Document:

Exhibit 10.1

EXECUTION VERSION

TERM LOAN AND SECURITY AGREEMENT

Bank of America, N.A.,

The Term Administrative Agent and Term Collateral Agent

for the Term Lenders Referenced Herein

Banc of America Securities LLC

Sole Lead Arranger and Sole Book Runner

Mothers Work, Inc.

The Lead Borrower

For The
Borrowers Referenced Herein

AND

The Guarantors Party Hereto

March 13,
2007

TABLE OF CONTENTS

	
  ARTICLE I. - DEFINITIONS:

  	
  1

  
	
  ARTICLE II. - THE
  TERM LOAN

  	
  31

  
	
  2.1

  	
  Commitment to Make the Term
  Loan

  	
  31

  
	
  2.2

  	
  Increase in the Term Loan

  	
  31

  
	
  2.3

  	
  Election of Term Loan
  Interest Rate and Interest Period

  	
  32

  
	
  2.4

  	
  Term Agent’s Records of
  Liabilities

  	
  34

  
	
  2.5

  	
  The Term Note

  	
  34

  
	
  2.6

  	
  Payment of Principal of the
  Term Loan

  	
  34

  
	
  2.7

  	
  Interest On The Term Loan

  	
  37

  
	
  2.8

  	
  Fees

  	
  37

  
	
  2.9

  	
  Concerning Fees

  	
  38

  
	
  2.10

  	
  Changed Circumstances

  	
  38

  
	
  2.11

  	
  Term Lenders’ Commitments

  	
  39

  
	
  2.12

  	
  Designation of Lead
  Borrower as Borrowers’ Agent

  	
  41

  
	
  ARTICLE III. -
  CONDITIONS PRECEDENT:

  	
  41

  
	
  3.1

  	
  Corporate Due Diligence

  	
  41

  
	
  3.2

  	
  Opinion

  	
  42

  
	
  3.3

  	
  Officers’ Certificates

  	
  42

  
	
  3.4

  	
  Additional Documents

  	
  42

  
	
  3.5

  	
  Representations and
  Warranties

  	
  44

  
	
  3.6

  	
  All Fees and Expenses Paid

  	
  44

  
	
  3.7

  	
  No Borrower Default

  	
  45

  
	
  3.8

  	
  No Adverse Change

  	
  45

  
	
  3.9

  	
  Absence of litigation

  	
  45

  
	
  3.10

  	
  Finalization of Revolving
  loan facility

  	
  45

  
	
  3.11

  	
  No other Material
  Indebtedness

  	
  45

  
	
  3.12

  	
  Validity of Liens

  	
  45

  
	
  3.13

  	
  Rating of Term Loan Facility

  	
  46

  
	
  3.14

  	
  Documents

  	
  46

  
	
  3.15

  	
  Conditions to Funding of
  Term Loan

  	
  46

  
	
  ARTICLE IV. - GENERAL
  REPRESENTATIONS, COVENANTS AND WARRANTIES:

  	
  46

  
	
  4.1

  	
  Payment and Performance of
  Liabilities

  	
  47

  
	
  4.2

  	
  Due Organization. Corporate
  Authorization. No Conflicts

  	
  47

  
	
  4.3

  	
  Trade Names

  	
  48

  
	
  4.4

  	
  Infrastructure

  	
  48

  
	
  4.5

  	
  GUARANTOR

  	
  49

  
	
  4.6

  	
  Locations

  	
  49

  
	
  4.7

  	
  Title To Assets

  	
  50

  
	
  4.8

  	
  Indebtedness

  	
  51

  
	
  4.9

  	
  Insurance

  	
  53

  
	
  4.10

  	
  Licenses; Material
  Contracts

  	
  54

  
	
  4.11

  	
  Leases

  	
  55

  

 

 i
 

 

	
  4.12

  	
  Requirements of Law

  	
  55

  
	
  4.13

  	
  Labor Relations

  	
  55

  
	
  4.14

  	
  Maintain Properties

  	
  56

  
	
  4.15

  	
  Taxes

  	
  57

  
	
  4.16

  	
  No Margin Stock or
  Securities

  	
  58

  
	
  4.17

  	
  ERISA

  	
  58

  
	
  4.18

  	
  Hazardous Materials and
  Environmental Compliance

  	
  59

  
	
  4.19

  	
  Litigation

  	
  62

  
	
  4.20

  	
  Dividends; Investments;
  Corporate Action

  	
  62

  
	
  4.21

  	
  Loans

  	
  64

  
	
  4.22

  	
  Protection of Assets

  	
  64

  
	
  4.23

  	
  Line of Business

  	
  64

  
	
  4.24

  	
  Affiliate Transactions

  	
  64

  
	
  4.25

  	
  Further Assurances

  	
  65

  
	
  4.26

  	
  Adequacy OF Disclosure

  	
  65

  
	
  4.27

  	
  No Restrictions on
  Liabilities

  	
  66

  
	
  4.28

  	
  Other Covenants

  	
  66

  
	
  ARTICLE V. -
  FINANCIAL REPORTING AND PERFORMANCE COVENANTS:

  	
  66

  
	
  5.1

  	
  Maintain Records

  	
  66

  
	
  5.2

  	
  Access to Records

  	
  67

  
	
  5.3

  	
  Immediate Notice to Term
  Agent

  	
  68

  
	
  5.4

  	
  Weekly and Monthly Reports

  	
  69

  
	
  5.5

  	
  Quarterly Reports

  	
  69

  
	
  5.6

  	
  Annual Reports

  	
  70

  
	
  5.7

  	
  Officers’ Certificates

  	
  70

  
	
  5.8

  	
  Inventories, Appraisals,
  and Audits

  	
  71

  
	
  5.9

  	
  Additional Financial
  Information

  	
  72

  
	
  5.10

  	
  Financial Performance
  Covenants

  	
  73

  
	
  ARTICLE VI. - USE AND
  COLLECTION OF COLLATERAL:

  	
  73

  
	
  6.1

  	
  Use of Inventory Collateral

  	
  73

  
	
  6.2

  	
  Inventory Quality

  	
  73

  
	
  6.3

  	
  Adjustments and Allowances

  	
  74

  
	
  6.4

  	
  Validity of Accounts

  	
  74

  
	
  6.5

  	
  Notification to Account
  Debtors

  	
  74

  
	
  ARTICLE VII. - CASH
  MANAGEMENT

  	
  74

  
	
  7.1

  	
  Depository Accounts

  	
  74

  
	
  7.2

  	
  The Blocked Accounts

  	
  75

  
	
  7.3

  	
  Proceeds and Collection of
  Accounts

  	
  76

  
	
  ARTICLE VIII. - GRANT
  OF SECURITY INTEREST:

  	
  77

  
	
  8.1

  	
  Grant of Security Interest

  	
  77

  
	
  8.2

  	
  Extent and Duration of
  Security Interest

  	
  78

  
	
  8.3

  	
  Perfection of Security
  Interests

  	
  78

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

  	
  82

  
	
  9.1

  	
  Appointment as Attorney-In-Fact

  	
  82

  

 

 ii
 

 

	
  9.2

  	
  No Obligation to Act

  	
  83

  
	
  ARTICLE X. - EVENTS
  OF DEFAULT:

  	
  83

  
	
  10.1

  	
  Failure to Pay Term Loan and other Liabilities

  	
  83

  
	
  10.2

  	
  Failure to Perform Covenant or Liability (No Grace Period)

  	
  83

  
	
  10.3

  	
  Failure to Perform Covenant or Liability (Grace Period)

  	
  84

  
	
  10.4

  	
  Misrepresentation

  	
  84

  
	
  10.5

  	
  Acceleration of Other Debt. Breach of Lease

  	
  85

  
	
  10.6

  	
  Default Under Other Agreements

  	
  85

  
	
  10.7

  	
  Attachment; Judgment; Restraint of Business

  	
  85

  
	
  10.8

  	
  Business Failure

  	
  86

  
	
  10.9

  	
  Bankruptcy

  	
  86

  
	
  10.10

  	
  Default by Guarantor or Affiliate

  	
  86

  
	
  10.11

  	
  Indictment - Forfeiture

  	
  86

  
	
  10.12

  	
  Termination of Guaranty

  	
  87

  
	
  10.13

  	
  Challenge to Loan Documents

  	
  87

  
	
  10.14

  	
  Change in Control

  	
  87

  
	
  10.15

  	
  Uninsured Losses

  	
  87

  
	
  10.16

  	
  ERISA

  	
  87

  
	
  ARTICLE XI. - RIGHTS
  AND REMEDIES UPON DEFAULT:

  	
  88

  
	
  11.1

  	
  Rights of Enforcement

  	
  88

  
	
  11.2

  	
  Sale of Collateral

  	
  88

  
	
  11.3

  	
  Occupation of Business
  Location

  	
  89

  
	
  11.4

  	
  Grant of Nonexclusive
  License

  	
  89

  
	
  11.5

  	
  Assembly of Collateral

  	
  90

  
	
  11.6

  	
  Rights and Remedies

  	
  90

  
	
  11.7

  	
  Application of Proceeds

  	
  90

  
	
  ARTICLE XII. -
  NOTICES:

  	
  91

  
	
  12.1

  	
  Notice Addresses

  	
  91

  
	
  Suite 3207

  	
  92

  
	
  12.2

  	
  Notice Given

  	
  92

  
	
  ARTICLE XIII. - TERM:

  	
  93

  
	
  13.1

  	
  Termination

  	
  93

  
	
  13.2

  	
  Actions On Termination

  	
  93

  
	
  ARTICLE XIV. -
  GENERAL:

  	
  93

  
	
  14.1

  	
  Protection of Collateral

  	
  93

  
	
  14.2

  	
  Publicity

  	
  94

  
	
  14.3

  	
  Successors and Assigns

  	
  94

  
	
  14.4

  	
  Severability

  	
  94

  
	
  14.5

  	
  Amendments; Course of
  Dealing

  	
  94

  
	
  14.6

  	
  Power of Attorney

  	
  95

  
	
  14.7

  	
  Application of Proceeds

  	
  95

  
	
  14.8

  	
  Increased Costs

  	
  95

  
	
  14.9

  	
  Costs and Expenses of the
  Term Agent and Term Lenders

  	
  96

  
	
  14.10

  	
  Copies and Facsimiles

  	
  96

  
	
  14.11

  	
  New York Law

  	
  96

  
					

 

 iii
 

 

	
  14.12

  	
  Consent to Jurisdiction

  	
  96

  
	
  14.13

  	
  Indemnification

  	
  97

  
	
  14.14

  	
  Rules of Construction

  	
  98

  
	
  14.15

  	
  Intent

  	
  99

  
	
  14.16

  	
  Participations

  	
  100

  
	
  14.17

  	
  Right of Set-Off

  	
  100

  
	
  14.18

  	
  Pledges To Federal Reserve Banks

  	
  101

  
	
  14.19

  	
  Maximum Interest Rate

  	
  101

  
	
  14.20

  	
  Waivers

  	
  101

  
	
  14.21

  	
  Counterparts

  	
  102

  
	
  14.22

  	
  Electronic Submissions

  	
  102

  
	
  14.23

  	
  Joint Obligor Provisions

  	
  103

  
	
  14.24

  	
  Confidentiality

  	
  106

  
	
  14.25

  	
  Intercreditor Agreement

  	
  107

  
	
  ARTICLE XV. - THE
  TERM AGENT

  	
  107

  
	
  15.1

  	
  Appointment and Authority

  	
  107

  
	
  15.2

  	
  Rights as a Term Lender

  	
  108

  
	
  15.3

  	
  Exculpatory provisions

  	
  108

  
	
  15.4

  	
  Reliance by Term Agents

  	
  109

  
	
  15.5

  	
  Delegation of Duties

  	
  110

  
	
  15.6

  	
  Resignation of Term Agents

  	
  110

  
	
  15.7

  	
  Non-Reliance on Term
  Administrative Agent and Other Term Lenders

  	
  111

  
	
  15.8

  	
  Collateral and Guaranty
  Matters

  	
  111

  
	
  15.9

  	
  Notice of Transfer

  	
  112

  
	
  15.10

  	
  Reports and Financial Statements

  	
  112

  
	
  15.11

  	
  Agency for Perfection

  	
  113

  
	
  15.12

  	
  Indemnification of Term Agents

  	
  113

  
	
  15.13

  	
  Relation among Term Lenders

  	
  113

  
	
  15.14

  	
  Action by Term Agents; Consents; Waivers; Amendments

  	
  113

  
	
  15.15

  	
  Non-Consenting Term Lender

  	
  115

  
	
  ARTICLE XVI. -
  ASSIGNMENT BY TERM LENDERS

  	
  116

  
	
  16.1

  	
  Assignments and Assumptions

  	
  116

  
	
  16.2

  	
  Assignment Procedures

  	
  116

  
	
  16.3

  	
  Effect of Assignment

  	
  117

  
				

 

 iv
 

EXHIBITS

	
  2.5

  	
  :

  	
  Term Note

  
	
  2.11

  	
  :

  	
  Term Lenders’ Commitments

  
	
  3.15

  	
  :

  	
  Form of Term Loan Draw Notice

  
	
  4.2

  	
  :

  	
  Affiliates

  
	
  4.3

  	
  :

  	
  Trade Names

  
	
  4.6(a)

  	
  :

  	
  Locations, Leases, and Landlords

  
	
  4.6(c)

  	
   

  	
  Form of Landlord Waiver

  
	
  4.7(a)

  	
  :

  	
  Encumbrances

  
	
  4.7(d)

  	
  :

  	
  Third Party Bailees

  
	
  4.8

  	
  :

  	
  Indebtedness

  
	
  4.9

  	
  :

  	
  Insurance Policies

  
	
  4.10

  	
  :

  	
  Licenses; Material Contracts

  
	
  4.11

  	
  :

  	
  Capital Leases

  
	
  4.15

  	
  :

  	
  Taxes

  
	
  4.17

  	
  :

  	
  ERISA

  
	
  4.18

  	
  :

  	
  Environmental Compliance

  
	
  4.19

  	
  :

  	
  Litigation

  
	
  4.20

  	
  :

  	
  Investments

  
	
  5.7

  	
  :

  	
  Officer’s Compliance Certificate

  
	
  5.10(a)

  	
  :

  	
  Financial Performance Covenants

  
	
  5.10(b)

  	
  :

  	
  Business Plan

  
	
  8.3(d)

  	
  :

  	
  Investment Property

  
	
  16.2

  	
  :

  	
  Assignment and Acceptance

  

 

 v

TERM LOAN AND SECURITY AGREEMENT

March 13, 2007

THIS
AGREEMENT is made between

Bank
of America, N.A., a national banking association, with
offices at 100 Federal Street, Boston, Massachusetts 02110, as agent (in such
capacity, herein the “Term Administrative
Agent”) for the benefit of the Term Lenders, on a Pro Rata basis,
based upon each Term Lender’s Commitment Percentage, who are, at present, those
financial institutions identified on the signature pages of this Agreement and
who in the future are those Persons (if any) who become a “Term Lender” in accordance with the
provisions of this Agreement;

and

Bank
of America, N.A., a national banking association, with
offices at 100 Federal Street, Boston, Massachusetts 02110, as agent (in such
capacity, herein the “Term Collateral Agent”)
for the benefit of the Term Lenders and the Term Administrative Agent,

and

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

Cave
Springs, Inc., a Delaware corporation (collectively, with the
Lead Borrower, the “Borrowers” and
each individually, a “Borrower”),
which has its principal executive offices at Little Falls Centre II, 2751
Centerville Road, Suite 3207, Wilmington, DE 19808,

and

Mothers
Work Canada, Inc., a Delaware corporation (“Guarantor”), which has its principal
executive offices at 456 North Fifth Street, Philadelphia, Pennsylvania 19123,

in consideration of the
mutual covenants contained herein and benefits to be derived herefrom,

WITNESSETH:

ARTICLE I. - Definitions:

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

 1
 

“Acceleration”:  With respect to any Indebtedness, its
becoming due and payable prior to its stated maturity.  Derivations of the word “Acceleration” (such
as “Accelerate”) are used with like meaning in this Agreement.

“Accounts”
and “Accounts Receivable”  “Accounts” as defined in the UCC, and also
all:  accounts, accounts receivable,
receivables, and rights to payment (whether or not earned by performance) for:
property that has been or is to be sold, leased, licensed, assigned, or
otherwise disposed of; services rendered or to be rendered; a policy of
insurance issued or to be issued; a secondary obligation incurred or to be
incurred; energy provided or to be provided; for the use or hire of a vessel;
arising out of the use of a credit or charge card or information contained on
or used with that card; winnings in a lottery or other game of chance; and also
all Inventory which gave rise thereto, and all rights associated with such
Inventory, including the right of stoppage in transit; all reclaimed, returned,
rejected or repossessed Inventory (if any) the sale of which gave rise to any
Account.

“ACH”:  Automated clearing house.

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

“Acquired Real Property”: Any real property acquired by
the Borrowers after the date hereof, other than the Headquarters Facility, and
including but not limited to the Lead Borrower’s leased Domestic Distribution
Center.

“Additional
Commitment Lender”:  Defined
in Section 2.2.

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

“Affiliate”:

(a)           With
respect to any two Persons, a relationship in which (i) one holds, directly or
indirectly, not less than twenty-five percent (25%) of the capital stock,
beneficial interests, partnership interests, or other equity interests of the
other; or (ii) one has, directly or indirectly, the right, under ordinary
circumstances, to elect a majority of the directors (or other body or Person
who has those powers customarily vested in a board of directors of a
corporation); or (iii) the same third Person holds, directly or indirectly, not
less than twenty-five percent (25%) of their respective capital stock,
beneficial interests, partnership interests or other equity

 2
 

interests; or has directly or indirectly the right to elect the
majority of directors of both such parties; or

(b)           Any corporation,
limited liability company, trust, partnership, joint venture, or other
enterprise which: is a parent, brother-sister, subsidiary, or affiliate,
of any Obligor; has such enterprise’s tax returns or financial statements
consolidated with the Lead Borrower’s; is a member of the same controlled group
of corporations (within the meaning of Section 1563(a)(1), (2) and (3) of the
Internal Revenue Code of 1986, as amended from time to time) of which the Lead
Borrower is a member; controls or is controlled by the Lead Borrower.

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

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

“Approved Electronic
Form Notice”:  Defined in Section 14.22.

“Approved Electronic
Form”:  Defined in Section
14.22.

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

“Arranger”: 
Banc of America Securities LLC.

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

 3
 

“Authorized Officer”: 
The Lead Borrower’s Chief Executive Officer, Chief Operating Officer,
President, Treasurer or Chief Financial Officer duly authorized by the Lead
Borrower’s Board of Directors.

“Bank of America”:  Bank of America, N.A. in its individual
capacity.

“Bankruptcy Code”:  Title 11, U.S.C., as amended from time to
time.

“Base”: 
Base is the publicly announced prime rate from time to time by Bank of
America (or any successor in interest to Bank of America)(which is not intended
to be Bank of America’s lowest or most favorable rate in effect at any
time).  In the event that said bank (or
any such successor) ceases to announce such a rate, “Base” shall refer to that
rate or index announced or published from time to time as the Term Administrative
Agent, in good faith, designates as the functional equivalent to said
rate.  Any change in “Base” shall be
effective, for purposes of the calculation of interest due hereunder, when such
change is made effective generally by the bank on whose rate or index “Base” is
being set.  In all events, interest that
is determined by reference to Base (or any successor to Base) shall be
calculated on a 365/366-day year and actual days elapsed.

“Base Margin”: 
1.00%.

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

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

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

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

“Borrowers”:  Defined in the Preamble.

“Business Day”: 
Any day (with any references herein to time of day requirements meaning
such times based on Eastern time) other than (a) Saturday or Sunday; (b) any
day on which banks in Boston, Massachusetts or New York City, New York,
generally are not open to the general public for the purpose of conducting
commercial banking business; or (c) a day on which the principal office of the
Term Administrative Agent or any Term Lender is not open to the general public
to conduct business.

 4
 

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

“Capital Adequacy
Demand”:  Defined in Section 14.8.

“Capital Adequacy
Charge”:  Defined in Section
14.8.

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

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

“Certificate”:  Any certificate in form and substance acceptable
to the Term Agents.  Each Certificate
shall be deemed to be given under oath by the signatory to such Certificate.

“Change in Control”: 
The occurrence of any of the following:

(a)           The
failure of the Lead Borrower to directly or indirectly own, beneficially and of
record, 100% of the capital stock of all of the other Obligors; provided, however, it shall not constitute
a “Change in Control” under this Agreement if the Lead Borrower no longer owns
100% of the capital stock of any other Obligor as a result of a merger or
consolidation of such other Obligor with and into Lead Borrower, with Lead
Borrower being the survivor thereof.

(b)           The
acquisition after the date hereof, by any group of persons (within the meaning
of the Securities Exchange Act of 1934, as amended) or by any Person, of
beneficial ownership (within the meaning of Rule 13d-3 of the Securities
Exchange Act of 1934, as amended), directly or indirectly, of 50% or more of
the issued and outstanding capital stock of any Obligor having the right to
vote for the election of directors of such Obligor.

(c)            More
than half of the persons who were directors of the Lead Borrower on the first
day of any period consisting of twelve (12) consecutive calendar months (the
first of which twelve (12) month periods commencing with the first day of the
month during which this Agreement was executed), cease, for any reason other
than death or disability, to be directors of the Lead Borrower, and the board
of directors as thereafter constituted is not acceptable to the Term
Administrative Agent.

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

“Closing Date”: 
The date on which all conditions precedent in Article III of this
Agreement (other than Section3.15) are satisfied.

 5
 

“Collateral”: 
Defined in Section 8.1.

“Collateral Interest”: 
Any interest in property to secure an obligation, including, without
limitation, a security interest, mortgage, and deed of trust.

“Commitment”:  With respect to each Term Lender, that
respective Term Lender’s Dollar Commitment.

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

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

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

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

 6
 

local and foreign income tax credits and (ii) all non-cash items
increasing Consolidated Net Income (in each case of or by the Lead Borrower and
its Subsidiaries for such Measurement Period). 
The term “non-cash expenses” includes, without limitation, stock based
compensation expense, gain or loss on impairment of long lived assets, and gain
or loss on disposal of assets.

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

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

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

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

 7
 

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

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

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

“Costa Rican Facilities”:  Includes (i) Property # A F
007368-000; Industrial Unit A2, Alajuela, District 09 Rio Segundo, County 01,
(ii) Property # A 182290-00, Alajuela, District 02 San Jose, County 01, (iii)
Property # A 205774-000, Alajuela, District 02 San Jose, County 01, and (iv)
Property # P 084214-000, lot for construction, Puntarenas, District 01 Quepos,
County 06.

“Costa Rican Transaction”:  The sale or lease of the
Costa Rican Facilities individually or as a whole.

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

 8
 

and amendment of any Loan Document; or efforts to preserve, protect,
collect, or enforce the Collateral, the Liabilities, and/or the Term Agent’s
Rights and Remedies and/or any of the rights and remedies of any such Term
Agent against or in respect of any guarantor or other person liable in respect
of the Liabilities (whether or not suit is instituted in connection with such
efforts).  “Costs of Collection” shall
also include the reasonable costs and expenses similar to the foregoing of Term
Lender’s Special Counsel.  The Costs of
Collection are Liabilities, and at the Term Administrative Agent’s option may
bear interest at the then effective Base Margin Rate.

“Customs Broker
Agreement”:  An agreement in
form satisfactory to the Term Collateral Agent, among the Lead Borrower or any
Obligor, Term Collateral Agent and Revolving Loan Collateral Agent,  and a customs broker or other carrier, in
which the customs broker or other carrier acknowledges that it has control over
and holds the documents evidencing ownership of the subject Inventory for the
benefit of the Term Collateral Agent and the Revolving Loan Collateral Agent
and agrees, subject to the terms of the Intercreditor Agreement, upon notice
from the Term Collateral Agent or the Revolving Loan Collateral Agent, as then
applicable, to hold and dispose of the subject Inventory solely as directed by
the Term Collateral Agent.

“Default”:  Any occurrence, circumstance, or state of
facts with respect to a Borrower which would become an Event of Default if any
requisite notice were given and/or any requisite period of time were to run and
such occurrence, circumstance, or state of facts were not cured within any
applicable grace period.

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

“Distributions”:  Includes (i) the payment of any dividends or
other distributions on capital stock of the Lead Borrower (except distributions
in such stock), and (ii) the redemption or acquisition of Securities.

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

“Dollar Commitment”:  As set forth on EXHIBIT 2.11, annexed hereto (as such amounts may change in
accordance with the provisions of this Agreement).  The aggregate of the Dollar Commitments shall
not exceed the Term Loan Amount.

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

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

 9
 

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

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

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

“Eligible Liquid Collateral”:  Each of the following:

(i)    a
money market fund whose assets consist entirely of cash, securities with
maturities of 180 days or less from the date of acquisition issued or fully
guaranteed or insured as to payment of principal and interest by the United
States Treasury, and certificates of de­posit with maturities of 365 days or
less from the date of acqui­sition issued by a FDIC-insured financial
institution;

(ii)   certificates
of de­posit with maturities of 365 days or less from the date of acqui­sition
issued by a FDIC-insured financial institution;

(iii)  securities
with maturities of 180 days or less from the date of acquisition issued or
fully guaranteed or insured as to payment of principal and interest by the
United States Treasury; and

(iv)  senior
unsecured bonds of a domestic corporate issuer rated at least A- by a rating
agency acceptable to the Term Collateral Agent with maturities of 2 years or
less from the date of acquisition;

 10
 

in each case only to the
extent (i) subject to the Term Collateral Agent’s first priority (subject only
to the lien granted to the Revolving Loan Agent) perfected, valid, and
enforceable security interest to secure the Liabilities; (ii) immediately
available to the Term Collateral Agent; (iii) not subject to any restriction on
their use (other than in favor of Term Collateral Agent and the Revolving Loan
Agent); and (iv) either held by Bank of America or by another financial
institution acceptable to the Term Collateral Agent with whom the Term
Collateral Agent and the applicable Borrower have agreed to a written control
agreement in form and substance satisfactory to Term Collateral Agent.  In no event shall Investment Property or
other assets or investments which are assets or investments of a Security-Free
Rabbi Trust held under an Approved Security-Free SERP constitute Eligible
Liquid Collateral.

“Employee Benefit
Plan”:  As defined in ERISA.

“Encumbrance”:  Each of the following:

(a)           Any
security interest, mortgage, pledge, hypothecation, lien, attachment, or charge
of any kind (including any agreement to give any of the foregoing); the
interest of a lessor under a Capital Lease; conditional sale or other title
retention agreement; sale of Accounts or Chattel Paper; or other arrangement
pursuant to which any Person is entitled to any preference or priority with
respect to the property or assets of another Person or the income or profits of
such other Person or which constitutes an interest in property to secure an
obligation; each of the foregoing whether consensual or non-consensual
and whether arising by way of agreement, operation of law, legal process or
otherwise.

(b)           The
filing of any financing statement under the UCC or comparable law of any
jurisdiction.

“Environmental Laws”:  All of the following:

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

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

 11
 

“Equipment”:  Includes, without limitation, Obligors’ Goods
which qualify as “equipment” as defined in the UCC.

“ERISA”:  The Employee Retirement Income Security Act
of 1974, as amended, together with all orders, regulations and interpretations
thereunder or related thereto.

“ERISA Affiliate”:  Any Person which is under common control with
the Obligors within the meaning of Section 4001 of ERISA or is part of a
controlled group including the Obligors and which would be treated as a single
employer under Section 414(b), (c), (m), and (o) of the Internal Revenue Code
of 1986, as amended.

“Events of Default”:  Defined in Article X.  Each reference to an “Event of Default” is to
an Event of Default that has not duly waived in writing by the Term
Administrative Agent.  In the event of
such due waiver, the so-waived Event of Default shall be deemed never to
have occurred, other than with respect to any post-default interest which
accrued prior to such waiver and with respect to any reimbursement obligation
in respect of any Costs of Collection.

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

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

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

“GAAP”:  Principles which are consistent with those
promulgated or adopted by the Financial Accounting Standards Board and its
predecessors (or successors) in effect and applicable to that accounting period
in respect of which reference to GAAP is being made, provided, however, in the
event of a Material Accounting Change, then unless otherwise specifically
agreed to by the Lead Borrower and the Term Administrative Agent, (a) the
Borrowers’ compliance with the financial performance covenants imposed pursuant
to Section 5.10 shall be determined as if such Material Accounting
Change had not taken place and (b) the Lead Borrower

 12
 

shall include, with its monthly, 
quarterly, and annual financial statements a schedule, certified by its
chief financial officer, on which the effect of such Material Accounting Change
to the statement with which provided shall be described.

“General Intangibles”:  Includes, without limitation, “general
intangibles” as defined in the UCC; and also all: rights to payment for credit
extended; deposits; amounts due to the Obligors; credit memoranda in favor of
the Obligors; warranty claims; tax refunds and abatements; insurance refunds
and premium rebates; all means and vehicles of investment or hedging,
including, without limitation, options, warrants, and futures contracts;
records; customer lists; telephone numbers; goodwill; causes of action;
judgments; payments under any settlement or other agreement; payments or right
to receive payments on account of any transfer of any interest in any Leasehold
Interest; literary rights; rights to performance; royalties; license and/or
franchise fees; rights of admission; licenses; franchises; license agreements,
including all rights of the Obligors to enforce the foregoing; permits,
certificates of convenience and necessity, and similar rights granted by any
governmental authority; patents, patent applications, patents pending, and other
intellectual property; internet addresses and domain names; developmental ideas
and concepts; proprietary processes; blueprints, drawings, designs, diagrams,
plans, reports, and charts; catalogs; manuals; technical data; computer
software programs (including the source and object codes therefor), computer
records, computer software, rights of access to computer record service
bureaus, service bureau computer contracts, and computer data; tapes, disks,
semi-conductors chips and printouts; trade secrets rights, copyrights,
copyrightable materials, copyright registrations and applications, mask work
rights and interests, and derivative works and interests; user, technical
reference, and other manuals and materials; trade names, trademarks, service
marks, and all goodwill relating thereto; registrations, applications for
registration of the foregoing; and all other intangible property of the
Obligors in the nature of intellectual property; proposals; cost estimates, and
reproductions on paper, or otherwise, of any and all concepts or ideas, and any
matter related to, or connected with, the design, development, manufacture,
sale, marketing, leasing, or use of any or all property produced, sold, or
leased, by the Obligors or credit extended or services performed, by the
Obligors, whether intended for an individual customer or the general business
of the Obligors, or used or useful in connection with research and development
by the Obligors.

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

“Hazardous Materials”:  Any (a) hazardous materials, hazardous waste,
hazardous or toxic substances or petroleum products, which (as to any of the
foregoing) are defined or regulated as a hazardous material in or under any
Environmental Law and (b) oil in any physical state.

 13
 

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

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

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

(b)           Any
reimbursement obligations and other liabilities of such Person with respect to
surety bonds (whether bid, performance or otherwise) letter of credit or
acceptance transactions (including, without limitation, the stated amount of
all outstanding letters of credit and acceptances issued for the account of
such Person, and (without duplication) any amount for which such Person would
be obligated to provide reimbursement or for which such Person is liable in
connection with a letter of credit or acceptance transaction;

(c)           The
provision of recourse in connection with the sale or discount of Accounts or
Chattel Paper of such Person;

(d)           On
account of recourse or repayment obligations with respect to deposits or
advances;

(e)           As
lessee under Capital Leases;

(f)            In
connection with any sale and leaseback transaction.

