the Termination Date of the L/C Demand
Facility (as defined therein), the Agent may, and at the request of the agent
under the L/C Demand Facility will, establish reserves against the Borrowing
Base in an amount up to the undrawn and unreimbursed amount of all L/C Demand
Facility Letters of Credit then outstanding under the L/C Demand Facility; provided,
however, that the Agent shall not establish such reserves if and to the
extent that the Borrowers have provided cash collateral or other security for
such L/C Demand Facility Letters of Credit in accordance with the terms and
conditions of Section 2.6 of the L/C Demand Facility Letter of Credit
Agreement.


(d)                                 Revolving Nature.  Amounts borrowed pursuant to this Section 2.1
may be repaid and, subject to the terms and conditions of this Agreement,
reborrowed at any time during the term of this Agreement.


(e)                                  Procedure for
Borrowing.  Each Borrowing shall be
made upon Administrative Borrower’s irrevocable request therefor delivered to
Agent (which notice must be



 23
 








received by Agent (i) no later than 2:00 p.m. (Boston time) on the
Funding Date, if such advance is for $20,000,000 or less, or (ii) no later than
2:00 p.m. (Boston time) (A) three Business Days prior to the Funding Date of
any Borrowing of, conversion to, or continuation of, LIBOR Rate Loans, and (B)
one Business Day prior to the requested Funding Date of any Borrowing of
Reference Rate Loans, if such advance is for more than $20,000,000) specifying (i)
the amount of the Borrowing; and (ii) the requested Funding Date, which shall
be a Business Day.


(f)                                    Agent’s Election.  Promptly after receipt of a request for a
Borrowing pursuant to Section 2.1(e) in excess of $20,000,000, the Agent
shall elect, in its discretion, (i) to have the terms of Section 2.1(g)
apply to such requested Borrowing, or (ii) to make an Agent Loan pursuant to
the terms of Section 2.1(h) in the amount of the requested
Borrowing.  Any requested Borrowing of
$20,000,000 or less shall be made as an Agent Loan pursuant to the terms of Section
2.1(h).


(g)                                 Making of Advances.


(i)                                     In the event that
Agent shall elect to have the terms of this Section 2.1(g) apply to
a requested Borrowing in excess of $20,000,000 as described in Section 2.1(f),
then promptly after receipt of a request for a Borrowing pursuant to Section 2.1(e),
Agent shall notify the Lenders, not later than 4:00 p.m. (Boston time) on the
Business Day on which such request for Borrowing pursuant to Section 2.1(e) is
received by Agent, by telephone and promptly followed by telecopy, or other
similar form of transmission, of the requested Borrowing.  Each Lender shall make the amount of such
Lender’s Pro Rata Share of the requested Borrowing available to the Agent in
same day funds, to such account of the Agent as the Agent may designate, not
later than 2:00 p.m. (Boston time) on the Funding Date applicable thereto.  After the Agent’s receipt of the proceeds of
such Advances, upon satisfaction of the applicable conditions precedent set
forth in Sections 3.1 and 3.2, the Agent shall make the proceeds
of such Advances available to Borrowers on the applicable Funding Date by
transferring same day funds equal to the proceeds of such Advances received by
the Agent to the Designated Account; provided, however, that,
subject to the provisions of Section 2.1(m), the Agent shall not request
any Lender to make, and no Lender shall have the obligation to make, any
Advance if the Agent shall have received written notice from any Lender, or
otherwise has actual knowledge, that (A) one or more of the applicable
conditions precedent set forth in Sections 3.1 or 3.2 will not be
satisfied on the requested Funding Date for the applicable Borrowing, or (B)
the requested Borrowing would exceed the Availability on such Funding Date.


(ii)                                  Unless Agent receives
notice from a Lender on or prior to the Closing Date or, with respect to any
Borrowing after the Closing Date, at least one Business Day prior to the date
of such Borrowing, that such Lender will not make available as and when
required hereunder to Agent for the account of Borrowers the amount of that
Lender’s Pro Rata Share of the Borrowing, Agent may assume that each Lender has
made or will make such amount available to Agent in immediately available funds
on the Funding Date and Agent may (but shall not be so required), in reliance
upon such assumption, make available to Borrowers on such date a corresponding
amount.  If and to the extent any Lender
shall not have made its full amount available to Agent in immediately available
funds and Agent in such circumstances has made available to Borrowers such
amount, that Lender shall on the Business Day following such



 24
 








Funding Date make such amount available to Agent, together with
interest at the Defaulting Lenders Rate for each day during such period.  A notice from Agent submitted to any Lender
with respect to amounts owing under this subsection shall be conclusive, absent
manifest error.  If such amount is paid
to Agent such payment to Agent shall constitute such Lender’s Advance on the
date of Borrowing for all purposes of this Agreement.  If such amount is not paid to Agent on the
Business Day following the Funding Date, Agent will notify Administrative
Borrower of such failure to fund and, upon demand by Agent, Borrowers shall pay
such amount to Agent for Agent’s account, together with interest thereon for
each day elapsed since the date of such Borrowing, at a rate per annum equal to
the interest rate applicable at the time to the Advances composing such Borrowing.  The failure of any Lender to make any Advance
on any Funding Date shall not relieve any other Lender of any obligation
hereunder to make an Advance on such Funding Date, but no Lender shall be
responsible for the failure of any other Lender to make the Advance to be made
by such other Lender on any Funding Date. 
Any Lender that fails to make any Advance that it is required to make
hereunder on any Funding Date and that has not cured such failure by making
such Advance within one Business Day after written demand upon it by Agent to
do so, shall constitute a “Defaulting Lender” for purposes of this Agreement
until such Advance is made.


(iii)                               Agent shall not be
obligated to transfer to a Defaulting Lender any payments made by Borrowers to
Agent for the Defaulting Lender’s benefit; nor shall a Defaulting Lender be
entitled to the sharing of any payments hereunder.  Amounts payable to a Defaulting Lender shall
instead be paid to or retained by Agent. 
Agent may hold and, in its discretion, re-lend to Borrowers the amount
of all such payments received or retained by it for the account of such
Defaulting Lender.  Solely for the
purposes of voting or consenting to matters with respect to the Loan Documents
and determining Pro Rata Shares, such Defaulting Lender shall be deemed not to
be a “Lender” and such Defaulting Lender’s Commitment shall be deemed to be
zero.  This section shall remain
effective with respect to such Defaulting Lender until (A) the Obligations under
this Agreement shall have been declared or shall have become immediately due
and payable or (B) the requisite non-Defaulting Lenders, Agent, and Borrowers
shall have waived such Defaulting Lender’s default in writing.  The operation of this section shall not be
construed to increase or otherwise affect the Commitment of any non-Defaulting
Lender, or relieve or excuse the performance by Borrowers of their duties and
obligations hereunder.


(h)                                 Making of Agent
Loans.


(i)                                     In the event the
Agent shall elect to have the terms of this Section 2.1(h) apply to
a requested Borrowing in excess of $20,000,000 as described in Section 2.1(f)
or in the event of any requested Borrowing of $20,000,000 or less, Agent shall
make an Advance in the amount of such Borrowing (any such Advance made solely
by Agent pursuant to this Section 2.1(h) being referred to as an “Agent
Loan” and such Advances being referred to collectively as “Agent Loans”)
available to Borrowers on the Funding Date applicable thereto by transferring
same day funds to Administrative Borrower’s Designated Account.  Each Agent Loan is an Advance hereunder and
shall be subject to all the terms and conditions applicable to other Advances,
except that all payments thereon shall be payable to Agent solely for its own
account (and for the account of the holder of any participation interest with
respect to such Advance).  Subject to the
provisions of Section 2.1(m), the Agent shall not make any Agent



 25
 








Loan if the Agent shall have received written notice from any Lender,
or otherwise has actual knowledge, that (i) one or more of the applicable
conditions precedent set forth in Sections 3.1 or 3.2 will not be
satisfied on the requested Funding Date for the applicable Borrowing, or (ii)
the requested Borrowing would exceed the Availability on such Funding Date.  Agent shall not otherwise be required to
determine whether the applicable conditions precedent set forth in Sections
3.1 or 3.2 have been satisfied on the Funding Date applicable
thereto prior to making, in its sole discretion, any Agent Loan.


(ii)                                  The Agent Loans shall
be secured by the Collateral and shall constitute Advances and Obligations
hereunder, and shall bear interest at the rate applicable from time to time to
Obligations pursuant to Section 2.7.


(i)                                     Agent Advances.


(i)                                     Agent hereby is
authorized by Borrowers and the Lenders, from time to time in Agent’s sole
discretion, (1) after the occurrence of a Default or an Event of Default
(but without constituting a waiver of such Default or Event of Default), or
(2) at any time that any of the other applicable conditions precedent set
forth in Section 3.1 or 3.2 have not been satisfied, to make
Advances to Borrowers on behalf of the Lenders which Agent, in its reasonable
business judgment, deems necessary or desirable (A) to preserve or protect
the Collateral, or any portion thereof (other than the Bank Product
Obligations), (B) to enhance the likelihood of, or maximize the amount of,
repayment of the Obligations, or (C) to pay any other amount chargeable to
Borrowers pursuant to the terms of this Agreement, including Lender Group
Expenses and the costs, fees, and expenses described in Section 10
(any of the Advances described in this Section 2.1(i) being
hereinafter referred to as “Agent Advances”); provided  that
Agent shall not make any Agent Advances to Borrowers without the consent of all
of the Lenders if the amount thereof would exceed $20,000,000 in the aggregate
at any one time; and provided  further that in no event shall
Agent make any Agent Advance if, after giving effect thereto, the outstanding
Revolving Facility Usage (except for and excluding amounts charged to the
applicable Loan Account for interest, fees, or Lender Group Expenses) would
exceed the Maximum Amount.


(ii)                                  Agent Advances shall
be repayable on demand and secured by the Collateral, shall constitute Advances
and Obligations hereunder, and shall bear interest at the rate applicable from
time to time to the Obligations pursuant to Section 2.7.


(j)                                     Settlement.  It is agreed that each Lender’s funded
portion of the Advances is intended by the Lenders to be equal at all times to
such Lender’s Pro Rata Share of the outstanding Advances.  Such agreement notwithstanding, the Agent and
the Lenders agree (which agreement shall not be for the benefit of or
enforceable by Borrowers) that in order to facilitate the administration of
this Agreement and the other Loan Documents, settlement among them as to the
Advances, the Agent Loans, and the Agent Advances shall take place on a
periodic basis in accordance with the following provisions:


(i)                                     The Agent shall
request settlement (“Settlement”) with the Lenders on a weekly basis, or
on a more frequent basis if so determined by the Agent, (1) for itself, with



 26
 








respect to each Agent Loan and Agent Advance, and (2) with respect to
Collections received, as to each by notifying the Lenders by telephone and
promptly followed by telecopy, or other similar form of transmission, of such
requested Settlement, no later than 1:00 p.m. (Boston time) on the Business Day
immediately preceding the date of such requested Settlement (the “Settlement
Date”).  Such notice of a Settlement
Date shall include a summary statement of the amount of outstanding Advances,
Agent Loans, and Agent Advances for the period since the prior Settlement Date,
the amount of repayments received in such period, and the amounts allocated to
each Lender of the principal, interest, fees, and other charges for such
period.  Subject to the terms and
conditions contained herein:  (y) if a
Lender’s balance of the Advances, Agent Loans, and Agent Advances exceeds such
Lender’s Pro Rata Share of the Advances, Agent Loans, and Agent Advances as of
a Settlement Date, then Agent shall by no later than 1:00 p.m. (Boston time) on
the Settlement Date transfer in same day funds to the account of such Lender as
Lender may designate, an amount such that each such Lender shall, upon receipt
of such amount, have as of the Settlement Date, its Pro Rata Share of the
Advances, Agent Loans, and Agent Advances; and (z) if a Lender’s balance of the
Advances, Agent Loans, and Agent Advances is less than such Lender’s Pro Rata
Share of the Advances, Agent Loans, and Agent Advances as of a Settlement Date,
such Lender shall no later than 1:00 p.m. (Boston time) on the Settlement Date
transfer in same day funds to such account of the Agent as the Agent may
designate, an amount such that each such Lender shall, upon transfer of such
amount, have as of the Settlement Date, its Pro Rata Share of the Advances,
Agent Loans, and Agent Advances.  Such
amounts made available to the Agent under clause (z) of the immediately
preceding sentence shall be applied against the amounts of the applicable Agent
Loan or Agent Advance and, together with the portion of such Agent Loan or
Agent Advance representing each Lender’s Pro Rata Share thereof, shall
constitute Advances of such Lenders.  If
any such amount is not made available to the Agent by any Lender on the
Settlement Date applicable thereto to the extent required by the terms hereof,
the Agent shall be entitled to recover for its account such amount on demand
from such Lender together with interest thereon at the Defaulting Lenders Rate.