(g)           All
obligations with respect to redeemable stock and redemption or repurchase
obligations under any equity securities issued by such Person.

“Indebtedness”
also includes:

(a)           Indebtedness
of others secured by an Encumbrance on any asset of such Person, whether or not
such Indebtedness is assumed by or is a personal liability of such Person.

(b)           Any
guaranty, endorsement, suretyship or other undertaking pursuant to which that
Person may be liable on account of any obligation of any third party other than
on account of the endorsement of checks and other items in the ordinary course.

 14
 

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

“Indemnified Person”:  Defined in Section 14.13.

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

“Index Business Day”:  Any day which is both a Business Day and a
day on which the principal market in LIBOR deposits in London in which Bank of
America or its successors participate is open for dealings in United States
Dollar deposits.

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

“Index Margin”:

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

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

	
  Level

  	
   

  	
  Consolidated Leverage

  Ratio

  	
   

  	
  Index Margin

  
	
  I

  	
   

  	
  Greater than or equal to 1.50 to 1.00

  	
   

  	
  2.50%

  
	
  II

  	
   

  	
  Less than 1.50 to 1.00

  	
   

  	
  2.25%

  

 

 15
 

“Index Offer Rate”:  For any Interest Period with respect to any
Index Loan, the rate per annum equal to the British Bankers Association LIBOR
Rate (“BBA LIBOR”), as published by Reuters (or other commercially
available source providing quotations of BBA LIBOR as designated by the Term
Administrative Agent from time to time) at approximately 11:00 a.m., London
time, two Business Days prior to the commencement of such Interest Period, for
Dollar deposits (for delivery on the first day of such Interest Period) with a
term equivalent to such Interest Period. 
If such rate is not available at such time for any reason, then the “Index
Offer Rate” for such Interest Period shall be the rate per annum determined by
the Term Administrative Agent to be the rate at which deposits in Dollars for
delivery on the first day of such Interest Period in same day funds in the
approximate amount of the Index Loan being made, continued or converted by Bank
of America and with a term equivalent to such Interest Period would be offered
by Bank of America’s London Branch to major banks in the London interbank
eurodollar market at their request at approximately 11:00 a.m. (London time)
two Business Days prior to the commencement of such Interest Period. In the
event that the Index Offer Rate for an Index Loan cannot be determined through
any of the methods provided above, it will be determined in whatever manner
Term Administrative Agent may reasonably determine or if Term Administrative
Agent deems that it cannot be determined, the Index Offer Rate will be
unavailable.

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

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

Index
Offer Rate

1 minus Reserve
Percentage

(b) is the applicable Index Margin.

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

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

“Interest Payment
Date”:  With reference to:

 16
 

(a)           Each
Index Loan: the earlier of the last day of the Interest Period relating thereto
or quarterly, whichever is earlier, and the Termination Date.

(b)           Each
Base Margin Loan: the last Business Day of each month in arrears and the
Termination Date.

“Interest Period”:

(a)           With
respect to each Index Loan: subject to Subsection (b), below, the period
commencing on the date of the making or continuation of, or conversion to, the
subject Index Loan and ending on the day that corresponds numerically to such
date, one (1), two (2), three (3), or six (6) months thereafter, as the Lead
Borrower may elect by irrevocable notice (pursuant to Section2.3) to the
Term Administrative Agent.

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

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

(ii)           Subject
to Subsections (iii) and (iv), below, any Interest Period applicable to a Index
Loan, which Interest Period begins on a day for which there is no numerically
corresponding day in the calendar month during which such Interest Period ends,
shall end on the last Index Business Day of the month during which that
Interest Period ends.

(iii)          Any Interest Period which would otherwise end
after the Termination Date shall end on the Termination Date.

(iv)          
The Lead Borrower shall not select, renew, or convert any interest rate for any
outstanding principal amount of the Term Loan such that, in addition to
interest at the Base Margin Rate, there are more than six (6) Interest Periods
applicable to Index Loans at any one time.

“Inventory”:  Includes, without limitation, “inventory” as
defined in the UCC and also all: 
packaging, advertising, and shipping materials related to any of the
foregoing, and all names or marks affixed or to be affixed thereto for
identifying or selling the same; Goods held for sale or lease or furnished or

 17
 

to be furnished under a contract or contracts of sale or service by the
Obligors, or used or consumed or to be used or consumed in the Obligors’
business; Goods of said description in transit: returned, repossessed and
rejected Goods of said description; and all Documents (whether or not
negotiable) which represent any of the foregoing.

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

“Landlord State”:  Initially Washington, Virginia, and
Pennsylvania and such other states in which a landlord’s claim for rent has
priority over the Encumbrances of the Term Collateral Agent in the Collateral.

“Lease”:  Any lease or other agreement, no matter how
styled or structured, pursuant to which any Obligor is entitled to the use or
occupancy of any space.

“Leasehold Interest”:  Shall mean the Obligors’ leasehold estate or
interest in each of the properties subject to a Lease at or upon which any
Obligor conducts business, offers any Inventory for sale, or maintains any of
the Collateral, whether or not for retail sale, together with the Obligors’
interest in any of the improvements and fixtures located upon or appurtenant to
each such estate or interest, including without limitation, any rights of the
Obligor to payment, proceeds or value of any kind or nature realized upon the
sale, transfer or assignment of any such estate or interest, whether or not
such sale, assignment or transfer occurs during any case commenced under the
Bankruptcy Code.

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

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

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

(i)            Any
and all direct and indirect liabilities, debts, and obligations of any of the
Obligors to any Term Agent or the Term Lenders, each of every kind, nature, and
description.

(ii)           Each
obligation to repay any loan, advance, indebtedness, note, obligation,
overdraft, or amount now or hereafter owing by the Obligors to any Term Agent
or the Term Lenders, (including all future advances whether or not made
pursuant to a commitment by any Term Agent or the Term Lenders), whether or not
any of such are liquidated, unliquidated, primary, secondary, secured,
unsecured, direct, indirect, absolute, contingent, or of any other

 18
 

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

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

(iv)          All
interest, fees, and charges and other amounts which may be charged by any Term
Agent or the Term Lenders, to the Obligors and/or which may be due from the
Obligors to any Term Agent or the Term Lenders, from time to time, including,
without limitation, interest and fees that accrue after the commencement by or
against any Obligor or any Affiliate thereof of any proceeding under the
Bankruptcy Code naming such Person as the debtor in such proceeding, regardless
of whether such interest and fees are allowed claims in such proceeding.

(v)           All
costs and expenses incurred or paid by any Term Agent or the Term Lenders, in
respect of any agreement between the Obligors and any Term Agent or the Term
Lenders, or instrument furnished by the Obligors to any Term Agent or Term
Lenders (including, without limitation, Costs of Collection, reasonable
attorneys’ fees, including reasonable fees and expenses of Term Lenders’
Special Counsel), and all court and litigation costs and expenses).

(vi)          Any
and all covenants of the Obligors to or with any Term Agent or the Term
Lenders, and any and all obligations of the Obligors to act or to refrain from
acting in accordance with any agreement between the Obligors and any Term Agent
or the Term Lenders, or instrument furnished by the Obligors to any Term Agent or
the Term Lenders.

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

(b)           Any
and all direct or indirect liabilities, debts, and obligations of the Obligors
to any Term Agent or the Term Lenders or any Affiliate of any Term Agent or
Affiliate of the Term Lenders, each of every kind, nature, and description
owing on account of any service or accommodation provided to, or for the
account of any Obligors pursuant to this or any other Loan Document, including
cash management services.

 19
 

“Liquidation”:  The exercise, by the Term Collateral Agent,
of those rights accorded to the Term Collateral Agent under the Loan Documents
as a creditor of the Obligors following and on account of the occurrence of an
Event of Default looking towards the realization on the Collateral.  Derivations of the word “Liquidation” (such
as “Liquidate”) are used with like meaning in this Agreement.

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

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

“Material Accounting
Change”:  Any change in GAAP
applicable to accounting periods subsequent to the Borrowers’ Fiscal Year most
recently completed prior to the execution of this Agreement, if such change has
a material effect on the Borrowers’ financial condition or operating results,
as reflected on financial statements and reports prepared by or for the
Borrowers, when compared with such condition or results as if such change had
not taken place, or where preparation of the Borrowers’ statements and reports
in compliance with such change results in the breach of a financial performance
covenant imposed pursuant to Section 5.10, where such a breach would not
have occurred if such change had not taken place or visa versa.

“Material Adverse Effect”: (a) Any
material adverse change in the business, prospects, operations, results of
operations, assets, liabilities or condition (financial or otherwise) of the Obligors (taken as a
whole), (b) the material impairment of the ability of any Obligors to perform its
Liabilities, or of the Term Agent’s ability to enforce the Liabilities or
realize upon any portion of the Collateral, or (c) a material impairment
of the priority of the liens with respect to the Collateral.

“Maturity Date”:  
March 13, 2013, or if such day is not a Business Day, the
next succeeding Business Day.

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

 20
 

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

“Mortgage”:  Includes, but not limited to, that certain
existing mortgage as described in Section 8.3, as the same may be
amended, modified, renewed, extended, replaced, restated or substituted from
time to time, executed by the Lead Borrower and PIDC Financing Corporation in
favor of the Revolving Loan Agent, for the benefit of, among others, the Term
Lenders.

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

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

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

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

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

Each Notice Address is subject to change as provided in Section 12.1.

“Obligor”:  Individually, each Guarantor and each
Borrower, and, “Obligors”,
collectively, the Borrower and Guarantors.

“Participant”:  Defined in Section 14.6.

“Payment Intangible”:  Has the meaning given that term in the UCC
and also refers to any general intangible under which the Account Debtor’s
primary obligation is a monetary obligation.

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

(i)            immediately
prior to, and after giving effect thereto, no Default or Event of Default shall
have occurred and be continuing or would result therefrom;

(ii)           all
transactions in connection therewith shall be consummated in accordance with
all applicable laws and in conformity with all applicable governmental
authorizations;

 21
 

(iii)          all
of the capital stock acquired or otherwise issued by such Person or any newly
formed Subsidiary of a Borrower in connection with such acquisition shall be
pledged to Term Collateral Agent, for the benefit of Term Lenders, pursuant
hereto, and Borrowers shall have taken, or caused to be taken, as of the date
such Person becomes a Subsidiary of Borrowers, each of the Permitted
Acquisition Requirements; and

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

“Permitted Acquisition Requirements”:
The Borrowers (a) immediately causing any new Subsidiary to
become a Borrower or guarantor hereunder, as determined by the Term
Administrative Agent, by executing and delivering to Term Administrative Agent
a counterpart agreement acceptable to Term Administrative Agent in its
discretion, (b) immediately thereupon, causing the Term Collateral Agent to
hold in such acquired assets or capital stock a first priority perfected Collateral
Interest (subject only to Permitted Encumbrances) to secure the Liabilities and
(c) taking all such actions and executing and delivering, or causing to be
executed and delivered, all such documents, instruments, agreements, and
certificates as Term Agent may require in its discretion.

“Permitted Creation”: Any creation by
Borrowers of a Person wholly-owned by Borrowers, provided:

(i)            immediately
prior to, and after giving effect thereto, no Default or Event of Default shall
have occurred and be continuing or would result therefrom;

(ii)           all
transactions in connection therewith shall be consummated in accordance with
all applicable laws and in conformity with all applicable governmental
authorizations;

(iii)          all
of the capital stock acquired or otherwise issued by such Person or any newly
formed Subsidiary of a Borrower in connection with such acquisition shall be
pledged to Term Collateral Agent, for the benefit of Term Lenders, pursuant
hereto, and Borrowers shall have taken, or caused to be taken, as of the date
such Person becomes a Subsidiary of Borrowers, each of the Permitted Creation
Requirements; and

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

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

 22
 

discretion, (b) immediately thereupon, causing the Term Collateral
Agent to hold in such acquired assets or capital stock a first priority
perfected Collateral Interest (subject only to Permitted Encumbrances) to
secure the Liabilities and (c) taking all such actions and executing and
delivering, or causing to be executed and delivered, all such documents,
instruments, agreements, and certificates as Term Agent may require in its
discretion.

“Permitted
Encumbrances”:  The following:

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

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

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

(d)           Liens
securing the payment of taxes, either not yet overdue or the validity of which
is being contested in good faith by the Obligors and for which the Obligors
have established adequate cash reserves; non-consensual statutory liens (other
than liens securing the payment of taxes) arising in the ordinary course of
Obligors’ business to the extent such liens secure (i) indebtedness that is not
overdue, or (ii) indebtedness relating to claims or liabilities which are fully
insured and being defended at the sole cost and expense and at the sole risk of
the insurer or are being contested by the Obligors in good faith by appropriate
proceedings diligently pursued, in each instance prior to the commencement of
foreclosure or other similar proceedings and provided that adequate reserves
therefor have been set aside on the Obligors’ books (provided, however,
that the inclusion of any of the foregoing as “Permitted Encumbrances” shall
not affect their respective relative priorities vis-à-vis the security
interests created herein), or (iii) zoning restrictions, easements, licenses,
covenants and other restrictions affecting the use of real property.

(e)           Deposits
under workmen’s compensation, unemployment insurance and social security laws,
or to secure the performance of bids, tenders, contracts (other than for the
repayment of borrowed money) or leases, or to secure statutory obligations or
surety or appeal bonds, or to secure indemnity, performance or other similar
bonds arising in the ordinary course of business.

(f)            Landlord’s
liens arising by operation of law where waivers have not been obtained.

 23
 

(g)           Purchase
money security interests or capitalized equipment leases on any Equipment
acquired or held by the Obligors and securing Indebtedness permitted by Section
4.8(a)(iv) or 4.8(a)(v) incurred or assumed for the purpose of financing all or
any part of the cost of acquiring such Equipment; provided  however
that (i) any such Encumbrance attaches to such property concurrently with or
within twenty (20) days after the acquisition thereof, (ii) such Encumbrance
attaches solely to the Equipment so acquired in such transaction, and (iii) the
principal amount of the Indebtedness secured thereby does not exceed 100% of
the cost of such Equipment; provided, however, that with respect to any
Indebtedness on account of purchase money security interests or capitalized
leases on or of such Equipment that arises during a period in which (x) the
outstanding principal amount of Indebtedness arising after the date hereof on
account of purchase money security interests or capitalized equipment leases on
or of such Equipment exceeds (y) $5,000,000 (the “Excess Indebtedness”), the
holder of any such Excess Indebtedness shall have agreed that the Term
Collateral Agent shall have the right to utilize, at no cost or expense to the
Term Agents or Term Lenders (other than a pro rated amount for the period in
which the Term Collateral Agent is utilizing such Equipment), such Equipment to
the extent necessary or appropriate to sell, lease or otherwise dispose of the
Collateral, such agreement to be in form and substance satisfactory to the Term
Collateral Agent in its sole discretion, provided further, that the
foregoing proviso shall not apply to any Equipment that is located in the
headquarters portion, and not the Domestic Distribution Center portion, of the
Headquarters Facility.

(h)           Purchase
money security interests on any Acquired Real Property and securing
Indebtedness permitted by Section 4.8(a)(ix) or Section 4.8(a)(x) incurred or
assumed for the purpose of financing all or any part of the cost of acquiring
such Acquired Real Property; provided
however that (i) any such
Encumbrance attaches to such Acquired Real Property concurrently with or within
twenty (20) days after the acquisition thereof, (ii) such Encumbrance attaches
solely to the Acquired Real Property so acquired in such transaction or the improvements
and fixtures thereon, and (iii) the principal amount of the Indebtedness
secured thereby does not exceed 100% of the cost of such Acquired Real
Property, together with the improvements and fixtures thereon.

(i)            Purchase
money security interests on any improvements or fixtures on Acquired Real
Property securing Indebtedness permitted pursuant to Section 4.8(a)(ix) or
Section 4.8(a)(x)

 24
 

incurred or assumed for the purpose of financing all
or any part of the cost of acquiring such improvements or fixtures on the
Acquired Real Property; provided  however that (i) any such Encumbrance
attaches to such improvements or fixtures on the Acquired Real Property
concurrently with or within twenty (20) days after the acquisition thereof,
(ii) such Encumbrance attaches solely to Acquired Real Property or the
improvements or fixtures thereon, and (iii) the principal amount of the
Indebtedness secured thereby does not exceed 100% of the cost of the Acquired
Real Property, together with the improvements and fixtures thereon .

(j) Purchase money security interests on any
improvements to or fixtures on or the construction of an addition or additions
to the Headquarters Facility or additional buildings at the Headquarters
Facility securing Indebtedness permitted pursuant to Section 4.8(a)(ix) or
Section 4.8(a)(x) incurred or assumed for the purpose of financing all or any
part of the cost of constructing or of acquiring such additions, improvements
or fixtures on the Headquarters Facility; provided
however that (i) any such
Encumbrance attaches to such improvements or fixtures on the Headquarters
Facility concurrently with or within twenty (20) days after the acquisition
thereof, (ii) such Encumbrance attaches solely to the Headquarters Facility or
the improvements or fixtures thereon, and (iii) the principal amount of the
Indebtedness secured thereby does not exceed 100% of the cost of such
additions, improvements and fixtures thereon provided, however, that the
holder of any such Indebtedness shall have agreed that the Term Collateral
Agent shall have the right to utilize the Domestic Distribution Center portion
of the Headquarters Facility, at no cost or expense to the Term Agents or Term
Lenders (other than a pro rated amount for the period in which the Term Collateral
Agent is utilizing such portion of the Headquarters Facility), to the extent
necessary or appropriate to sell, lease or otherwise dispose of the Collateral,
such agreement to be in form and substance satisfactory to the Term Collateral
Agent in its reasonable discretion.

(k)  Inclusive
of those Encumbrances (if any) listed on EXHIBIT
4.7 in favor of landlords, liens or security interests held by the
Borrowers’ landlords for up to a maximum of twenty (20) store locations in the
aggregate, to the extent that such liens or security interests of each landlord
(i) relate to Collateral located at a specific store location or (ii) have been
subordinated to the lien and security interest of the Term Collateral Agent
pursuant to the lease between the landlord and the Borrowers.

 25
 

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

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

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

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

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

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

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

“Property”:  Any interest in any kind of property or
asset, whether real, personal or mixed, or tangible or intangible.

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

“Real Estate”:  Includes all real property including the
Headquarters Facility, owned or leased (as lessee or sublessee) by the
Borrowers or any of their Subsidiaries.

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

 26

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

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

“Reports”:  Defined in Section 15.10.

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

“Requirement of Law”:  As to any Person:

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

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

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

“Reserve Percentage”:   The decimal equivalent of that rate
applicable to a Term Lender under regulations issued from time to time by the
Board of Governors of the Federal Reserve System for determining the maximum
reserve requirement of that Term Lender with respect to “LIBOR liabilities” as
defined in such regulations.  The Reserve
Percentage applicable to a particular Index Loan shall be based upon that in
effect during the subject Interest Period, with changes in the Reserve
Percentage which take effect during such Interest Period to take effect (and to
consequently change any interest rate determined with reference to the Reserve
Percentage) if and when such change is applicable to such loans.

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

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

 27
 

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

“Second Mortgage Cap”:
The amount as might be agreed to from time to time between the Term Collateral
Agent and PIDA as constituting the extent of the mortgage lien evidenced by the
PIDA Mortgage, subject to further reduction upon Term Collateral Agent’s
determination that the holder of the PIDA Mortgage has agreed in writing to
further limitations on the extent of its mortgage lien in the Headquarters
Facility.

“Security”:  Shall have the same meaning as in Section
2(1) of the Securities Act of 1933, as amended.

“Security-Free Rabbi Trust”:  Shall be the grantor trusts established by
the Lead Borrower in accordance with Internal Revenue Service Revenue Procedure
92-64 to accept both employer and employee contributions made under the terms
of one or more Approved Security-Free SERPS, so long as the Lead Borrower has
designated such grantor trust as a Security-Free Rabbi Trust in a writing
delivered to the Term Administrative Agent, which writing designates the name
of the trust company with whom such trust has been established and the date of
such establishment.  In no circumstances
shall the Term Collateral Agent or the Term Lenders under this Agreement have a
security interest in the assets of such grantor trusts.

“Series
A Preferred Stock”: 
All shares of Series A Preferred Stock of the Lead Borrower that were
issued and then redeemed by the Lead Borrower which shares continue to be held
as of the date hereof by certain holders pending presentation by such holders
of proper documentation to the Lead Borrower required to receive payment in
respect of such redemption.

“Special
Purpose Credit”:  The
letter of credit issued under that certain Letter of Credit and Reimbursement
Agreement dated as of July 1, 1998 among the Lead Borrower, Fleet Capital
Corporation, as predecessor in interest to the Revolving Loan Agent as Lender,
and Fleet National Bank, as predecessor in interest to Bank of America, N.A.,
related to those certain $4,000,000 Philadelphia Authority for Industrial
Development Variable/Fixed Rate Federally Taxable Economic Development Bonds
(Mothers Work, Inc. Project) Series of 1995, as it may be or may have been
amended, modified, restated, supplemented, replaced, or substituted.

“Subordinated
Debt”:  Includes  unsecured Indebtedness of Borrowers that
is subordinated to the Liabilities in a manner, under terms and subject to a
written agreement satisfactory to Term Administrative Agent.

 28
 

“Subsidiary”:   Any corporation of which more than fifty
percent (50%) of the outstanding capital stock having ordinary voting power to
elect a majority of the board of directors of such corporation (irrespective of
whether at the time stock of any other class of such corporation shall have or
might have voting power by reason of the happening of any contingency) is at
the time, directly or indirectly, owned by any Obligor, or any partnership,
joint venture or limited liability company of which more than fifty percent
(50%) of the outstanding equity interests are at the time, directly or
indirectly, owned by any Obligor or any partnership of which any Obligor is a
general partner.

“Supporting
Obligation”:  Has the
meaning given that term in the UCC and also refers to a Letter-of-Credit Right
or secondary obligation which supports the payment or performance of an
Account, Chattel Paper, a Document, a General Intangible, an Instrument, or
Investment Property.

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

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

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

“Term
Administrative Agent”: 
Defined in the Preamble.

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

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

“Term
Collateral Agent”:   Defined
in the Preamble.

 29
 

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

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

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

“Term
Loan Increase”: 
Defined in Section 2.2.

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

“Term
Note”:  Defined in Section
2.2.

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

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

“Transfer”: 
Wire transfer pursuant to the wire transfer system maintained by the
Board of Governors of the Federal Reserve Board, or as otherwise may be agreed
to from time to time by the Term Administrative Agent. Wire instructions may be
changed in the same manner that Notice Addresses may be changed pursuant to Section
12.1 of this Agreement, except that no change of the wire instructions for
Transfers to the Term Administrative Agent shall be effective without the
consent of the Term Administrative Agent.

“UCC”:  The Uniform
Commercial Code as presently in effect in New York as used herein in the
context of any definitions; otherwise, as in effect from time to time is New
York.

“Unused
Fee”:  Defined in Section
2.8.

“Voting
Stock”:  Includes
securities of any class or classes of a corporation the holders of which are
ordinarily, in the absence of contingencies, entitled to elect a majority of
the corporate directors (or Persons performing similar functions).

 30
 

ARTICLE II. - The TERM LOAN

2.1  Commitment to Make the Term Loan.

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

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

2.2  Increase in the Term Loan.

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

 31
 

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

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

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

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

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

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

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

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

 32
 

2.3  Election of Term Loan Interest Rate
and Interest Period

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

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

(i)                                     If
such outstanding portion of the Term Loan is to be converted to a Base Margin
Loan: By 1:00 p.m. on the Business Day on which the subject outstanding portion
of the Term Loan is to be so converted. 
Base Margin Loans requested by the Lead Borrower, other than those
resulting from the conversion of an Index Loan, shall not be less than
$10,000.00.

(ii)                                  If
such outstanding portion of the Term Loan is to be converted to an Index
Loan:  By 1:00 p.m., three (3) Index
Business Days before the commencement of any new Interest Period or the end of
the then applicable Interest Period. 
Index Loans and conversions to Index Loans shall each be not less than
$1,000,000.00 and in increments of $500,000.00 in excess of such minimum.

(iii)                               Any
Index Loan which matures while a Default or Event of Default exists, may be
converted, at the option of the Term Administrative Agent, to a Base Margin
Loan notwithstanding any notice from the Lead Borrower that such outstanding
portion of the Term Loan is to be continued as an Index Loan.

(c)   Any request for the continuance
or conversion of any outstanding portion of the Term Loan which is made after
the applicable deadline therefor, as set forth above, shall be deemed to have
been made at the opening of business on the then next Business Day or Index
Business Day, as applicable, unless the Term Administrative Agent, in its
discretion, determines to deem it to have been made earlier.  Each request for the conversion of any
outstanding portion of the Term Loan shall be made in such manner as may from
time to time be acceptable to the Term Administrative Agent.

(d)   The Term Administrative Agent
may rely on any request for any financial accommodation under the Term Loan
which the Term Administrative Agent, in good faith, believes to have been made
by a Person duly authorized to act on behalf of the Lead Borrower and may
decline to provide any such financial accommodation pending the Term
Administrative Agent’s being furnished with such documentation concerning that
Person’s authority to act as may be satisfactory to the Term Administrative
Agent.

 33
 

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

2.4  Term Agent’s Records of Liabilities

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

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

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

(d)   Any statement rendered by the
Term Administrative Agent or the Term Lenders to the Borrowers concerning the
Liabilities shall, in the absence of manifest error, be considered correct and
accepted by the Borrowers and shall be conclusively binding upon the Borrowers
unless the Lead Borrower provides the Term Administrative Agent with written
objection thereto within twenty (20) days from the mailing of such statement,
which written objection shall indicate, with particularity, the reason for such
objection.  In the absence of manifest
error, the Term Administrative Agent’s and Term Lenders’ books and records
concerning the loan arrangement contemplated herein and the Liabilities shall
be prima facie evidence and proof of the items described therein.

2.5  The Term Note.

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

 34
 

2.6  Payment of Principal of the Term
Loan.

(a)   The Borrowers may repay all or any portion of the
principal balance of the Term Loan from time to time until the Termination Date
in minimum amounts not less than $1,000,000 and integral multiples of
$1,000,000 in excess thereof, without premium or penalty except as expressly
set forth in Section 2.6(f) hereof.  The
Term Administrative Agent shall cause such payments to be applied first,
to all interest and fees due with respect to the Term Loan, second, to
the outstanding principal balance of the Term Loan (provided that the Term
Administrative Agent shall cause those application of payments (if any),
pursuant to this Section 2.6 against Index Loans then outstanding in
such manner as results in the least cost to the Borrowers, but shall not have
any affirmative obligation to do so nor liability on account of the Term
Administrative Agent’s failure to have done so), and third, to all other
outstanding Liabilities.

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

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

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

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

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

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

 35
 

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

(f)    Upon the request of the Term
Administrative Agent, each Borrower, jointly and severally, shall indemnify the
Term Agents and Term Lenders and hold the Term Agents and Term Lenders harmless
from and against any loss, cost or expense (including loss of anticipated
profits) which the Term Agents or Term Lenders may sustain or incur (including,
without limitation, by virtue of acceleration after the occurrence of any Event
of Default) as a consequence of any of the following:

(i)                                     Default
by the Borrowers in payment of the principal amount of or any interest on any
Index Loan as and when due and payable, including any such loss or expense
arising from interest or fees payable by the Term Agent or Term Lenders in
order to maintain its Index Loans.

(ii)                                  Default
by the Borrowers in making a conversion after the Borrowers have given (or are
deemed to have given) a request to convert any outstanding principal amount of
the Term Loan from one applicable interest rate to another.

(iii)                               The
making of any payment on an Index Loan or the making of any conversion of any
such Loan to a Base Margin Loan on a day that

 36
 

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

2.7  Interest On The Term Loan.

(a)   Any outstanding principal
amount of the Term Loan which consists of a Base Margin Loan shall bear
interest at the Base Margin Rate (determined based upon a 365/366-day year and
actual days elapsed).

(b)   Any outstanding principal
amount of the Term Loan which consists of an Index Loan shall bear interest at
the applicable Index Rate (determined based upon a 360-day year and actual days
elapsed).

(c)   Subject to, and in accordance
with, the provisions of this Agreement, the Lead Borrower may cause all or a
part of the unpaid principal balance of the Term Loan to bear interest at the
Base Margin Rate or the Index Rate as specified from time to time by the Lead
Borrower.

(d)   The Lead Borrower shall not
select, renew or convert any interest rate such that there are more than six
(6) Interest Periods applicable to the outstanding Index Loans at any one time.

(e)   The Borrowers shall pay accrued
and unpaid interest on the Term Loan in arrears on the applicable Interest
Payment Date therefor.  Following the
occurrence and during the continuance of any Event of Default (and whether or
not the Term Agent exercises the Term Agent’s rights on account thereof), the
Liabilities shall bear interest, at the option of the Term Agent, at a rate which
is the aggregate in the case of Base Margin Loan, of the then applicable Base
Margin Rate as set forth in Section 2.7(a) above plus two percent
(2.00%) per annum, and in the case of Index Loans, the then applicable Index
Rate as set forth in Section 2.7 (b) above plus two percent
(2.00%) per annum.

2.8  Fees.

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

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

 37
 

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

2.9  Concerning Fees.

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

2.10                        Changed Circumstances.

(a)   Subject to the provisions of
this Agreement, the Borrowers shall have the option (A) as of any date, to
convert all or any part of Base Margin Loans to Index Loans of various Interest
Periods, (B) as of the last day of any Interest Period, to continue all or any
portion of the relevant Index Loans as Index Loans; and (C) as of the last day
of any Interest Period, to convert all or any portion of the Index Loans to
Base Margin Loans; provided, that Loans may not be continued as or converted to
Index Loans, if the continuation or conversion thereof would violate the
provisions of Sections 2.10(b) or 2.10(c) of this Agreement or if
an Event of Default has occurred and is continuing.

(b)   The Term Administrative Agent’s
determination of the Index Rate as provided above shall be conclusive.  Furthermore, if the Term Administrative Agent
or the Term Lenders determines, in good faith (which determination shall be
conclusive), prior to the commencement of any Interest Period that (A) U.S.
Dollar deposits of sufficient amount and maturity for funding the Loans are not
available to the Term Administrative Agent or the Term Lenders in the London
Interbank Eurodollar market in the ordinary course of business, or (B) by
reason of circumstances affecting the London Interbank Eurodollar market,
adequate and fair means do not exist for ascertaining the rate of interest to
be applicable to the Loans requested by the Borrowers to be Index Loans or the
Loans bearing interest at the rates set forth in this Agreement shall not
represent the effective pricing to the Term Administrative Agent for U.S.
Dollar deposits of a comparable amount for the relevant period (such as for
example, but not limited to, official reserve requirements required by
Regulation D to the extent not given effect in determining the rate), the Term
Administrative Agent shall promptly notify the Lead Borrower and (1) all
existing Index Loans shall convert to Base Margin Loans upon the end of the
applicable Interest Period, and (2) no additional Index Loans shall be made
until such circumstances are cured.

(c)   If, after the date hereof, the
introduction of, or any change in any applicable law, treaty, rule, regulation
or guideline or in the interpretation or administration thereof by any
governmental authority or any central bank or other fiscal, monetary or other
authority having jurisdiction over the Term Agent, the Term Lenders or their
respective lending offices (a “Regulatory Change”),
shall, in the opinion of counsel to the Term Agent or the Term Lenders, make it
unlawful for the Term Agent or the Term Lenders to make or maintain Index
Loans, then the Term Administrative Agent shall promptly notify the Lead
Borrower and (A) the Index Loans shall immediately convert to Base Margin Loans
on the last Business Day of the then existing

 38
 

Interest Period or on such earlier date as
required by law and (B) no additional Index Loans shall be made until such
circumstance is cured.