(ii)                                  In determining
whether a Lender’s balance of the Advances, Agent Loans, and Agent Advances is
less than, equal to, or greater than such Lender’s Pro Rata Share of the
Advances, Agent Loans, and Agent Advances as of a Settlement Date, Agent shall,
as part of the relevant Settlement, apply to such balance the portion of
payments actually received by Agent with respect to principal, interest, fees payable
by Borrowers and allocable to the Lenders hereunder, and proceeds of
Collateral.  To the extent that a net
amount is owed to any such Lender after such application, such net amount shall
be distributed by Agent to that Lender as part of such Settlement.


(iii)                               Between Settlement
Dates, the Agent, to the extent no Agent Advances or Agent Loans are
outstanding, may pay over to Lenders any payments received by the Agent, which
in accordance with the terms of the Agreement would be applied to the reduction
of the Advances, for application to Lenders’ Pro Rata Share of the
Advances.  If, as of any Settlement Date,
Collections received since the then immediately preceding Settlement Date have
been applied to Lenders’ Pro Rata Share of the Advances other than to Agent
Loans or Agent Advances, as provided for in the previous sentence, Lenders
shall pay to the Agent for the accounts of the Lenders, and Agent shall pay to
the Lenders, to be applied to the outstanding



 27
 








Advances of such Lenders, an amount such that each Lender shall, upon
receipt of such amount, have, as of such Settlement Date, its Pro Rata Share of
the Advances.  During the period between
Settlement Dates, the Agent with respect to Agent Loans and Agent Advances, and
each Lender with respect to the Advances other than Agent Loans and Agent
Advances, shall be entitled to interest at the applicable rate or rates payable
under this Agreement on the daily amount of funds employed by the Agent or the
Lenders, as applicable.


(k)                                  Notation.  The Agent shall record on its books the
principal amount of the Advances owing to each Lender, including the Agent
Loans and Agent Advances owing to the Agent, and the interests therein of each
Lender, from time to time.  In addition,
each Lender is authorized, at such Lender’s option, to note the date and amount
of each payment or prepayment of principal of such Lender’s Advances in its
books and records, including computer records, such books and records
constituting rebuttably presumptive evidence, absent manifest error, of the
accuracy of the information contained therein.


(l)                                     Lenders’
Failure to Perform.  All Advances
(other than Agent Loans and Agent Advances) shall be made by the Lenders
simultaneously and in accordance with their Pro Rata Shares.  It is understood that (i) no Lender shall be
responsible for any failure by any other Lender to perform its obligation to
make any Advances hereunder, nor shall any Commitment of any Lender be
increased or decreased as a result of any failure by any other Lender to perform
its obligation to make any Advances hereunder, and (ii) no failure by any
Lender to perform its obligation to make any Advances hereunder shall excuse
any other Lender from its obligation to make any Advances hereunder.


(m)                               Overadvances.  In addition to any Agent Advances which may
be made in accordance with Section 2.1(i), above, the Agent may make voluntary
Overadvances without the written consent of the Required Lenders for amounts
charged to the applicable Loan Account for interest, fees or Lender Group
Expenses pursuant to Section 2.1(i)(i)(2)(C).  If the conditions for borrowing under
Section 3.2(d) cannot be fulfilled, the Agent may, but is not obligated
to, knowingly and intentionally continue to make Advances (without limiting the
ability of the Agent to make Agent Loans) to Borrowers, such failure of
condition notwithstanding, so long as, at any time, (i) the outstanding
Revolving Facility Usage would not exceed the Borrowing Base for more than 60
consecutive days or more than once in any 180 day period, and the maximum
outstanding overadvance amount shall not exceed $2,000,000, without the consent
of all of the Lenders, and (ii) the outstanding Revolving Facility Usage
(except for and excluding amounts charged to the applicable Loan Account for interest,
fees, or Lender Group Expenses) does not exceed the Maximum Amount.  The foregoing provisions are for the sole and
exclusive benefit of the Agent and the Lenders and are not intended to benefit
Borrowers in any way.  The Advances that
are made pursuant to this Section 2.1(m) shall be subject to the same
terms and conditions as any other Agent Advance or Agent Loan, as applicable,
except that the rate of interest applicable thereto shall be the rates set
forth in Section 2.7(c)(i) without regard to the presence or absence of a
Default or Event of Default.


Each Lender shall be
obligated to settle with Agent as provided in Section 2.1(j) for
the amount of such Lender’s Pro Rata Share of any Overadvances made as
permitted under this Section 2.1(m).



 28
 








(n)                                 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 make additional loans or provide additional financial
accommodations under the Loan Documents 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).


2.2                               Letters
of Credit.


(a)                                  Agreement to Cause
Issuance; Amounts; Outside Expiration Date. 
Subject to the terms and conditions of this Agreement, Agent agrees to
issue Letters of Credit pursuant to this Agreement; provided, however,
Parent or Services Company shall have the right to cause Canadian Letters of
Credit to be issued pursuant to this Agreement; provided  further
that, so long as the L/C Demand Facility is in effect, no written notice of
termination has been delivered by either the Administrative Borrower or the
agent under the L/C Demand Facility in accordance with the terms thereof and
the Borrowers are otherwise entitled to the issuance of L/C Demand Facility
Letters of Credit under the L/C Demand Facility, no Commercial Letters of
Credit shall be issued under this Agreement unless, at the time any such
Commercial Letter of Credit is requested hereunder, the maximum amount
available to be drawn under such Commercial Letter of Credit exceeds the
maximum amount available to be issued under the L/C Demand Facility (in which
case, subject to the terms and conditions set forth herein, the requested
Commercial Letter of Credit shall be issued under this Agreement).  Agent shall have no obligation to issue a
Letter of Credit if any of the following would result:


(i)                                     The aggregate
amount of:


(A)                              all
undrawn and unreimbursed Letters of Credit would exceed the L/C Sublimit; or


(B)                                all
undrawn and unreimbursed Canadian Letters of Credit would exceed $10,000,000;
or


(ii)                                  100% of the aggregate
amount of all undrawn and unreimbursed Letters of Credit would exceed the
Borrowing Base less the amount of outstanding Revolving Advances (including any
Agent Advances and Agent Loans); or


(iii)                               the aggregate amount of
all undrawn or unreimbursed Letters of Credit would exceed the Maximum Amount
(without giving effect to the Seasonal Overadvance Amount) less the amount of
outstanding Revolving Advances (including any Agent Advances and Agent Loans).


Borrowers expressly
understand and agree that Agent shall have no obligation to arrange for the
issuance by issuing banks of the letters of credit that are to be the subject
of L/C Guarantees.  Borrowers and the
Lender Group acknowledge and agree that certain of the letters of credit that
are to be the subject of L/C Guarantees may be issued and outstanding on the
Closing Date.  Each Letter of Credit
shall have an expiry date no later than the date on which this Agreement is



 29
 








scheduled to terminate
under Section 3.4 (without regard to any potential renewal term)
and all such Letters of Credit shall be in form and substance acceptable to
Agent in its sole discretion.  If Agent
notifies Parent on or before 1:00 p.m. Boston time on any Business Day that the
Lender Group is obligated to advance funds under a Letter of Credit, Borrowers
shall reimburse such amount to Agent on the same Business Day.  If Agent notifies Parent after 1:00 p.m.
Boston time on any Business Day that the Lender Group is obligated to advance
funds under a Letter of Credit, Borrowers shall reimburse such amount to Agent
by 10:00 a.m. Boston time on the then next Business Day.  In the absence of such reimbursement, the
amount so advanced immediately and automatically shall be deemed to be an
Advance hereunder and, thereafter, shall bear interest at the rate then
applicable to Advances under Section 2.7.


(b)                                 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.  Each Borrower understands that the L/C
Guarantees may require the Lender Group to indemnify the issuing bank for
certain costs or liabilities arising out of claims by Borrowers against such
issuing bank.  Each Borrower hereby
agrees to indemnify, save, defend, and hold the Lender Group harmless with
respect to any loss, cost, expense (including reasonable attorneys fees), or
liability incurred by the Lender Group under any L/C Guaranty as a result of
the Lender Group’s indemnification of any such issuing bank.


(c)                                  Supporting
Materials.  Borrowers hereby
authorize and direct any bank that issues a letter of credit guaranteed by an L/C
Guaranty to deliver to Agent all instruments, documents, and other writings and
property received by the issuing bank pursuant to such letter of credit, and to
accept and rely upon Agent’s instructions and agreements with respect to all
matters arising in connection with such letter of credit and the related
application.  A Borrower may or may not
be the “applicant” or “account party” with respect to such letter of credit.


(d)                                 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 2.7(b)),
and costs relating to any L/C or to the letters of credit guaranteed by an L/C
Guaranty.


(e)                                  Indemnification.  Immediately upon the termination of this
Agreement, Borrowers agree to either (i) provide cash collateral to be held by
Agent in an amount equal to 105% of the maximum amount of the Lender Group’s
obligations under outstanding Letters of Credit, or (ii) cause to be delivered
to Agent releases of all of the Lender Group’s obligations under outstanding
Letters of Credit.  At Agent’s
discretion, any proceeds of Collateral received



 30
 








by Agent after the occurrence and during the continuation of an Event
of Default may be held as the cash collateral required by this Section
2.2(e).


(f)                                    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 2.7(a) or (c)(i), as
applicable.  The determination by the
issuing bank or Agent, as the case may be, of any amount due pursuant to this Section 2.2(f),
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.


(g)                                 Participations.


(i)                                     Purchase of
Participations.  Immediately upon
issuance of any Letter of Credit in accordance with this Section 2.2,
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



 31
 








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.


(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.


2.3                               Intentionally
Omitted.


2.4                               Intentionally
Omitted.


2.5                               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.  Except as otherwise expressly provided
herein, all payments by Borrowers shall be made to Agent for the account of the
Lenders or Agent, as the case may be, at Agent’s address set forth in Section 12,
and shall be made in immediately available funds, no later than 2:00 p.m.
(Boston time) on the date specified herein. 
Any payment received by Agent later than 2:00 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.



 32















(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
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 with respect to Defaulting Lenders and 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,


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,
to pay interest due in respect of all Agent Advances, until paid in full,


F.                                      sixth,
ratably to pay interest due in respect of the Advances (other than Agent
Advances) until paid in full,



 33
 









G.                                     seventh,
to pay the principal of all Agent Advances until paid in full,


H.                                    eighth,
so long as no Event of Default has occurred and is continuing, to pay (i) first,
the entire principal of all Seasonal Advances (or, if less, the portion of the
Seasonal Advances that is then required to be repaid hereunder), and (ii) second,
the principal of all Revolving Advances until paid in full,


I.                                         ninth,
so long as no Event of Default has occurred and is continuing, and at Agent’s
election (which election Agent agrees will not be made if an Overadvance would
be created thereby), to pay amounts then due and owing by Administrative
Borrower or its Subsidiaries in respect of Bank Products, until paid in full,


J.                                        tenth,
if an Event of Default has occurred and is continuing, first, to pay the
principal of all Revolving Advances until paid in full, second, to the
Agent, to be held by the Agent, for the ratable benefit of those Lenders having
a Commitment, as cash collateral in an amount up to 105% of the then extant
Letters of Credit until paid in full, third, to pay the principal of all
Seasonal Advances under the Seasonal Overadvance Facility, and fourth,
to the Agent, to be held by the Agent, for the benefit of the Bank Product
Providers, as cash collateral in an amount up to the amount of the Bank Product
Reserve established prior to the occurrence of, and not in contemplation of,
the subject Event of Default until Administrative Borrower’s and its
Subsidiaries’ obligations in respect of the then outstanding Bank Products have
been paid in full or the cash collateral amount has been exhausted,


K.                                    eleventh,
if an Event of Default has occurred and is continuing, to pay any other
Obligations (including the provision of amounts to Agent, to be held by Agent,
for the benefit of the Bank Product Providers, as cash collateral in an amount
up to the amount determined by Agent in its discretion as the amount necessary
to secure Administrative Borrower’s and its Subsidiaries’ obligations in
respect of the then outstanding Bank Products), and


L.                                      twelfth,
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, subject to a Settlement delay as provided in Section 2.1(j).


(iii)                               In each instance, so
long as no Event of Default has occurred and is continuing, this Section 2.5(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,



 34
 









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 2.5
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 2.5 shall control and govern.


2.6                               Overadvances. 
If, at any time or for any reason, the amount of Obligations owed by
Borrowers to the Lender Group pursuant to Sections 2.1 and 2.2 is
greater than either the Dollar or percentage limitations set forth in Sections
2.1 and 2.2 (an “Overadvance”), Borrowers immediately shall
pay to Agent, in cash, the amount of such excess to be used by Agent to reduce
the Obligations pursuant to the terms of Section 2.5(b).


2.7                               Interest
and Letter of Credit Fees:  Rates,
Payments, and Calculations.


(a)                                  Interest Rate.  Except as provided in Section 2.7(c)
or in Section 2.7(d) below, all Obligations shall bear interest on the
Daily Balance as follows:


(i)                                     each LIBOR Rate
Loan shall bear interest at a per annum rate equal to the Adjusted LIBOR Rate
plus the LIBOR Rate Margin; and


(ii)                                  all other Obligations
(except for undrawn Letters of Credit) shall bear interest at a per annum rate
equal to the Reference Rate.


(b)                                 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.


(c)                                  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 the rate in effect from time to time plus three percent (3.00%), and
(ii) the Letter of Credit fee provided in Section 2.7(b) shall be
increased by three percent (3.00%) per annum; provided, however,
the foregoing adjustments are subject to waiver by the Required Lenders.


(d)                                 Interest Rate;
Letter of Credit Fee during Seasonal Overadvance Period.  Notwithstanding anything to the contrary
contained herein, at all times during which Seasonal Advances are outstanding
under the Seasonal Overadvance Facility, (i) all LIBOR Rate Loans shall bear
interest on the Daily Balance at a per annum rate equal to (A) the Adjusted
LIBOR Rate, plus (B) the LIBOR Rate Margin in effect from time to time, plus
(C) one-quarter of one percent (.25%); (ii) all Reference Rate Loans shall bear
interest on the Daily Balance at a per annum rate equal to (A) the Reference
Rate, plus (B) one-quarter of one percent (.25%); and (iii)



 35
 









the Letter of Credit fee provided in Section 2.7(b) shall be
increased by one-quarter of one percent (0.25%) per annum.


(e)                                  Payments.  Interest in respect of Reference Rate Loans
and Letter of Credit fees payable hereunder shall be due and payable, in
arrears, on the first day of each month during the term hereof.  Interest in respect of each LIBOR Rate Loan
shall be due and payable, in arrears, on (i) the last day of the applicable
Interest Period, and (ii) the first day of each month occurring during the term
thereof.  Each Borrower hereby authorizes
the Agent, at its option, without prior notice to such Borrower, to charge such
interest and Letter of Credit fees, the fees and charges provided for in Section 2.12
(as and when accrued or incurred), all amounts due under the L/C Demand
Facility, and all installments or other payments due under any Loan Document
(including the amounts due and payable to the Bank Product Providers in respect
to Bank Products up to the amount of the Bank Product Reserve) to
Administrative Borrower’s Loan Account, which amounts thereafter shall accrue
interest at the rate then applicable to Advances hereunder.  Any interest not paid when due shall be
compounded and shall thereafter accrue interest at the rate then applicable to
Advances hereunder.


(f)                                    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.


(g)                                 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.



 36
 









2.8                               Collection
of Accounts.  Borrowers shall at all
times maintain lockboxes (the “Lockboxes”) and, immediately after the
Closing Date, shall instruct all Account Debtors with respect to the Accounts,
General Intangibles, and Negotiable Collateral of Borrowers to remit all
Collections in respect thereof to such Lockboxes.  Borrowers, Agent, and the Lockbox Banks shall
enter into the Lockbox Agreements, which among other things shall provide for
the opening of a Lockbox Account for the deposit of Collections at a Lockbox
Bank.  Borrowers agree that all
Collections and other amounts received by Borrowers from any Account Debtor or
any other source immediately upon receipt shall be deposited into a Lockbox
Account.  No Lockbox Agreement or
arrangement contemplated thereby shall be modified by Borrowers without the
prior written consent of Agent.  Upon the
terms and subject to the conditions set forth in the Lockbox Agreements, all
amounts received in each Lockbox Account shall be wired each Business Day into
an account (the “Agent’s Account”) maintained by Agent at a depositary
selected by Agent (except as provided in the last sentence of Section 2.9).


2.9                               Crediting
Payments; Application of Collections. 
The receipt of any Collections by Agent (whether from transfers to Agent
by the Lockbox Banks pursuant to the Lockbox Agreements or otherwise)
immediately shall be applied provisionally to reduce the Obligations
outstanding under Section 2.1, but shall not be considered a payment on
account unless such Collection item is a wire transfer of immediately available
federal funds and is made to the Agent’s Account or unless and until such
Collection item is honored when presented for payment.  Should any Collection item not be honored
when presented for payment, then Borrowers shall be deemed not to have made
such payment, and interest shall be recalculated accordingly.  Anything to the contrary contained herein
notwithstanding, any Collection item shall be deemed received by Agent only if
it is received into the Agent’s Account on a Business Day on or before 11:00
a.m. Boston time.  If any Collection item
is received into the Agent’s Account on a non-Business Day or after 11:00 a.m.
Boston time on a Business Day, it shall be deemed to have been received by
Agent as of the opening of business on the immediately following Business
Day.  Prior to the occurrence of an Event
of Default or Agent reasonably deeming itself insecure, and so long as
Availability is $25,000,000 or more, at Administrative Borrower’s option,
monies shall be transferred from the Lock Box to Agent or to Administrative
Borrower’s account on a daily basis, and if transferred to Administrative
Borrower’s account such monies will not be applied to the Obligations.


2.10                        Designated
Account.  Agent and the Lender Group
are authorized to make the Advances and the Letters of Credit under this
Agreement based upon telephonic or other instructions received from anyone
purporting to be an Authorized Person, or without instructions if pursuant to Section
2.7(e). Administrative Borrower agrees to establish and maintain the
Designated Account with the Designated Account Bank for the purpose of
receiving the proceeds of the Advances requested by Administrative Borrower and
made by the Lender Group hereunder. 
Unless otherwise agreed by Agent and Administrative Borrower, any
Advance requested by Borrowers and made by the Lender Group hereunder shall be
made to the Designated Account.



 37
 









2.11                        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
Advances made by the Lender Group to Borrowers or for Borrowers’ account,
including, accrued interest, Lender Group Expenses, and any other payment
Obligations of Borrowers.  In accordance
with Section 2.9, the Loan Account will be credited with all payments
received by Agent from Borrowers or for Borrowers’ account, including all
amounts received in the Agent’s Account from any Lockbox Bank.  Agent shall render statements regarding the
Loan Account to Administrative Borrower, including 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.


2.12                        Fees.  Borrowers shall pay to Agent for the ratable
benefit of the Lender Group (except where otherwise indicated) the following
fees:


(a)                                  Amendment Fee.  An Amendment Fee in the amount and as
provided in the Fee Letter.


(b)                                 Intentionally
Omitted.


(c)                                  Intentionally
Omitted.


(d)                                 Anniversary Fee.  An anniversary fee equal to 0.125% of the
Maximum Amount (without giving effect to the Seasonal Overadvance Amount),
which fee shall be due and payable in full on each October 31, commencing
October 31, 2007 through and including October 31, 2010; provided, however,
the Agreement has not previously been terminated.


(e)                                  Unused Line Fee.  On the first day of each month commencing
July 1, 2007, whenever the average Daily Balance of Obligations is less than
the Maximum Amount then in effect, an unused line fee in an amount equal to
0.25% per annum times the Average Unused Portion of Maximum Amount.


(f)                                    Intentionally
Omitted.


(g)                                 Appraisals;
Financial Examination and Appraisal Fees. 
The Agent or its designee, at the sole expense of Borrowers, shall
conduct periodic appraisals of the Borrowers’ Inventory.  So long as no Event of Default has occurred
and is continuing, the Borrowers shall not be liable to pay more than $60,000
per year (exclusive of out of pocket expenses) for financial analyses and
examinations and periodic appraisals of Inventory in the aggregate.



 38
 









2.13                        LIBOR Rate
Loans.  Any other provisions herein
to the contrary notwithstanding, the following provisions shall govern with
respect to LIBOR Rate Loans as to the matters covered:


(a)                                  Borrowing;
Conversion; Continuation. 
Administrative Borrower may from time to time, on or after the Closing
Date (and subject to the satisfaction of the requirements of Sections 3.1
and 3.2), request in a written or telephonic communication with Agent:
(i) Advances to constitute LIBOR Rate Loans; (ii) that Reference Rate
Loans be converted into LIBOR Rate Loans; or (iii) that existing LIBOR Rate
Loans continue for an additional Interest Period.  Any such request shall specify the aggregate
amount of the requested LIBOR Rate Loans, the proposed Funding Date therefor
(which shall be a Business Day, and with respect to continued LIBOR Rate Loans
shall be the last day of the Interest Period of the existing LIBOR Rate Loans
being continued), and the proposed Interest Period (in each case subject to the
limitations set forth below).  LIBOR Rate
Loans may only be made, continued, or extended if, as of the proposed Funding
Date therefor, each of the following conditions is satisfied:


(v)                                 no
Event of Default exists;


(w)                               no
more than five Interest Periods may be in effect at any one time;


(x)                                   the
amount of each LIBOR Rate Loan borrowed, converted, or continued must be in an
amount not less than $5,000,000 and integral multiples of $1,000,000 in excess
thereof;


(y)                                 Agent
shall have determined that the Interest Period or Adjusted LIBOR Rate is
available to it and can be readily determined as of the date of the request for
such LIBOR Rate Loan by Borrowers; and


(z)                                   Agent
shall have received such request at least three Business Days prior to the
proposed Funding Date therefor.


Any request by
Administrative Borrower to borrow LIBOR Rate Loans, to convert Reference Rate
Loans to LIBOR Rate Loans, or to continue any existing LIBOR Rate Loans shall
be irrevocable, except to the extent that any Lender shall determine under Sections 2.13(a),
2.14 or 2.15 that such LIBOR Rate Loans cannot be made or continued.


(b)                                 Determination of
Interest Period.  By giving notice as
set forth in Section 2.12(a), Borrowers shall select an Interest
Period for such LIBOR Rate Loan.  The
determination of the Interest Period shall be subject to the following
provisions:


(i)                                     in the case of
immediately successive Interest Periods, each successive Interest Period shall
commence on the day on which the next preceding Interest Period expires;


(ii)                                  if any Interest
Period would otherwise expire on a day which is not a Business Day, the
Interest Period shall be extended to expire on the next succeeding Business
Day; provided, however, that if the next succeeding Business Day
occurs in the following calendar month, then such Interest Period shall expire
on the immediately preceding Business Day;



 39
 









(iii)                               if any Interest Period
begins on the last Business Day of a month, or on a day for which there is no
numerically corresponding day in the calendar month at the end of such Interest
Period, then the Interest Period shall end on the last Business Day of the
calendar month at the end of such Interest Period; and


(iv)                              Administrative Borrower
may not select an Interest Period which expires later than the date on which
this Agreement is scheduled to terminate pursuant to Section 3.4 hereof.