(d)   If any Regulatory Change
(whether or not having the force of law) shall (A) impose, modify or deem
applicable any assessment, reserve, special deposit or similar requirement
against assets held by, or deposits in or for the account of or loans by, or
any other acquisition of funds or disbursements by, the Term Agent or the Term
Lenders; (B) subject the Term Agent, the Term Lenders or the Index Loans to any
Tax or change the basis of taxation of payments to the Term Agent or the Term
Lenders of principal or interest due from the Borrowers to the Term Agent or
the Term Lenders hereunder (other than a change in the taxation of the overall net
income of the Term Agent or the Term Lenders); or (C) impose on the Term Agent
or the Term Lenders any other condition regarding the Index Loans or the Term
Agent’s or Term Lenders’ funding thereof, and the Term Administrative Agent or
Term Lenders shall determine (which determination shall be conclusive) that the
result of the foregoing is to increase the cost to the Term Agent or the Term
Lenders of making or maintaining the Index Loans or to reduce the amount of
principal or interest received by the Term Agent or Term Lenders hereunder,
then the Borrowers shall pay to the Term Agent or the Term Lenders, on demand,
such additional amounts as the Term Administrative Agent or the Term Lenders
shall, from time to time, determine are sufficient to compensate and indemnify
the Term Agent or Term Lenders from such increased cost or reduced amount.  Each Term Lender will use reasonable efforts
to designate a different lending office for the Liabilities if such designation
will avoid the need for, or reduce the amount of such compensation and will
not, in the reasonable opinion of such Term Lender (including, without
limitation, by reason of any economic, legal, or regulatory cost or
disadvantage that such Term Lender may bear or suffer by reason of such designation).

(e)   The Term Agent and Term Lenders
shall receive payments of amounts of principal of and interest with respect to
the Index Loans free and clear of, and without deduction for, any Taxes.  If (A) the Term Agent or any Term Lender
shall be subject to any Tax in respect of any Index Loans or any part thereof
or, (B) the Borrowers shall be required to withhold or deduct any Tax from any
such amount, the Index Rate applicable to such Index Loans shall be adjusted by
the Term Administrative Agent or such Term Lender to reflect all additional
costs incurred by the Term Agent or such Term Lender in connection with the
payment by the Term Agent or such Term Lender or the withholding by the
Borrowers of such Tax and the Borrowers shall provide the Term Agent or such
Term Lender with a statement detailing the amount of any such Tax actually paid
by the Borrowers. Determination by the Term Administrative Agent or such Term
Lender of the amount of such costs shall be conclusive absent manifest error.  If after any such adjustment any part of any
Tax paid by the Term Agent or such Term Lender is subsequently recovered by the
Term Agent or such Term Lender, the Term Agent or such Term Lender, as
applicable, shall reimburse the Borrowers to the extent of the amount so recovered.  A certificate of an officer of the Term
Administrative Agent or such Term Lender setting forth the amount of such
recovery and the basis therefor shall be conclusive absent manifest error.

 39
 

2.11                        Term Lenders’ Commitments.

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

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

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

(d)   The Dollar Commitments,
Commitment Percentages, and identities of the Term Lenders may be changed, from
time to time by the reallocation or assignment of Dollar Commitments and
Commitment Percentages amongst the Term Lenders or with other Persons who
become “Term Lenders” and as provided in Section 2.2 hereof; provided, however
unless an Event of Default has occurred (in which event, no consent of the Lead
Borrower is required) any assignment to a Person not then a Term Lender or an
Affiliate of a Term Lender shall be subject to the prior written consent of the
Lead Borrower (not to be unreasonably withheld), which consent will be deemed
given unless the Lead Borrower provides the Term Administrative Agent with
written objection, not more than five (5) Business Days after the Term
Administrative Agent shall have given the Lead Borrower written notice of a
proposed assignment.

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

(i)                                     The Lead Borrower
and the other Borrowers, if required by the Term Administrative Agent, shall
execute one or more Term Notes (which notes shall replace any Term Notes
theretofore provided by the Borrowers) to reflect such changed Dollar
Commitments, Commitment Percentages, and identities and shall deliver such Term
Notes to the Term Administrative Agent (which promptly thereafter shall cancel
and deliver to the Lead Borrower the Term Notes so replaced, if any).  In the event that the Term Administrative
Agent does not require the delivery of Term Notes or that in the event that a
Term Note is to be exchanged following its acceleration or the entry of an
order for relief under the Bankruptcy Code with respect to the Borrowers, the
Term Administrative Agent, in lieu of causing the Lead Borrower to execute one
or more new Term Notes, may issue the Term Administrative Agent’s Certificate
confirming the resulting Dollar Commitments and Commitment Percentages.

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

 40
 

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

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

2.12                        Designation of Lead Borrower as
Borrowers’ Agent.

(a)   Each Borrower hereby
irrevocably designates and appoints the Lead Borrower as that Borrower’s agent
to obtain the Term Loan, the proceeds of which shall be available to each
Borrower for those uses as those set forth in this Agreement.  As the disclosed principal for its agent,
each Borrower shall be obligated to the Term Agent and Term Lenders on account
of the Term Loan so made as if made directly by the Term Agent or Term Lenders
to that Borrower, notwithstanding the manner by which such loans and advances
are recorded on the books and records of the Lead Borrower and of any Borrower.

(b)   The Lead Borrower shall act as
a conduit for each Borrower (including itself, as a “Borrower”) on whose behalf
the Lead Borrower has requested the Term Loan.

ARTICLE
III. - Conditions Precedent:

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

3.1  Corporate Due Diligence.

(a)   A Certificate of corporate good
standing issued with respect to each Obligor by the Secretary of State of the
State in which that Obligor was organized.

(b)   Certificates of qualification
to do business as a foreign corporation, issued by the Secretary(ies) of State
of each State in which such Obligor’s conduct of business or

 41
 

ownership of assets requires such
qualification, except where the failure to so qualify would not have a Material
Adverse Effect.

(c)   A Certificate of each Obligor’s
respective Secretary as to the due adoption and continued effectiveness of,
each corporate resolution adopted in connection with the establishment of the
loan arrangement contemplated by the Loan Documents and attesting to the true
signatures of each Person authorized as a signatory to any of the Loan
Documents, such certificate to set forth the text of each such resolution in an
attachment thereto.

3.2  Opinion.

An opinion of counsel to
the Obligors in form and substance satisfactory to the Term Agent.

3.3  Officers’ Certificates.

Certificates executed by
the Chief Executive Officer, Chief Operating Officer, President or Chief
Financial Officer of each Obligor stating that the representations and
warranties made by such Obligor to the Term Agent in the Loan Documents are
true and complete as of the date of such certificate, and that no event has
occurred which is or which, solely with the giving of notice or passage of time
(or both), would be an Event of Default.

3.4  Additional Documents.

Such additional
instruments and documents as the Term Agent or its counsel reasonably may
require or request including, without limitation, the following:

(a)   Loan Documents.  Each of the Loan Documents shall have been
duly executed and delivered by the respective parties thereto shall be in full
force and effect and shall be in form and substance satisfactory to Term Agent.

(b)   Certificates of Insurance.  (a) A certificate of insurance from an
independent insurance broker dated as of the Closing Date, identifying
insurers, types of insurance, insurance limits, policy terms and otherwise
describing the insurance obtained in accordance with this Agreement, and (b)
copies of all policies evidencing such insurance, in each case in form and
substance satisfactory to the Term Collateral Agent.

(c)                                  Blocked
Account Agreements.

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

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

 42
 

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

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

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

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

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

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

(h)   Landlord Waiver
Notifications.  Duly executed and
delivered notifications to the Landlords in connection with the Collateral
Access Agreements for the Domestic Distribution Centers in form and substance
reasonably satisfactory to the Term Collateral Agent.

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

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

 43
 

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

(k)   Title Policy.  A
date-down endorsement to the existing loan policy of title insurance issued by
Commonwealth Land Title Insurance Company with respect to the Mortgaged
Property, subject to the exceptions set forth in the existing title policy for
the Mortgaged Property and such other exceptions as may be acceptable to the
Term Collateral Agent and, confirming that all real estate taxes are paid
through the date of such date-down.

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

(m)    Subordination Agreement.  PIDA shall have amended its existing
Subordination Agreement with Revolving Loan Collateral Agent in order to
confirm the effect of the Mortgage Amendment and its relative priority of the
obligations described above and to determine the Second Mortgage Cap;

(n)     Authorization/Incumbency.  Borrower shall have provided copies or
originals as appropriate of the resolutions of the board of directors of the
Lead Borrower, PIDA, and PIDC Financing Corporation and any other usual
evidence of authority and incumbency for the Lead Borrower, PIDA, and PIDC
Financing Corporation to enter into all documents related to the Mortgage
Amendment and the amendment to the Subordination Agreement;

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

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

3.5  Representations and Warranties.

Each of the
representations made by or on behalf of the Obligors in this Agreement or in
any of the other Loan Documents or in any other report, statement, document, or
paper provided by or on behalf of the Borrowers shall be true and complete as
of the date as of which such representation or warranty was made, except to the
extent it specifically relates solely to an earlier date.

 44
 

3.6  All Fees and Expenses Paid.

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

3.7  No Borrower Default.

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

3.8  No Adverse Change.

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

3.9  Absence of litigation.

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

3.10                        Finalization of Revolving loan
facility.

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

3.11                        No other Material Indebtedness.

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

 45
 

3.12                        Validity of Liens.

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

3.13                        Rating of Term Loan Facility.

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

3.14                        Documents.

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

3.15                        Conditions to Funding of Term Loan.

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

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

(b)   Each representation, not
relating to a specific date, which is made herein or in any of the Loan
Documents is then true and correct in all material respects as of and as if
made on the date of such request (except (A) to the extent of changes resulting
from transactions contemplated or permitted by this Agreement or the other Loan
Documents and changes occurring in the ordinary course of business which singly
or in the aggregate would not reasonably be expected to have a Material Adverse
Effect and (B) to the extent that such representations and warranties expressly
relate to an earlier date).

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

ARTICLE IV. - General Representations, Covenants and Warranties:

To induce the Term Agent
and Term Lenders to establish the credit facility contemplated herein and to
make loans and advances and to provide financial accommodations under this
Agreement (each of which loans shall be deemed to have been made in reliance
thereupon) the

 46
 

Obligors, in addition to
all other representations, warranties, and covenants made by the Obligors in
any other Loan Document, represents, warrants, and covenants as follows:

4.1  Payment and Performance of
Liabilities.

The Obligors shall pay
each Liability when due (or when demanded, if payable on demand) and shall
promptly, punctually, and faithfully perform each other Liability.

4.2  Due Organization. Corporate
Authorization. No Conflicts.

(a)   The exact name of each Obligor,
as set forth in each Obligor’s organizational documents, is set forth in EXHIBIT 4.2 hereof. 
Each Obligor presently is and shall hereafter remain in good standing as
the type of entity indicated on EXHIBIT 4.2
hereof and be duly organized under the laws of the state of its incorporation
indicated in EXHIBIT 4.2 hereof and shall
hereafter remain duly qualified and in good standing in every other state in
which, by reason of the nature or location of that Obligor’s assets or
operation of that Borrower’s business, such qualification may be necessary,
except where the failure to so qualify or be in good standing would not have a
Material Adverse Effect.  EXHIBIT 4.2 accurately describes the corporate structure of
the Obligors and any Affiliates, including the identity of shareholders holding
more than 25% of the issued and outstanding stock having the right to vote,
limited and general partners, or members, as the case may be.

(b)   Each Affiliate of the Obligors
is listed on EXHIBIT 4.2. The Lead Borrower
shall provide the Term Administrative Agent with prior written notice of any
entity’s becoming or ceasing to be an Affiliate (provided, however, that with
respect to any Affiliate that becomes or cease to become an Affiliate solely
due to issuances or exchanges of the publicly-traded stock of the Lead
Borrower, the Lead Borrower shall provide the Term Administrative Agent with
written notice thereof on or before the thirtieth (30th) day of the next month thereafter).

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

(d)   Each Obligor has all requisite
corporate power and authority to execute and deliver all Loan Documents to
which the Obligor is a party and has and will hereafter retain all requisite
corporate power to perform all Liabilities.

(e)   The execution and delivery by
each Obligor or by the Lead Borrower of each Loan Document on behalf of each
Obligor that is a party thereto, such Obligor’s consummation of the
transactions contemplated by such Loan Documents (including, without
limitation, the creation of Collateral Interests by such Obligor to secure the
Liabilities), such Borrower’s performance under such Loan Document, the
borrowings hereunder, and the use of the proceeds thereof:

(i)                                     Have been duly
authorized by all necessary corporate action on the part of such Obligor;

 47
 

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

(iii)                               Will not result in the
creation or imposition of, or the obligation to create or impose, any
Encumbrance upon any assets of such Obligor pursuant to any Requirement of Law
or obligation of such Obligor, except pursuant to the Loan Documents and the
Revolving Loan Agreement.

(f)    The Loan Documents have been
duly executed and delivered by the Lead Borrower and the other Borrowers or by
the Lead Borrower on behalf of itself and the other Borrowers and by the
Guarantor, as the case may be and are the legal, valid and binding obligations
of the Obligors, enforceable against the Obligors in accordance with their
respective terms, except to the extent enforceability may be limited by
applicable bankruptcy, insolvency, moratorium, or other similar laws affecting
the enforcement of creditors’ rights generally and by general principles of
equity.

4.3  Trade Names.

(a)   EXHIBIT 4.3
is a listing of:

(i)                                     All names under
which each Obligor has conducted its business within the past five (5) years,
and

(ii)                                  All entities and/or
persons with whom each Obligor ever consolidated or merged within the past five
(5) years, or from whom each Obligor ever acquired in a single transaction or
in a series of related transactions substantially all of such entity’s or
Person’s assets within the past five (5) years.

(b)   The Lead Borrower will provide
the Term Administrative Agent with not less than twenty-one (21) days
prior written notice (with reasonable particularity) of any change to any
Obligor’s name from that under which such Obligor is conducting its business at
the execution of this Agreement and such Obligor will not effect such change if
a Default or Event of Default has occurred and is continuing.

4.4  Infrastructure.

(a)   The Obligors have and will
maintain a sufficient infrastructure to conduct their business as presently
conducted and as contemplated to be conducted as described in the Business
Plan.

(b)   Each Obligor owns and
possesses, or has the right to use (and will hereafter own, possess, or have
such right to use) all patents, industrial designs, trademarks, trade names,
trade styles, brand names, service marks, logos, copyrights, trade secrets,
know-how, confidential information, and other intellectual or proprietary
property of any third Person necessary for the

 48
 

Obligors’ conduct of the Obligors’ business,
except where the failure to do so could not reasonably be expected to have a
Material Adverse Effect.

(c)   The conduct by the Obligors of
the Obligors’ business does not presently infringe (nor will the Obligors
conduct their business in the future so as to infringe) the patents, industrial
designs, trademarks, trade names, trade styles, brand names, service marks, logos,
copyrights, trade secrets, know-how, confidential information, or other
intellectual or proprietary property of any third Person, except where the
infringement could not reasonably be expected to have a Material Adverse
Effect.

4.5  GUARANTOR.

The Guarantor will
not conduct any business in the United States or hold any assets in the United
States, other than (i) holding the leases for certain stores in Canada that
sell the Borrowers’ inventory; and (ii) holding assets in the corporate
headquarters portion of the Headquarters Facility.

4.6  Locations.

(a)   The Collateral, and the books,
records, and papers of the Obligors pertaining thereto, are kept and maintained
solely at the Obligors’ chief executive offices and those locations which are
listed on EXHIBIT 4.6(a), which includes, with
respect to each such location, the name and address of the landlord on the
Lease which covers such location (or an indication that the Obligors own the
subject location) and of all service bureaus with which any such records are
maintained.  The Obligors shall
supplement EXHIBIT 4.6(a) on a monthly basis
after the date hereof to reflect any Permitted Store Openings/Closings,
additional Domestic Distribution Centers (for which prior notice has been given
pursuant to the definition thereof), or new chief executive offices.

(b)   The Obligors shall not remove
any of the Collateral from such chief executive office or those locations
listed on EXHIBIT 4.6(a) except to:

(i)                                     accomplish the
Costa Rican Transaction;

(ii)                                  accomplish sales of
Inventory in the ordinary course of business;

(iii)                               move Inventory from one
such location to another such location;

(iv)                              utilize such of the
Collateral as is removed from such locations in the ordinary course of business
(such as motor vehicles); or

(v)                                 move Inventory from
one store to another store in connection with Permitted Store
Openings/Closings.

(c)   The Borrowers shall use their
reasonable efforts to provide the Term Collateral Agent with Landlord Waivers
or subordinations, in substantially the form annexed hereto as EXHIBIT 4.6(c) for each of the Borrowers’ locations in any
of the Landlord States or

 49
 

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

(d)   The Borrowers will not:

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

(ii)                                  Commit
to, or open or close any location at which the Borrowers maintains, offers for
sales, or stores any of the Collateral, except that (A) the Borrowers may open
or close, in their business judgment, locations within department or specialty
stores or other locations in which a Borrower leases or licenses a portion of
the space in such store; and (B) the Borrowers may: (I) open, during any Fiscal
Year, new stores in an amount not to exceed twenty percent (20%) of the number
of stores (other than locations within department or specialty stores or other
locations in which a Borrower leases or licenses a portion of the space in such
store) existing as of the first day of such Fiscal Year (including stores that
have closed since such first day), and (II) close, during any Fiscal Year,
stores in an amount not to exceed twenty percent (20%) of the number of stores
(other than locations within department or specialty stores or other locations
in which a Borrower leases or licenses a portion of the space in such store)
existing as of the first day of such Fiscal Year (not including stores that
have opened since such first day) (“Permitted Store Openings/Closings”).

(e)   No tangible personal property
of the Borrowers is in the care or custody of any third party or stored or
entrusted with a bailee or other third party and none shall hereafter be placed
under such care, custody, storage, or entrustment, except (i) as otherwise
disclosed pursuant to, or permitted by, this Section 4.6, (ii) for
Inventory located in department or specialty stores or other locations in which
a Borrower leases or licenses a portion of the space in such store; (iii) for
goods in control of a customs broker, which has entered into a Customs Brokers
Agreement, (iv) for work-in-progress at contractors (whether or not in the
United States), and (v) any raw materials at contractors (whether or not in the
United States), finished goods out for re-working, and goods in transit.

4.7  Title To Assets.

(a)   The Obligors are, and shall
hereafter remain, the owners of the Collateral free and clear of all
Encumbrances other than Encumbrances or exceptions to ownership listed on EXHIBIT 4.7(a) and other Permitted Encumbrances. The
Obligors do not and shall not have possession of any property on consignment to
the Obligors.

 50
 

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

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

(ii)                                  Equipment
subject to (a) Capital Leases or purchase money security interests comprised in
each case of Permitted Encumbrances; and (b) operating leases.

(c)   The Obligors do not have any
goods, documents of title or other Collateral in the custody, control, or
possession of a third party, except as set forth in EXHIBIT
4.7(d) and except for goods located in the United States in transit
to a location of the Borrowers permitted herein or in the ordinary course of
business of the Obligors in the possession of the carrier transporting such
goods.  In the event that any goods,
documents of the title or other Collateral are at any time after the date
hereof in the custody, control or possession of any other person not referred
to in EXHIBIT 4.7(d) or such carriers,
Obligors shall promptly notify the Term Collateral Agent thereof in
writing.  Promptly upon Term Collateral
Agent’s request, the Obligors shall deliver to the Term Agent a collateral
access agreement, in form and substance acceptable to the Term Collateral Agent
in its sole discretion, duly authorized, executed and delivered by such person
and Borrowers.

(d)   EXHIBIT
4.7(d) is a schedule of all customs brokers employed by the Obligors
for the transport of goods in the ordinary course of the business of the
Obligors.  The Obligors shall not employ
any other customs brokers unless (i) the Obligors have provided the Term
Collateral Agent with thirty (30) days prior notice thereof and (ii) such
customs broker has executed and delivered to the Term Collateral Agent a
Customs Broker Agreement.  The Term
Collateral Agent shall not give notice to any of the Obligors’ customs brokers
to follow the instructions of the Term Collateral Agent as provided in any
Customs Brokers Agreement except upon or following the occurrence and during
the continuance of an Event of Default and in accordance with the Intercreditor
Agreement.

4.8  Indebtedness.

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

(i)                                     The
Term Loan;

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

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

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

 51
 

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

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

(vii)                           Indebtedness
of Guarantor to Borrowers up to the amount equal to Fifteen Million Dollars
($15,000,000) less the amount of
any capital contributions or other investments by Borrowers to Guarantor or its
Subsidiaries made after the date hereof, in the aggregate;

(viii)                        Indebtedness
to finance the construction of an addition or additions to the Headquarters
Facility or additional buildings on the Headquarters Facility premises or to
acquire fixtures for the Headquarters Facility to the extent secured by
Permitted Encumbrances described in clause (j) of the definition thereof;

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

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

 52

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

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

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

(xiii)                          Any
Indebtedness between any of the Borrowers.

(b)   The
Obligors shall not permit more than 25% of that portion of the aggregate of
their Indebtedness for the purchase of goods or services which is not the
subject of a good faith dispute to remain unpaid more than 30 days beyond then
current trade terms provided to the subject Borrower by the supplier of such
goods and services.

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

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

4.9  INSURANCE.

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

 53
 

effect.  The Obligors are not in
material default or violation of any such policy and, to the Obligors’
knowledge, no issuer is in material default or violation of any such policy.

(b)   The
Obligors shall have and maintain at all times insurance covering such risks, in
such amounts, containing such terms, in such form, and for such periods
customary for entities in similar industries and in similar locations as
Obligors, and written by such companies as may be reasonably satisfactory to
the Term Agent.

(c)   All
insurance carried by the Obligors shall provide for a minimum of thirty (30)
days’ written notice of cancellation to the Term Collateral Agent and all such
insurance which covers the Collateral shall include an endorsement in favor of
the Term Collateral Agent that is reasonably acceptable to the Term Collateral
Agent.

(d)   The
coverage reflected on EXHIBIT 4.9
presently satisfies the foregoing requirements, it being recognized by the Obligors, however, that such
requirements may change hereafter to reflect changing circumstances.

(e)   The
Obligors shall furnish the Term Agent from time to time with certificates or
other evidence reasonably satisfactory to the Term Agent regarding compliance
by the Borrowers with the foregoing requirements.

(f)    In
the event of the failure by the Obligors to maintain insurance as required
herein, the Term Collateral Agent, at its option, may obtain such insurance, provided, however,
the Term Collateral Agent’s obtaining of such insurance shall not constitute a
cure or waiver of any Event of Default occasioned by the Obligors’ failure to
have maintained such insurance.

(g)   The
Lead Borrower shall advise the Term Collateral Agent of each claim in excess of
$1,000,000 (or, following the occurrence and during the continuance of an Event
of Default, $100,000) made by any Obligor under any policy of insurance which
covers the Collateral and will permit the Term Collateral Agent, at the Term
Collateral Agent’s option in each instance, to the exclusion of the Obligors,
to conduct the adjustment of each such claim in excess of such amounts (and, at
the Term Collateral Agent’s option in each instance, of all claims following
the occurrence of any Event of Default). 
Upon and following the occurrence and during the continuation of an
Event of Default, the Obligors hereby appoint the Term Collateral Agent as the
Obligors’ attorney in fact to obtain, adjust, settle, and cancel any insurance
described in this section and to endorse in favor of the Term Collateral Agent
any and all drafts and other instruments with respect to such insurance.  The within appointment, being coupled with an
interest, is irrevocable until this Agreement is terminated by a written
instrument executed by a duly authorized officer of the Term Collateral Agent.
The Term Agent shall not be liable on account of any exercise pursuant to said
power except where there has been a final judicial determination (in a
proceeding in which the Term Agent had an opportunity to be heard) that such
exercise was conducted in a grossly negligent manner or in willful misconduct.  The Term Administrative Agent shall apply any
proceeds of such insurance against the Liabilities as set forth in Section 2.6
hereof.

 54
 

4.10                        Licenses; Material Contracts.

EXHIBIT
4.10 is a schedule of all presently effective material
agreements and licenses, distributorships, franchises, and similar agreements,
copies of which have previously been delivered (in final, executed form,
subject to such exceptions as are satisfactory to the Term Administrative
Agent) to the Term Administrative Agent. 
Each agreement, license, distributorship, franchise, and similar
agreement issued to the Obligor, or to which the Obligor is a party is in full
force and effect in each case except those the failure of which to be in full
force and effect do not have a Material Adverse Effect.  No party to any such license or agreement is
in default or violation thereof in each case except those the default or
violation of which do not have a Material Adverse Effect. The Obligors have not
received any notice or threat of cancellation of any such license or agreement.

4.11                        Leases.

EXHIBIT
4.11 is a schedule of all presently effective Capital Leases
and includes a list of all other presently effective Leases.  Each of such Leases and Capital Leases is in
full force and effect.  No party to any
such Lease or Capital Lease is in default or violation of any such Lease or
Capital Lease and none of the Obligors have received any notice or threat of
cancellation of any such Lease or Capital Lease which in any such case could
reasonably be expected to have a Material Adverse Effect.  After the occurrence and during the
continuance of an Event of Default, the Obligors hereby authorize the Term
Agent at any time and from time to time to contact any of the Obligors’
landlords in order to confirm the continued compliance by any Obligor with the
terms and conditions of the Lease(s) between such Borrower and that landlord
and to discuss such issues, concerning such Obligor’s occupancy under such
Lease(s), as the Term Agent may reasonably determine.

4.12                        Requirements of Law.

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

4.13                        Labor Relations.

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

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

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

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

 55
 

Employment
Opportunity Commission, or any comparable governmental body, organizational
activity, or other labor or employment dispute against or affecting any
Obligor, which, if determined adversely to such Obligor could not have a
Material Adverse Effect;

(iii)                               Any
lockout of any employees by any Obligor, (and no such action is contemplated by
any Obligor); or

(iv)                              Any
application for the certification of a collective bargaining agent.

(c)   No
work stoppage or other labor dispute exists, and, to Obligors’ knowledge, no
event has occurred or circumstance exists that could provide the basis for any
work stoppage or other labor dispute.

(d)   Each
Obligor:

(i)                                     (A)
Has complied in all material respects with all Requirements of Law relating to
employment, equal employment opportunity, nondiscrimination, immigration, wages,
hours, benefits, and occupational safety and health, except such noncompliance
which would not reasonably be expected to have a Material Adverse Effect; and
(B) has complied in all material respects with all Requirements of Law relating
to collective bargaining, the payment of social security and similar taxes, and
plant closing.

(ii)                                  Is
not liable for the payment of more than a de
minimus amount of compensation, damages, taxes, fines, penalties, or
other amounts, however designated, for such Obligor’s failure to comply with
any Requirement of Law referenced in Section 4.12.

4.14                        Maintain Properties.

Each Obligor shall:

(a)   Keep
the Collateral in good order and repair (ordinary reasonable wear and tear and
insured casualty excepted);

(b)   Not
suffer or cause the waste or destruction of any material part of the
Collateral;

(c)   Not
use any of the Collateral in material violation of any policy of insurance
thereon; and

(d)   Not
sell, lease, or otherwise dispose of any of the Collateral, other than the
following:

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(i)                                     The
Costa Rican Transaction;

(ii)                                  The
sale of Inventory in compliance with this Agreement;

(iii)                               The
disposal of Equipment which is obsolete, worn out, or damaged beyond repair,
which Equipment is replaced to the extent necessary to preserve or improve the
operating efficiency of such Borrower;

(iv)                              The
turning over to the Revolving Loan Agent of all Receipts as provided in the
Revolving Loan Agreement; and

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

4.15                        Taxes.

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

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

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

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

 57
 

been established); properly exercise any trust responsibilities imposed
upon the Obligors by reason of withholding from employees’ pay or by reason of
the Obligors’ receipt of sales tax or other funds for the account of any third
party; timely make all contributions and other payments as may be required pursuant
to any Employee Benefit Plan now or hereafter established by the Obligors; and
timely file all tax and other returns and other reports with each governmental
authority to whom the Obligors are obligated to so file, except in those cases
where extensions have been granted or are permitted of which the Obligors have
given the Term Administrative Agent written notice.

(e)   At
its option, the Term Agent may, but shall not be obligated to, pay any taxes,
unemployment contributions, and any and all other charges levied or assessed
upon the Obligors or the Collateral by any person or entity or governmental
authority, and make any contributions or other payments on account of the
Obligors’ Employee Benefit Plan as the Term Agent, in the Term Agent’s
discretion, may deem necessary or desirable, to protect, maintain, preserve,
collect, or realize upon any or all of the Collateral or the value thereof or
any right or remedy pertaining thereto, provided,
however, the Term Agent’s making
of any such payment shall not constitute a cure or waiver of any Event of
Default occasioned by the Obligors’ failure to have made such payment.

4.16                        No Margin Stock or Securities.

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

4.17                        ERISA.

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

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

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

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

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

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

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(f)    Terminated
or shall terminate any Employee Benefit Plan such that a lien could be asserted
against any assets of the Obligors on account thereof pursuant to ERISA; or

(g)   Been
a member of or shall be a member of, contributed to or shall contribute to, or
have any obligation under any Employee Benefit Plan which is a multiemployer
plan within the meaning of Section 4001(a) of ERISA.

4.18                        Hazardous Materials and
Environmental Compliance.

(a)   The
Obligors have never:

(i)                                     Been
legally responsible for any release or threat of release of any Hazardous
Material; or

(ii)                                  Received
notification of any release or threat of release of any Hazardous Material from
any site or vessel occupied or operated by the Borrowers and/or of the
incurrence of any expense or loss in connection with the assessment,
containment, or removal of any release or threat of release of any Hazardous
Material from any such site or vessel.

(b)   The
Obligors shall:

(i)                                     Dispose
of any Hazardous Material only in compliance with all Environmental Laws; and

(ii)                                  Not
store on any site or vessel occupied or operated by the Obligors and not
transport or arrange for the transport of any Hazardous Material, except if
such storage or transport is in the ordinary course of the Obligors’ business
and is in compliance with all Environmental Laws.

(c)   The
Lead Borrower shall provide the Term Administrative Agent with written notice
upon obtaining knowledge of any expense or loss incurred by any governmental
authority or other Person in connection with the assessment, containment, or
removal of any Hazardous Material, for which expense or loss the Borrowers may
be liable.