(c)                                  Automatic
Conversion: Optional Conversion by Agent. 
Any LIBOR Rate Loan shall automatically convert to a Reference Rate Loan
upon the last day of the applicable Interest Period, unless Agent has received
a request to continue such LIBOR Rate Loan at least three Business Days prior
to the end of such Interest Period in accordance with the terms of Section 2.13(a).  Any LIBOR Rate Loan shall, at Agent’s option,
upon notice to Borrowers, immediately convert to a Reference Rate Loan in the
event that (i) an Event of Default shall have occurred and be continuing or
(ii) this Agreement shall terminate, and Borrowers shall pay to Agent, for the
benefit of the Lenders, any amounts required by Section 2.16 as a
result thereof.


2.14                        Illegality.  Any other provision herein to the contrary
notwithstanding, if the adoption of or any change in any Requirement of Law or
in the interpretation or application thereof by a Governmental Authority made
subsequent to the Closing Date shall make it unlawful for any Lender to make or
maintain LIBOR Rate Loans as contemplated by this Agreement, (a) the obligation
of such Lender hereunder to make LIBOR Rate Loans, continue LIBOR Rate Loans as
such, and convert Reference Rate Loans to LIBOR Rate Loans shall forthwith be
suspended and (b) such Lender’s then outstanding LIBOR Rate Loans, if any,
shall be converted automatically to Reference Rate Loans on the respective last
days of the then current Interest Periods with respect thereto or within such
earlier period as required by law; provided, however, that before
making any such demand, each Lender agrees to use reasonable efforts
(consistent with its internal policy and legal and regulatory restrictions and
so long as such efforts would not be disadvantageous to it, in its reasonable
discretion, in any legal, economic, or regulatory manner) to designate a
different lending office if the making of such a designation would allow such
Lender or its lending office to continue to perform its obligations to make
LIBOR Rate Loans.  If any such conversion
of a LIBOR Rate Loan occurs on a day which is not the last day of the then
current Interest Period with respect thereto, Borrowers shall pay to such
Lender such amounts, if any, as may be required pursuant to Section 2.15.  If circumstances subsequently change so that
such Lender shall determine that it is no longer so affected, such Lender will
promptly notify Agent and Administrative Borrower, and upon receipt of such
notice, the obligations of such Lender to make or continue LIBOR Rate Loans or
to convert Reference Rate Loans into LIBOR Rate Loans shall be reinstated.


2.15                        Requirements
of Law.


(a)                                  If the adoption of or
any change in any Requirement of Law or in the interpretation or application
thereof by a Governmental Authority made subsequent to the Closing Date or
compliance by any Lender with any request or directive (whether or not having



 40
 









the force of law) from any central bank or other Governmental Authority
made subsequent to the Closing Date:


(i)                                     shall subject such
Lender to any tax, levy, charge, fee, reduction, or withholding of any kind
whatsoever with respect to LIBOR Rate Loans, or change the basis of taxation of
payments to such Lender in respect thereof (except for the establishment of a
tax based on the net income of the Lender or changes in the rate of tax on the
net income of such Lender);


(ii)                                  shall in respect of
LIBOR Rate Loans impose, modify or hold applicable any reserve, special
deposit, compulsory loan, or similar requirement against assets held by,
deposits or other liabilities in or for the account of, Advances or other
extensions of credit by, or any other acquisition of funds by, any office of
such Lender; or


(iii)                               shall impose on such
Lender any other condition with respect to LIBOR Rate Loans;


and the result of any of
the foregoing is to increase the cost to such Lender, by an amount which such
Lender deems to be material, of making, converting into, continuing, or
maintaining LIBOR Rate Loans or to increase the cost to such Lender in respect
of LIBOR Rate Loans, by an amount which such Lender deems to be material, or to
reduce any amount receivable hereunder in respect of LIBOR Rate Loans, or to
forego any other sum payable thereunder or make any payment on account thereof
in respect of LIBOR Rate Loans, then, in any such case, Borrowers shall promptly
pay to Agent (for the benefit of such Lender), upon such Lender’s demand, any
additional amounts necessary to compensate such Lender for such increased cost
or reduced amount receivable; provided, however, that before
making any such demand, each Lender agrees to use reasonable efforts
(consistent with its internal policy and legal and regulatory restrictions and
so long as such efforts would not be disadvantageous to it, in its reasonable
discretion, in any legal, economic, or regulatory manner) to designate a
different LIBOR lending office if the making of such designation would allow
such Lender or its LIBOR lending office to continue to perform its obligations
to make LIBOR Rate Loans or to continue to fund or maintain LIBOR Rate Loans
and avoid the need for, or materially reduce the amount of, such increased
cost.  If a Lender becomes entitled to
claim any additional amounts pursuant to this Section 2.15, such
Lender shall promptly notify Agent and Administrative Borrower of the event by
reason of which it has become so entitled. 
A certificate as to any additional amounts payable pursuant to this Section 2.15
submitted in reasonable detail by such Lender to Agent and Administrative
Borrower shall be conclusive in the absence of manifest error.  Within five Business Days after a Lender
notifies Agent and Administrative Borrower of any increased cost pursuant to
the foregoing provisions of this Section 2.15, Administrative
Borrower may convert all LIBOR Rate Loans then outstanding into Reference Rate Loans
in accordance with Section 2.13 and, additionally, reimburse such
Lender for any cost in accordance with Section 2.16.  This covenant shall survive the termination
of this Agreement and the payment of the Advances and all other amounts payable
hereunder for nine months following such termination and repayment.


(b)                                 If a Lender shall have
determined that the adoption of or any change in any Requirement of Law
regarding capital adequacy or in the interpretation or application



 41
 









thereof by a Governmental Authority made subsequent to the Closing Date
or compliance by such Lender or any Person controlling such Lender with any
request or directive regarding capital adequacy (whether or not having the
force of law) from any Governmental Authority made subsequent to the Closing
Date does or shall have the effect of increasing the amount of capital required
to be maintained or reducing the rate of return on such Lender’s or such
Person’s capital as a consequence of its obligations hereunder to a level below
that which such Lender or such Person could have achieved but for such change
or compliance (taking into consideration such Lender’s or such Person’s
policies with respect to capital adequacy) by an amount deemed by such Lender
to be material, then from time to time, after submission by such Lender to
Agent and Administrative Borrower of a prompt written request therefor,
Borrowers shall pay to Agent (for the benefit of such Lender) such additional
amount or amounts as will compensate such Lender or such Person for such
reduction.  This covenant shall survive
the termination of this Agreement and the payment of the Advances and all other
amounts payable hereunder for nine months following such termination and
repayment.


2.16                        Indemnity.  Each Borrower
agrees to indemnify Agent and each Lender and to hold Agent and each Lender
harmless from any loss or expense which Agent and each Lender may sustain or
incur as a consequence of (a) default by Borrowers in payment when due of
the principal amount of or interest on any LIBOR Rate Loan, (b) default by
Borrowers in making a Borrowing of, conversion into, or continuation of LIBOR
Rate Loans after Administrative Borrower have given a notice requesting the
same in accordance with the provisions of this Agreement, (c) default by
Borrowers in making any prepayment of a LIBOR Rate Loan after Administrative
Borrower has given a notice thereof in accordance with the provisions of this
Agreement, or (d) the making of a prepayment of LIBOR Rate Loans on a day
which is not the last day of an Interest Period with respect thereto (whether
due to the termination of this Agreement, upon an Event of Default, or
otherwise), including, in each case, any such loss or expense (but excluding
loss of margin or anticipated profits) arising from the reemployment of funds
obtained by it or from fees payable to terminate the deposits from which such
funds were obtained; provided, however, that Agent or any Lender,
if requesting indemnification, shall have delivered to the Borrowers a
certificate as to the amount of such loss or expense, which certificate shall
be conclusive in the absence of manifest error. 
Calculation of all amounts payable to Agent or any such Lender under
this Section 2.16 shall be made as though such Lender had actually
funded the relevant LIBOR Rate Loan through the purchase of a deposit bearing
interest at the LIBOR Rate in an amount equal to the amount of such LIBOR Rate
Loan and having a maturity comparable to the relevant Interest Period; provided,
however, that each Lender may fund each of the LIBOR Rate Loans in any
manner it sees fit, and the foregoing assumption shall be utilized only for the
calculation of amounts payable under this Section 2.16.  This covenant shall survive the termination
of this Agreement and the payment of the Advances and all other amounts payable
hereunder for a period of nine months thereafter.


2.17                        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,



 42
 









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 2.17),
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 2.17
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
Advances or 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 of this Section 2.17
afford grounds for terminating, discharging or relieving any Person composing
Borrowers, in whole or in part, from any of its Obligations under this Section 2.17,
it being the intention of each Person composing Borrowers that, so long as any
of



 43
 









the Obligations hereunder remain unsatisfied, the Obligations of such
Person composing Borrowers under this Section 2.17 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 2.17 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 2.17 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 2.17 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 2.17 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 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



 44
 









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 Section 2.5(b).


2.18                        Increase
in Maximum Amount and Commitments.


(a)                                  Increase in
Maximum Amount.  Provided that no
Event of Default has occurred and is continuing, the Borrowers shall have the
right at any time, on up to five (5) separate occasions (subject to Section
2.18(b)(iii)) and upon not less than five (5) Business Days prior written
notice to the Agent in each instance, to elect to increase the Maximum Amount
(other than the Seasonal Overadvance Amount) by an amount of up to
$30,000,000.00 in the aggregate (each, a “Commitment Increase”) from the
existing aggregate amount of $100,000,000.00, to an aggregate amount of $130,000,000.00
(the “Increased Maximum Amount”). 
Each such requested increase shall be in the minimum amount of
$5,000,000.00.  Each such requested
increase shall be made to all existing Lenders on a pro rata basis in accordance
with Schedule C-1, except as otherwise provided in Section 2.18(d).


(b)                                 Increase Conditions.  No Commitment Increase shall become effective
unless and until each of the following conditions have been satisfied:


(i)                                     The Borrowers
shall have paid the Agent the Commitment Increase Fee with respect to such
Commitment Increase;


(ii)                                  A note will be
issued, at the Borrowers’ expense, to each Lender to the extent necessary to
reflect the new Commitments of such Lender; and


(iii)                               The Borrowers shall have
delivered such other instruments, documents and agreements with respect to the
Commitment Increase as the Agent may reasonably have requested.


(c)                                  Commitment
Increase Date.  The Agent shall
promptly notify each Lender as to the effectiveness of any such Commitment
Increase (with the date of such effectiveness being referred to herein as the “Commitment
Increase Date”), and at such time (i) the Maximum Amount (other than the
Seasonal Overadvance Amount) under, and for all purposes of, this Agreement
shall be increased by the aggregate amount of each such Commitment Increase, (ii)



 45
 









the L/C Sublimit under, and for all purposes of, this Agreement shall
be increased by the aggregate amount of each such Commitment Increase, (iii)
the Commitments set forth on Schedule C-1 shall be deemed amended,
without further action, to reflect the increased Commitments of the Lenders,
and (iv) this Agreement shall be deemed amended, without further action, to the
extent necessary to reflect such Increased Maximum Amount.


(d)                                 Pro Rata Share.  In connection with any Commitment Increase
hereunder, the Lenders and the Borrowers agree that, notwithstanding anything
to the contrary in this Agreement, the Borrowers shall, in coordination with
the Agent, (i) repay outstanding loans of certain Lenders, and obtain loans
from certain other Lenders, or (ii) take such other actions as reasonably may
be required by the Agent, in each case to the extent necessary so that all of
the Lenders effectively participate in each of the outstanding loans pro rata
on the basis of their Commitment (determined after giving effect to the
Increased Maximum Amount pursuant to this Section 2.18); provided
that the Agent and the Lenders agree that no such prepayment shall be
required if, as a result thereof, the Borrowers would be obligated to pay all
losses, costs, or expenses required to be paid pursuant to Section 2.16;
provided  further that the Agent agrees that the Agent will assume
Citicorp USA, Inc.’s pro rata share of each Commitment Increase hereunder in
the event that Citicorp USA, Inc. has not obtained credit approval for such
Commitment Increase on or before the Commitment Increase Date.  Upon each Commitment Increase Date, the Agent
shall issue a new Schedule C-1 to this Agreement reflecting each
Lender’s increased Commitment.


3.                                      CONDITIONS;
TERM OF AGREEMENT.


3.1                               Conditions
Precedent to the Initial Advance and the Initial Letter of Credit.  The obligation of the Lender Group to make
the initial Advance and 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 a confirmation of the Guaranties and each security agreement or other
instrument or document executed and delivered pursuant to this Agreement or any
other Loan Document to secure any of the Obligations, duly executed, and each
such document shall be in full force and effect;


(c)                                  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;


(d)                                 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;



 46
 









(e)                                  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;


(f)                                    Agent shall have received
a certificate of insurance, together with the endorsements thereto, as are
required by Section 6.9, the form and substance of which shall be
satisfactory to Agent and its counsel;


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


(h)                                 Agent shall have
received counterparts of the Fee Letter dated as of the Closing Date duly
executed by each of the parties thereto;


(i)                                     Agent shall have
received fully executed Collateral Access Agreements for each location set
forth on Schedule 3.1(i).


(j)                                     Agent shall have
received a fully executed customs broker agreement for the Borrowers’ customs
broker listed on Schedule 3.1(j), in substantially in the form attached
hereto as Exhibit E-1, subject to such changes requested by such customs
broker as shall be reasonably acceptable to the Agent.


(k)                                  Agent shall have
entered into an Intercreditor Agreement with the lenders under the L/C Demand
Facility (as defined herein), on terms reasonably acceptable to the Agent;


(l)                                     Borrowers shall
have paid to the Agent all fees required pursuant to the terms and conditions
of the Fee Letter; and


(m)                               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.


3.2                               Conditions
Precedent to all Advances and all Letters of Credit.  The following shall be conditions precedent
to all Advances and all Letters 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 such extension of credit, nor
shall either result from the making thereof;



 47















(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; and


(d)                                 the amount of any
requested Advance or Letter of Credit shall not exceed Availability at such
time.


(e)                                  Intentionally
Omitted.


3.3                               Intentionally
Omitted.


3.4                               Term.  This Agreement shall become effective as of
June 28, 2007 upon the execution and delivery hereof by the Borrowers and the
Lender Group and shall continue in full force and effect for a term ending on
November 1, 2010 (the “Maturity Date”). 
The foregoing notwithstanding, the Agent (on behalf of the Lender Group)
shall have the right to terminate the Lender Group’s obligations under this
Agreement immediately and without notice upon the occurrence and during the
continuation of an Event of Default.


3.5                               Effect
of Termination.  On the date of
termination of this Agreement, all Obligations (including contingent
reimbursement obligations of Borrowers with respect to any outstanding Letters
of Credit and including Bank Product Obligations) immediately shall become due
and payable without notice or demand.  No
termination of this Agreement, however, shall relieve or discharge Borrowers of
Borrowers’ duties, Obligations, or covenants hereunder, and the Lender Group’s
continuing security interests in the Collateral shall remain in effect until
all Obligations have been fully and finally discharged and the Lender Group’s
obligation to provide additional credit hereunder is terminated.


3.6                               Early
Termination by Borrowers.  Borrowers
have the option, at any time upon 90 days prior written notice to Agent, to
terminate this Agreement by paying to Agent, for the benefit of the Lender
Group, in cash, the Obligations (including either (a) providing cash
collateral to be held by Agent for the benefit of those Lenders with a
Commitment in an amount equal to 105% of the then outstanding Letters of
Credit, or (b) causing the outstanding original Letters of Credit to be
returned to the issuer thereof, in full, together with the Applicable
Prepayment Premium, if any (to be allocated based upon letter agreements
between Agent and individual Lenders)). 
If Administrative Borrower has sent a notice of termination pursuant to
the provisions of this Section, then the Commitments shall terminate and
Borrowers shall be obligated to repay the Obligations (including either (i)
providing cash collateral to be held by Agent for the benefit of those Lenders
with a Commitment in an amount equal to 105% of the then outstanding Letters of
Credit, or (ii) causing the original Letters of Credit to be returned to the
issuer thereof, in full, together with the Applicable Prepayment Premium, if
any, on the date set forth as the date of termination of this Agreement in such
notice).  In the event of the termination
of this Agreement and repayment of the Obligations at any time prior to the
date on which this Agreement is scheduled to terminate pursuant to Section
3.4 hereof, for any other reason, including (a) foreclosure and sale
of Collateral, (b) sale of the Collateral in any Insolvency Proceeding, or (c)
restructure, reorganization, or compromise of the Obligations by



 48
 









the confirmation of a plan of reorganization or any other plan of
compromise, restructure, or arrangement in any Insolvency Proceeding, then, in
view of the impracticability and extreme difficulty of ascertaining the actual
amount of damages to the Lender Group or profits lost by the Lender Group as a
result of such early termination, and by mutual agreement of the parties as to
a reasonable estimation and calculation of the lost profits or damages of the
Lender Group, Borrowers shall pay the Applicable Prepayment Premium, if any, to
Agent (to be allocated based upon letter agreements between Agent and
individual Lenders), measured as of the date of such termination.


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 Obligations,
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 Agent.


4.3                               Collection
of Accounts, General Intangibles, and Negotiable Collateral.  At any time, 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.  Each Borrower agrees that, subject to Section
2.9, it will hold in trust for the Lender Group, as the Lender Group’s trustee,
any Collections that it receives and immediately will deliver said Collections
to Agent in their original form as received by such Borrower.


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.



 49
 









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 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 making of each Advance and Letter of Credit made thereafter, as though made
on and as of the date of such Advance and 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                               Eligible
Accounts.  The Eligible Accounts are,
at the time of the creation thereof and as of each date on which Borrowers
includes them in a Borrowing Base calculation or certification, bona fide
existing obligations created by the sale and delivery of Inventory or the



 50
 









rendition of services to
Account Debtors in the ordinary course of Borrowers’ business, unconditionally
owed to Borrowers without defenses, disputes, offsets, counterclaims, or rights
of return or cancellation other than normal returns or disputes in the normal
course of business.  The property giving
rise to such Eligible Accounts has been delivered to the Account Debtor, or to
the Account Debtor’s agent for immediate shipment to and unconditional
acceptance by the Account Debtor.  At the
time of the creation of an Eligible Account and as of each date on which
Borrowers include an Eligible Account in a Borrowing Base calculation or
certification, Borrowers have not received notice of actual or imminent
bankruptcy, insolvency, or material impairment of the financial condition of
any applicable Account Debtor regarding such Eligible Account.


5.3                               Eligible
Inventory.  All Eligible Inventory is
now and at all times hereafter shall be of good and merchantable quality, free
from defects, except for minor defects arising in the ordinary course of
business.


5.4                               Equipment.  All of the Equipment is used or held for use
in Borrowers’ business and is fit for such purposes.


5.5                               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 6.11
or otherwise permitted by Section 6.11.


5.6                               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.


5.7                               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.


5.8                               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 5.8,
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 5.8, no capital stock (or any securities, instruments,
warrants, options, purchase rights, conversion or exchange rights, calls,



 51
 









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.


5.9                               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.


5.10                        Litigation.  Except as set forth on Schedule 5.10,
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.


5.11                        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 in accordance
with Section 6.2 of this Agreement.


5.12                        Fraudulent
Transfer.


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



 52
 









(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.


5.13                        Employee
Benefits.  None of any Borrower, any
of its Subsidiaries, or any of their ERISA Affiliates maintains or contributes
to any Benefit Plan, other than those listed on Schedule 5.13.  Each Borrower, each of its Subsidiaries and
each ERISA Affiliate have satisfied the minimum funding standards of ERISA and
the IRC with respect to each Benefit Plan to which it is obligated to contribute.  No ERISA Event has occurred nor has any other
event occurred that may result in an ERISA Event that reasonably could be
expected to result in a Material Adverse Change.  No Borrower or its Subsidiaries, any ERISA
Affiliate, or any fiduciary of any Plan is subject to any direct or indirect
liability with respect to any Plan under any applicable law, treaty, rule,
regulation, or agreement.  No Borrower or
its Subsidiaries or any ERISA Affiliate is required to provide security to any
Plan under Section 401(a)(29) of the IRC.


5.14                        Environmental
Condition.  Except as set forth on
Schedule 5.14, none of Borrowers’ properties or assets has ever been used
by Borrowers or, to the best of Borrowers’ knowledge, by previous owners or
operators in the disposal of, or to produce, store, handle, treat, release, or
transport, any Hazardous Materials.  None
of Borrowers’ properties or assets has ever been designated or identified in
any manner pursuant to any environmental protection statute as a Hazardous
Materials disposal site, or a candidate for closure pursuant to any
environmental protection statute.  No
lien arising under any environmental protection statute has attached to any
revenues or to any real or personal property owned or operated by
Borrowers.  Borrowers have not received a
summons, citation, notice, or directive from the Environmental Protection
Agency or any other federal or state governmental agency concerning any action
or omission by Borrowers resulting in the releasing or disposing of Hazardous
Materials into the environment.


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 do all of the
following:


6.1                               Accounting
System and Schedules.


(a)                                  Maintain a standard
and modern system of accounting in accordance with GAAP with ledger and account
cards or computer tapes, discs, printouts, and records pertaining to the
Collateral which contain information as from time to time may be requested by
Agent.  Borrowers also shall keep proper
books of account showing all sales, claims, and allowances on its Inventory.


(b)                                 Schedules of
Accounts.  With such regularity as Agent
shall require, Borrowers shall provide Agent with schedules describing all
Accounts.  Agent’s failure to request
such schedules or Borrowers’ failure to execute and deliver such schedules
shall not affect or limit the Lender Group’s security interests or other rights
in and to the Accounts.



 53
 









6.2                               Financial
Statements, Reports, Certificates. 
Deliver to Agent: (a) as soon as available, but in any event within 30
days after the end of each Fiscal Month (except with respect to the last Fiscal
Month of each fiscal quarter, with respect to which the applicable period for
delivery shall be 45 days rather than 30 days) during each of Parent’s Fiscal
Years, a company prepared balance sheet, income statement, and cash flow
statement covering Parent’s operations during such Fiscal Month; and (b) as
soon as available, but in any event within 90 days after the end of each of
Parent’s Fiscal Years (except with respect to the Fiscal Year ended February 3,
2007, with respect to which the deadline for delivery shall be July 31, 2007),
financial statements of Parent for each such Fiscal Year, audited by
independent certified public accountants reasonably acceptable to Agent and
certified, without any going concern or other material qualifications, by such
accountants to have been prepared in accordance with GAAP; together with a
certificate of such accountants addressed to Agent stating that such
accountants do not have knowledge of the existence of any failure of Parent to
comply with Section 7.19. 
Such audited financial statements shall include a balance sheet, profit
and loss statement, and cash flow statement, and, if prepared, such
accountants’ letter to management.  If
Parent is a parent company of one or more Subsidiaries, or Affiliates, or is a
Subsidiary or Affiliate of another company, then, in addition to the financial
statements referred to above, Parent agrees to deliver financial statements
prepared on a consolidating basis so as to present Parent and each such related
entity separately, and on a consolidated basis.


Parent also shall deliver
to Lenders (a) written notice of the filing of Parent’s Form 10-Q Quarterly
Reports, Form 10-K Annual Reports, and Form 8-K Current Reports, and any other
filings made by Parent with the Securities and Exchange Commission, if any, as
soon as the same are filed, (b) any other information that is provided by
Parent to its public shareholders, and (c) any other report reasonably
requested by Agent relating to the Collateral and financial condition of
Parent.


Each month, together with
the financial statements provided pursuant to Section 6.2(a),
Administrative Borrower shall deliver to Agent a Compliance Certificate signed
by its chief financial officer to the effect that: (i) all reports, statements,
or computer prepared information of any kind or nature delivered or caused to
be delivered to Agent hereunder have been prepared in accordance with GAAP and
fairly present the financial condition of Borrowers, except for the months
ended March, 2007, April, 2007 and May, 2007 as may be directly impacted by the
Stock Option Issue; (ii) Borrowers are in timely compliance with all of its
covenants and agreements hereunder; (iii) the representations and warranties of
Borrowers contained in this Agreement and the other Loan Documents are true and
correct in all material respects on and as of the date of such certificate, as
though made on and as of such date (except to the extent that such
representations and warranties relate solely to an earlier date); and (iv) on
the date of delivery of such certificate to Agent there does not exist any
condition or event that constitutes an Event of Default (or, in each case, to
the extent of any non-compliance, describing such non-compliance as to which he
or she may have knowledge and what action Borrowers have taken, is taking, or
proposes to take with respect thereto).