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

(i)                                     none of the Borrowers, their Subsidiaries
or any operator of the Headquarters Facility and the Domestic Distribution
Facilities or any operations thereon is in violation, or alleged violation, of
any 

 59
 

judgment, decree, order, law, license,
rule or regulation pertaining to environmental matters, including without
limitation, those arising under the Resource Conservation and Recovery Act (“RCRA”), the Comprehensive Environmental
Response, Compensation and Liability Act of 1980 as amended (“CERCLA”), the Superfund Amendments and
Reauthorization Act of 1986 (“SARA”),
the Federal Clean Water Act, the Federal Clean Air Act, the Toxic Substances
Control Act, or any state, local or foreign law, statute, regulation,
ordinance, order or decree relating to health, safety or the environment
(hereinafter “Environmental Laws”),
which violation would have a material adverse effect on the environment or a
Material Adverse Effect, provided that for operators or operation prior to the
time that Borrowers owned or operated such real estate, said representation
shall be limited to Borrower’s knowledge;

(ii)                                  neither the Borrowers nor any of their
Subsidiaries has received notice from any third party including, without
limitation, any Governmental Authority, (A) that any one of them has been
identified by the United States Environmental Protection Agency (“EPA”) as a potentially responsible party
under CERCLA with respect to a site listed on the National Priorities List, 40
C.F.R. Part 300 Appendix B; (B) that any hazardous waste, as defined by 42
U.S.C. §6903(5), any hazardous substances as defined by 42 U.S.C. §9601(14),
any pollutant or contaminant as defined by 42 U.S.C. §9601(33) and any toxic
substances, oil or hazardous materials or other chemicals or substances
regulated by any Environmental Laws (“Hazardous
Substances”) which any one of them has generated, transported or
disposed of has been found at any site at which a Governmental Authority has
conducted or has ordered that any Borrowers or any of their Subsidiaries
conduct a remedial investigation, removal or other response action pursuant to
any Environmental Law; or (iii) that it is or shall be a named party to any
claim, action, cause of action, complaint, or legal or administrative
proceeding (in each case, contingent or otherwise) arising out of any third
party’s incurrence of costs, expenses, losses or damages of any kind whatsoever
in connection with the release of Hazardous Substances;

(iii)                               except as set forth on EXHIBIT 4.18 attached hereto: (A) no
portion of the Headquarters Facility and the Domestic Distribution Facilities
has been used for the handling, processing, storage or disposal of Hazardous
Substances except in accordance with applicable Environmental Laws; and no
underground tank or other 

 60
 

underground storage receptacle for
Hazardous Substances is located on any portion of the Headquarters Facility and
the Domestic Distribution Facilities; (B) in the course of any activities
conducted by the Borrowers, their Subsidiaries or operators of its properties,
no Hazardous Substances have been generated or are being used on the
Headquarters Facility  and the Domestic
Distribution Facilities  except in
accordance with applicable Environmental Laws; (C) there have been no releases
(i.e. any past or present releasing, spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, disposing or dumping) or
threatened releases of Hazardous Substances on, upon, into or from the
properties of the Borrowers or their Subsidiaries, which releases would have a
material adverse effect on the value of any of the Headquarters Facility and
the Domestic Distribution Facilities  or
adjacent properties or the environment; (iv) to the best of the Borrowers’
knowledge, there have been no releases on, upon, from or into any real property
in the vicinity of any of the Headquarters Facility and the Domestic
Distribution Facilities which, through soil or groundwater contamination, may
have come to be located on, and which would have a material adverse effect on
the value of, the Headquarters Facility and the Domestic Distribution
Facilities; and (v) in addition, any Hazardous Substances that have been
generated on any of the Headquarters Facility and the Domestic Distribution
Facilities  have been transported offsite
only by carriers having an identification number issued by the EPA (or the
equivalent thereof in any foreign jurisdiction), treated or disposed of only by
treatment or disposal facilities maintaining valid permits as required under
applicable Environmental Laws, which transporters and facilities have been and
are, to the best of the Borrowers’ knowledge, operating in compliance with such
permits and applicable Environmental Laws provided that for purposes of this
clause (iii), representations relating to real property for a period prior to
the operation or occupation by Borrowers shall be to Borrowers’ knowledge; and

(iv)                              none
of the Borrowers and their Subsidiaries, any Mortgaged Property or the
Headquarters Facility and the Domestic Distribution Facilities  is subject to any applicable Environmental
Law requiring the performance of Hazardous Substances site assessments, or the
removal or remediation of Hazardous Substances, or the giving of notice to any
Governmental Authority or the recording or delivery to other Persons of an
environmental disclosure document or statement by virtue of the transactions
set forth herein and contemplated hereby, or as a condition to the recording of
any 

 61
 

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

4.19                        Litigation.

As of the Closing Date,
except as described in EXHIBIT 4.19
there is not presently pending or threatened by or against any Obligor any
suit, action, proceeding, or investigation which, if determined adversely to
such Obligor, would have a Material Adverse Effect.

4.20                        Dividends; Investments; Corporate
Action.

(a)   The
Obligors shall not:

(i)  Pay any
cash dividend or make any other distribution in respect of any class of the
Obligors’ capital stock (except as permitted in Section 4.20(b));

(ii)  Redeem,
retire, purchase, or acquire any Obligor’s capital stock or Securities, except
as permitted under Section 4.20(b), and, in any event, unless such stock
repurchases are approved by the Lead Borrower’s Board of Directors and be no be
less favorable to the Borrowers than those which would have been charged and
imposed in an arms length transaction;

(iii)  Invest in or purchase any stock or securities
or rights to purchase any such stock or securities, of any corporation or other
entity (except (A) in Eligible Liquid Collateral, (B) investments (including,
without limitation, capital contributions and loans) to Guarantor or its
Subsidiaries, in an aggregate amount not to exceed Fifteen Million Dollars
($15,000,000) (without duplication of the advances permitted under Section
4.21(e) hereof) in the aggregate after the Closing Date; (C) as permitted
in Section 4.20(c); (D) so long as there has not occurred a Default or
an Event of Default, and no Default or Event of Default would result therefrom,
contributions to one or more Approved Security-Free SERPS or the related
Security-Free Rabbi Trusts in the amount of not more than $4,000,000 per annum,
and not more than $10,000,000 in the aggregate, and subject to delivery of a
certificate to the Term Administrative Agent demonstrating pro forma compliance
with Section 5.10 hereof upon and following the making of such
contributions); (E) investments of assets permitted to be contributed to any
Approved Security-Free SERP or related Security-Free Rabbi Trust hereunder; and
(F) fixed income instruments or fixed income equity securities, in each case
rated A- or better by a rating agency acceptable to the Term Administrative
Agent, with intermediate to perpetual maturities that (i) are structured with
frequent short-term auction periods of the type described in EXHIBIT 4.20 and that meet the qualifications with respect
thereto as set forth therein; and (ii) are subject to the first-priority
security interest in favor of the Term Collateral Agent pursuant to Section
8.3(d) (ii) and  a security interest in
favor of the Revolving Loan Collateral Agent;

(iv)  Merge or consolidate or be merged or
consolidated with or into any other corporation or other entity (except as
permitted in Section 4.20(c));

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(v)  Consolidate any of the Obligors’ operations
with those of any other corporation or other entity (other than with any other
present or future Obligor) (except as part of a Permitted Acquisition or
Permitted Creation);

(vi)  Organize any Subsidiary (except as permitted
in Section 4.20(c)), or create any Subsidiary, except pursuant to a
Permitted Creation;

(vii)  Subordinate any debts or obligations owed to
the Obligors by any third party to any other debts owed by such third party to
any other Person;

(viii)  Acquire any assets other than in the ordinary
course and conduct of the Obligors’ business as conducted at the execution of
this Agreement (except as permitted in Section 4.20(c)); or

(ix)  Make any Loans except as permitted in Section
4.21.

(b)     (i) Borrowers may make dividends,
distributions and common stock buybacks in an amount not to exceed $10,000,000
in the aggregate per annum provided that (A) no Default or Event of Default has
occurred which is continuing at the time of such dividend, distribution, or
buyback, and (B) subject to delivery of a certificate to the Term
Administrative Agent demonstrating pro forma compliance with Section 5.10
hereof upon the making of such dividend, distribution or common stock buyback,
(ii)  Borrowers may repurchase capital
stock held by officers, directors, and employees in an amount not to exceed
$5,000,000 in the aggregate per annum provided that such purchase is approved
by the Lead Borrower’s Board of Directors and conducted on an arm’s length
basis and subject to delivery of a certificate to the Term Administrative Agent
demonstrating pro forma compliance with Section 5.10 hereof upon such
repurchase, and (iii) Borrowers may make other payments otherwise prohibited by
Section 4.20(a) in an amount, when taken together with all payments made
under Section 4.8(c) (v) and this Section 4.20(b) (iii) after the Closing Date,
do not exceed the Permitted Payments Amount.

(c)   So
long as there is no Default or Event of Default that has occurred or would
occur as a result thereof, the Borrowers may make Permitted Acquisitions and
Permitted Creations, provided, that, the aggregate amount of consideration for
all Permitted Acquisitions and Permitted Creations (including all Indebtedness
incurred, repaid or assumed in connection with all acquisitions occurring after
the Closing Date and net of cash and cash equivalents acquired), cash paid, and
capital stock issued or expended in respect of all such acquisitions after the
Closing Date shall not exceed $75,000,000 (exclusive of any consideration
delivered to another Borrower, whether such Borrower is now a Borrower or
becomes a Borrower prior to delivery of such consideration (whether in the form
of cash of capital stock)) in the aggregate following the Closing Date; and provided
further that the Consolidated Leverage Ratio at the time of any Permitted
Acquisition or Permitted Creation and after giving effect to such Permitted
Acquisition or Permitted Creation pursuant to this Section 4.20(c), does
not and shall not exceed (x) the required Consolidated Leverage Ratio as
applicable for such period as set forth in Section 5.10, less
0.25 (e.g., if such Permitted Acquisition or Permitted Creation occurred during
the fiscal quarter ending March 30, 2009, the Consolidated Leverage Ratio at
the time of  such 

 63
 

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

4.21                        Loans.

The Obligors shall not
make any loans or advances to, nor acquire the Indebtedness of, any Person, provided, however, the foregoing does not
prohibit any of the following:

(a)   Advance
payments made to the Obligors’ suppliers in the ordinary course; and

(b)   Advances
to the Obligors’ officers, employees, and salespersons with respect to reasonable
expenses to be incurred by such officers, employees, and salespersons for the
benefit of the Obligors, which expenses are properly substantiated by the
person seeking such advance and properly reimbursable by the Obligors.

(c)   Additional
advances to the Obligors’ employees approved by the Chief Financial Officer, in
an amount not more than $1,000,000 in the aggregate.

(d)   Advances
from a Borrower to another Borrower.

(e)   Advances
to Guarantors and their Subsidiaries, in an aggregate amount not to exceed
Fifteen Million Dollars ($15,000,000) (without duplication of the investments
permitted under Section 4.20(a) (iii)(B)).

4.22                        Protection of Assets.

The Term Agent may in its
discretion from time to time, discharge any tax or Encumbrance on any of the Collateral,
or take any other action which the Term Agent may deem necessary or desirable
to repair, insure, maintain, preserve, collect, or realize upon any of the
Collateral.  The Term Agent shall not
have any obligation to undertake any of the foregoing and shall have no
liability on account of any action so undertaken except where there is a
specific finding in a judicial proceeding (in which the Term Agent has had an
opportunity to be heard), from which finding no further appeal is available,
that the Term Agent had acted in actual bad faith or in a grossly negligent
manner.  The Borrowers shall pay to the
Term Administrative Agent, on demand, all amounts paid or incurred by the Term
Agent pursuant to this Section 4.22. 
The obligation of the Borrowers to pay such amounts is a Liability.

4.23                        Line of Business.

The Obligors shall not
engage in any business other than the business in which they are currently
engaged or a business reasonably related thereto or such other lines of
business as may be consented to by Term Administrative Agent.

4.24                        Affiliate Transactions.

The Obligors shall not make any payment, nor give any value to any
Affiliate except for goods and services actually purchased by the Obligors
from, or sold by the Borrowers 

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to, such
Affiliate for a price and on terms which shall be no be less favorable to the
Borrowers than those which would have been charged and imposed in an arms
length transaction, other than investments permitted under Section
4.20(a) (iii) and dividends, distributions, stock buybacks and repurchases
permitted under Section 4.20(b).

4.25                        Further Assurances.

(a)   Other
than property and assets in Canada and as otherwise provided in this Agreement,
the Obligors are not the owner of, nor have they any interest in, any property
or asset in which a Collateral Interest is required to be granted hereunder
which, immediately upon the satisfaction of the conditions precedent to the
effectiveness of the credit facility contemplated hereby (Article III) will not
be subject to perfected Collateral Interests in favor of the Term Collateral
Agent (subject only to Permitted Encumbrances) to secure the Liabilities.

(b)   The
Obligors will not hereafter acquire any asset or any interest in property in
which a Collateral Interest is required to be granted hereunder which is not,
immediately upon such acquisition, subject to such a perfected Collateral
Interest in favor of the Term Collateral Agent (subject only to Permitted
Encumbrances) to secure the Liabilities.

(c)   The
Obligors shall execute and deliver to the Term Agent such instruments,
documents, and papers, and shall do all such things from time to time hereafter
as the Term Agent may reasonably request to carry into effect the provisions
and intent of this Agreement; to protect and perfect the Term Agent’s
Collateral Interests in the Collateral; and to comply with all applicable
statutes and laws; and facilitate the collection of the Receivables
Collateral.  The Obligors shall execute
all such instruments as may be reasonably required by the Term Agent with
respect to the recordation and/or perfection of the Collateral Interests
created or contemplated herein.

(d)   The
Obligors hereby designate the Term Agent as and for the  Obligors’ true and lawful attorney, with full
power of substitution, to sign and file any financing statements in order to
perfect or protect the Term Agent’s Collateral Interests in the Collateral.

(e)   A
carbon, photographic, or other reproduction of this Agreement or of any
financing statement or other instrument executed pursuant to this Section
4.25 shall be sufficient for filing to perfect the security interests
granted herein.

4.26                        Adequacy OF Disclosure.

(a)   All
financial statements furnished to the Term Agent or the Term Lenders by the
Obligors have been prepared in accordance with GAAP consistently applied and
present fairly the consolidated condition of the Obligors at the date(s)
thereof and the consolidated results of operations and cash flows of the
Obligors for the period(s) covered subject,
in the case of interim financials, to normal year end adjustments.  As of the Closing Date, there has been no
change in the financial condition, results of operations, or cash flows of the
Obligors since the date(s) of such financial statements, other than changes in
the ordinary course of business, which changes have not been materially
adverse, either singularly or in the aggregate.

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(b)   The
Obligors do not have any contingent obligations or obligation under any Lease
or Capital Lease which is not noted in the Obligors’ most recent consolidated
financial statements furnished to the Term Agent or the Term Lenders prior to
the execution of this Agreement which would have a Material Adverse Effect.

(c)   No
document, instrument, agreement, or paper now or hereafter given the Term Agent
or the Term Lenders by or on behalf of the Obligors or any guarantor of the
Liabilities in connection with the execution of this Agreement by the Term
Agent or Term Lenders contains or will contain any untrue statement of a
material fact or omits or will omit to state a material fact necessary in order
to make the statements therein not misleading. 
There is no fact known to the Borrowers which has, or which, in the
foreseeable future could have, a Material Adverse Effect on the financial
condition of the Obligors or any such guarantor which has not been disclosed in
writing to the Term Agent or Term Lenders.

4.27                        No Restrictions on Liabilities.

No Obligor shall enter
into or become subject to, directly or indirectly, any agreement (other than
the Indenture Agreement, as in effect as of the date hereof and without giving
effect to any subsequent amendment, modification, replacement or substitution
thereof) prohibiting or restricting (other than with respect to Permitted
Encumbrances), in any manner (including, without limitation, by way of
covenant, representation, or event of default) any of the following:

(a)   The
granting of Collateral Interests in favor of the Term Agent on any asset of any
Obligor; or

(b)   The
incurrence of any of the Liabilities.

4.28                        Other Covenants.

No Obligor shall
indirectly do or cause to be done any act which, if done directly by such
Obligor or Obligors, would breach any covenant contained in this Agreement
(excluding any covenant or representation and warranty made solely as of the
Closing Date).

ARTICLE V. - Financial
Reporting and Performance Covenants:

5.1
 Maintain Records.

The Obligors shall:

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

(b)   Timely
provide the Term Agent with those financial reports, statements, and schedules
required by this Article V or otherwise, each of which reports, statements and
schedules shall be prepared, to the extent applicable, in accordance with GAAP
applied 

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consistently with prior periods to fairly reflect the financial
condition of the Obligors at the close of, and its results of operations for,
the period(s) covered therein.

(c)   At
all times, retain independent certified public accountants who are reasonably
satisfactory to the Term Administrative Agent and instruct such accountants to
fully cooperate with, and be available to, the Term Administrative Agent to
discuss the Obligors’ financial performance, financial condition, operating
results, controls, and such other matters, within the scope of the retention of
such accountants, as may be raised by the Term Administrative Agent.

(d)   Not
change their respective Fiscal Years, tax identification numbers, or state of
incorporation, except as set forth herein.

5.2  Access to Records.

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

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

(i)                                     Subject
to Section 14.24, inspect, copy, duplicate, review, cause to be reduced
to hard copy, run off, draw off, and otherwise use any and all computer or
electronically stored information or data which relates to the Obligors,
whether maintained by Obligors or by any service bureau, contractor,
accountant, or other person, and directs any such service bureau, contractor,
accountant, or other person who maintains such information for the Obligor
fully to cooperate with the Term Agent and the Term Agent’s representatives
with respect thereto.

(ii)                                  Verify
at any time the Collateral or any portion thereof, including upon and following
the occurrence and during the continuance of any Default or Event of Default:
verification with Account Debtors, and/or with the Borrowers’ computer billing
companies, 

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collection
agencies, and accountants and to sign the name of the Obligors on any notice to
the Obligors’ Account Debtors or verification of the Collateral.

5.3                               Immediate Notice to Term Agent.

(a)   The
Lead Borrower shall provide the Term Administrative Agent and Term Collateral
Agent with written notice promptly upon the occurrence of any of the following
events, which written notice shall be with reasonable particularity as to the
facts and circumstances in respect of which such notice is being given:

(i)                                     Any
change in the Authorized Officers.

(ii)                                  The
completion of any physical count of all or a material portion of the Obligor’s
Inventory (together with a copy of the results thereof certified by the Lead
Borrower).

(iii)                               Any
cessation by the Obligors of their making payment to their creditors generally
as the Obligors’ debts become due.

(iv)                              Any
failure by the Obligors to pay rent at any forty or more of the Borrowers’
locations, which failure continues for more than ten (10) days following the
last day on which such rent was payable.

(v)                                 Any
material adverse change in the business, operations, or financial affairs of
the Obligors.

(vi)                              The
existence of any Default or Event of Default.

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

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

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

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(b)   The Lead Borrower shall:

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

(ii)                                  Provide the Term
Administrative Agent, when received by the Obligors, with a copy of any
management letter or similar communications from any accountant of the
Obligors.

5.4  Weekly and Monthly Reports.

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

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

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

(ii)                                  An internally
prepared financial statement of the Borrowers’ financial condition and the
results of its operations for, the period ending with the end of the subject
month, which financial statement shall include, at a minimum, a consolidated
balance sheet, income statement, cash flow and 
comparison to the Business Plan, which statement shall be certified by
the Lead Borrower’s chief financial officer or chief operating officer as
fairly presenting the financial position of the Borrowers in accordance with
GAAP (subject to year-end audit adjustments).

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

5.5  Quarterly Reports.

Quarterly, within forty
five (45) days following the end of each of the Borrower’s first three fiscal
quarters, the Borrowers shall provide the Term Agent with an original
counterpart of a management prepared financial statement of the Borrowers for
the period from the beginning of the Borrowers’ then current Fiscal Year
through the end of the subject quarter, with comparative information for the
same period of the previous Fiscal Year, which statement shall include, at a
minimum, a consolidated  balance sheet,
income statement (if requested, on a company specific 

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and on a “consolidating” basis) and cash flows and
comparisons for the corresponding quarter of the then immediately previous
year, as well as to the Business Plan.

5.6  Annual Reports.

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

(i)                                     Borrowers’
consolidated annual financial statement, which statement shall have been
prepared by, and bear the unqualified opinion of, the Borrowers’ independent
certified public accountants (i.e. said statement shall be “certified” by such
accountants) and shall include, at a minimum (with comparative information for
the then prior Fiscal Year) a balance sheet, income statement, statement of
changes in shareholders’ equity, and cash flows; and

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

(b)   Each annual statement shall be accompanied by such accountant’s
certificate indicating that, in conducting the audit for such annual statement,
nothing came to the attention of such accountants to believe that any Default
or Event of Default relating to the financial performance covenants imposed
pursuant to Section 5.10 had occurred during the subject Fiscal Year (or
if one or more had occurred, the facts and circumstances thereof).

5.7  Officers’ Certificates.

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

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

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

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

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

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

5.8  Inventories, Appraisals, and Audits.

(a)   The Term Collateral Agent may, at the expense of the Borrowers,
participate in and/or observe each inventory and any cycle count of the
Collateral which is undertaken on behalf of the Borrowers (provided that any
expenses of Term Collateral Agent for which Term Collateral Agent seeks
reimbursement shall be reasonable expenses). 
No Borrower may, without the prior written consent of the Term
Collateral Agent, change the methodology to be followed in connection with the
conduct of and reporting on the results of such inventory from the methodology
employed by the Borrowers as of the date of this Agreement.

(b)   The Borrowers, at their expense, shall cause each store location,
warehouse, and distribution center to have not less than one (1) physical
inventory or cycle count in each twelve (12) month period to be undertaken
consistent with current practice, while this Agreement is in effect (the
scheduling of which shall be subject to the Term Collateral Agent’s reasonable
discretion, subject to reasonable coordination with the Revolving Loan
Collateral Agent so as to not cause duplication), conducted by such inventory
takers as are reasonably satisfactory to the Term Collateral Agent and
following such methodology as may be reasonably satisfactory to the Term Agent.

(i)                                     The Lead Borrower
shall provide the Term Collateral Agent with a copy of the preliminary results
of each such inventory (as well as of any other physical inventory undertaken
by the Borrowers) within ten (10) days after its completion.

(ii)                                  The Lead Borrower
shall provide the Term Collateral Agent with a reconciliation of the results of
each such inventory (as well as of any other physical inventory undertaken by
the Borrowers) to the Borrowers’ books and records within thirty (30) days
following the completion of such inventory.

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

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

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

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

5.9  Additional Financial Information.

(a)   In addition to all other information required to be provided
pursuant to this Article V, the Lead Borrower promptly shall provide the Term Agent
(and any guarantor of the Liabilities), such other and additional information
concerning the Obligors, the Collateral, the operation of the Obligors’
business, and the Obligors’ financial condition, including financial reports
and statements (including supporting schedules), as the Term Agent may from
time to time reasonably request from the Lead Borrower.

(b)   The Lead Borrower may
provide the Term Agent, from time to time hereafter, with updated forecasts of
the Obligors’ anticipated performance and operating results.

(c)   The Lead Borrower shall, no later than thirty (30) days prior to
the end of each of the Borrowers’ Fiscal Years, furnish the Term Administrative
Agent with a draft updated and extended forecast (which forecast shall be
proposed by the Lead Borrower to become the Business Plan as provided in clause
(5.9(d) below) which shall go out at least through the end of the then next
Fiscal Year and shall include a consolidated income statement, balance sheet,
and statement of cash flow, by month, and shall include assumptions as are
reasonably satisfactory to the Term Agent, each prepared in conformity with
GAAP and consistent with the Borrowers’ then current practices, and the Lead
Borrower shall, no later than sixty (60) days after the end of each of the
Borrowers’ Fiscal Years, furnish the Term Agent with a final updated and
extended forecast which shall go out at least through the end of the then next
Fiscal Year and shall include a consolidated income statement, balance sheet,
and statement of cash flow, by month, and shall include assumptions as are
reasonably satisfactory to the Term Agent, each prepared in conformity with
GAAP and consistent with the Borrowers’ then current practices.

(d)   The Term Administrative Agent, following the receipt of any of
such forecast, may, but shall not be under any obligation to, accept in writing
such forecast (in which event, such forecast shall become the Business Plan).

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(e)   Promptly after the sending or filing thereof, as the case may be,
the Obligors shall deliver to the Term Administrative Agent copies of any proxy
statements, financial statements or reports which Obligors have sent to
shareholders qua shareholders and copies of any regular, periodic and special
reports or registration statements which Obligors file with the Securities and
Exchange Commission of any governmental authority which may be substituted
therefore, or any national securities exchange.

(f)    The Obligors recognize that all appraisals, inventories,
analysis, financial information, and other materials which the Term Agent may
obtain, develop, or receive with respect to the Obligors is confidential to the
Term Agent and that, except as otherwise provided herein, the Obligors are not
entitled to receipt of any of such appraisals, inventories, analysis, financial
information, and other materials, nor copies or extracts thereof or therefrom.

5.10  Financial Performance Covenants.

The Borrowers shall
observe and comply with those financial performance covenants set forth on EXHIBIT 5.10 (a) certain of which covenants
are based on the Business Plan set forth on EXHIBIT
5.10 (b).  Compliance with
such financial performance covenants shall be made as if no Material Accounting
Changes had been made (other than any Material Accounting Changes specifically
taken into account in the setting of such covenants).  The Term Administrative Agent may determine
the Borrowers’ compliance with such covenants based upon financial reports and
statements provided by the Lead Borrower to the Term Administrative Agent
(whether or not such financial reports and statements are required to be
furnished pursuant to this Agreement) as well as by reference to interim
financial information provided to, or developed by, the Term Administrative
Agent.

ARTICLE VI. - Use And Collection
Of Collateral:

6.1  Use of Inventory Collateral.

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

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

6.2  Inventory Quality.

All Inventory now owned
or hereafter acquired by the Borrowers is and will be of good and merchantable
quality and free from defects (other than defects within customary trade
tolerances or for purchases of “irregular” Inventory in accordance with current
practices).

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6.3  Adjustments and Allowances.

The Borrowers may grant
such allowances or other adjustments to the Borrowers’ Account Debtors
(exclusive of extending the time for payment of any Account or Account
Receivable, which shall not be done except in the ordinary course of the
Borrowers’ business) as the Borrowers may reasonably deem to accord with sound
business practice, provided, however, upon the occurrence and during
the continuance of an Event of Default, the authority granted the Borrowers
pursuant to this Section 6.3 may be limited or terminated by the Term
Collateral Agent at any time in the Term Collateral Agent’s discretion.

6.4  Validity of Accounts.

(a)   The amount of each Account shown on the books, records, and invoices
of the Borrowers represented as owing by each Account Debtor is and will be the
correct amount actually owing by such Account Debtor and shall have been fully
earned by performance by the Borrowers.

(b)   Upon and following the occurrence and during the continuance of
any Default or Event of Default, the Term Collateral Agent from time to time
may verify the Receivables Collateral directly with the Borrowers’ Account
Debtors, such verification to be undertaken in keeping with commercially
reasonable commercial lending standards.

(c)   The Borrowers have no knowledge of any impairment of the validity
or collectibility of any material portion of the Accounts and the Lead Borrower
shall notify the Term Collateral Agent of any such fact immediately after any
Borrower becomes aware of any such impairment.

(d)   Except with respect to performance bonds in respect of
construction contracts, up to an aggregate maximum of $2,500,000, for which the
sole collateral is the Borrower’s cash, the Borrowers shall not post any bond
to secure any Borrowers’ performance under any agreement to which any Borrower
is a party nor cause any surety, guarantor, or other third party obligee to
become liable to perform any obligation of any Borrower (other than to the Term
Agent or the Revolving Loan Agent) in the event of such Borrower’s failure so
to perform.

6.5  Notification to Account Debtors.

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

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ARTICLE VII. -  CASH MANAGEMENT

7.1  Depository Accounts.

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

7.2  The Blocked Accounts.

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

(i)                                     Established by
each of the Obligors with each of JPMorgan Chase Bank, N.A. and Wells Fargo
Bank, N.A., and upon and following the date that is 60 days after the date
hereof, Wachovia Bank, N.A. (provided that the accounts at Wachovia Bank, N.A.
shall not become Blocked Accounts if, after the Borrowers have used best
efforts to cause Wachovia Bank, N.A. to enter into a Blocked Account Agreement
acceptable to the Term Collateral Agent and the Revolving Loan Collateral
Agent, Wachovia Bank, N.A. has not entered into such an agreement); or

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

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

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

(d)   The Obligors shall pay all fees and charges of, and maintain such
impressed balances as may be required by the depository  in which any account is opened as required
hereby (even if such account is opened by and/or is the property of the Term
Administrative Agent).

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

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

7.3  Proceeds and Collection of Accounts.

(a)   All Receipts constitute Collateral and proceeds of Collateral and
shall be held in trust by the Obligors for the Term Collateral Agent, shall not
be commingled with any of the Obligors’ other funds, and shall be deposited
and/or transferred only to a Blocked Account, another account permitted
hereunder (and, in such case, only if the funds in such account are deposited
and/or transferred to a Blocked Account or as otherwise set forth in the
Revolving Loan Agreement) or as otherwise set forth in the Revolving Loan
Agreement.

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

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

(ii)                                  The proceeds of all
credit card charges.

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

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

(d)   In the event that, notwithstanding the provisions of this Section
7.3, the Obligors receive or otherwise have dominion and control of any
Receipts, or any proceeds or collections of any Collateral, such Receipts,
proceeds, and collections shall be held in trust by the Obligors for the Term
Collateral Agent and shall not be commingled with any of the Obligors’ 

 76
 

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

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

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

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

ARTICLE VIII. -  Grant of
Security Interest:

8.1  Grant of Security Interest.

To secure the Obligors’
prompt, punctual, and faithful performance and payment of all and each of the
Liabilities, each Obligor hereby grants to the Term Collateral Agent, for the
benefit of the Term Agents and the Term Lenders, a continuing security interest
in and to, and assigns to the Term Collateral Agent certain assets as set forth
below of the Obligors, and each item thereof, whether now owned or now due, or
in which that Obligor has an interest, or hereafter acquired, arising, or to
become due, or in which that Obligor obtains an interest (all of which,
together with any other property in which the Term Agent may in the future be
granted a security interest, is referred to herein as the “Collateral”):

(a)   All Accounts.

(b)   All Inventory.

(c)   All General Intangibles.

(d)   All Goods (including all Equipment).

(e)   All Chattel Paper.

(f)    All Leasehold Interests.

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

(h)   All Letter-of-Credit Rights.

(i)    All Payment Intangibles.

(j)    All Supporting Obligations.

 77
 

(k)   All books, records, and information relating to the Collateral
and/or to the operation of the Obligors’ business, and all rights of access to
such books, records, and information, and all property in which such books,
records, and information are stored, recorded, and maintained.

(l)    All Investment Property, Instruments, Documents, Deposit
Accounts, policies and certificates of insurance, deposits, impressed accounts,
compensating balances, money, cash, or other property.

(m)  All commercial tort claims.

(n)   All insurance proceeds, refunds, and premium rebates, including,
without limitation, proceeds of fire and credit insurance, whether any of such
proceeds, refunds, and premium rebates arise out of any of the foregoing
(8.1(a) through 8.1(n)) or otherwise.

(o)   All supporting obligations and all present and future liens,
security interests, rights, remedies, title and interest in, to and in respect
of Accounts and other Collateral, including (i) rights and remedies relating to
guaranties, contracts of suretyship, letter of credit and credit and other
insurance related to the Collateral, (ii) rights of stoppage in transit,
replevin, repossession, reclamation and other rights and remedies of an unpaid
vendor, lien or secured party, (iii) goods described in invoices, documents,
contracts or instruments with respect thereto, or otherwise representing or
evidencing, Accounts or other Collateral, including returned, repossessed and
reclaimed goods, and (iv) deposits by and property of Account Debtors or other
persons securing the obligations of Account Debtors.