Administrative Borrower
shall deliver to Agent its Business Plan for each fiscal year, the form of
which shall be substantially similar to the business plan for the Fiscal Year
ending on or about



 54
 









January 31, 2008 attached
hereto as Exhibit B-1 and the substance of which shall be reasonably
satisfactory to the Agent, on or before March 1 of such fiscal year.


Administrative Borrower
shall have issued written instructions to its independent certified public
accountants authorizing them to communicate with Agent and to release to Agent
whatever financial information concerning Borrowers that Agent may
request.  Administrative Borrower hereby
irrevocably authorizes and directs all auditors, accountants, or other third
parties to deliver to Agent, at Borrowers’ expense, copies of Borrowers’
financial statements, papers related thereto, and other accounting records of
any nature in their possession, and to disclose to Agent any information they
may have regarding the Collateral or the financial condition of Borrowers.


6.3                               Tax
Returns.  Deliver to Agent copies of each of Parent’s
future federal income tax returns, and any amendments thereto, concurrently
with the filing thereof with the Internal Revenue Service.


6.4                               Borrowing
Base Certificate.  Borrowers shall now and from time to time
hereafter, but not less frequently than (a) weekly (to be delivered each
Wednesday based upon the close of business on the preceding Saturday) or (b)
monthly, so long as Borrowers have maintained at least $25,000,000 of Availability
without being limited by the Maximum Amount (to be delivered on the first
Wednesday of each Fiscal Month (or, if such day is not a Business Day, on the
next succeeding Business Day) based upon the close of business as of the last
day of the immediately preceding Fiscal Month), execute and deliver to Agent a
Borrowing Base Certificate (in the form of Exhibit D-1 attached hereto,
as such form may be revised from time to time by Agent consistent with the
terms of this Agreement) and a designation of Inventory specifying the retail
selling price of Borrowers’ Inventory, and not less frequently than monthly,
execute and deliver to Agent a designation of Inventory specifying Borrowers’
cost, and further specifying such other information as Agent may reasonably
request.  Such designation shall
separately report Inventory that is subject to a letter of credit issued by any
Person other than Agent.  Borrowers will
not include Inventory in transit in its Inventory reports until such Inventory
has been paid for by draws under applicable letters of credit or has been
acquired by Borrowers without letter of credit financing.


6.5                               Store
Openings and Closings and Rents Reports.  Borrowers shall give Agent
reasonable prior notice of new store openings and closing of its stores.  Borrowers shall make timely payment of all
rents on real property leases where a Borrower is the lessee within applicable
grace periods, and shall provide Agent with a monthly report specifying the
status of such payments.  In the event
that Borrowers become delinquent in their rent payments, then Agent can
establish reserves against the Borrowing Base for the amount of any landlord
liens arising from such delinquency.


6.6                               Title to Equipment.  Upon Agent’s request, Borrowers
shall within 30 days of such request deliver to Agent, properly endorsed, any
and all evidences of ownership of, certificates of title, or applications for
title to any items of Equipment with a market value of $100,000 or more other
than Equipment leased or to be leased.



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6.7                               Maintenance of Equipment.  Maintain the Equipment in good
operating condition and repair (ordinary wear and tear excepted), and make all
necessary replacements thereto so that the value and operating efficiency
thereof shall at all times be maintained and preserved.  Other than those items of Equipment that
constitute fixtures on the Closing Date, Borrowers shall not permit any item of
Equipment to become a fixture to real estate or an accession to other property,
and such Equipment shall at all times remain personal property.


6.8                               Taxes. 
Cause all assessments and taxes, whether real, personal, or
otherwise, due or payable by, or imposed, levied, or assessed against
Borrowers, their Subsidiaries, or any of their property to be paid in full,
before delinquency or before the expiration of any extension period, except to
the extent that the validity of such assessment or tax shall be the subject of
a Permitted Protest.  Borrowers shall
make due and timely payment or deposit of all such federal, state, and local
taxes, assessments, or contributions required of it by law, and will execute
and deliver to Agent, on demand, appropriate certificates attesting to the
payment thereof or deposit with respect thereto.  Borrowers will make timely payment or deposit
of all tax payments and withholding taxes required of it by applicable laws,
including those laws concerning F.I.C.A., F.U.T.A., state disability, and
local, state, and federal income taxes, and will, upon request, furnish Agent
with proof satisfactory to Agent indicating that Borrowers have made such
payments or deposits.


6.9                               Insurance.


(a)                                  Borrowers, at their
expense, shall keep the Collateral insured against loss or damage by fire,
theft, explosion, sprinklers, and all other hazards and risks, and in such amounts,
as are ordinarily insured against by other owners in similar businesses.  Borrowers also shall maintain business
interruption, public liability, product liability, and property damage
insurance relating to Borrowers’ ownership and use of the Collateral, as well
as insurance against larceny, embezzlement, and criminal misappropriation.


(b)                                 All such policies of
insurance shall be in such form, with such companies, and in such amounts as
may be reasonably satisfactory to Agent. 
All such policies of insurance (except those of public liability and
property damage) shall contain a 438BFU lender’s loss payable endorsement, or
an equivalent endorsement in a form satisfactory to Agent, showing Agent as
sole loss payee thereof, and shall contain a waiver of warranties, and shall
specify that the insurer must give at least 10 days prior written notice to
Agent before canceling its policy for any reason.  Administrative Borrower shall deliver to
Agent certified copies of such policies of insurance and evidence of the
payment of all premiums therefor.  All
proceeds payable under any such policy shall be payable to Agent to be applied
on account of the Obligations.


6.10                        No Setoffs
or Counterclaims.  Make payments
hereunder and under the other Loan Documents by or on behalf of Borrowers
without setoff or counterclaim and free and clear of, and without deduction or
withholding for or on account of, any federal, state, or local taxes.



 56
 









6.11                        Location
of Inventory and Equipment.  Keep the Inventory (other than
Inventory in transit) and Equipment only at the locations identified on Schedule 6.11;
provided, however, that Borrowers may amend Schedule 6.11
so long as such amendment occurs by written notice to Agent not less than 30
days prior to the date on which the Inventory or Equipment is moved to such new
location, so long as such new location is within the continental United States,
Alaska, Hawaii or Puerto Rico, and so long as, at the time of such written
notification, Borrowers provide any financing statements necessary to perfect
and continue perfected the Agent’s Lien for the benefit of the Lender Group in
such assets, and Borrowers will use their best efforts to obtain a Collateral
Access Agreement if requested by Agent.


6.12                        Compliance
with Laws.  Comply with the requirements of
all applicable laws, rules, regulations, and orders of any Governmental
Authority, including the Fair Labor Standards Act and the Americans With
Disabilities Act, other than laws, rules, regulations, and orders the
non-compliance with which, individually or in the aggregate, would not have and
could not reasonably be expected to cause a Material Adverse Change.


6.13                        Employee
Benefits.  (a)                     Deliver to
Agent:  (i) promptly, and in any event
within 10 Business Days after Parent or any of its Subsidiaries knows or has
reason to know that an ERISA Event has occurred that reasonably could be
expected to result in a Material Adverse Change, a written statement of the
chief financial officer of Parent describing such ERISA Event and any action
that is being taking with respect thereto by Parent, any such Subsidiary or
ERISA Affiliate, and any action taken or threatened by the IRS, Department of
Labor, or PBGC.  Parent or such
Subsidiary, as applicable, shall be deemed to know all facts known by the
administrator of any Benefit Plan of which it is the plan sponsor, (ii)
promptly, and in any event within three Business Days after the filing thereof
with the IRS, a copy of each funding waiver request filed with respect to any
Benefit Plan and all communications received by Parent, any of its Subsidiaries
or, to the knowledge of Parent, any ERISA Affiliate with respect to such
request, and (iii) promptly, and in any event within three Business Days after
receipt by Parent, any of its Subsidiaries or, to the knowledge of Parent, any
ERISA Affiliate, of the PBGC’s intention to terminate a Benefit Plan or to have
a trustee appointed to administer a Benefit Plan, copies of each such notice.


(b)                                 Cause to be delivered
to Agent, upon Agent’s request, each of the following:  (i) a copy of each Plan (or, where any such
plan is not in writing, complete description thereof) (and if applicable,
related trust agreements or other funding instruments) and all amendments
thereto, all written interpretations thereof and written descriptions thereof
that have been distributed to employees or former employees of Parent or its
Subsidiaries; (ii) the most recent determination letter issued by the IRS with
respect to each Benefit Plan; (iii) for the three most recent plan years, annual
reports on Form 5500 Series required to be filed with any governmental agency
for each Benefit Plan; (iv) all actuarial reports prepared for the last three
plan years for each Benefit Plan; (v) a listing of all Multiemployer Plans,
with the aggregate amount of the most recent annual contributions required to
be made by Parent or any ERISA Affiliate to each such plan and copies of the
collective bargaining agreements requiring such contributions; (vi) any
information that has been provided to Parent or any ERISA Affiliate regarding
withdrawal liability under any Multiemployer Plan; and (vii) the aggregate
amount of



 57
 









the most recent annual payments made to former employees of Parent or
its Subsidiaries under any Retiree Health Plan.


6.14                        Leases. 
Pay when due all rents and other amounts payable under any
leases to which Parent is a party or by which Borrowers’ properties and assets
are bound, unless such payments are the subject of a Permitted Protest.  To the extent that Borrowers fail timely to
make payment of such rents and other amounts payable when due under their
leases, Agent shall be entitled, in its discretion, to reserve an amount equal
to such unpaid amounts against the Borrowing Base.


6.15                        Restatement
of Financial Statements.


On or before July 31, 2007,
the Parent shall:


(a)                                  deliver to the Agent
(i) its quarterly reports on Form 10-Q for the quarters ended July 29, 2006,
October 28, 2006 and May 5, 2007 (or the equivalent report(s) which the Parent
files with the SEC that covers the same periods); and (ii) its annual report on
Form 10-K for the Fiscal Year ended February 3, 2007;


(b)                                  file with the SEC its
(i) quarterly reports on Form 10-Q for the quarters ended July 29, 2006,
October 28, 2006 and May 5, 2007 (or the equivalent report(s) which the Parent
files with the SEC that covers the same periods); and (ii) its annual report on
Form 10-K for the Fiscal Year ended February 3, 2007.


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, together with Indebtedness to issuers of letters
of credit that is the subject of L/C Guarantees;


(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
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



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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 7.13;


(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 under
the L/C Demand Facility (including guarantees by the Borrowers or any Guarantor
in respect of such Indebtedness) not to exceed $60,000,000; 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.



 59
 









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
hereto as Exhibit F-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 hereto as Exhibit G-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 9402(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).



 60
 









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                        Consignments.  Consign
any Inventory or sell any Inventory on bill and hold, sale or return, sale on
approval, or other conditional terms of sale.


7.11                        Distributions.  Make
any distribution or declare or pay any dividends (in cash or other property,
other than capital stock) on, or purchase, acquire, redeem, or retire any of
Parent’s capital stock, of any class, whether now or hereafter outstanding; provided,
however, Parent may buy back certain of its capital stock so long as (i)
no Event of Default or Default exists and (ii) there has been at least
$10,000,000 of borrowing Availability under Section 2.1 (without
being limited by the Maximum Amount) as of the end of each of the three months
preceding such payment or purchase, and on such date, after taking into account
the payment or purchase of such stock.


7.12                        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.


7.13                        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;



 61
 









(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 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 7.13(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
this Agreement; provided  further that in no event shall the
aggregate amount of the investments made pursuant to clauses (i) and (ii) of
this Section 7.13(e) exceed $175,000,000.00 in the aggregate during the
term of this 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 7.13(e); provided  further that
investments in Hoop Canada, Inc. made pursuant to this Section 7.13(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 7.13(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) acceptable to Agent; and


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


7.14                        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



 62















intercompany Indebtedness
permitted by Sections 7.13(f) or 7.13(g), and (iii) any investments
permitted by Section 7.13(e).


7.15                        Suspension.  Suspend
or go out of a material portion of their business.


7.16                        Use of
Proceeds.  Use (a) the proceeds of the Advances
for any purpose other than (i) to pay transactional costs and expenses incurred
in connection with this Agreement, (ii) to fund working capital in the
ordinary course of business; (iii) to fund Capital Expenditures in the amounts
permitted pursuant to Section 7.19(b) of this Agreement; (iv) to make
investments for the purposes, and in the amounts, permitted pursuant to Section
7.13(e) of this Agreement, provided  that in no event shall
the proceeds of Advances be used to make investments pursuant to clause (ii) of
Section 7.13(e) in excess of $50,000,000 in the aggregate during the
term of this Agreement or any extensions or renewals thereof; and (v)
consistent with the terms and conditions hereof, for any lawful and permitted
corporate purposes.  In no event may any
proceeds of Advances be used to pay indemnification obligations to the Walt
Disney Companies, as described in Section 7.6, above, in an amount
greater than $25,000,000.00 at any one time or in the aggregate, without the
prior written consent of the Required Lenders.


7.17                        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.


7.18                        No
Prohibited Transactions Under ERISA. 
Directly or indirectly:


(a)                                  engage, or permit any
Subsidiary of any Borrower to engage, in any prohibited transaction which is
reasonably likely to result in a civil penalty or excise tax described in Sections
406 of ERISA or 4975 of the IRC for which a statutory or class exemption is
not available or a private exemption has not been previously obtained from the
Department of Labor;


(b)                                 permit to exist with
respect to any Benefit Plan any accumulated funding deficiency (as defined in Sections
302 of ERISA and 412 of the IRC), whether or not waived;


(c)                                  fail, or permit any
Subsidiary of any Borrower to fail, to pay timely required contributions or
annual installments due with respect to any waived funding deficiency to any
Benefit Plan;


(d)                                 terminate, or permit
any Subsidiary of any Borrower to terminate, any Benefit Plan where such event
would result in any liability of any Borrower, any of its Subsidiaries or any
ERISA Affiliate under Title IV of ERISA;



 63
 









(e)                                  fail, or permit any
Subsidiary of any Borrower to fail, to make any required contribution or
payment to any Multiemployer Plan;


(f)                                    fail, or permit any
Subsidiary of any Borrower to fail, to pay any required installment or any
other payment required under Section 412 of the IRC on or before the due
date for such installment or other payment;


(g)                                 amend, or permit any
Subsidiary of any Borrower to amend, a Plan resulting in an increase in current
liability for the plan year such that either of any Borrower, any Subsidiary of
any Borrower or any ERISA Affiliate is required to provide security to such
Plan under Section 401(a)(29) of the IRC; or


(h)                                 withdraw, or permit
any Subsidiary of any Borrower to withdraw, from any Multiemployer Plan where
such withdrawal is reasonably likely to result in any liability of any such
entity under Title IV of ERISA;


which, individually or in
the aggregate, results in or reasonably would be expected to result in a claim
against or liability of any Borrower, any of its Subsidiaries or any ERISA
Affiliate in excess of $100,000.


7.19                        Financial
Covenants.  


(a)                                  Fail to maintain
Availability at all times of not less than an amount equal to the product of
(i) the Maximum Amount (other than the Seasonal Overadvance Amount) then in
effect, multiplied by (ii) ten percent (10%).


(b)                                 Make Capital Expenditures
(based upon Parent’s Statement of Cash Flows for Investing Activities, net of
construction allowances or other allowances granted by the applicable landlord,
exclusive of non-capital items and inclusive of any Capital Expenditures made
by Hoop Holdings, LLC, Hoop Retail Stores, LLC and Hoop Canada, Inc. during
such period, except to the extent the aggregate amount of Capital Expenditures
made by Hoop Holdings, LLC, Hoop Retail Stores, LLC and Hoop Canada, Inc.
during such period exceeds the aggregate amount of funding provided by the
Borrowers to such Subsidiary during such period) in each of the following
Fiscal Years in excess of the applicable amount set forth below:


	
  Fiscal Year Ending

  On or About

  	
   

  	
  Maximum

  Capital Expenditures

  
	
   

  	
   

  	
   

  
	
  January 31, 2008

  	
   

  	
  $203,000,000.00

  
	
   

  	
   

  	
   

  
	
  January 31, 2009

  	
   

  	
  To be determined in accordance with the two
  following paragraphs.

  
	
   

  	
   

  	
   

  
	
  January 31, 2010

  	
   

  	
  To be determined in accordance with the two
  following paragraphs.

  
	
   

  	
   

  	
   

  
	
  January 31, 2011

  	
   

  	
  To be determined in accordance with the two
  following paragraphs.

  



 



 64
 









Agent, the Required Lenders and Administrative
Borrower shall reasonably agree upon the maximum Capital Expenditures for each
Fiscal Year subsequent to the Fiscal Year ending on or about January 31,
2008 based upon Parent’s Business Plan for such Fiscal Year.  Further, any unutilized Capital Expenditures
in any given Fiscal Year may be carried forward as an increase to the
subsequent year’s Capital Expenditure covenant, without regard to any prior
carryover.


In no event shall
the maximum permitted Capital Expenditures for any Fiscal Year specified in the
table above, as agreed by Agent, the Required Lenders and Administrative
Borrower in accordance with the preceding paragraph, be less than the corresponding
amounts that are set forth in the table below.


In addition, the
Borrowers acknowledge and agree that the respective amounts set forth in the
table below opposite each such period shall only be available for use as
investments in Hoop Holdings, LLC, Hoop Retail Stores, LLC and/or Hoop Canada,
Inc. which are expressly permitted pursuant to Section 7.13(e) of this
Agreement:




	
  Period

  	
   

  	
  Amount to be Preserved

  for investments in Hoop

  Holdings, LLC, Hoop Retail

  Stores, LLC and/or Hoop

  Canada, Inc.

  	
   

  
	
  Closing Date
  through January 31, 2008

  	
   

  	
  $

  	
  20,000,000

  	
   

  
	
  February 1, 2008
  – January 31, 2009

  	
   

  	
  $

  	
  55,000,000

  	
   

  
	
  February 1, 2009
  – January 31, 2010

  	
   

  	
  $

  	
  36,000,000

  	
   

  
	
  February 1, 2010 –
  January 31, 2011

  	
   

  	
  $

  	
  52,000,000

  	
   

  






 


Further, if the Borrowers
desire during any fiscal period specified in the table above to expend amounts
greater than those provided for such period in the table above as investments
in Hoop Retail Stores, LLC, then such additional investments shall be permitted
if, as of the date any such additional investment is made, (a) no Default or
Event of Default then exists or would arise therefrom, and (b)(i) immediately
after giving effect to the proposed investment, and (ii) for a period of ninety
(90) days thereafter, the Borrowers are projected to maintain Availability of
not less than $25,000,000.  The Agent and
each of the Lenders agrees that it will not unreasonably withhold its consent
to any requested modification of, or increase to, the foregoing terms and
conditions.



 65
 









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 principal, interest (including any interest 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 Sections 6.1(b), 6.2, 6.3, 6.4,
6.5, 6.6, 6.8, 6.11 and 6.13 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;


(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;



 66
 









(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 L/C Demand Facility Letter of Credit Agreement (other
than any such “Event of Default” that has been waived in writing by the agent
and the required lenders under the L/C Demand Facility).


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:


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


(b)                                 Cease advancing money
or extending credit to or for the benefit of Borrowers under this Agreement,
under any of the Loan Documents, or under any other agreement between Borrowers
and the Lender Group;



 67
 









(c)                                  Terminate this
Agreement and any of the other Loan Documents as to any future liability or
obligation of the Lender Group, but without affecting the Lender Group’s rights
and security interests in the Collateral and without affecting the Obligations;


(d)                                 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;


(e)                                  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;


(f)                                    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;


(g)                                 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 9505 of the Code), set off and apply to the Obligations any
and all (i) balances and deposits of Borrowers held by the Lender Group
(including any amounts received in the Lockbox Accounts), or (ii) indebtedness
at any time owing to or for the credit or the account of Borrowers held by the
Lender Group;


(h)                                 Hold, as cash
collateral, any and all balances and deposits of Borrowers held by the Lender
Group, and any amounts received in the Lockbox Accounts, to secure the full and
final repayment of all of the Obligations;


(i)                                     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;



 68
 









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


(k)                                  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;


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


(m)                               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.


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.


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; (b) set up such reserves in



 69
 









Borrowers’ Loan Account as Agent deems necessary to protect the Lender
Group from the exposure created by such failure; or (c) obtain and maintain
insurance policies of the type described in Section 6.9, 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
9207 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.


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.



 70
 









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 of Agent:

  	
   

  	
  WELLS FARGO RETAIL FINANCE, LLC

  One Boston Place

  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 9611 or 9620 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 9611 or 9620 of the
Code shall be deemed sent when



 71
 









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
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.



 72
 









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 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



 73
 









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 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



 74
 









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 Advances or 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.


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)                                 except as provided in Section
2.18, increase the aggregate Commitments;



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(c)                                  postpone or delay any
date fixed by this Agreement or any other Loan Document for any payment of
principal, 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 Advance, or any fees or
other amounts payable hereunder or under any other Loan Document;


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


(f)                                    increase the
advance rate with respect to Advances (except for the restoration of an advance
rate after the prior reduction thereof), or change Section 2.1(b);


(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


(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; and, provided  further, that the limitation
contained in clause (e) above shall not be deemed to limit the ability of Agent
to make Advances or Agent Loans, as applicable, in accordance with the
provisions of Sections 2.1(g), (h), or (l).  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).



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16.2                        Replacement
of Non-Consenting Lenders.  If any
Lender is a Non-Consenting Lender, then 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 Advances and Obligations in respect of L/Cs,
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 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



 77















provisions contained
herein; provided, however, that the provisions of Sections 17.10, 17.11,
and 17.16(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,
including making the determinations contemplated by Section 2.1(b).  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
Advances, 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)
make Advances for itself or on behalf of Lenders as provided in the Loan
Documents; (d) exclusively receive, apply, and distribute the Collections as
provided in the Loan Documents; (e) 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; (f) perform, exercise, and enforce any and all other rights and
remedies of the Lender Group with respect to Borrowers, the Advances, the
Collateral, the Collections, or otherwise related to any of same as provided in
the Loan Documents; and (g) 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.


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).



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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.


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



 79
 









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).


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



 80
 









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, 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. 
With respect to the Agent Loans and Agent Advances, Wells Fargo Retail
shall have the same rights and powers under this Agreement as any other Lender
and may exercise the same as though it were not Agent, and the terms “Lender”
and “Lenders” include Wells Fargo Retail in its individual capacity.


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



 81
 









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;


(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.



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(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.


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.



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(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)                                  Subject to Section
17.12(b), each of the Lenders agrees that it may, at any time and from time
to time, after obtaining the prior written consent of Agent or the Required
Lenders, and agrees 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 to notify Administrative Borrower and Agent promptly
after any such setoff, provided  that the failure to give such
notice shall not affect the validity of such setoff.  Each of the Lenders agrees that it shall not,
unless specifically requested to do so by Agent, take or cause to be taken any
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 pursuant to the terms of this
Agreement, in each case in excess of such Lender’s Pro Rata Share, 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.



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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
principal, premium or interest on Revolving Advances 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.


17.16                 Field Audits and
Examination Reports; Confidentiality; Disclaimers by Lenders; Other Reports and
Information.  By signing this Agreement, each
Lender:


(a)                                  is deemed to have
requested that Agent furnish such Lender, promptly after the same become
available, copies of all financial statements, reports and certificates
required to be delivered by Administrative Borrower under Sections 6.2, 6.4
and 6.15 of this Agreement, and a copy of each field audit or
examination report (each a “Report” and collectively, “Reports”)
received by Agent, and Agent shall so furnish each Lender with such Reports;


(b)                                 expressly agrees and
acknowledges that Agent (i) does not make any representation or warranty as to the
accuracy of any Report, and (ii) shall not be liable for any information
contained in any Report;


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


(d)                                 agrees to keep all
Reports and other 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



 85
 









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(d) concurrent
with, or where practicable, prior to the disclosure thereof; and


(e)                                  without limiting the
generality of any other indemnification provision contained in this Agreement,
agrees:  (i) to hold Agent and any
such other Lender preparing a Report harmless from any action the indemnifying
Lender may take or conclusion the indemnifying Lender may reach or draw from
any Report in connection with any loans or other credit accommodations that the
indemnifying Lender has made or may make to Borrowers, or the indemnifying
Lender’s participation in, or the indemnifying Lender’s purchase of, a loan or
loans of Borrowers; and (ii) to pay and protect, and indemnify, defend,
and hold Agent and any such other Lender preparing a Report harmless from and
against, the claims, actions, proceedings, damages, costs, expenses and other
amounts (including, attorney costs) incurred by Agent and any such other Lender
preparing a Report as the direct or indirect result of any third parties who might
obtain all or part of any Report through the indemnifying Lender.