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

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

8.2  Extent and Duration of Security
Interest.

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

8.3  Perfection of Security Interests.

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

 78

instruments, financing statements, obtaining such notices and assents
of third parties, obtaining governmental approvals and providing such other
instruments and documents in recordable form as the Term Collateral Agent may
request.  Obligors irrevocably and
unconditionally authorize the Term Collateral Agent to file at any time and
from time to time such financing statements with respect to the Collateral
naming the Term Collateral Agent or its designee as the secured party and
Obligors as debtors, as Term Collateral Agent may require, together with any
amendment and continuations with respect thereto, that (a) indicate the
Collateral (i) as “all assets of such Obligor” or words of similar effect,
regardless of whether any particular asset comprised in the Collateral falls
within the scope of Article 9 of the Uniform Commercial Code of the State of
New York or such jurisdiction, or (ii) as being of an equal or lesser scope or
with greater detail, and (b) provide any other information required by part 5
of Article 9 of the Uniform Commercial Code of any jurisdiction for the
sufficiency or filing office acceptance of any financing statement or
amendment, including (i) whether such Obligor is an organization, the type of
organization and any organization identification number issued to such Obligor
and, (ii) in the case of a financing statement filed as a fixture filing, if
any, a sufficient description of real property to which the Collateral
relates.  Such Obligor agrees to furnish
any such information to the Term Collateral Agent promptly upon the Term Agent’s
request.  Obligors hereby authorize Term
Collateral Agent to adopt on behalf of Obligors any symbol required for
authenticating any electronic filing.  In
no event shall Obligors at any time file, or permit or cause to be filed,  any correction statement or termination
statement with respect to any financing statement (or amendment or continuation
with respect thereto) naming Term Collateral Agent or its designee as secured
party and Obligors as debtors.

(b)   No Obligor has any Chattel Paper (whether tangible
or electronic) or instruments as of the date hereof.  In the event that any Obligor shall be
entitled to or shall receive any Chattel Paper or instrument after the date
hereof, such Obligor or the Lead Obligor shall promptly notify Term Collateral
Agent thereof in writing.  Promptly upon
the receipt thereof by or on behalf of such Obligor (including by any agent or
representative), such Obligor or the Lead Borrower shall deliver, or cause to
be delivered to Term Collateral Agent, all tangible Chattel Paper and
instruments that such Obligor or may at any time acquire, accompanied by such
instruments of transfer or assignment duly executed in blank as Term Collateral
Agent may from time to time specify, in each case except as Term Collateral
Agent may otherwise agree.  At Term
Collateral Agent’s option, such Obligor or the Lead Borrower shall, or Term
Collateral Agent may at any time on behalf of such Obligor, cause the original
of any such instrument or Chattel Paper to be conspicuously marked in a form
and manner acceptable to Term Collateral Agent with the following legend
referring to Chattel Paper or instruments as applicable: “This [chattel
paper][instrument] is subject to the security interest of [name of Term
Collateral Agent] and any sale, transfer, assignment or encumbrance of this
[chattel paper][instrument] violates the rights of such secured party.”

(c)   In the event that any Obligor shall at any time hold
or acquire an interest in any electronic Chattel Paper or any “transferable
record” (as such term is defined in Section 201 of the Federal Electronic
Signatures in Global and National Commerce Act or in Section 16 of the Uniform
Electronic Transactions Act as in effect in any relevant jurisdiction), such
Obligor or the Lead Borrower shall promptly notify Term Collateral Agent
thereof in writing.  Promptly upon Term
Collateral Agent’s request, such Obligor or the Lead Borrower shall take, or
cause to 

 79
 

be taken, such actions as Term Collateral Agent may reasonably request
to give Term Collateral Agent control of such electronic Chattel Paper under
Section 9-105 of the UCC and control of such transferable record under Section
201 of the Federal Electronic Signatures in Global and National Commerce Act
or, as the case may be, Section 16 of the Uniform Electronic Transactions Act,
as in effect in such jurisdiction.

(d)   Except as set forth on EXHIBIT
8.3(d), no Obligor owns or holds, directly or indirectly,
beneficially or as record owner or both, any Investment Property, as of the
date hereof, or has any investment account, securities account, commodity
account or other similar account with any bank or other financial institution
or other securities intermediary or commodity intermediary as of the date hereof.

(i)                                     In
the event that any Obligor shall be entitled to or shall at any time after the
date hereof hold or acquire any certificated securities, such Obligor or the
Lead Borrower shall promptly endorse, assign and deliver the same to Term
Collateral Agent, accompanied by such instruments of transfer or assignment
duly executed in blank as Term Collateral Agent may from time to time
specify.  If any securities, now or
hereafter acquired by any Obligor are uncertificated and are issued to any
Obligor or its nominee directly by the issuer thereof, such Obligor shall
immediately notify Term Collateral Agent thereof and shall as Term Collateral
Agent may specify, either (A) cause the issuer to agree to comply with
instructions from Term Collateral Agent as to such securities, without further
consent of such Obligor or such nominee, or (B) arrange for Term Collateral
Agent to become the registered owner of the securities.

(ii)                                  No
Obligor shall, directly or indirectly, after the date hereof open, establish or
maintain any investment account, securities account, commodity account or any
other similar account (other than a deposit account) with any securities
intermediary or commodity intermediary unless each of the following conditions
is satisfied:  (A)  Term Collateral Agent shall have received not
less than five (5) Business Days prior written notice of the intention of a
Obligor to open or establish such account which notice shall specify in
reasonable detail and specificity acceptable to Term Collateral Agent the name
of the account, the owner of the account, the name and address of the
securities intermediary or commodity intermediary at which such account is to
be opened or established, the individual at such intermediary with whom such
Obligor is dealing and the purpose of the account, (B) the securities
intermediary or commodity intermediary (as the case may be) where such account
is opened or maintained shall be acceptable to Term Collateral Agent, and (C)
on or before the opening of such investment account, securities account or
other similar account 

 80
 

with a securities intermediary or commodity
intermediary, such Obligor or the Lead Borrower shall as Term Collateral Agent
may specify either (1) execute and deliver, and cause to be executed and
delivered to Term Collateral Agent, an investment property control agreement
(in form and substance acceptable to the Term Collateral Agent in its
reasonable discretion) with respect thereto duly authorized, executed and
delivered by such Obligor or the Lead Borrower and such securities intermediary
or commodity intermediary or (2) arrange for Term Collateral Agent to become
the entitlement holder with respect to such investment property on terms and
conditions acceptable to Term Collateral Agent.

(e)   No Obligor is the beneficiary or otherwise entitled
to any Letter of Credit Rights as of the date hereof.  In the event that any Obligor shall be
entitled to or shall receive any Letter of Credit Rights, such Obligor or the
Lead Borrower shall promptly notify Term Collateral Agent thereof in
writing.  Such Obligor or the Lead
Borrower shall immediately, as Term Collateral Agent may specify, either (i)
deliver, or cause to be delivered to Term Collateral Agent, with respect to any
such letter of credit, banker’s acceptance or similar instrument, the written
agreement of the issuer and any other nominated person obligated to make any
payment in respect thereof (including any confirming or negotiating bank), in
form and substance satisfactory to Term Collateral Agent, consenting to the
assignment of the proceeds of the letter of credit to Term Collateral Agent by
such Obligor and agreeing to make all payments thereon directly to Term
Collateral Agent or as Term Collateral Agent may otherwise direct or (ii) cause
Term Collateral Agent to become, at such Obligor’s expense, the transferee
beneficiary of the letter of credit, banker’s acceptance or similar instrument
(as the case may be).

(f)    No Obligor has any commercial tort claims as of the
date hereof.  In the event that any Obligor
shall at any time after the date hereof have any commercial tort claims, such
Obligor or the Lead Borrower shall promptly notify Term Collateral Agent
thereof in writing, which notice shall (i) set forth in reasonable detail the
basis for and nature of such commercial tort claim and (ii) include the express
grant by such Obligor to Term Collateral Agent of a security interest in such
commercial tort claim (and the proceeds thereof).  In the event that such notice does not
include such grant of a security interest, the sending thereof by such Obligor
to Term Collateral Agent shall be deemed to constitute such grant to Term
Collateral Agent.  Upon the sending of
such notice, any commercial tort claim described therein shall constitute part
of the Collateral and shall be deemed included therein.  Without limiting the authorization of Term
Agent otherwise provided herein or otherwise arising by the execution by
Obligors of this Agreement, Term Agent is hereby irrevocably authorized from
time to time and at any time to file such financing statements naming Term
Agent or its designee as secured party and Obligors as debtors, or any
amendments to any financing statements, covering any such commercial tort claim
as Collateral. In addition, Obligors shall promptly upon Term Agent’s request,
execute and deliver, or cause to be executed and delivered,  to Term Agent such other agreements,
documents and instruments as Term Agent may require in connection with such
commercial tort claim.

(g)   The Obligors hereby covenant and agree that each
Leasehold Interest shall at all times be free and clear of all liens, claims
and encumbrances of any nature or description 

 81
 

(other than Permitted Encumbrances) and no other creditor of the estate
(secured or unsecured) shall be entitled to encumber any Leasehold Interest
without the express written consent of the Term Collateral Agent.

(h)  The due and punctual payment and performance
of the Obligations shall also be secured by the Encumbrance created by the
Mortgage upon the Headquarters Facility of Lead Borrower described therein.

(i)            Notwithstanding
anything herein to the contrary, the Obligors (I) may hold assets consisting of
Chattel Paper, Letter of Credit Rights, and commercial tort claims in an
aggregate amount not to exceed $50,000 in which the Term Collateral Agent’s
security interest has not been perfected; and (II) may hold assets consisting
of Investment Property in an aggregate amount not to exceed $10,000 in which
the Term Collateral Agent’s security interest has not been perfected.

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

9.1                               APPOINTMENT
AS ATTORNEY-IN-FACT.

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

(a)   Prosecute, defend, compromise, or release any action
relating to the Collateral.

(b)   Sign change of address forms to change the address
to which the Obligors’ mail is to be sent to such address as the Term
Collateral Agent shall designate; receive and open the Obligors’ mail; remove
any Receivables Collateral and Proceeds of Collateral therefrom and turn over
the balance of such mail either to the Obligors or to any trustee in
bankruptcy, receiver, assignee for the benefit of creditors of the Obligors, or
other legal representative of the Obligors whom the Term Collateral Agent
determines to be the appropriate person to whom to so turn over such mail.

(c)   Endorse the name of the Obligors in favor of the
Term Collateral Agent upon any and all checks, drafts, notes, acceptances, or
other items or instruments; sign and endorse the name of the Obligors on, and
receive as secured party, any of the Collateral, any invoices, schedules of
Collateral, freight or express receipts, or bills of lading, storage receipts,
warehouse receipts, or other documents of title respectively relating to the
Collateral.

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(d)   Sign the name of the Obligors on any notice to the
Obligors’ Account Debtors or verification of the Receivables Collateral; sign
the Obligors’ name on any Proof of Claim in Bankruptcy against Account Debtors,
and on notices of lien, claims of mechanic’s liens, or assignments or releases
of mechanic’s liens securing the Accounts.

(e)   Take all such action as may be necessary to obtain
the payment of any letter of credit and/or banker’s acceptance of which any
Obligor is a beneficiary.

(f)    Repair, manufacture, assemble, complete, package,
deliver, alter or supply goods, if any, necessary to fulfill in whole or in
part the purchase order of any customer of the Borrowers.

(g)   Use, license or transfer any or all General Intangibles
of the Obligors.

9.2                               No Obligation to Act.

The Term Collateral Agent
shall not be obligated to do any of the acts or to exercise any of the powers
authorized by Section 9.1 herein, but if the Term Collateral Agent
elects to do any such act or to exercise any of such powers, it shall not be
accountable for more than it actually receives as a result of such exercise of
power, and shall not be responsible to the Obligors for any act or omission to
act except for any act or omission to act as to which there is a final
determination made in a judicial proceeding (in which proceeding the Term
Collateral Agent has had an opportunity to be heard) which determination
includes a specific finding that the subject act or omission to act had been
grossly negligent or in actual bad faith.

ARTICLE X. -  Events
of Default:

The occurrence of any
event described in this Article X respectively shall constitute an “Event of Default” herein.  Upon the occurrence of any Event of Default
described in Section 10.9, any and all Liabilities shall become due
and payable without any further act on the part of the Term Agent. Upon the
occurrence of any other Event of Default, the Term Administrative Agent may by
written notice to the Lead Borrower declare any and all Liabilities immediately
due and payable and thereupon any and all such Liabilities shall become
immediately due and payable.  The
occurrence of any Event of Default shall also constitute, without notice or
demand, a default under all other agreements between the Term Agent or Term
Lenders and the Obligors and instruments and papers heretofore, now or
hereafter given the Term Agent or Term Lenders.

10.1                        Failure to Pay Term Loan and other
Liabilities.

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

 83
 

10.2                        Failure  to Perform Covenant or Liability (No
Grace Period).

The failure by the
Obligors to promptly, punctually, faithfully and timely perform, discharge, or
comply with any covenant or Liability not otherwise described in Section
10.1 hereof, and included in any of the following provisions hereof:

	
  Section

  	
   

  	
  Relates
  to:

  
	
   

  	
   

  	
   

  
	
  4.3(b)

  	
   

  	
  Notice of Name Change

  
	
  4.6

  	
   

  	
  Location of Collateral

  
	
  4.7

  	
   

  	
  Title to Assets

  
	
  4.8

  	
   

  	
  Indebtedness

  
	
  4.9

  	
   

  	
  Insurance Policies

  
	
  4.15

  	
   

  	
  Pay taxes

  
	
  4.20

  	
   

  	
  Dividends, Investments, Corporate Actions

  
	
  4.24

  	
   

  	
  Affiliate Transactions

  
	
  4.25

  	
   

  	
  Further Assurances

  
	
  6.1

  	
   

  	
  Use of Collateral

  
	
  Article V

  	
   

  	
  Reporting Requirements and

  Financial Performance Covenants

  
	
  Article VII

  	
   

  	
  Cash Management

  

 

10.3                        Failure to Perform Covenant or
Liability (Grace Period).

The failure by the
Obligors, within thirty (30) days following the earlier of the Obligors’
knowledge of a breach of any covenant or Liability not described in any of Sections
10.1, or 10.2 or of the Lead Borrower’s receipt of written notice from the
Term Administrative Agent of the breach of any of those Sections, to promptly,
punctually, faithfully and timely perform, discharge, or comply with any such
covenant or Liability not otherwise described in Sections 10.1, or 10.2.

10.4                        Misrepresentation.

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

 84
 

10.5                        Acceleration of Other Debt. Breach
of Lease.

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

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

(c)   The occurrence of any of the following with respect
to Leases on which any Borrower is the lessee or is obligated:

(i)                                     An
aggregate of more than $500,000 in rent is then overdue, except to the extent
being contested in good faith and for which adequate reserves have been
established by such Obligor.

(ii)                                  Default
and the expiry of any applicable grace period with respect to more than twenty
(20) Leases of retail stores, except if the existence of such default is
disputed in good faith by the Obligors and the applicable landlord has been
stayed or agreed in writing to forbear from instituting proceedings to recover
possession of the leased premises or otherwise terminate the subject Lease or
Obligors’ rights to peaceful possession of the subject premises.

(iii)                               Default
and the expiry of any applicable grace period of any Lease of any warehouse or
distribution center, except to the extent being contested in good faith and for
which adequate reserves have been established by such Obligor.

10.6                        Default Under Other Agreements.

The occurrence of any
breach or default under any agreement (including any Loan Document other than
this Loan Agreement) between the Term Agent and the Obligors or instrument
given by the Obligors to the Term Agent and the expiry, without cure, of any
applicable grace period (notwithstanding that the subject Term Agent may not
have exercised all or any of its rights on account of such breach or default).

10.7                        Attachment; Judgment; Restraint of
Business.

(a)   The service of process upon the Term Agent or the
Term Lenders or any Participant seeking to attach, by trustee, manse, or other
process, any of an Obligor’s funds on deposit with, or assets of such Obligor
in the possession of, the Term Agent or the Term Lenders or such Participant.

 85
 

(b)   The entry of any judgment against any Obligor or
group of Obligors (which, if a money judgment, is in excess of $1,000,000
singly, or in the aggregate), which judgment is not satisfied (if a money
judgment) or appealed from (with execution or similar process stayed) within
any applicable appeal period.

(c)   The entry of any order or the imposition of any
other process having the force of law, the effect of which is to restrain in
any material way the conduct by any Obligor of its business in the ordinary
course.

10.8                        Business Failure.

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

10.9                        Bankruptcy.

The failure by any Obligor
to generally pay its debts as they mature; adjudication of bankruptcy or
insolvency relative to any Obligor; the entry of an order for relief or similar
order with respect to any Obligor in any proceeding pursuant to the Bankruptcy
Code or any other federal bankruptcy law; the filing of any complaint,
application, or petition by any Obligor initiating any matter in which such
Obligor is or may be granted any relief from the debts of that Obligor pursuant
to the Bankruptcy Code or any other insolvency statute or procedure; the filing
of any complaint, application, or petition against any Obligor initiating any
matter in which the Obligor is or may be granted any relief from the debts of
that Obligor pursuant to the Bankruptcy Code or any other insolvency statute or
procedure.

10.10                 Default by Guarantor or Affiliate.

The occurrence of any of
the foregoing Events of Default with respect to any guarantor or endorser, or
surety of the Liabilities, or the occurrence of any of the foregoing Events of
Default with respect to any Subsidiary, or Affiliate (other than an Affiliate
that is an Affiliate solely due to ownership of the Lead Borrower’s
publicly-traded stock) of any Obligor, as if such guarantor, endorser, surety,
Subsidiary, or Affiliate were the “ Obligor “ described therein.

 86
 

10.11                 Indictment - Forfeiture.

The indictment of, or
institution of any legal process or proceeding against, any Obligor or any
member of any Obligor’s senior management, under any federal, state, municipal,
and other civil or criminal statute, rule, regulation, order, or other
requirement having the force of law where the relief, penalties, or remedies
sought or available include the forfeiture of any property of any Obligor
and/or the imposition of any stay or other order, the effect of which could be
to restrain in any material way the conduct by that Obligor of its business in
the ordinary course.

10.12                 Termination of Guaranty.

The termination or
attempted termination (other than a mere request for consent to termination) of
any guaranty by any guarantor of the Liabilities.

10.13                 Challenge to Loan Documents.

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

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

10.14                 Change in Control.

Any Change in Control.

10.15                 Uninsured Losses.

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

10.16                 ERISA.

A reportable event
shall occur which Term Agent, in its sole discretion, shall determine in good
faith constitutes grounds for the termination by the Pension Benefit Guaranty
Corporation of any Plan or for the appointment by the appropriate United Stated
district court of a trustee for any Plan, or if any Plan shall be terminated in
a “distress termination” pursuant to Section 4041(c) or any such trustee shall
be requested or appointed, or if any 
Obligor is in “default” (as defined in Section 4219(c)(5) of ERISA) with
respect to payments to a Multiemployer Plan resulting from such Obligor’s
complete or partial withdrawal from such Plan.

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ARTICLE XI. - Rights and
Remedies Upon Default:

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

11.1                        Rights of Enforcement.

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

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

(b)   To give notice to any of the Obligors’ customs
brokers to follow the instructions of the Term Collateral Agent as provided in
any Customs Brokers Agreement.

(c)   To collect the Receivables Collateral with or without
the taking of possession of any of the Collateral.

(d)   To take possession of all or any portion of the
Collateral.

(e)   To sell, lease, or otherwise dispose of any or all
of the Collateral, in its then condition or following such preparation or
processing as the Term Collateral Agent deems advisable and with or without the
taking of possession of any of the Collateral.

(f)    To conduct one or more going out of business sales
which include the sale or other disposition of the Collateral.

(g)   To apply the Receivables Collateral or the Proceeds
of the Collateral towards (but not necessarily in complete satisfaction of) the
Liabilities.

(h)   To exercise all or any of the rights, remedies,
powers, privileges, and discretions under all or any of the Loan Documents.

11.2                        Sale of Collateral.

(a)   Any sale or other disposition of the Collateral may
be at public or private sale upon such terms and in such manner as the Term
Collateral Agent deems advisable, having due regard to compliance with any
statute or regulation which might affect, limit, or apply to the Term
Collateral Agent’s disposition of the Collateral.

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

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Term Collateral Agent’s own right or by one or more agents and
contractors. Such sale(s) may be conducted upon any premises owned, leased, or
occupied by any Obligor.  The Term
Collateral Agent and any such agent or contractor, in conjunction with any such
sale, may augment the Inventory with other goods (all of which other goods
shall remain the sole property of the Term Collateral Agent or such agent or
contractor).  Any amounts realized from
the sale of such goods which constitute augmentations to the Inventory (net of
an allocable share of the costs and expenses incurred in their disposition)
shall be the sole property of the Term Collateral Agent or such agent or
contractor and neither the Obligors nor any Person claiming under or in right
of the Obligors shall have any interest therein.

(c)   Unless the Collateral is perishable or threatens to
decline speedily in value, or is of a type customarily sold on a recognized
market (in which event the Term Collateral Agent shall provide the Lead Borrower
with such notice as may be practicable under the circumstances), the Term
Collateral Agent shall give the Lead Borrower at least ten (10) days prior
written notice of the date, time, and place of any proposed public sale, and of
the date after which any private sale or other disposition of the Collateral
may be made.  The Obligors agree that
such written notice shall satisfy all requirements for notice to the Obligors
which are imposed under the UCC or other applicable law with respect to the
exercise of the Term Collateral Agent’s rights and remedies upon default.

(d)   The Term Collateral Agent or the Term Lenders may
credit bid and may purchase the Collateral, or any portion of it at any sale
held under this Article XI.

(e)   If any of the Collateral is sold, leased, or
otherwise disposed of by the Term Collateral Agent on credit, the Liabilities
shall not be deemed to have been reduced as a result thereof unless and until
payment is finally received thereon by the Term Collateral Agent.

11.3                        Occupation of Business Location.

In connection with the
Term Collateral Agent’s exercise of the Term Collateral Agent’s rights under
this Article XI, the Term Collateral Agent may enter upon, occupy, and use any
premises owned or occupied by any Obligor, and may exclude the Obligors from
such premises or portion thereof as may have been so entered upon, occupied, or
used by the Term Collateral Agent.  The
Term Collateral Agent shall not be required to remove any of the Collateral
from any such premises upon the Term Agent’s taking possession thereof, and may
render any Collateral unusable to the Obligors. 
In no event shall the Term Agent be liable to the Obligors for use or
occupancy by the Term Collateral Agent of any premises pursuant to this Article
XI, nor for any charge (such as wages for the Obligors’ employees and
utilities) incurred in connection with the Term Collateral Agent’s exercise of
the Term Agent’s Rights and Remedies.

11.4                        Grant of Nonexclusive License.

Each Obligor hereby
grants to the Term Collateral Agent a royalty free nonexclusive irrevocable
license to use, apply, and affix any trademark, trade name, logo, or the like
in which that Obligor now or hereafter has rights, such license being with
respect to the Term Collateral 

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Agent’s exercise of the
rights hereunder including, without limitation, in connection with any
completion of the manufacture of Inventory or sale or other disposition of
Inventory.

11.5                        Assembly of Collateral.

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

11.6                        Rights and Remedies.

The rights, remedies,
powers, privileges, and discretions of the Term Agent hereunder, under any
other Loan Document or under applicable law (herein, the “Term Agent’s Rights and Remedies”) shall be
cumulative and not exclusive of any rights or remedies which it would otherwise
have.  No delay or omission by the Term
Agent in exercising or enforcing any of the Term Agent’s Rights and Remedies
shall operate as, or constitute, a waiver thereof.  No waiver by the Term Agent of any Event of
Default or of any default under any other agreement shall operate as a waiver
of any other default hereunder or under any other agreement.  No single or partial exercise of any of the
Term Agent’s Rights or Remedies, and no express or implied agreement or
transaction of whatever nature entered into between the Term Agent and any
person, at any time, shall preclude the other or further exercise of the Term
Agent’s Rights and Remedies.  No waiver
by the Term Agent of any of the Term Agent’s Rights and Remedies on any one
occasion shall be deemed a waiver on any subsequent occasion, nor shall it be
deemed a continuing waiver.  The Term
Agent’s Rights and Remedies may be exercised at such time or times and in such
order of preference as the Term Agent may determine. The Term Agent’s Rights
and Remedies may be exercised without resort or regard to any other source of
satisfaction of the Liabilities.

11.7                        Application of Proceeds.

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

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

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

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

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

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

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

ARTICLE XII. - Notices:

12.1                        Notice Addresses.

All notices, demands, and
other communications made in respect of this Agreement (other than a request
for a loan or advance or other financial accommodation under the Revolving
Credit) shall be made to the following addresses, each of which may be changed
upon Seven (7) days written notice to all others given by certified mail,
return receipt requested:

If to the Term Agent:

Bank of America,
N.A..

100 Federal Street

MA5-100-11-04

Boston, MA  02110

Attention:  Mark M. Andrew, Principal

Fax:  (617) 434-6669

With a copy to:

Riemer &
Braunstein LLP

Three Center Plaza

Boston, MA 02108

Attention:  David S. Berman, Esquire

Fax:  (617) 880-3456

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

c/o Lead Borrower

Mothers Work, Inc.

456 North Fifth
Street

Philadelphia,
PA  19123

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

Fax: (215) 923-0975

With a copy to:

Pepper Hamilton
LLP

3000 Two Logan
Square

Eighteenth and
Arch Streets

Philadelphia, PA  19103-2799

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Attention:  David G. Smith, Esquire

Fax:  (215) 981-4750

If to the Cave Springs,
Inc.:

Cave Springs, Inc.

Little Falls Centre II

2751
Centerville Road

suite 3207

Wilmington,
DE  19808

Attention:
Assistant Secretary

Fax: (302) 225-1594

With a copy to:

Mothers Work, Inc.

456 North Fifth
Street

Philadelphia,
PA  19123

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

Fax: (215) 923-0975

And:

Pepper Hamilton
LLP

3000 Two Logan
Square

Eighteenth and
Arch Streets

Philadelphia,
PA  19103-2799

Attention:  David G. Smith, Esquire

Fax:  (215) 981-4750

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

12.2                        Notice Given.

(a)   Except as otherwise specifically provided herein,
notices shall be deemed made and correspondence received, as follows (all times
being local to the place of delivery or receipt):

(i)                                     By
mail: the sooner of when actually received or three (3) days following deposit
in the United States mail, postage prepaid.

(ii)                                  By
recognized overnight express delivery: the Business Day following the day when
sent.

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(iii)                               By
Hand: If delivered on a Business Day after 9:00 a.m. and no later than three
(3) hours prior to the close of customary business hours of the recipient, when
delivered.  Otherwise, at the opening of
the then next Business Day.

(iv)                              By
Facsimile transmission (which must include a header on which the party sending
such transmission is indicated): If sent on a Business Day after 9:00 a.m. and
no later than three (3) hours prior to the close of customary business hours of
the recipient, one (1) hour after being sent. 
Otherwise, at the opening of the then next Business Day.

(b)   Rejection or refusal to accept delivery and
inability to deliver because of a changed address or facsimile number for which
no due notice was given shall each be deemed receipt of the notice sent.

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

ARTICLE XIII. - Term:

13.1                        Termination.

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

13.2                        Actions On Termination.

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

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ARTICLE XIV. - General:

14.1                        Protection of
Collateral.

The Term Agent has no
duty as to the collection or protection of the Collateral beyond the safe
custody of such of the Collateral as may come into the possession of the Term
Agent.

14.2                        Publicity.

The Term Administrative
Agent, at its expense, may issue a “tombstone” notice of the establishment of
the credit facility contemplated by this Agreement and may make reference to
the Obligors (and may utilize any logo or other distinctive symbol associated
with the Borrowers) in connection with any advertising, promotion, or marketing
undertaken by the Term Administrative Agent.

14.3                        Successors and Assigns.

This Agreement shall be
binding upon the Obligors and the Obligors’ representatives, successors, and
assigns and shall inure to the benefit of the Term Agent and the Term Lenders
and their respective successors and assigns, provided,
however, no trustee or other
fiduciary appointed with respect to the Obligors shall have any rights
hereunder.  In the event that the Term
Agent or Term Lenders assigns or transfers its rights under this Agreement
pursuant to Article XVI hereof, the assignee shall thereupon succeed to and
become vested with all rights, powers, privileges, and duties of such assignor
hereunder and such assignor shall thereupon be discharged and relieved from its
duties and obligations hereunder.

14.4                        Severability.

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

14.5                        Amendments; Course of Dealing.

(a)   This Agreement and the other Loan Documents
incorporate all discussions and negotiations between the Obligors, the Term
Agent and the Term Lenders, either express or implied, concerning the matters
included herein and in such other instruments, any custom, usage, or course of
dealings to the contrary notwithstanding. 
No such discussions, negotiations, custom, usage, or course of dealings
shall limit, modify, or otherwise affect the provisions thereof.  No failure by the Term Agent or Term Lenders
to give notice to the Lead Borrower of the Obligors’ having failed to observe
and comply with any warranty or covenant included in any Loan Document shall
constitute a waiver of such warranty or covenant or the amendment of the
subject Loan Document.

(b)   The Obligors may undertake any action otherwise
prohibited hereby, and may omit to take any action otherwise required hereby,
upon and with the express prior written consent of the Term Agent. No consent,
modification, amendment, or waiver of any provision of any Loan Document shall
be effective unless executed in writing by or on behalf of the party to be
charged with such modification, amendment, or waiver (and if such party is the
Term Agent then by a duly authorized officer thereof) except as otherwise
provided in Section 15.14 hereof.  

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Any modification, amendment, or waiver provided by the Term
Administrative Agent shall be in reliance upon all representations and
warranties theretofore made to the Term Administrative Agent by or on behalf of
the Borrowers (and any guarantor, endorser, or surety of the Liabilities) and
consequently may be rescinded in the event that any of such representations or
warranties was not true and complete in all material respects when given.

14.6                        Power of Attorney.

In connection with all
powers of attorney included in this Agreement, the Obligors hereby grant unto
the Term Agent full power to do any and all things necessary or appropriate in
connection with the exercise of such powers as fully and effectually as the
Obligors might or could do, hereby ratifying all that said attorney shall do or
cause to be done by virtue of this Agreement. 
No power of attorney set forth in this Agreement shall be affected by
any disability or incapacity suffered by the Obligors and each shall survive
the same. All powers conferred upon the Term Agent by this Agreement, being
coupled with an interest, shall be irrevocable until this Agreement is
terminated by a written instrument executed by a duly authorized officer of the
Term Agent.

14.7                        Application of Proceeds.

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

14.8                        Increased Costs.

If the Term
Administrative Agent or Term Lenders shall have determined that the adoption of
any law, rule or regulation regarding capital adequacy, or any change therein
or in the interpretation or application thereof, or compliance by the Term
Agent or Term Lenders with any request or directive regarding capital adequacy
(whether or not having the force of law) from any central bank or governmental
authority enacted after the date hereof, does or shall have the effect of
reducing the rate of return on such party’s capital as a consequence of its
obligations hereunder to a level below that which the Term Agent or Term
Lenders could have achieved but for such adoption, change or compliance (taking
into consideration the Term Agent’s or Term Lenders’ policies with respect to
capital adequacy) by a material amount, then from time to time, after
submission by the Term Administrative Agent or Term Lenders to the Lead
Borrower of a written demand therefor (“Capital
Adequacy Demand”) together with the certificate described below, the
Borrowers shall pay to the Term Agent or Term Lenders, as applicable, such
additional amount or amounts (“Capital
Adequacy Charge”) as will compensate the Term Agent or Term Lenders
for such reduction, such Capital Adequacy Demand to be made with reasonable
promptness following such determination. 
A certificate of the Term Administrative Agent or Term Lenders claiming
entitlement to payment as set forth above shall be conclusive.  Such certificate shall set forth the nature
of the occurrence giving rise to such reduction, the amount of the Capital
Adequacy Charge to be paid to the Term Agent or Term Lenders, and the 

 95
 

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

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

The Borrowers shall pay
from time to time on demand all Costs of Collection and all reasonable costs,
expenses, and disbursements of (including reasonable attorneys’ fees and
expenses) which are incurred by the Term Agent in connection with the
preparation, negotiation, execution, and delivery of this Agreement and of any
other Loan Documents, and all other reasonable costs, expenses, and
disbursements which may be incurred connection with or in respect to the credit
facility contemplated hereby or which otherwise are incurred with respect to
the Liabilities.