In addition to the
foregoing: (x) any Lender may from time to time request of Agent in writing
that Agent provide to such Lender a copy of any report or document provided by
Borrowers to Agent, and, upon receipt of such request, Agent shall provide a
copy of same to such Lender promptly upon receipt thereof; (y) to the extent
that Agent is entitled, under any provision of the Loan Documents, to request
additional reports or information from Borrowers, any Lender may, from time to
time, reasonably request Agent to exercise such right as specified in such
Lender’s notice to Agent, whereupon Agent promptly shall request of Borrowers
the additional reports or information specified by such Lender, and, upon
receipt thereof, Agent promptly shall provide a copy of same to such Lender;
and (z) any time that Agent renders to Administrative Borrower a statement
regarding the Loan Account, Agent shall send a copy of such statement to each
Lender.


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 make any
Advances shall constitute the several (and not joint) obligations of the
respective Lenders on a ratable basis, according to their respective
Commitments, to make an amount of such Advances not to exceed, in principal
amount, at any one time outstanding, 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



 86
 









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 make Advances, 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.


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.



 87
 









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.


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 Advances and 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 Advances and 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



 88
 









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.


18.9                        Acknowledgment
and Restatement of Existing Loan Agreement.


(a)                                  Existing
Obligations.  Each Borrower hereby
acknowledges, confirms and agrees that Borrowers are indebted to Agent and
Lenders for Advances to Borrowers under the Existing Loan Agreement, as of the
close of business on June 27, 2007, in the aggregate principal amount of
$9,234,916.65 and the aggregate amount of $80,931,033.52 in respect of undrawn
or unreimbursed Letters of Credit, together with all interest accrued and
accruing thereon (to the extent applicable), and all fees, costs, expenses and
other charges relating thereto, all of which are unconditionally owing by
Borrowers to Agent and Lenders, without offset, defense or counterclaim of any
kind, nature or description whatsoever.


(b)                                 Acknowledgment of
Security Interests.  


(i)                                     Each Borrower
hereby acknowledges, confirms and agrees that Agent, for itself and the ratable
benefit of Lenders, has and shall continue to have a security interest in and
lien upon the Collateral heretofore granted to Agent pursuant to the Existing
Loan Agreement to secure the Obligations, as well as any Collateral granted
under this Agreement or under any of the other Loan Documents or otherwise
granted to or held by Agent or any Lender.


(ii)                                  The liens and
security interests of Agent, for itself and the ratable benefit of Lenders, in
the Collateral shall be deemed to be continuously granted and perfected from
the earliest date of the granting and perfection of such liens and security
interests, whether under the Existing Agreement, this Agreement or any other
Loan Documents.


(c)                                  Existing Loan
Agreement.  Each Borrower hereby
acknowledges, confirms and agrees that: (a) the Existing Loan Agreement has
been duly executed and delivered by each Borrower and is in full force and
effect as of the date hereof and (b) the agreements and obligations of each
Borrower contained in the Existing Loan Agreement constitute the legal, valid
and binding obligations of each Borrower, enforceable against it in accordance
with their respect terms, and each Borrower has no valid defense to the
enforcement of such obligations and (c) Agent and Lenders are entitled to all
of the rights and remedies provided for in the Existing Loan Agreement.



 89
 









(d)                                 Restatement.


(i)                                     Except as
otherwise stated in Section 18.9(b) hereof and this Section 18.9(d),
as of the date hereof, the terms, conditions, agreements, covenants,
representations and warranties set forth in the Existing Loan Agreement are
hereby amended and restated in their entirety, and as so amended and restated,
replaced and superseded, by the terms, conditions, agreements, covenants,
representations and warranties set forth in this Agreement and the other Loan
Documents, except that nothing herein or in the other Loan Documents shall
impair or adversely affect the continuation of the liability of any Borrower
for the Obligations heretofore granted, pledge and/or assigned to Agent or any
Lender.  The amendment and restatement
contained herein shall not, in any manner, be construed to constitute payment
of, or impair, limit, cancel or extinguish, or constitute a novation in respect
of, the Obligations and other liabilities of any Borrower evidenced by or
arising under the Existing Loan Agreement, and the liens and security interests
securing such Obligations and other liabilities, which shall not in any manner
be impaired, limited, terminated, waived or released.


(e)                                  The principal amount
of the Advances outstanding under the Existing Loan Agreement on the Closing
Date (as set forth in Section 18.9(a) above) shall, for purposes of this
Agreement, be included as Advances hereunder and each of the L/Cs and LC
Guarantees outstanding under the Existing Loan Agreement on the Closing Date
shall, for purposes of this Agreement, be included as L/Cs and L/C Guarantees
hereunder; provided, however, that the outstanding L/Cs described
on Schedule 18.9(e)(i) shall be deemed to have been issued as of the
Closing Date by Wells Fargo Bank, National Association, as Issuing Bank under
the L/C Demand Facility Letter of Credit Agreement, and shall no longer be
deemed to be L/Cs issued hereunder but, rather, shall be deemed as of the
Closing Date to be L/C Demand Facility Letters of Credit.  The outstanding L/Cs described on Schedule
18.9(e)(ii) shall remain L/Cs hereunder.


[Remainder of this page intentionally left blank]



 90















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

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  WACHOVIA CAPITAL FINANCE

  CORPORATION (NEW ENGLAND), as

  Documentation Agent and as a Lender

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name: 

  	
   

  	
   

  
	
   

  	
   

  	
  Title: 

  	
   

  	
   

  
						



 


Fifth Amended and
Restated

Loan and Security Agreement



 S-1
 









 


	
  

  	
   

  	
  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:

  	
   

  	
   

  
							



 


Fifth Amended and
Restated

Loan and Security Agreement



 S-2















SCHEDULE
C-1


COMMITMENTS
ON CLOSING DATE


	
  1. 

  	
  Wells Fargo Retail
  Finance, LLC

  	
   

  	
  $

  	
  37,200,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2. 

  	
  Wachovia Capital
  Finance Corporation (New England)

  	
   

  	
  $

  	
  24,000,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3. 

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

  	
   

  	
  $

  	
  24,000,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
  JPMorgan Chase Bank,
  N.A.

  	
   

  	
  $

  	
  12,000,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5. 

  	
  Citicorp USA, Inc.

  	
   

  	
  $

  	
  12,000,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6. 

  	
  HSBC Bank USA, National
  Association

  	
   

  	
  $

  	
  10,800,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total

  	
   

  	
   

  	
  $

  	
  120,000,000.00

  	
   

  



 


Commitment on Closing
Date



 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 Fifth Amended and Restated Loan and Security
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”),
and 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.                                     As
provided under the Loan Agreement, the Assignor has committed to making
Advances (the “Committed Loans”) to the Borrowers in an aggregate amount
not to exceed $                    
(the “Commitment”);


C.                                     [The
Assignor has made Committed Loans in the aggregate principal amount of
$                   
to the Borrowers] [No Committed Loans are outstanding under the Loan
Agreement];


D.                                    [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


E.                                      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
Committed Loans and 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



 1
 








and without representation or warranty (except as provided in this
Assignment and Acceptance)     % (the “Assignee’s
Percentage Share”) of (A) the Commitment [and the Committed Loans 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, Committed Loans and L/C
Obligations assigned.]


(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
Committed Loans.


(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] Committed Loans [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



 2
 








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 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)                        ,
200  ; 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.



 3
 








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.]


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



 4
 








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 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.



 5
 








(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 COMMONWEALTH OF
MASSACHUSETTS AND SHALL BE GOVERNED BY AND INTERPRETED IN ACCORDANCE WITH THE
LAWS OF SUCH COMMONWEALTH, 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 and Acceptance may be commenced in the state and federal courts
located in the County of Suffolk, Commonwealth of Massachusetts, 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.



 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:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
						



 



 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 Fifth
Amended and Restated Loan and Security 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 (collectively,
the “Lenders”), and Wells Fargo Retail Finance LLC, as agent for the
Lenders (the “Agent”).  Terms
defined in the Loan 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 Loan 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 outstanding loans is $              [,
and 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 Loan 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:                                                                            



 8
 








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:

  	
   

  
						



 



 9
 








ACKNOWLEDGED AND, TO THE
EXTENT REQUIRED, CONSENTED TO:


	
  THE CHILDREN’S PLACE RETAIL

  	
   

  
	
  STORES,
  INC., a
  Delaware corporation,

  	
   

  
	
  as
  Administrative Borrower

  	
   

  
	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  
	
   

  
	
  ACKNOWLEDGED AND
  ASSIGNMENT

  	
   

  
	
   

  	
   

  
	
  CONSENTED TO:

  	
   

  
	
   

  	
   

  
	
  WELLS
  FARGO RETAIL FINANCE, LLC,

  	
   

  
	
   

  	
   

  
	
  a Delaware
  limited liability company, as Agent

  	
   

  
	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  
						



 



 10















EXHIBIT
C-1


COMPLIANCE
CERTIFICATE SAMPLE COPY


Date                                   ,
200    


WELLS
FARGO RETAIL FINANCE, LLC


One Boston Place,
Suite 1800


Boston,
Massachusetts  02108


Attn:                                                 


RE:                            Fifth
Amended and Restated Loan and Security Agreement, dated as of June 28, 2007
(the “Agreement”) by and among WELLS FARGO RETAIL FINANCE, LLC, as agent
(“Agent”) for certain financial institutions, the financial
institutions, and THE CHILDREN’S PLACE RETAIL STORES, INC. and THE CHILDREN’S
PLACE SERVICES COMPANY, LLC (“Borrowers”).


Dear                             :


This certificate
accompanies the financial statements for the Fiscal Month ending                            
(the “Financial Statements”) furnished by Borrowers to Agent in
accordance with Section 6.2 of the Agreement. 
Capitalized terms used but not defined herein shall have the meanings
set forth in the Agreement.


The undersigned, in
his/her capacity as the chief financial officer of Administrative Borrower, has
reviewed the Financial Statements, the Agreement and each of the other Loan
Documents and has made such investigation of the business and affairs of
Borrowers and such inquiry of the officers of Borrowers as the undersigned has
deemed appropriate under the circumstances. 
Following such review and investigation, the undersigned hereby
certifies, on behalf of Administrative Borrower and the other Borrowers, as of
the date of this certificate as follows: (i) all reports, statements, or
computer prepared information of any kind or nature delivered or caused to be
delivered to Agent under the Agreement have been prepared in accordance with
GAAP and fairly present the financial condition of Borrowers[, except for the
months ended March, 2007, April, 2007 and May, 2007 as may be directly impacted
by the Stock Option Issue]; (ii) Borrowers are in timely compliance with all of
the covenants and agreements under the Agreement; (iii) the representations and
warranties of Borrowers contained in the Agreement and the other Loan Documents
are true and correct in all material respects on and as of the date of this
certificate, as though made on and as of such date (except to the extent that
such representations and warranties relate solely to an earlier date); and (iv)
except as set forth on Exhibit A attached hereto, there does not exist
any condition or event that constitutes an Event of Default (if there does
exist an Event of Default, Borrowers have taken, are taking, or propose to take
those actions with respect thereto as described on said Exhibit A).



 1
 









 


	
  Sincerely,

  
	
   

  
	
  THE CHILDREN’S PLACE RETAIL STORES, INC.

  
	
   

  
	
   

  
	
  By:

  	
   

  	
   

  
	
  Name: 

  	
   

  	
   

  
	
  Title:

  	
  Chief Financial Officer

  	
   

  
					



 



 2