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

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

(c)   The undertaking on the part of the Borrowers in this
Section 14.9 shall survive payment of the Liabilities and/or any
termination, release, or discharge executed by the Term Agent in favor of the
Borrowers, other than a termination, release, or discharge which makes specific
reference to this Section 14.9.

14.10                 Copies and Facsimiles.

This Agreement and all
documents which relate thereto, which have been or may be hereinafter furnished
the Term Agent or the Term Lenders may be reproduced by the Term Agent or Term
Lenders by any photographic, microfilm, xerographic, digital imaging, or other
process, and such Person making such reproduction may destroy any document so
reproduced.  Any such reproduction shall
be admissible in evidence as the original itself in any judicial or
administrative proceeding (whether or not the original is in existence and
whether or not such reproduction was made in the regular course of business).
Any facsimile which bears proof of transmission shall be binding on the party
which or on whose behalf such transmission was initiated and likewise shall be
so admissible in evidence as if the original of such facsimile had been
delivered to the party which or on whose behalf such transmission was received.

14.11                 New York Law.

This Agreement and all
rights and obligations hereunder, including matters of construction, validity,
and performance, shall be governed by the law of the State of New York.

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14.12                 Consent to Jurisdiction.

(a)   Each Obligor agrees that any legal action,
proceeding, case, or controversy against the Obligors with respect to any Loan
Document may be brought in the Supreme Court for New York County or in the
United States District Court, Southern District of New York, sitting in New
York City, New York, or the Superior Court of Suffolk County, Massachusetts or
in the United States District Court, District of Massachusetts, sitting in
Boston, Massachusetts, as the Term Agent may elect in the Term Agent’s sole
discretion.  By execution and delivery of
this Agreement, each Borrower, for itself and in respect of its property,
accepts, submits, and consents generally and unconditionally, to the
jurisdiction of the aforesaid courts.

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

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

(d)   Nothing herein shall affect the right of the Term
Agent to bring legal actions or proceedings in any other competent
jurisdiction.

(e)   Each Obligor agrees that any action commenced by any
Borrower asserting any claim arising under or in connection with this Agreement
or any other Loan Document shall be brought solely in the Superior Court of
Suffolk County, Massachusetts or in the United States District Court, District
of Massachusetts, sitting in Boston, Massachusetts, and that such Courts shall
have exclusive jurisdiction with respect to any such action.

14.13                 Indemnification.

The
Obligors shall indemnify, defend, and hold the Term Agent, the Term Lenders,
and any Participant and any of their respective agents, employees, officers, or
representatives (each, an “Indemnified Person”),
harmless of and from any claim brought or threatened against any Indemnified
Person by any Borrower, any guarantor or endorser of the Liabilities, or any
other Person (as well as from reasonable attorneys’ fees, expenses, and
disbursements in connection therewith) on account of the Term Agent’s or any Term Lender’s relationship with any Obligor or
any other guarantor or endorser of the Liabilities (each of which claims
which may be defended, compromised, settled, or pursued by such Indemnified
Person with counsel of its selection, but at the expense of the Obligors;
provided that, absent a conflict of interest, Term Lenders other than the Term
Agent shall be entitled only to one counsel for all such Term Lenders) other
than any claim as to which a final determination is made in a judicial
proceeding (in which the Term Agent,
Term Lenders and any other Indemnified Person has had an opportunity to be
heard), which determination includes a specific finding that the Indemnified
Person seeking indemnification had acted in a grossly negligent manner or in
actual bad faith.  This indemnification
shall survive payment of the Liabilities and/or any termination, release, or
discharge executed by the Term Agent
or Term Lenders in favor of the Obligors, other than a 

 97
 

termination, release, or
discharge duly executed on behalf of the Term Agent or Term Lenders which makes
specific reference to this Section 14.13.

14.14                 Rules of Construction.

The following rules of
construction shall be applied in the interpretation, construction, and
enforcement of this Agreement and of the other Loan Documents:

(a)   Unless otherwise specifically
provided for herein, interest and any fee or charge which is stated as a per
annum percentage shall be calculated based on a 360 day year and actual days
elapsed.

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

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

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

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

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

(g)   Text which follows the words “including,
without limitation” (or similar words) is illustrative and not limiting.

(h)   Except where the context
otherwise requires or where the relevant subsections are joined by “or”,
compliance with any Section or provision of any Loan Document which constitutes
a warranty or covenant requires compliance with all subsections (if any) of
that Section or provision.  Except where
the context otherwise requires, compliance with any warranty or covenant of any
Loan Document which includes subsections which are joined by “or” may be
accomplished by compliance with any of such subsections.

(i)    Text which is shown in italics, shown in bold,
shown IN ALL CAPITAL LETTERS, or in any combination of the foregoing, shall be
deemed to be conspicuous.

(j)    The words “may not” are
prohibitive and not permissive.

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(k)   The word “or” is not exclusive.

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

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

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

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

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

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

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

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

(ii)                                  The word “from” means
“from and including”.

(iii)                               The words “to” and “until”
each mean “to, but excluding”.

(iv)                              The word “through” means “to
and including”.

(s)   The Loan Documents shall be
construed and interpreted in a harmonious manner and in keeping with the
intentions set forth in Section 14.15 hereof, provided, however, in the
event of any inconsistency between the provisions of this Agreement and any
other Loan Document, the provisions of this Agreement shall govern and control.

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14.15                 Intent.

It is intended that:

(a)   This Agreement take effect as a
sealed instrument.

(b)   The scope of the Collateral
Interests created by any Obligor to secure the Liabilities be broadly construed
in favor of the Term Agent and that they cover all assets of each Borrower.

(c)   All Collateral Interests
created in favor of the Term Agent at any time and from time to time by any
Obligor secure all Liabilities, whether now existing or contemplated or
hereafter arising.

(d)   Except as specifically limited
herein, all reasonable costs, expenses, and disbursements incurred by the Term
Agent and, to the extent provide herein, the Term Lenders, in connection with
such Person’s relationship(s) with the Obligors shall be borne by the Obligors.

14.16                 Participations.

The Term Agent or Term
Lenders may sell participations to one or more financial institutions (a “Participant”) of all or a portion of the
Term Agent’s or Term Lenders’ rights and obligations under this Agreement,
provided, however, that except with the consent of the Borrowers (which may not
be unreasonably withheld or delayed), the only
rights granted to the participant pursuant to such participation arrangements
with respect to waivers, amendments or modifications of the Loan Documents
shall be the rights to approve waivers, amendments or modifications that would
reduce the principal of or the interest rate on any Loans, extend the term or
increase the amount of the Term Loan due to such Term Lender as it relates to
such participant, increase the availability of Loans to the Borrowers, reduce
the amount of any fees to which such participant is entitled, or extend any
regularly scheduled payment date for principal or interest.  No such sale of a participation shall relieve
the Term Agent or Term Lenders from the Term Agent’s or Term Lenders’
obligations hereunder.

14.17                 Right of Set-Off.

Any and all deposits or
other sums at any time credited by or due to the Obligors from the Term Agent,
Term Lenders or any Participant or from any Affiliate of any of the foregoing,
and any cash, securities, instruments or other property of the Obligors in the
possession of any of the foregoing, whether for safekeeping or otherwise
(regardless of the reason such Person had received the same), to the extent
permitted by law, shall at all times constitute security for all Liabilities
and for any and all obligations of the Obligors to the Term Agent, Term Lenders
or any Participant or such Affiliate and may be applied or set off against the
Liabilities and against such obligations at any time, whether or not such are
then due and whether or not other collateral is then available to the Term
Agent; provided that no Term Lender shall exercise any right of set off
pursuant hereto without the prior written consent of the Term Administrative
Agent.  If any Lender shall, by
exercising any right of setoff or counterclaim or otherwise, obtain payment in
respect of any principal of, interest on, or other amounts with respect to, any
of the Liabilities resulting in such Lender’s receiving payment of a proportion
of the aggregate amount of such Liabilities greater than its Pro Rata share
thereof as provided herein (including as in contravention of the priorities of
payment set forth in Section 11.7), then the Lender receiving

 100

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

14.18                 Pledges To Federal Reserve Banks.

Nothing included in this
Agreement shall prevent or limit the Term Agent or Term Lenders, from pledging
all or any portion of that Term Agent’s or Term Lenders’ interest and rights
under this Agreement to any funding source of such Term Agent or Term Lender or
to the extent that the Term Agent or Term Lenders is subject to any of the
twelve Federal Reserve Banks organized under §4 of the Federal Reserve Act (12
U.S.C. §341), provided, however,
neither such pledge nor the enforcement thereof shall release the Term Agent or
Term Lenders from their respective obligations hereunder or under any of the
Loan Documents.

14.19                 Maximum Interest Rate.

Regardless of any
provision of any Loan Document, the Term Agent and Term Lenders shall not be
entitled to contract for, charge, receive, collect, or apply as interest on any
Liability, any amount in excess of the maximum rate imposed by applicable
law.  Any payment which is made which, if
treated as interest on a Liability would result in such interest’s exceeding
such maximum rate shall be held, to the extent of such excess, as additional collateral
for the Liabilities as if such excess were “Collateral.”

14.20                 Waivers.

(a)   Each
Borrower (and all guarantors, endorsers, and sureties of the Liabilities) make
each of the waivers included in Section 14.20(b), below, knowingly,
voluntarily, and intentionally, and understands that Term Agent and Term
Lenders, in establishing the facilities contemplated hereby and in providing
loans and other financial accommodations to or for the account of the Borrowers
as provided herein, whether not or in the future, is relying on such waivers.

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

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

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

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(iii)                               THE
RIGHT TO A JURY IN ANY TRIAL OF ANY CASE OR CONTROVERSY IN WHICH THE  TERM AGENT OR TERM LENDER IS OR BECOMES A
PARTY (WHETHER SUCH CASE OR CONTROVERSY IS INITIATED BY OR AGAINST THE TERM
AGENT OR TERM LENDER OR IN WHICH THE TERM AGENT OR TERM LENDER IS JOINED AS A
PARTY LITIGANT), WHICH CASE OR CONTROVERSY ARISES OUT OF OR IS IN RESPECT OF,
ANY RELATIONSHIP AMONGST OR BETWEEN ANY BORROWER OR ANY OTHER PERSON AND THE
TERM AGENT OR TERM LENDER LIKEWISE WAIVES THE RIGHT TO A JURY IN ANY TRIAL OF
ANY SUCH CASE OR CONTROVERSY).

(iv)                              Any
defense, counterclaim, set-off, recoupment, or other basis on which the
amount of any Liability, as stated on the books and records of the Term Agent
or Term Lenders, could be reduced or claimed to be paid otherwise than in accordance
with the tenor of and written terms of such Liability.

(v)                                 Any
claim to consequential, special, or punitive damages.

14.21                 Counterparts.

This Agreement, any of
the Loan Documents, and any amendments, waivers, consents or supplements may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which, when so executed and delivered, shall be
deemed an original, but all of which counterparts together shall constitute but
one agreement.

14.22                 Electronic Submissions.

Upon not less than thirty
(30) days’ prior written notice (the “Approved
Electronic Form Notice”), the Term Agent may permit or require that
any of the documents, certificates, forms, deliveries or other communications,
authorized, required or contemplated by this Agreement or the Loan Documents,
be submitted to the Term Agent in “Approved
Electronic Form” (as hereafter defined), subject to any reasonable
terms, conditions and requirements in the applicable Approved Electronic Forms
Notice.  For purposes hereof “Electronic Form” means e-mail, e-mail
attachments, data submitted on web-based forms or any other communication
method that delivers machine readable data or information to the Term Agent,
and “Approved Electronic Form”
means an Electronic Form that has been approved in writing by the Term Agent
(which approval has not been revoked or modified by the Term Agent) and sent to
the Borrowers in an Approved Electronic Form Notice.  Except as otherwise specifically provided in
the applicable Approved Electronic Form Notice, any submissions made in an
applicable Approved Electronic Form shall have the same force and effect that
the same submissions would have had if they had been submitted in any other
applicable form authorized, required or contemplated by this Agreement or the
Loan Documents.

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14.23                 Joint Obligor Provisions.

(a)   Each
Obligor represents to the Term Agent and Term Lenders that it is an integral
part of a consolidated enterprise, and that each Obligor will receive direct
and indirect benefits from the availability of the joint credit facility
provided for herein, and from the ability to access the collective credit
resources of the consolidated enterprise that are Obligors.

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

(c)   Each
Obligor acknowledges that the Liabilities of such Obligor undertaken herein or
in the other Loan Documents, and the grants of security interests and liens by
such Obligor to secure Liabilities of the other Obligor could be construed to
consist, at least in part, of the guaranty of Liabilities of the other Obligor
and, in full recognition of that fact, each Obligor consents and agrees as
hereinafter set forth in the balance of this Section 14.23.  The consents, waivers, and agreements of the
Obligors that are contained in the balance of this Section 14.23 are
intended to deal with the suretyship aspects of the transactions evidenced by
the Loan Documents (to the extent that a Obligor may be deemed a guarantor or
surety for the Liabilities of another Obligor) and thus are intended to be
effective and applicable only to the extent that any Obligor has agreed to
answer for the Liabilities of another Obligor or has granted a lien or security
interest in Collateral to secure the Liabilities of another Obligor.  Conversely, the consents, waivers, and
agreements of the Obligors that are contained in the balance of this Section
14.23 shall not be applicable to the direct Liabilities of a Obligor with
respect to credit extended directly to such Obligor, and shall not be applicable
to security interests or liens on Collateral of a Obligor given to directly
secure direct Liabilities of such Obligor where no aspect of guaranty or
suretyship is involved.  Each Obligor
consents and agrees that the Term Lenders may, at any time and from time to
time, without notice or demand, whether before or after any actual or purported
termination, repudiation or revocation of this Agreement by any one or more 

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Obligors, and without affecting the enforceability or continuing
effectiveness hereof as to such Obligor, in accordance with the terms of the
Loan Documents:  (a) supplement,
restate, modify, amend, increase, decrease, extend, renew, accelerate or
otherwise change the time for payment or the terms of the Liabilities or any
part thereof, including any increase or decrease of the rate(s) of interest
thereon; (b) supplement, restate, modify, amend, increase, decrease or
waive, or enter into or give any agreement, approval or consent with respect
to, the Liabilities or any part thereof, or any of the Loan Documents or any
security or guarantees granted or entered into by any Person(s) other than such
Obligor, or any condition, covenant, default, remedy, right, representation or
term thereof or thereunder; (c) accept new or additional instruments,
documents or agreements in exchange for or relative to any of the Loan
Documents or the Liabilities or any part thereof, (d) accept partial
payments on the Liabilities; (e) receive and hold additional security or
guarantees for the Liabilities or any part thereof, (f) release, reconvey,
terminate, waive, abandon, fail to perfect, subordinate, exchange, substitute,
transfer or enforce any security or guarantees, and apply any security and
direct the order or manner of sale thereof as the Term Lenders in their sole
and absolute discretion may determine; (g) release any other Person
(including, without limitation, any other Obligor) from any personal liability
with respect to the Liabilities or any part thereof, (h) with respect to
any Person other than such Obligor (including, without limitation, any other
Obligor), settle, release on terms satisfactory to the Term Lenders or by
operation of applicable laws or otherwise liquidate or enforce any Liabilities
and any security therefor or guaranty thereof in any manner, consent to the
transfer of any security and bid and purchase at any sale; or (i) consent
to the merger, change or any other restructuring or termination of the
corporate or partnership existence of any other Obligor or any other Person,
and correspondingly agree, in accordance with all applicable provisions of the
Loan Documents, to the restructure of the Liabilities, and any such merger,
change, restructuring or termination shall not affect the liability of any
Obligor or the continuing effectiveness hereof, or the enforceability hereof
with respect to all or any part of the Liabilities.

(d)   Upon
the occurrence and during the continuance of any Event of Default, the Term
Agent may enforce the Loan Documents independently as to each Obligor and independently
of any other remedy the Term Agent at any time may have or hold in connection
with the Liabilities, and it shall not be necessary for the Term Agent to
marshal assets in favor of any Obligor or any other Person or to proceed upon
or against or exhaust any security or remedy before proceeding to enforce this
Agreement or any other Loan Documents. 
Each Obligor expressly waives any right to require the Term Agent to
marshal assets in favor of any Obligor or any other Person or to proceed
against any other Obligor or any Collateral provided by any Person, and agrees
that the Term Agent may proceed against Obligors or any Collateral in such
order as they shall determine in their sole and absolute discretion, subject to
the terms hereof.

(e)   The
Term Agent may file a separate action or actions against any Obligor, whether
action is brought or prosecuted with respect to any security or against any
other Person, or whether any other Person is joined in any such action or
actions.  Each Obligor agrees, for
itself, that the Term Agent and any other Obligor, or any Affiliate of any
other Obligor (other than such Obligor itself), may deal with each other in
connection with the Liabilities or otherwise, or alter any contracts or
agreements now or hereafter existing between any of them, in any manner
whatsoever, all without in any way altering or affecting the continuing
efficacy as to such Obligor of the Loan Documents.

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(f)    The
Term Agent’s rights hereunder shall be reinstated and revived, and the
enforceability of this Agreement shall continue, with respect to any amount at
any time paid on account of the Liabilities which thereafter shall be required
to be restored or returned by the Term Agent (including, without limitation,
the restoration or return of any amount pursuant to a court order or judgment
(whether or not final or non-appealable), or pursuant to a good faith
settlement of a pending or threatened avoidance or recovery action, or pursuant
to good faith compliance with a demand made by a Person believed to be entitled
to pursue an avoidance or recovery action (such as a bankruptcy trustee or a
Person having the avoiding powers of a bankruptcy trustee, or similar avoiding
powers), and without requiring the Term Agent to oppose or litigate avoidance or
recovery demands or actions that it believes in good faith to be meritorious or
worthy of settlement or compliance, or pursue or exhaust appeals), all as
though such amount had not been paid. 
The rights and priorities of the Term Agent created or granted herein
and the enforceability of the Loan Documents at all times shall remain
effective to cover the full amount of all the Liabilities even though the
Liabilities, including any part thereof or any other security or guaranty
therefor, may be or hereafter may become invalid or otherwise unenforceable as
against any Obligor and whether or not any other Obligor shall have any
personal liability with respect thereto.

(g)   To
the maximum extent permitted by applicable law, each Obligor, for itself,
expressly waives any and all defenses now or hereafter arising or that
otherwise might be asserted by reason of (a) any disability or other
defense of any other Obligor with respect to the Liabilities or with respect to
the enforceability of the Term Agent’s security interest in or Encumbrance on
any collateral securing any of the Liabilities (including, without limitation,
the Collateral), (b) the unenforceability or invalidity of any security or
guaranty for the Liabilities or the lack of perfection or continuing perfection
or failure of priority of any security for the Liabilities, (c) the
cessation for any cause whatsoever of the liability of any other Obligor (other
than by reason of the full payment and performance of all Liabilities),
(d) any failure of the Term Agent to give notice of sale or other
disposition of Collateral to any other Obligor or any other Person other than
such waiving Obligor, or any defect in any notice that may be given to any
other Obligor for any other Person other than such waiving Obligor, in
connection with any sale or disposition of any collateral securing the
Liabilities or any of them (including, without limitation, the Collateral),
(e) any failure of the Term Agent to comply with applicable law in
connection with the sale or other disposition of any collateral or other
security for any Liabilities that is owned by another Obligor or by any other
Person other than such waiving Obligor, including any failure of the Term Agent
to conduct a commercially reasonable sale or other disposition of any such
collateral or other security for any Liabilities, (f) any act or omission
of the Term Agent or others that directly or indirectly results in or aids the
discharge or release of any other Obligor, or the Liabilities of any other
Obligor, or any security or guaranty therefor, by operation of law or
otherwise, or (g) any law which provides that the obligation of a surety
or guarantor must neither be larger in amount nor in other respects more
burdensome than that of the principal or which reduces a surety’s or guarantor’s
obligation in proportion to the principal obligation.  Until such time, if any, as all of the
Liabilities (other than contingent Liabilities and indemnities which survive
repayment of the Loans) have been paid and performed in full and no portion of
any commitment of the Term Lenders to any Obligor under any Loan Document
remains in effect, no Obligor shall have any right of subrogation,
contribution, reimbursement or 

 105
 

indemnity, and each Obligor expressly waives any right to enforce any
remedy that the Term Agent now have or hereafter may have against any other
Person and waives the benefit of, or any right to participate in, any
collateral now or hereafter held by the Term Agent.  Except to the extent expressly provided for
in any Loan Document, each Obligor expressly waives, to the maximum extent
permitted by applicable law, all rights or entitlements to presentments,
demands for payment or performance, notices of nonpayment or nonperformance,
protests, notices of protest, notices of dishonor and all other notices or
demands of any kind or nature whatsoever with respect to the Liabilities, and
all notices of acceptance of the Loan Documents or of the existence, creation
or incurring of new or additional Liabilities.

(h)   Each
Obligor hereby agrees to keep each other Obligor fully apprised at all times as
to the status of its business, affairs, finances, and financial condition, and
its ability to perform its Liabilities under the Loan Documents, and in
particular as to any adverse developments with respect thereto.  Each Obligor hereby agrees to undertake to
keep itself apprised at all times as to the status of the business, affairs,
finances, and financial condition of each other Obligor, and of the ability of
each other Obligor to perform its Liabilities under the Loan Documents, and in
particular as to any adverse developments with respect to any thereof.  Each Obligor hereby agrees, in light of the
foregoing mutual covenants to inform each other, and to keep themselves and
each other informed as to such matters, that the Term Agent shall have no duty
to inform any Obligor of any information pertaining to the business, affairs,
finances, or financial condition of any other Obligor, or pertaining to the
ability of any other Obligor to perform its Liabilities under the Loan
Documents, even if such information is adverse, and even if such information
might influence the decision of one or more of the Obligors to continue to be
jointly and severally liable for, or to provide Collateral for, Liabilities of
one or more of the other Obligors.  To
the fullest extent permitted by applicable law, each Obligor hereby expressly
waives any duty of the Term Agent to inform any Obligor of any such information.

(i)    Obligors
and each of them warrant and agree that each of the waivers and consents set
forth herein are made after consultation with legal counsel and with full
knowledge of their significance and consequences, with the understanding that
events giving rise to any defense or right waived may diminish, or otherwise
adversely affect rights that Obligors otherwise may have against other
Obligors, the Term Agent or others, or against Collateral, and that, under the
circumstances, the waivers and consents herein given are reasonable.  If any of the waivers or consents herein is
determined to be contrary to any applicable law or public policy, such waivers
and consents shall be effective to the maximum extent permitted by law.

14.24                 Confidentiality.

(a)   Obligors
and each Term Lender will maintain, as confidential (other than to their
respective attorneys, agents, accountants, participants and prospective
participants) all of the following:

(i)                                     Proprietary
approaches, techniques, and methods of analysis which are applied by any Term
Agent in the administration of the credit facility contemplated by this
Agreement.

 106
 

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

(b)           Term Agent and each Term Lender will
maintain, as confidential (other than to their respective attorneys, agents,
funding sources, accountants, participants and prospective participants) all
confidential information provided by the Obligors pursuant to the Loan Documents,
except that such confidential information may be disclosed by Term Agent or
such Term Lender (a) to its Affiliates and to its and its Affiliates’
respective partners, directors, officers, employees, agents, advisors and
representatives (it being understood that the Persons to whom such disclosure
is made will be informed of the confidential nature of such information and
instructed to keep such information confidential), (b) to the extent
requested by any regulatory authority purporting to have jurisdiction over it
(including any self-regulatory authority, such as the National Association of
Insurance Commissioners), (c) to the extent required by applicable laws or
regulations or by any subpoena or similar legal process, (d) to any other party
hereto, (e) in connection with the exercise of any remedies hereunder or under
any other Loan Document or any action or proceeding relating to this Agreement
or any other Loan Document or the enforcement of rights hereunder or
thereunder, (f) subject to an agreement containing provisions substantially the
same as those of this Section, to (i) any assignee of or Participant in, or any
prospective assignee of or Participant in, any of its rights or obligations
under this Agreement or (ii) any actual or prospective counterparty (or its
advisors) to any swap or derivative transaction relating to the Borrowers and
their obligations, (g) with the consent of the Borrowers or (h) to the
extent such information (i) becomes publicly available other than as a
result of a breach of this Section or (ii) becomes available to the Term
Agent, any Term Lender or any of their respective Affiliates on a
nonconfidential basis from a source other than the Borrowers.

(c)           Nothing included
herein shall prohibit the disclosure of any such information as may be required
to be provided by judicial process or by regulatory authorities having
jurisdiction over any party to this Agreement.

14.25                 Intercreditor Agreement

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

ARTICLE XV. - the Term
Agent

15.1                        Appointment and Authority.

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

 107
 

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

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

15.2                        Rights as a Term Lender.

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

15.3                        Exculpatory provisions.

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

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

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

 108
 

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

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

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

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

15.4                        Reliance by Term Agents.

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

 109
 

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

15.5                        Delegation of Duties.

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

15.6                        Resignation of Term Agents.

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

 110
 

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

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

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

15.8                        Collateral and Guaranty Matters.

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

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

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

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

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

 111
 

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

15.9                        Notice of Transfer.

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

15.10                 Reports and Financial Statements.

By signing this
Agreement, each Term Lender:

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

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

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

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

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

 112
 

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

15.11                 Agency for Perfection.

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

15.12                 Indemnification of Term Agents.

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

15.13                 Relation among Term Lenders.

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

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

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

 113
 

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

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

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

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

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

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

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

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

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

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

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

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

 114
 

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

15.15                 Non-Consenting Term Lender.

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

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

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

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

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

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

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

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

 115
 

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

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

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

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

ARTICLE XVI. - assignment by
Term Lenders.

16.1                        Assignments and Assumptions.

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

(i)                                     in
the case of an Assigning Lender:

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

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

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

 116
 

16.2                        Assignment Procedures

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

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

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

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

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

16.3                        Effect of Assignment.

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

(i)                                     The
Assignee Lender:

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

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

 117
 

outstanding
Term Loan assigned by such Assignment and Acceptance.

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

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

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

[REMAINDER OF PAGE
INTENTIONALLY BLANK]

 118
 

Signature Page to Term Loan and Security Agreement

 

	
  

  	
   

  	
  MOTHERS WORK, INC.

  
	
   

  	
   

  	
  (“Lead Borrower”)

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ EDWARD M.
  KRELL

  
	
   

  	
   

  	
   

  	
  Edward M. Krell

  
	
   

  	
   

  	
   

  	
  Executive Vice President - Chief

  
	
   

  	
   

  	
   

  	
  Financial Officer

  

 

	
  

  	
   

  	
  CAVE SPRINGS, INC.

  
	
   

  	
   

  	
  (a “Borrower”)

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ EDWARD M.
  KRELL

  
	
   

  	
   

  	
   

  	
  Edward M. Krell

  
	
   

  	
   

  	
   

  	
  Executive Vice President - Chief

  
	
   

  	
   

  	
   

  	
  Financial Officer

  

 

	
  

  	
   

  	
  MOTHERS WORK CANADA, INC.

  
	
   

  	
   

  	
  (a “Guarantor”)

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ EDWARD M.
  KRELL

  
	
   

  	
   

  	
   

  	
  Edward M. Krell

  
	
   

  	
   

  	
   

  	
  Treasurer

  

 

 119

Signature Page to Term Loan and
Security Agreement

	
   

  	
   

  	
  BANK OF AMERICA, N.A., as

  
	
   

  	
   

  	
  Term Administrative Agent and Term

  
	
   

  	
   

  	
  Collateral Agent

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   /s/ Tamisha
  Eason

  
	
   

  	
   

  	
  Name:

  	
   Tamisha Eason

  
	
   

  	
   

  	
  Title:

  	
   Vice
  President

  

 

 1
 

Signature
Page to Term Loan and Security Agreement

	
   

  	
   

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

  
	
   

  	
   

  	
  Lender

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   /s/ Christine
  Hutchinson

  
	
   

  	
   

  	
  Name:

  	
   Christine
  Hutchinson

  
	
   

  	
   

  	
  Title:

  	
   Vice
  President

  

 

 2
 

Signature
Page to Term Loan and Security

Agreement

	
   

  	
   

  	
                                            ,
  as a Term 

  
	
   

  	
   

  	
  Lender

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Print Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Address:  

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Attention:  

  	
   

  
	
   

  	
   

  	
  Fax No.:  

  	
   

  
									

 

 3

EXHIBIT
5.10(a)

Financial
Covenants

This Exhibit is
attached to and made part of that certain Term Loan and Security Agreement
between Bank of America, N.A., as Term Administrative Agent, Term Collateral
Agent, and Term Lender, the other Term Lenders party thereto, and Mothers Work,
Inc., as Lead Borrower, and the other Borrowers and Guarantors party thereto,
dated as of March 13, 2007.  Capitalized
terms used in this Exhibit and not separately defined herein shall have the
meanings ascribed under the Term Loan and Security Agreement.

1)  Consolidated
Leverage Ratio

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

	
  Period

  	
   

  	
  Maximum Consolidated Leverage Ratio

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

  	
   

  	
  3.50 to 1.00

  
	
   

  	
   

  	
   

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

  	
   

  	
  3.25 to1.00

  

 

2)  Consolidated Interest
Coverage Ratio

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

	
  Period

  	
   

  	
  Minimum Consolidated Interest Coverage

  Ratio

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

  	
   

  	
  2.25 to 1.00

  
	
   

  	
   

  	
   

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

  	
   

  	
  2.50 to 1.00

  

 

 1EXHIBIT
10.2

SECOND AMENDED AND RESTATED LOAN AND SECURITY
AGREEMENT

BANK OF AMERICA, N.A.,

THE ADMINISTRATIVE AND COLLATERAL
AGENT

FOR THE LENDERS REFERENCED HEREIN

MOTHERS WORK, INC.

THE LEAD BORROWER

FOR THE BORROWERS REFERENCED
HEREIN

AND

THE GUARANTORS PARTY HERETO

March 13,
2007

TABLE OF CONTENTS

	
  ARTICLE I. - DEFINITIONS:

  	
   

  	
  2

  
	
  ARTICLE II. - THE REVOLVING CREDIT

  	
   

  	
  41

  
	
  2.1

  	
   

  	
  Establishment of Revolving
  Credit

  	
   

  	
  41

  
	
  2.2

  	
   

  	
  Advances in Excess of
  Borrowing Base (Overloans)

  	
   

  	
  42

  
	
  2.3

  	
   

  	
  Risks of Value of
  Collateral

  	
   

  	
  42

  
	
  2.4

  	
   

  	
  Commitment to Make
  Revolving Credit Loans and Support Letters of Credit

  	
   

  	
  43

  
	
  2.5

  	
   

  	
  Revolving Credit Loan
  Requests

  	
   

  	
  43

  
	
  2.6

  	
   

  	
  Making Of Revolving Credit
  Loans

  	
   

  	
  45

  
	
  2.7

  	
   

  	
  SwingLine Loans

  	
   

  	
  46

  
	
  2.8

  	
   

  	
  The Loan Account

  	
   

  	
  46

  
	
  2.9

  	
   

  	
  The Revolving Credit Note

  	
   

  	
  47

  
	
  2.10

  	
   

  	
  Payment of the Loan Account

  	
   

  	
  48

  
	
  2.11

  	
   

  	
  Interest On Revolving
  Credit Loans

  	
   

  	
  49

  
	
  2.12

  	
   

  	
  Revolving Credit Commitment
  Fee

  	
   

  	
  50

  
	
  2.13

  	
   

  	
  Intentionally Omitted

  	
   

  	
  50

  
	
  2.14

  	
   

  	
  Unused Line Fee

  	
   

  	
  50

  
	
  2.15

  	
   

  	
  Early Termination Fee

  	
   

  	
  50

  
	
  2.16

  	
   

  	
  Concerning Fees

  	
   

  	
  51

  
	
  2.17

  	
   

  	
  Intentionally Omitted

  	
   

  	
  51

  
	
  2.18

  	
   

  	
  Procedures For Issuance Of
  L/C’s

  	
   

  	
  51

  
	
  2.19

  	
   

  	
  Fees For L/C’s

  	
   

  	
  52

  
	
  2.20

  	
   

  	
  Concerning L/C’s

  	
   

  	
  54

  
	
  2.21

  	
   

  	
  Changed Circumstances

  	
   

  	
  55

  
	
  2.22

  	
   

  	
  Lenders’ Commitments

  	
   

  	
  57

  
	
  2.23

  	
   

  	
  Designation of Lead
  Borrower as Borrowers’ Agent

  	
   

  	
  58

  
	
  ARTICLE III. —
  CONDITIONS PRECEDENT:

  	
   

  	
  59

  
	
  3.1

  	
   

  	
  Corporate Due Diligence

  	
   

  	
  59

  
	
  3.2

  	
   

  	
  Opinion

  	
   

  	
  59

  
	
  3.3

  	
   

  	
  Officers’ Certificates

  	
   

  	
  59

  
	
  3.4

  	
   

  	
  Additional Documents

  	
   

  	
  60

  
	
  3.5

  	
   

  	
  Representations and
  Warranties

  	
   

  	
  62

  
	
  3.6

  	
   

  	
  Minimum Day One Excess
  Availability

  	
   

  	
  62

  
	
  3.7

  	
   

  	
  All Fees and Expenses Paid

  	
   

  	
  62

  
	
  3.8

  	
   

  	
  No Borrower Default

  	
   

  	
  63

  
	
  3.9

  	
   

  	
  No Adverse Change

  	
   

  	
  63

  
	
  3.10

  	
   

  	
  Finalization of term loan
  facility

  	
   

  	
  63

  
	
  3.11

  	
   

  	
  Validity of Liens

  	
   

  	
  63

  
	
  3.12

  	
   

  	
  Documents

  	
   

  	
  63

  
	
  ARTICLE IV. - GENERAL
  REPRESENTATIONS, COVENANTS

  	
   

  	
   

  
	
  AND WARRANTIES:

  	
   

  	
  63

  
	
  4.1

  	
   

  	
  Payment and Performance of
  Liabilities

  	
   

  	
  63

  
	
  4.2

  	
   

  	
  Due Organization. Corporate
  Authorization. No Conflicts

  	
   

  	
  64

  

 

 i
 

 

	
  4.3

  	
   

  	
  Trade Names

  	
   

  	
  65

  
	
  4.4

  	
   

  	
  Infrastructure

  	
   

  	
  65

  
	
  4.5

  	
   

  	
  GUARANTOR

  	
   

  	
  66

  
	
  4.6

  	
   

  	
  Locations

  	
   

  	
  66

  
	
  4.7

  	
   

  	
  Title To Assets

  	
   

  	
  67

  
	
  4.8

  	
   

  	
  Indebtedness

  	
   

  	
  68

  
	
  4.9

  	
   

  	
  Insurance

  	
   

  	
  70

  
	
  4.10

  	
   

  	
  Licenses; Material
  Contracts

  	
   

  	
  71

  
	
  4.11

  	
   

  	
  Leases

  	
   

  	
  71

  
	
  4.12

  	
   

  	
  Requirements of Law

  	
   

  	
  71

  
	
  4.13

  	
   

  	
  Labor Relations

  	
   

  	
  72

  
	
  4.14

  	
   

  	
  Maintain Properties

  	
   

  	
  73

  
	
  4.15

  	
   

  	
  Taxes

  	
   

  	
  73

  
	
  4.16

  	
   

  	
  No Margin Stock or
  Securities

  	
   

  	
  74

  
	
  4.17

  	
   

  	
  ERISA

  	
   

  	
  74

  
	
  4.18

  	
   

  	
  Hazardous Materials and
  Environmental Compliance

  	
   

  	
  75

  
	
  4.19

  	
   

  	
  Litigation

  	
   

  	
  78

  
	
  4.20

  	
   

  	
  Dividends; Investments;
  Corporate Action

  	
   

  	
  78

  
	
  4.21

  	
   

  	
  Loans

  	
   

  	
  80

  
	
  4.22

  	
   

  	
  Protection of Assets

  	
   

  	
  80

  
	
  4.23

  	
   

  	
  Line of Business

  	
   

  	
  80

  
	
  4.24

  	
   

  	
  Affiliate Transactions

  	
   

  	
  81

  
	
  4.25

  	
   

  	
  Further Assurances

  	
   

  	
  81

  
	
  4.26

  	
   

  	
  Adequacy OF Disclosure

  	
   

  	
  81

  
	
  4.27

  	
   

  	
  No Restrictions on
  Liabilities

  	
   

  	
  82

  
	
  4.28

  	
   

  	
  Other Covenants

  	
   

  	
  82

  
	
  ARTICLE V. -
  FINANCIAL REPORTING AND PERFORMANCE COVENANTS:

  	
   

  	
  82

  
	
  5.1

  	
   

  	
  Maintain Records

  	
   

  	
  82

  
	
  5.2

  	
   

  	
  Access to Records

  	
   

  	
  83

  
	
  5.3

  	
   

  	
  Immediate Notice to Agent

  	
   

  	
  84

  
	
  5.4

  	
   

  	
  Borrowing Base Certificate

  	
   

  	
  85

  
	
  5.5

  	
   

  	
  Weekly Reports

  	
   

  	
  85

  
	
  5.6

  	
   

  	
  Monthly Reports

  	
   

  	
  86

  
	
  5.7

  	
   

  	
  Quarterly Reports

  	
   

  	
  87

  
	
  5.8

  	
   

  	
  Annual Reports

  	
   

  	
  88

  
	
  5.9

  	
   

  	
  Officers’ Certificates

  	
   

  	
  88

  
	
  5.10

  	
   

  	
  Inventories, Appraisals,
  and Audits

  	
   

  	
  89

  
	
  5.11

  	
   

  	
  Additional Financial
  Information

  	
   

  	
  90

  
	
  5.12

  	
   

  	
  Financial Performance
  Covenants

  	
   

  	
  91

  
	
  ARTICLE VI. - USE AND
  COLLECTION OF COLLATERAL:

  	
   

  	
  91

  
	
  6.1

  	
   

  	
  Use of Inventory Collateral

  	
   

  	
  91

  
	
  6.2

  	
   

  	
  Inventory Quality

  	
   

  	
  92

  
	
  6.3

  	
   

  	
  Adjustments and Allowances

  	
   

  	
  92

  
	
  6.4

  	
   

  	
  Validity of Accounts

  	
   

  	
  92

  
	
  6.5

  	
   

  	
  Notification to Account
  Debtors

  	
   

  	
  93

  

 

 ii
 

 

	
  ARTICLE VII. - CASH MANAGEMENT; PAYMENT OF LIABILITIES:

  	
   

  	
  93

  
	
  7.1

  	
   

  	
  Depository Accounts

  	
   

  	
  93

  
	
  7.2

  	
   

  	
  Credit Card Receipts

  	
   

  	
  94

  
	
  7.3

  	
   

  	
  The Concentration, Blocked,
  and Operating Accounts

  	
   

  	
  94

  
	
  7.4

  	
   

  	
  Proceeds and Collection of
  Accounts

  	
   

  	
  96

  
	
  7.5

  	
   

  	
  Payment of Liabilities

  	
   

  	
  97

  
	
  7.6

  	
   

  	
  The Operating Account and
  Disbursement Account

  	
   

  	
  98

  
	
  ARTICLE VIII. - GRANT
  OF SECURITY INTEREST:

  	
   

  	
  98

  
	
  8.1

  	
   

  	
  Grant of Security Interest

  	
   

  	
  98

  
	
  8.2

  	
   

  	
  Extent and Duration of
  Security Interest

  	
   

  	
  100

  
	
  8.3

  	
   

  	
  Perfection of Security
  Interests

  	
   

  	
  100

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

  	
   

  	
  103

  
	
  9.1

  	
   

  	
  Appointment as Attorney-In-Fact

  	
   

  	
  103

  
	
  9.2

  	
   

  	
  No Obligation to Act

  	
   

  	
  104

  
	
  ARTICLE X. - EVENTS
  OF DEFAULT:

  	
   

  	
  105

  
	
  10.1

  	
   

  	
  Failure to Pay Revolving
  Credit

  	
   

  	
  105

  
	
  10.2

  	
   

  	
  Failure To Make Other
  Payments

  	
   

  	
  105

  
	
  10.3

  	
   

  	
  Failure to Perform Covenant
  or Liability (No Grace Period)

  	
   

  	
  105

  
	
  10.4

  	
   

  	
  Failure to Perform Covenant
  or Liability (Grace Period)

  	
   

  	
  106

  
	
  10.5

  	
   

  	
  Misrepresentation

  	
   

  	
  106

  
	
  10.6

  	
   

  	
  Acceleration of Other Debt.
  Breach of Lease

  	
   

  	
  106

  
	
  10.7

  	
   

  	
  Default Under Other
  Agreements

  	
   

  	
  107

  
	
  10.8

  	
   

  	
  Intentionally Omitted

  	
   

  	
  107

  
	
  10.9

  	
   

  	
  Attachment; Judgment;
  Restraint of Business

  	
   

  	
  107

  
	
  10.10

  	
   

  	
  Business Failure

  	
   

  	
  107

  
	
  10.11

  	
   

  	
  Bankruptcy

  	
   

  	
  108

  
	
  10.12

  	
   

  	
  Default by Guarantor or
  Affiliate

  	
   

  	
  108

  
	
  10.13

  	
   

  	
  Indictment -
  Forfeiture

  	
   

  	
  108

  
	
  10.14

  	
   

  	
  Termination of Guaranty

  	
   

  	
  108

  
	
  10.15

  	
   

  	
  Challenge to Loan Documents

  	
   

  	
  108

  
	
  10.16

  	
   

  	
  Intentionally Omitted

  	
   

  	
  109

  
	
  10.17

  	
   

  	
  Change in Control

  	
   

  	
  109

  
	
  10.18

  	
   

  	
  Uninsured Losses

  	
   

  	
  109

  
	
  10.19

  	
   

  	
  ERISA

  	
   

  	
  109

  
	
  ARTICLE XI. - RIGHTS
  AND REMEDIES UPON DEFAULT:

  	
   

  	
  109

  
	
  11.1

  	
   

  	
  Rights of Enforcement

  	
   

  	
  109

  
	
  112

  	
   

  	
  Sale of Collateral

  	
   

  	
  110

  
	
  113

  	
   

  	
  Occupation of Business
  Location

  	
   

  	
  111

  
	
  114

  	
   

  	
  Grant of Nonexclusive
  License

  	
   

  	
  111

  
	
  115

  	
   

  	
  Assembly of Collateral

  	
   

  	
  111

  
	
  116

  	
   

  	
  Rights and Remedies

  	
   

  	
  111

  
	
  ARTICLE XII -
  NOTICES:

  	
   

  	
  112

  
	
  12.1

  	
   

  	
  Notice Addresses

  	
   

  	
  112

  
	
  12.2

  	
   

  	
  Notice Given

  	
   

  	
  113

  
	
  ARTICLE XIII. - TERM:

  	
   

  	
  114

  

 

 iii
 

 

	
  13.1

  	
   

  	
  Termination of Revolving
  Credit.

  	
   

  	
  114

  
	
  13.2

  	
   

  	
  Actions On Termination.

  	
   

  	
  114

  
	
  ARTICLE XIV. -
  GENERAL:

  	
   

  	
  114

  
	
  14.1

  	
   

  	
  Protection of Collateral.

  	
   

  	
  114

  
	
  14.2

  	
   

  	
  Publicity.

  	
   

  	
  114

  
	
  14.3

  	
   

  	
  Successors and Assigns.

  	
   

  	
  114

  
	
  14.4

  	
   

  	
  Severability.

  	
   

  	
  115

  
	
  14.5

  	
   

  	
  Amendments; Course of
  Dealing.

  	
   

  	
  115

  
	
  14.6

  	
   

  	
  Power of Attorney.

  	
   

  	
  115

  
	
  14.7

  	
   

  	
  Application of Proceeds.

  	
   

  	
  116

  
	
  14.8

  	
   

  	
  Increased Costs.

  	
   

  	
  116

  
	
  14.9

  	
   

  	
  Costs and Expenses of the
  Agent and Lenders.

  	
   

  	
  116

  
	
  14.10

  	
   

  	
  Copies and Facsimiles.

  	
   

  	
  117

  
	
  14.11

  	
   

  	
  New York Law.

  	
   

  	
  117

  
	
  14.12

  	
   

  	
  Consent to Jurisdiction.

  	
   

  	
  117

  
	
  14.13

  	
   

  	
  Indemnification.

  	
   

  	
  118

  
	
  14.14

  	
   

  	
  Rules of Construction.

  	
   

  	
  118

  
	
  14.15

  	
   

  	
  Intent.

  	
   

  	
  120

  
	
  14.16

  	
   

  	
  Participations.

  	
   

  	
  120

  
	
  14.17

  	
   

  	
  Right of Set-Off.

  	
   

  	
  121

  
	
  14.18

  	
   

  	
  Pledges To Federal Reserve
  Banks.

  	
   

  	
  121

  
	
  14.19

  	
   

  	
  Maximum Interest Rate.

  	
   

  	
  121

  
	
  14.20

  	
   

  	
  Waivers.

  	
   

  	
  121

  
	
  14.21

  	
   

  	
  Counterparts.

  	
   

  	
  122

  
	
  14.22

  	
   

  	
  Electronic Submissions.

  	
   

  	
  122

  
	
  14.23

  	
   

  	
  Bank of America, N.A as Agent.

  	
   

  	
  123

  
	
  14.24

  	
   

  	
  Joint Borrower Provisions.

  	
   

  	
  123

  
	
  14.25

  	
   

  	
  Transitional Arrangements.

  	
   

  	
  127

  
	
  14.26

  	
   

  	
  Confidentiality.

  	
   

  	
  128

  

 

 iv
 

EXHIBITS

	
  2.7

  	
  :

  	
  SwingLine Note

  
	
  2.9

  	
  :

  	
  Revolving Credit Note

  
	
  2.22

  	
  :

  	
  Revolving Credit Lenders’ Commitments

  
	
  4.2

  	
  :

  	
  Affiliates

  
	
  4.3

  	
  :

  	
  Trade Names

  
	
  4.6(a)

  	
  :

  	
  Locations, Leases, and Landlords

  
	
  4.6(c)

  	
  :

  	
  Form of Landlord Waiver

  
	
  4.7(a)

  	
  :

  	
  Encumbrances

  
	
  4.7(d)

  	
  :

  	
  Third Party Bailees

  
	
  4.8

  	
  :

  	
  Indebtedness

  
	
  4.9

  	
  :

  	
  Insurance Policies

  
	
  4.10

  	
  :

  	
  Licenses; Material Contracts

  
	
  4.11

  	
  :

  	
  Capital Leases

  
	
  4.15

  	
  :

  	
  Taxes

  
	
  4.17

  	
  :

  	
  ERISA

  
	
  4.18

  	
  :

  	
  Environmental Compliance

  
	
  4.19

  	
  :

  	
  Litigation

  
	
  4.20

  	
  :

  	
  Investments

  
	
  5.4

  	
  :

  	
  Form of Borrowing Base Certificate

  
	
  5.9

  	
  :

  	
  Officer’s Compliance Certificate

  
	
  5.12(a)

  	
  :

  	
  Financial Performance Covenants

  
	
  5.12(b)

  	
  :

  	
  Business Plan

  
	
  7.1

  	
  :

  	
  DDA’s

  
	
  7.2

  	
  :

  	
  Credit Card Arrangements

  
	
  8.3(d)

  	
  :

  	
  Investment Property

  

 

 v

SECOND
AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT

March 13, 2007

THIS
AGREEMENT is made between

Bank of
America, N.A., a national banking association, with offices
at 100 Federal Street, Boston, Massachusetts 
02110, as agent (in such capacity, herein the “Administrative
Agent”) for the benefit of the Lenders,
on a Pro Rata basis, based upon each Lender’s Percentage Commitment, who are,
at present, those financial institutions identified on the signature pages of
this Agreement and who in the future are those Persons (if any) who become a “Lender” in accordance with the provisions of Article VII of
the Agency Agreement;

and

Bank of
America, N.A., a national banking association, with offices
at 100 Federal Street, Boston, Massachusetts 
02110, as agent (in such capacity, herein the “Collateral
Agent”) for the benefit of the Lenders and the Administrative Agent,

and

Cave
Springs, Inc., a Delaware corporation (collectively, with the
Lead Borrower, the “Borrowers” and
each individually, a “Borrower”),
which has its principal executive offices at Little Falls Centre II,
2751 Centerville Road, Suite 3207, Wilmington,
DE  19808,

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

and

Mothers
Work Canada, Inc., a Delaware corporation (“Guarantor”), which has its principal executive offices at
456 North Fifth Street, Philadelphia, Pennsylvania 19123,

in consideration of the
mutual covenants contained herein and benefits to be derived herefrom,

WITNESSETH:

 1
 

ARTICLE I. - Definitions:

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

“Acceleration”:  With respect to any Indebtedness, its
becoming due and payable prior to its stated maturity.  Derivations of the word “Acceleration” (such
as “Accelerate”) are used with like meaning in this Agreement.

“Accounts” and “Accounts Receivable”  
“Accounts” as defined in the UCC, and also all:  accounts, accounts receivable, receivables,
and rights to payment (whether or not earned by performance) for: property that
has been or is to be sold, leased, licensed, assigned, or otherwise disposed
of; services rendered or to be rendered; a policy of insurance issued or to be
issued; a secondary obligation incurred or to be incurred; energy provided or
to be provided; for the use or hire of a vessel; arising out of the use of a
credit or charge card or information contained on or used with that card;
winnings in a lottery or other game of chance; and also all Inventory which
gave rise thereto, and all rights associated with such Inventory, including the
right of stoppage in transit; all reclaimed, returned, rejected or repossessed
Inventory (if any) the sale of which gave rise to any Account.

“ACH”:  Automated clearing house.

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

“Acquired Real Property”: Any real property acquired by the
Borrowers after the date hereof, other than the Headquarters Facility, and
including but not limited to real property acquired by the Borrowers after the
date hereof consisting of the Lead Borrower’s leased Domestic Distribution
Center located at the Philadelphia Naval Business Center.

“Administrative Agent”:  Defined in the Preamble.

“Affiliate”:

(a)                                  With
respect to any two Persons, a relationship in which (i) one holds, directly or
indirectly, not less than Twenty-Five Percent (25%) of the capital stock,
beneficial interests, partnership interests, or other equity interests of the
other; or (ii) one has, directly or indirectly, the right, under ordinary
circumstances, to elect a majority  of
the directors (or other body or Person who has those powers customarily vested
in a board of directors of a corporation); or (iii) the same third Person
holds, directly or indirectly, not less than Twenty-Five Percent (25%) of their
respective capital stock, beneficial interests, partnership interests or other
equity

 2
 

interests; or has directly or indirectly the right to
elect the majority of directors of both such parties; or

(b)                                 Any
corporation, limited liability company, trust, partnership, joint venture, or
other enterprise which: is a parent, brother-sister, subsidiary, or
affiliate, of any Obligor; has such enterprise’s tax returns or financial
statements consolidated with the Lead Borrower’s; is a member of the same
controlled group of corporations (within the meaning of Section 1563(a)(1), (2)
and (3) of the Internal Revenue Code of 1986, as amended from time to time) of
which the Lead Borrower is a member; controls or is controlled by the Lead
Borrower.

“Agreement”:  This Second Amended and Restated Loan and
Security Agreement, as it may be modified, amended, supplemented or restated
from time to time.

“Agency Agreement”:   That certain Agency Agreement dated March
13, 2007, by and among the Administrative Agent, the Collateral Agent, and the
Lenders.

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

 “Agent Fee Letter”:  That certain letter of even
date by and between the Administrative Agent and the Borrowers concerning
Administrative Agent’s and Collateral Agent’s fees.

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

“Appraised Inventory Liquidation Percentage”:
That percentage, obtained by the Collateral Agent from the then most recent
appraisal of the Borrowers’ Inventory obtained by the Collateral Agent, to reflect
the appraiser’s estimate of the consolidated net recovery (liquidation value)
as a percentage of cost including raw materials.

“Approved Electronic Form
Notice”:  Defined in Section
14.22.

“Approved Electronic Form”:  Defined in Section 14.22.

“Approved Security-Free SERPS”:
All non-qualified supplemental employee retirement plans approved by a majority
of the independent members of the Obligor’s board of directors providing for
payments by the Obligor into a Security-Free Rabbi Trusts, and designated as an
“Approved Security-Free SERP” in a writing from the Lead Borrower to the
Administrative Agent, which writing identifies the date on which such members
of the board of directors have approved such plan.

 3
 

“Authorized Officer”:  The Lead Borrower’s Chief Executive Officer,
Chief Operating Officer, President, Treasurer or Chief Financial Officer duly
authorized by the Lead Borrower’s Board of Directors, or, in the case of
Borrowing Base Certificates, such person as is authorized by the Board of
Directors of the Borrower.

“Availability”:                   The sum of:

(a)                                  The
Borrowing Base

Minus

(b)                                 The
aggregate unpaid balance of the Loan Account

Minus

(c)                                  The
aggregate undrawn Stated Amount of all then outstanding L/C’s.

“Availability Reserves”:  Such reserves as the Collateral Agent from
time to time determines in the Collateral Agent’s reasonable discretion as
being appropriate (determined in accordance with customary credit
considerations) to reflect the impediments to the Collateral Agent’s ability to
realize upon the Collateral.  Without
limiting the generality of the foregoing, Availability Reserves may include
(but are not limited to) reserves based on the following:

(i)                                     Rent
for any location in a Landlord State with respect to which a Landlord Waiver
has not been received by the Collateral Agent (which initially shall be one (1)
month rent for any such location).

(ii)                                  Customer
Credit Liabilities (the Availability Reserve for which initially shall be up to
Thirty-Three Percent (33%) of Customer Credit Liabilities and which may be
adjusted based on changes in the operation of the Borrower’s business).

(iii)                               Taxes
and other governmental charges, including, ad valorem, personal property, and
other taxes which might have priority over the Collateral Interests of the
Collateral Agent in the Collateral.

(iv)                              Payables
(based upon payables which are past the Borrower’s normal trade terms).

“Bank of
America”:   Bank of
America, N.A. in its individual capacity.

“Bankruptcy Code”:  Title 11, U.S.C., as amended from time to
time.

“Base”:  The Base is the publicly announced prime rate
from time to time by Bank of America (or any successor in interest to Bank of
America) (which is not intended

 4
 

to be Bank of America’s lowest or most favorable rate in effect at any
time).  In the event that said bank (or
any such successor) ceases to announce such a rate, “Base” shall refer to that
rate or index announced or published from time to time as the Administrative
Agent, in good faith, designates as the functional equivalent to said
rate.  Any change in “Base” shall be
effective, for purposes of the calculation of interest due hereunder, when such
change is made effective generally by the bank on whose rate or index “Base” is
being set.  In all events, interest that
is determined by reference to Base (or any successor to Base) shall be
calculated on a 365/366-day year and actual days elapsed.

“Base Margin”:  Zero Percent (0.00 %).

“Base Margin Loan”:  Each Revolving Credit Loan while bearing
interest at the Base Margin Rate.

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

“Blocked Account”:  Defined in Section 7.3(a)(ii).

“Blocked Account Agreement”:  An agreement, in form satisfactory to the
Collateral Agent, which agreement recognizes the Collateral Agent’s Collateral
Interest in the contents of the DDA which is the subject of such agreement and
agrees that such contents shall be transferred only to the Concentration
Account or as otherwise instructed by the Collateral Agent.

“Borrowers”:  Defined in the Preamble.

“Borrowing Base”:                                        The
lesser of:

(a)                                  the
lesser of the Revolving Credit Loan Ceiling or Borrowing Base A;

or

(b)                                 the
Borrowing Base B.

“Borrowing Base A”:  The sum of:

(a)                                  The
lesser of (1) 50% of the sum of clauses (b), (c), (d), and (e) below or (2) the
sum of:

(i)                   the
face amount of Eligible Accounts arising from the sale of goods in wholesale
arrangements multiplied by Eighty-Five Percent
(85%), plus

(ii)                the
face amount of Eligible Accounts arising from the leasing of a customer list,
marketing services, or an Account owing to

 5
 

a Borrower from an account debtor operating a
department or specialty store or other location in which a Borrower leases or
licenses a portion of the space in such store 
(provided, however, that customer list or marketing services Accounts
shall be included only to the extent that they do not exceed $7,000,000 in the
aggregate) multiplied by Eighty Percent (80%), 

Plus

(b)                                 the
face amount of Eligible Credit Card Receivables multiplied
by the Credit Card Advance Rate;

Plus

(c)                                  approved
Eligible Nondomestic Licensing Accounts, multiplied by
the Nondomestic Licensing Advance Rate;

Plus

(d)                                                         the
sum of:

(i) the NOLV of Eligible Raw Materials Inventory (net
of Inventory Reserves) multiplied by
the applicable Inventory Advance Rate,

(ii) (A) the sum of (I) the NOLV of Eligible Finished
Goods Inventory (net of Inventory Reserves) not located in department or
specialty stores or other locations in which a Borrower leases or licenses a
portion of the space in such store; plus (II) the lesser of (a) 21% of the sum of the NOLV of Eligible
Finished Goods Inventory, Eligible L/C Inventory, and Eligible In-Transit
Inventory (in each case, net of Inventory Reserves) or (b) the NOLV of Eligible
Finished Goods Inventory (net of Inventory Reserves) located in department or
specialty stores or other locations in which a Borrower leases or licenses a
portion of the space in such store  multiplied by (B) the applicable Inventory Advance Rate, and

(iii) the lesser of $20,000,000 or the sum of (A) the
NOLV of Eligible L/C Inventory (net of Inventory Reserves) multiplied
by the applicable Inventory Advance Rate; plus (B) the NOLV of
Eligible In-Transit Inventory (net of Inventory Reserves) multiplied
by the applicable Inventory Advance Rate;

 6
 

Plus

(e)                                  the
amount equal to (i) the Determined Value of the Eligible Fixed Assets multiplied by the Real Estate Advance Rate; less (ii) the Second Mortgage Cap; less
(iii) the New HQ Encumbrance Amount;

Plus

(f)                                        the
sum of:

(i) 100% of Eligible
Liquid Collateral consisting of a money market fund held by Bank of America
whose assets entirely consist of cash;

PLUS

(ii) 90% of Eligible
Liquid Collateral consisting of a money market fund whose assets entirely
consist of cash (other than a fund held by Bank of America);

PLUS

(iii) 100% of Eligible
Liquid Collateral consisting of certificates of de­posit with maturities of 365
days or less from the date of acqui­sition issued by Bank of America (or a
money market fund held by Bank of America whose assets consist entirely of cash
and certificates of de­posit with maturities of 365 days or less from the date
of acqui­sition issued by a FDIC-insured financial institution);

PLUS

(iv) 90% of Eligible
Liquid Collateral consisting of certificates of de­posit with maturities of 365
days or less from the date of acqui­sition issued by a FDIC-insured financial
institution other than Bank of America (or a money market fund (other than a
fund held by Bank of America) whose assets consist entirely of cash and
certificates of de­posit with maturities of 365 days or less from the date of
acqui­sition issued by FDIC-insured financial institutions);

PLUS

(v) 90% of Eligible
Liquid Collateral consisting of securities with maturities of 180 days or less
from the date of acquisition issued or fully guaranteed or insured as to
payment of principal and interest by the United States

 7
 

Treasury held by Bank of
America (or a money market fund held by Bank of America whose assets consist
entirely of cash, securities with maturities of 180 days or less from the date
of acquisition issued or fully guaranteed or insured as to payment of principal
and interest by the United States Treasury, and certificates of de­posit with
maturities of 365 days or less from the date of acqui­sition issued by a
FDIC-insured financial institution);

PLUS

(vi) 85% of Eligible
Liquid Collateral consisting of securities (not held by Bank of America) with
maturities of 180 days or less from the date of acquisition issued or fully
guaranteed or insured as to payment of principal and interest by the United
States Treasury (or a money market fund (other than a fund held by Bank of
America) whose assets consist entirely of cash, securities with maturities of
180 days or less from the date of acquisition issued or fully guaranteed or
insured as to payment of principal and interest by the United States Treasury,
and certificates of de­posit with maturities of 365 days or less from the date
of acqui­sition issued by a FDIC-insured financial institution);

PLUS

(vii) 80% of Eligible
Liquid Collateral consisting of senior unsecured bonds of a domestic corporate
issuer rated at least A- by a rating agency acceptable to the Collateral Agent
with maturities of 2 years or less from the date of acquisition held by Bank of
America (or a money market fund held by Bank of America whose assets consist
entirely of cash, senior unsecured bonds of a domestic corporate issuer rated
at least A- by a rating agency acceptable to the Collateral Agent with
maturities of 2 years or less from the date of acquisition, securities with
maturities of 180 days or less from the date of acquisition issued or fully
guaranteed or insured as to payment of principal and interest by the United
States Treasury, and certificates of de­posit with maturities of 365 days or
less from the date of acqui­sition issued by a FDIC-insured financial
institution);

PLUS

(viii) 75% of Eligible
Liquid Collateral consisting of senior unsecured bonds (not held by Bank of
America) of a

 8
 

domestic corporate issuer
rated at least A- by a rating agency acceptable to the Collateral Agent with
maturities of 2 years or less from the date of acquisition (or a money market
fund (other than a fund held by Bank of America) whose assets consist entirely
of cash, senior unsecured bonds of a domestic corporate issuer rated at least
A- by a rating agency acceptable to the Collateral Agent with maturities of 2
years or less from the date of acquisition, securities with maturities of 180
days or less from the date of acquisition issued or fully guaranteed or insured
as to payment of principal and interest by the United States Treasury, and
certificates of de­posit with maturities of 365 days or less from the date of
acqui­sition issued by a FDIC-insured financial institution);

Minus

(g)                                 Availability
Reserves.

“Borrowing Base B”:  At any time that the Indenture Agreement
restricts Indebtedness, the sum that the Lead Borrower and those Obligors that
are Restricted Subsidiaries (as defined in the Indenture Agreement) are
permitted to incur as Indebtedness (as defined in the Indenture Agreement)
hereunder on a consolidated basis without violating the Indenture Agreement.

“Borrowing Base Certificate”:  Defined in Section 5.4.

“Business Day”:  Any day (with any references herein to time
of day requirements meaning such times based on Eastern time) other than (a)
Saturday or Sunday; (b) any day on which banks in Boston, Massachusetts or New
York City, New York, generally are not open to the general public for the
purpose of conducting commercial banking business; or (c) a day on which the
principal office of the Administrative Agents or any Lender is not open to the
general public to conduct business.

“Business Plan”:  The Borrowers’ business plan annexed hereto
as EXHIBIT 5.12(b) and any revision,
amendment, or update of such business plan, provided such revision, amendment,
or update has been accepted in writing by the Administrative Agent.

“Capital Adequacy Demand”:  Defined in Section 14.8.

“Capital Adequacy Charge”:  Defined in Section 14.8.

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

 9
 

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

“Certificate”:  Any certificate in form and substance
acceptable to the Agents.  Each Certificate
shall be deemed to be given under oath by the signatory to such Certificate.

“Change in Control”:  The occurrence of any of the following:

(a)                                  The
failure of the Lead Borrower to directly or indirectly own, beneficially and of
record, 100% of the capital stock of all of the other Obligors; provided, however, it shall not constitute a “Change in
Control” under this Agreement if the Lead Borrower no longer owns 100% of the
capital stock of any other Obligor as a result of a merger or consolidation of such
other Obligor with and into Lead Borrower, with Lead Borrower being the
survivor thereof.

(b)                                 The
acquisition after the date hereof, by any group of persons (within the meaning
of the Securities Exchange Act of 1934, as amended) or by any Person, of beneficial
ownership (within the meaning of Rule 13d-3 of the Securities Exchange Act of
1934, as amended), directly or indirectly, of 50% or more of the issued and
outstanding capital stock of any Obligor having the right to vote for the
election of directors of such Obligor.

(c)                                  
More than half of the persons who were directors of the Lead Borrower on the
first day of any period consisting of Twelve (12) consecutive calendar months
(the first of which Twelve (12) month periods commencing with the first day of
the month during which this Agreement was executed), cease, for any reason
other than death or disability, to be directors of the Lead Borrower, and the
board of directors as thereafter constituted is not acceptable to the
Administrative Agent.

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

“Closing Date”:  The date on which all conditions precedent in
Article III of this Agreement are satisfied.

“Collateral”:  Defined in Section 8.1.

“Collateral Agent”:  Defined
in the Preamble.

“Collateral Interest”:  Any interest in property to secure an
obligation, including, without limitation, a security interest, mortgage, and
deed of trust.

“Commitment”:  With respect to each Lender, that respective
Lender’s Dollar Commitment.

“Concentration Account”:  Defined in Section 7.3(a)(i).

 10
 

“Consolidated”:  When used to modify a financial term, test,
statement, or report, refers to the application or preparation of such term,
test, statement, or report (as applicable) based upon the consolidation, in
accordance with GAAP, with any adjustments or modifications agreed to between
the Lead Borrower and the Administrative Agent, of the financial condition or
operating results of the Borrowers.

 “Costa Rican Facilities”:  Includes (i) Property # A F 007368-000; Industrial
Unit A2, Alajuela, District 09 Rio Segundo, County 01, (ii) Property # A
182290-00, Alajuela, District 02 San Jose, County 01, (iii) Property # A
205774-000, Alajuela, District 02 San Jose, County 01, and (iv) Property # P 084214-000, lot for construction,
Puntarenas, District 01 Quepos, County 06.

“Costa Rican Transaction”:  The sale or lease of the Costa Rican
Facilities individually or as a whole.

“Costs of Collection”:  Includes, without limitation, all attorneys’
reasonable fees and reasonable out-of-pocket expenses incurred by
the Agents’ attorneys, and all reasonable costs incurred by any Agent
including, without limitation, reasonable costs and expenses associated with
any bankruptcy or insolvency proceeding or travel on behalf of any Agent, where
such costs and expenses are directly or indirectly related to or in respect of
such Agent’s:  administration and
management of the Liabilities; negotiation, documentation, and amendment of any
Loan Document; or efforts to preserve, protect, collect, or enforce the
Collateral, the Liabilities, and/or the Agent’s Rights and Remedies and/or any
of the rights and remedies of any such Agent against or in respect of any
guarantor or other person liable in respect of the Liabilities (whether or not
suit is instituted in connection with such efforts).  “Costs of Collection” shall also include the
reasonable costs and expenses similar to the foregoing of Lender’s Special
Counsel.  The Costs of Collection are
Liabilities, and at the Administrative Agent’s option may bear interest at the
then effective Base Margin Rate.

 “Credit Card Advance Rate”: 
Ninety Percent (90%).

“Customer Credit Liability”:  Gift certificates, customer deposits,
merchandise credits, layaway obligations, frequent shopping programs, and similar
liabilities of any Borrower to its retail customers and prospective customers.

“Customs Broker Agreement”:   An agreement in form satisfactory to the
Collateral Agent, among the Lead Borrower or any Obligor, Collateral Agent,
Term Loan Collateral Agent, and a customs broker or other carrier, in which the
customs broker or other carrier acknowledges that it has control over and holds
the documents evidencing ownership of the subject Inventory for the benefit of
the Collateral Agent and the Term Loan Collateral Agent and agrees, upon notice
from the Collateral Agent or the Term Loan Collateral Agent, to hold and
dispose

 11
 

of the subject Inventory solely as directed by the Collateral Agent or
the Term Loan Collateral Agent.

“DDA”:  Any checking or other demand depository
account maintained by any of the Borrowers other than an Exempt DDA.

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

“Determined Value”:  At the relevant time of reference thereto,
the appraised value of such assets on fair market value basis determined by the
most recent appraisal thereof acceptable to the Collateral Agent in its
discretion.

 “Distributions”: 
Includes (i) the payment of any dividends or other distributions on
capital stock of the Lead Borrower (except distributions in such stock), and
(ii) the redemption or acquisition of Securities.

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

“Documents of Title”:  Has the meaning given that term in the UCC.

“Dollar Commitment”:  As set forth on EXHIBIT 2.22,
annexed hereto (as such amounts may change in accordance with the provisions of
this Agreement).  The aggregate of the
Dollar Commitments shall not exceed the Revolving Credit Loan Ceiling.

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

“EBITDA”:  The Borrowers’ Consolidated earnings
(excluding extraordinary gains and gains from the sale of assets other than in
the ordinary course of business) before interest, taxes, depreciation,
amortization, loss on extinguishment of debt, and other non-cash expenses
properly deducted in determining earnings in accordance with GAAP.  The term “non-cash expenses” includes,
without limitation, stock-based compensation expense, gain or loss on
impairment of long-lived assets, and gain or loss on disposal of assets.

“Eligible Accounts”:  Includes an Account owing to a Borrower with
respect to (A) the leasing of a customer list or marketing services, (B) an
Account owing to a Borrower arising from a department or specialty store or
other location in which a Borrower leases or licenses a portion of the space in
such store, or (C) a wholesale Account, each of which arose in the ordinary
course of a Borrower’s business from the lease of customer lists, sale of goods
or rendition of services.  Eligible
Accounts shall be determined without duplication of Eligible Credit Card
Receivables.  In no event shall Accounts
purchased by a Borrower or held by a Borrower whose stock has been purchased by
a Borrower constitute Eligible Accounts until after a determination thereof has
been made by the Collateral

 12
 

Agent in its reasonable discretion (determined in accordance with
customary credit considerations). 
Without limiting the generality of the foregoing, no Account shall be an
Eligible Account if:

(i)                                     it
arises out of a sale made by a Borrower to a Subsidiary or an Affiliate of a
Borrower or to a Person controlled by an Affiliate of a Borrower; or

(ii)                                  (a)
if arising under clause (A) above, it is due or unpaid more than 60 days after
the original due date shown on the invoice or more than 90 days after the date
of such invoice;

(b) if arising under clause (B) above, it is due or
unpaid more than 30 days from the date such account is owing under the
applicable agreement; or

(c) if arising under clause (C) above, it is due or
unpaid more than 60 days after the original due date shown on the invoice or
more than 120 days after the date of such invoice;

(iii)                               50% or more of the
Accounts from the Account Debtor are not deemed Eligible Accounts hereunder; or

(iv)                              the
total unpaid Accounts of the Account Debtor exceed 20% of the net amount of all
Eligible Accounts, to the extent of such excess (other than those Account
Debtors as to which the Collateral Agent has agreed in writing that this clause
(iv) does not apply); or

(v)                                 any
covenant, representation or warranty contained in the Agreement with respect to
such Account has been breached; or

(vi)                              the
Account Debtor is also a Borrower’s creditor or supplier, or the Account Debtor
has disputed liability with respect to such Account, or the Account Debtor has
made any claim with respect to any other Account due from such Account Debtor
to any Borrower or the Account otherwise is or may become subject to any right
of setoff by the Account Debtor (but in the case of such claims or setoff, the
portion of the Accounts of such Account Debtor in excess of the amount at any
time and from time to time owed by such Borrower to such Account Debtor or
claimed owed by such Account Debtor may be an Eligible Account); or

(vii)                           the Account Debtor has
commenced a voluntary case under the federal bankruptcy laws, as now
constituted or hereafter amended, or made an assignment for the benefit of
creditors, or a decree or order for relief has been entered by a court having
jurisdiction in the premises in respect of the Account Debtor in an involuntary
case under the federal bankruptcy laws, as now constituted or hereafter amended,
or any other petition or other application for relief under the federal
bankruptcy laws has been filed against the Account Debtor, or if the Account
Debtor has failed, 

 13
 

suspended business, ceased to be solvent, or consented
to or suffered a receiver, trustee, liquidator or custodian to be appointed for
it or for all or a significant portion of its assets or affairs; or

(viii)                        it arises from a sale to an
Account Debtor outside the United States, unless the sale is on letter of
credit, guaranty or acceptance terms, in each case acceptable to Collateral
Agent in its sole discretion; or

(ix)                                it
arises from a sale to the Account Debtor on a bill-and-hold, guaranteed sale,
sale-or-return, sale-on-approval, consignment or any other repurchase or return
basis; or

(x)                                   the
Account Debtor is the United States of America or any department, agency or
instrumentality thereof, unless such Borrower assigns its right to payment of
such Account to Collateral Agent for the benefit of the Lenders, in a manner
satisfactory to Collateral Agent, so as to comply with the Assignment of Claims
Act of 1940 (31 U.S.C. §§ 203 et seq., as amended); or

(xi)                                the
Account is not at all times subject to Lender’s duly perfected, first priority
security interest and no other Encumbrance other than a Permitted Encumbrance;
or

(xii)                             the goods giving rise to
such Account have not been delivered to and accepted by the Account Debtor or
the services giving rise to such Account have not been performed by a Borrower
and accepted by the Account Debtor or the Account otherwise does not represent
a final sale; or

(xiii)                          the Account is evidenced by
chattel paper or an Instrument of any kind, or has been reduced to judgment; or

(xiv)                         such Borrower has made any
agreement with the Account Debtor for any deduction therefrom, except for
discounts or allowances which are made in the ordinary course of business for
prompt payment and which discounts or allowances are reflected in the
calculation of the face value of each invoice related to such Account; or

(xv)                            such
Borrower has made an agreement with the Account Debtor to extend the time of
payment thereof in the ordinary course of business (provided, however that such
Account shall cease to be an Eligible Account if it is due or unpaid beyond the
applicable limited period of days after the original invoice date or original
due date set forth in clause (ii) above); or

(xvi)                         the Account is otherwise
deemed unacceptable by the Collateral Agent in its reasonable discretion
(determined in accordance with customary credit considerations).

 14
 

The criteria for Eligible Accounts set forth above may only be changed
and any new criteria for Eligible Accounts may only be established by
Collateral Agent in its reasonable credit judgment (determined in accordance
with customary credit considerations) based on either: (i) an event,
condition or other circumstance arising after the date hereof, or (ii) an
event, condition or other circumstance existing on the date hereof to the
extent Collateral Agent has no written notice thereof from Borrower prior to
the date hereof, in either case under clause (i) or (ii) which adversely
affects or could reasonably be expected to adversely affect the Accounts in the
good faith determination of Collateral Agent. 
Any Accounts which are not Eligible Accounts shall nevertheless be part
of the Collateral.

“Eligible Credit Card
Receivables”:  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 reasonable
discretion of the Collateral Agent to be eligible (determined in accordance
with customary credit considerations)), which accounts have been outstanding
for no more than Five (5) Business Days.

 “Eligible Finished Goods Inventory”: Eligible Inventory consisting
of finished goods.

“Eligible Fixed Assets”:  The Headquarters Facility to the extent that it is (a) owned by the
Borrowers, (b) subject to a Mortgage, (c) properly insured in accordance with
the provisions of Section 4.9, and (d) not encumbered by an Encumbrance
other than Permitted Encumbrances.

“Eligible Inventory”:  Borrowers’ Inventory in the United States, at
such locations, and of such types, character, quality and quantities, as the
Collateral Agent in its reasonable discretion from time to time determines to
be acceptable for inclusion in the calculation of the Borrowing Base purposes
(determined in accordance with customary credit considerations), as to which
the Collateral Agent has a perfected security interest that is prior and superior
to all claims and all Encumbrances (other than Permitted Encumbrances, subject
to the Collateral Agent’s rights to establish Reserves therefore).   In no event shall Inventory purchased by a
Borrower out of the ordinary course or held by a Borrower whose common stock
has been purchased by a Borrower constitute Eligible Inventory until after the
results of an appraisal thereof satisfactory to Collateral Agent in its
discretion has been performed by an appraiser satisfactory to Collateral  Agent in its reasonable discretion and the
determination thereof has been made by the Collateral Agent in its reasonable
discretion (determined in accordance with customary credit considerations).

In no event, shall  “Eligible Inventory” include: (i) any non-merchandise
inventory (such as labels, bags, and packaging materials); (ii) damaged goods,
return to vendor merchandise, packaways, consigned inventory, and other similar
categories of Goods; (iii) any Inventory located in any store of the Borrowers
which has been closed for business for more than 20 days in any fiscal quarter;
and (iv) work in process.

 15
 

“Eligible
In-Transit Inventory”: That portion of the Borrowers’
Inventory (without duplication of other Eligible Inventory and Eligible L/C
Inventory)  that meets the following
criteria, which criteria may be revised by the Collateral Agent in its
reasonable discretion (determined in accordance with customary credit
considerations) from time to time after the Closing Date:

(a)                                  such
Inventory currently is in transit (whether by vessel, air, or land) from a
location outside of the continental United States to one of the Borrower’s
Domestic Distribution Centers, which is expected to be delivered to such
Domestic Distribution Center and received by such Borrower within 30 days,

(b)                                 title
to such Inventory has passed to the Borrower,

(c)                                  such
Inventory is insured against types of loss, damage, hazards, and risks, and in
amounts, satisfactory to the Collateral Agent in its reasonable discretion,

(e)                                  such
Inventory either

(1)          is the subject of a
negotiable bill of lading that (x) is consigned to Lender (either directly or
by means of endorsements), (y) was issued by the carrier respecting the subject
Inventory, and (z) either is (I) in the possession of Collateral Agent or a
customs broker or (II) if such Inventory was the subject of a documentary L/C,
the subject of a telefacsimile copy that Collateral Agent has received from the
Issuer which issued the LC  and as to
which Collateral Agent also has received a confirmation from such Issuer that
such document is in-transit by air-courier to Collateral Agent or a customs
broker, or

(2)          is the subject of a
negotiable cargo receipt and is not the subject of a bill of lading (other than
a negotiable bill of lading consigned to, and in the possession of, a
consolidator or Collateral Agent, or their respective agents) and such
negotiable cargo receipt is (x) consigned to Collateral Agent (either directly
or by means of endorsements), (y) that was issued by a consolidator respecting
the subject Inventory, (z) that either is (I) in the possession of Collateral
Agent or a customs broker, or (II) if such Inventory was the subject of a
documentary L/C, the subject of a telefacsimile copy that Collateral Agent has
received from the Issuer which issued the LC and as to which Collateral Agent
also has received a confirmation from such Issuer that such document is
in-transit by air-courier to Collateral Agent or a customs broker, and

(f)                                    Borrower
has provided a Borrowing Base Certificate to Collateral Agent that certifies
that, to the best knowledge of Borrower, such Inventory meets all of Borrower’s
representations and warranties contained in the

 16
 

Loan Documents concerning
Eligible Inventory, that Borrower knows of no reason why such Inventory would
not be accepted by the Borrower when it is delivered to Borrower, and that the
shipment as evidenced by the documents conforms to the related order documents.

 “Eligible L/C Inventory”: 
That portion of the Borrowers’ Inventory (without duplication of other Eligible
Inventory and Eligible In-Transit Inventory) the purchase of which is supported
by a documentary L/C and which is expected to be delivered to such Domestic
Distribution Center and received by such Borrower within 30 days, provided that

(a)                                  Such
Inventory is of such types, character, quality and quantities as the Collateral
Agent in its reasonable discretion (determined in accordance with customary
credit considerations) from time to time determines to be Eligible Inventory;
and

(b)                                 The
documentary L/C which relate to such shipment names the Collateral Agent as
consignee of the subject Inventory and the Collateral Agent has control over
the documents which evidence ownership of the subject Inventory (such as by the
providing to the Collateral Agent of a Customs Brokers Agreement to the
Collateral Agent).

“Eligible Liquid Collateral”:  Each of the following:

(i) a
money market fund whose assets consist entirely of cash, securities with
maturities of 180 days or less from the date of acquisition issued or fully
guaranteed or insured as to payment of principal and interest by the United
States Treasury, and certificates of de­posit with maturities of 365 days or
less from the date of acqui­sition issued by a FDIC-insured financial
institution;

(ii)
certificates of de­posit with maturities of 365 days or less from the date of
acqui­sition issued by a FDIC-insured financial institution;

(iii)
securities with maturities of 180 days or less from the date of acquisition
issued or fully guaranteed or insured as to payment of principal and interest
by the United States Treasury; and

(iv)
senior unsecured bonds of a domestic corporate issuer rated at least A- by a
rating agency acceptable to the Collateral Agent with maturities of 2 years or
less from the date of acquisition;

in each case only to the
extent (i) subject to the Collateral Agent’s first priority, perfected, valid,
and enforceable security interest to secure the Liabilities; (ii) immediately
available to the Collateral Agent; (iii) not subject to any restriction on
their use (other than in favor of Collateral 

 17
 

Agent and the Term Loan
Collateral Agent; and (iv) either held by Bank of America or by another
financial institution acceptable to the Collateral Agent with whom the
Collateral Agent and the applicable Borrower have agreed to a written control
agreement in form and substance satisfactory to Collateral Agent.  In no event shall Investment Property or
other assets or investments which are assets or investments of a Security-Free
Rabbi Trust held under an Approved Security-Free SERP constitute Eligible
Liquid Collateral.

“Eligible
Nondomestic Licensing Accounts”:  Accounts arising from licensing or
franchising of Borrower’s intellectual property which would qualify as Eligible
Accounts except that it arises from an Account Debtor outside the United
States, which is subject in each case to due diligence and approval by the
Collateral Agent and first priority perfection under the local law of the
United States and the local laws of the jurisdiction of such Account Debtor.

“Eligible Raw Materials Inventory”:
Eligible Inventory consisting of raw materials .

“Employee Benefit Plan”:  As defined in ERISA.

“Encumbrance”:  Each of the following:

(a)                                  Any
security interest, mortgage, pledge, hypothecation, lien, attachment, or charge
of any kind (including any agreement to give any of the foregoing); the
interest of a lessor under a Capital Lease; conditional sale or other title
retention agreement; sale of Accounts or Chattel Paper; or other arrangement
pursuant to which any Person is entitled to any preference or priority with
respect to the property or assets of another Person or the income or profits of
such other Person or which constitutes an interest in property to secure an
obligation; each of the foregoing whether consensual or non-consensual
and whether arising by way of agreement, operation of law, legal process or
otherwise.

(b)                                 The
filing of any financing statement under the UCC or comparable law of any
jurisdiction.

“End Date”:  The date upon which both (a) all Liabilities
have been indefeasibly paid in full and (b) all obligations of the Agents and
Lenders to make loans and advances and to provide other financial
accommodations to the Borrowers hereunder shall have been irrevocably
terminated.

“Environmental Laws”:  All of the following:

(a)                                  Any
and all federal, state, local or municipal laws, rules, orders, regulations,
statutes, ordinances, codes, decrees or requirements which regulate or relate
to, or impose any standard of

 18
 

conduct or liability on account of or in respect to
environmental protection matters, including, without limitation, Hazardous
Materials, as are now or hereafter in effect.

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

“Equipment”:  Includes, without limitation, Obligors’ Goods
which qualify as “equipment” as defined in the UCC.

“ERISA”:  The Employee Retirement Income Security Act
of 1974, as amended, together with all orders, regulations and interpretations
thereunder or related thereto.

“ERISA Affiliate”:  Any Person which is under common control with
the Obligors within the meaning of Section 4001 of ERISA or is part of a
controlled group including the Obligors and which would be treated as a single
employer under Section 414(b), (c), (m), and (o) of the Internal Revenue Code
of 1986, as amended.

“Events of Default”:  Defined in Article X.  Each reference to an “Event of Default” is to
an Event of Default that has not duly waived in writing by the Administrative
Agent.  In the event of such due waiver,
the so-waived Event of Default shall be deemed never to have occurred,
other than with respect to any post-default interest which accrued prior
to such waiver and with respect to any reimbursement obligation in respect of
any Costs of Collection.

“Excess Availability”:  The difference of (a) Availability minus (b) all then past due obligations of the Borrowers
(other than those being contested in good faith for which adequate reserves
have been established by Borrowers), including accounts payable which are
beyond customary trade terms and rent obligations for leases which are beyond
applicable grace periods.

“Exempt DDA”:  A depository account maintained by any
Obligor, the only contents of which may be transfers from the Operating Account
and actually used solely (i) for petty cash purposes; or (ii) for payroll and
payroll taxes, together with such other depository accounts agreed to by
Collateral Agent in writing as constituting an Exempt DDA.

“First Agreement”:  That certain Loan and Security Agreement
dated May 24, 1998, by and between Lead Borrower, Cave Springs and Fleet
Capital Corporation, successor-by-assignment to Fleet Retail Group, Inc., as
amended.

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

“Fixed Charge Coverage
Ratio”:  For any twelve month
period, the ratio of Borrowers’ consolidated (a) EBITDA minus Gross
Non-Financed Capital Expenditures minus

 19
 

the payment of any dividends or other distributions on capital stock of
the Lead Borrower (except distributions in such stock), plus (or minus) the increase (or decrease) in total
deferred rent liability, to (b) scheduled cash interest expense, plus
scheduled principal payments on account of current maturities of long term
Indebtedness, plus, without duplication, payments for the scheduled
redemption or acquisition of Securities, plus income taxes paid in cash,
all as determined in accordance with GAAP, provided, however, that
contributions made by Borrowers under any Approved Security-Free SERP into a
Security-Free Rabbi Trust shall be treated as a reduction of EBITDA as used in
the calculation of the Fixed Charge Coverage Ratio, and the GAAP Supplemental
Employee Retirement Plan expense related to such Security-Free Rabbit Trust
will not be treated as a reduction of EBITDA as used in the calculation of the
Fixed Charge Coverage Ratio.

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

“GAAP”:  Principles which are consistent with those
promulgated or adopted by the Financial Accounting Standards Board and its
predecessors (or successors) in effect and applicable to that accounting period
in respect of which reference to GAAP is being made, provided, however, in the
event of a Material Accounting Change, then unless otherwise specifically
agreed to by the Lead Borrower and the Administrative Agent, (a) the Lead
Borrower’s compliance with the financial performance covenants imposed pursuant
to Section 5.12 shall be determined as if such Material Accounting
Change had not taken place and (b) the Lead Borrower shall include, with its
monthly, quarterly, and annual financial statements a schedule, certified by
its chief financial officer, on which the effect of such Material Accounting
Change to the statement with which provided shall be described.

“General Intangibles”:  Includes, without limitation, “general
intangibles” as defined in the UCC; and also all: rights to payment for credit
extended; deposits; amounts due to the Obligors; credit memoranda in favor of
the Obligors; warranty claims; tax refunds and abatements; insurance refunds
and premium rebates; all means and vehicles of investment or hedging,
including, without limitation, options, warrants, and futures contracts;
records; customer lists; telephone numbers; goodwill; causes of action;
judgments; payments under any settlement or other agreement; payments or right
to receive payments on account of any transfer of any interest in any Leasehold
Interest; literary rights; rights to performance; royalties; license and/or
franchise fees; rights of admission; licenses; franchises; license agreements,
including all rights of the Obligors to enforce the foregoing; permits,
certificates of convenience and necessity, and similar rights granted by any
governmental authority; patents, patent applications, patents pending, and
other intellectual property; internet addresses and domain names; developmental
ideas and concepts; proprietary processes; blueprints, drawings, designs,
diagrams, plans, reports, and charts; catalogs; manuals; technical data;
computer software programs (including the source and object codes therefor),
computer

 20
 

records, computer software, rights of access to computer record service
bureaus, service bureau computer contracts, and computer data; tapes, disks,
semi-conductors chips and printouts; trade secrets rights, copyrights,
copyrightable materials, copyright registrations and applications, mask work
rights and interests, and derivative works and interests; user, technical
reference, and other manuals and materials; trade names, trademarks, service
marks, and all goodwill relating thereto; registrations, applications for
registration of the foregoing; and all other intangible property of the
Obligors in the nature of intellectual property; proposals; cost estimates, and
reproductions on paper, or otherwise, of any and all concepts or ideas, and any
matter related to, or connected with, the design, development, manufacture,
sale, marketing, leasing, or use of any or all property produced, sold, or leased,
by the Obligors or credit extended or services performed, by the Obligors,
whether intended for an individual customer or the general business of the
Obligors, or used or useful in connection with research and development by the
Obligors.

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

“Gross Margin”:  With respect to the subject accounting period
for which it is being calculated, the decimal equivalent of the following:

Sales (Minus) Cost of
Goods Sold

Sales

“Gross Non-Financed
Capital Expenditures”:  
The amount equal to: (a) Capital Expenditures minus (b) only to the
extent included in clause (a) hereof, the amount of Capital Expenditures
financed through Indebtedness (other than Indebtedness incurred under this
Agreement).

“Hazardous Materials”:  Any (a) hazardous materials, hazardous waste,
hazardous or toxic substances or petroleum products, which (as to any of the
foregoing) are defined or regulated as a hazardous material in or under any
Environmental Law and (b) oil in any physical state.

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

“Import Landing Costs”:  To the extent not included in the Stated
Amount of an L/C, Landing Costs for Inventory, the purchase of which is
supported by such L/C, or customs, duty, freight, and other out-of-pocket costs
and expenses which will be expended to “land” in transit Inventory and which is
not included in invoices for prepaid Inventory.

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

 21
 

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

(b)                                 Any
reimbursement obligations and other liabilities of such Person with respect to
surety bonds (whether bid, performance or otherwise) letter of credit or
acceptance transactions (including, without limitation, the Stated Amount of
all outstanding letters of credit and acceptances issued for the account of
such Person, and (without duplication) any amount for which such Person would
be obligated to provide reimbursement or for which such Person is liable in
connection with a letter of credit or acceptance transaction;

(c)                                  The
provision of recourse in connection with the sale or discount of Accounts or
Chattel Paper of such Person;

(d)                                 On
account of recourse or repayment obligations with respect to deposits or
advances;

(e)                                  As
lessee under Capital Leases;

(f)                                    In
connection with any sale and leaseback transaction.

(g)                                 All
obligations with respect to redeemable stock and redemption or repurchase
obligations under any equity securities issued by such Person.

“Indebtedness”
also includes:

(a)                                  Indebtedness
of others secured by an Encumbrance on any asset of such Person, whether or not
such Indebtedness is assumed by or is a personal liability of such Person.

(b)                                 Any
guaranty, endorsement, suretyship or other undertaking pursuant to which that
Person may be liable on account of any obligation of any third party other than
on account of the endorsement of checks and other items in the ordinary course.

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

“Indemnified Person”:  Defined in Section 14.13.

 22
 

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

“Index Business Day”:  Any day which is both a Business Day and a
day on which the principal market in LIBOR deposits in London in which Bank of
America or its successors participate is open for dealings in United States
Dollar deposits.

“Index Loan”:  Any Revolving Credit Loan which bears
interest at an Index Rate.

“Index Margin”:  As determined pursuant to the applicable
section of the Margin Pricing Grid set forth in Section 2.11(f), for
loans initiated on or after the date when so set, that is to
say Index contracts in effect at the time of increases/decreases in
margin will remain in effect at the margin originally utilized when the
contract was opened.  The margin in
effect at a given time will apply to contracts opened at that time, and shall
be based upon the Margin Pricing Grid.

“Index Offer Rate”:  For any Interest Period with respect to any
Index Loan, the rate per annum equal to the British Bankers Association LIBOR
Rate (“BBA LIBOR”), as published by Reuters (or other commercially
available source providing quotations of BBA LIBOR as designated by the
Administrative Agent from time to time) at approximately 11:00 a.m., London
time, two Business Days prior to the commencement of such Interest Period, for
Dollar deposits (for delivery on the first day of such Interest Period) with a
term equivalent to such Interest Period. 
If such rate is not available at such time for any reason, then the “Index
Offer Rate” for such Interest Period shall be the rate per annum determined by
the Administrative Agent to be the rate at which deposits in Dollars for
delivery on the first day of such Interest Period in same day funds in the
approximate amount of the Index Loan being made, continued or converted by Bank
of America and with a term equivalent to such Interest Period would be offered
by Bank of America’s London Branch to major banks in the London interbank
eurodollar market at their request at approximately 11:00 a.m. (London time)
two Business Days prior to the commencement of such Interest Period. In the
event that the Index Offer Rate for an Index Loan cannot be determined through
any of the methods provided above, it will be determined in whatever manner
Administrative Agent may reasonably determine or if Administrative Agent deems
that it cannot be determined, the Index Offer Rate will be unavailable.  “Index Rate”:  That per annum rate (calculated on a
365/366-day year and actual days elapsed) equal to the Index Offer Rate plus
the Index Margin except that, in the event that the Administrative Agent
determines that any Lender may be subject to the Reserve Percentage, the “Index
Rate” shall mean, with respect to any Index Loans then outstanding (from the
date on which that Reserve Percentage first became applicable to such loans),
and with respect to all Index

 23
 

Loans thereafter made, an interest rate per annum equal the sum of (a)
plus (b), where:

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

Index
Offer Rate

1 minus Reserve
Percentage

(b) is the applicable Index Margin.

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

“Intercreditor Agreement”: That
certain Intercreditor Agreement dated as of even date herewith by and among the
Administrative Agent, the Collateral Agent, the Term Loan Agent, and the Term
Loan Collateral Agent, acknowledged by the Obligors as of the date hereof, as
it may be amended or restated.

“Interest Payment Date”:  With reference to:

(a)                                  Each
Index Loan: the earlier of the last day of the Interest Period relating thereto
or quarterly, whichever is earlier, and the Termination Date and the End Date.

(b)                                 Each
Base Margin Loan: the last Business Day of each month in arrears; the
Termination Date; and the End Date.

“Interest Period”:

(a)                                With
respect to each Index Loan: subject to Subsection (b), below, the period
commencing on the date of the making or continuation of, or conversion to, the
subject Index Loan and ending on the day that corresponds numerically to such
date, One (1), Two (2), Three (3), or Six (6) months thereafter, as the Lead
Borrower may elect by irrevocable notice (pursuant to Section 2.5(b)) to
the Administrative Agent.

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

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

 24
 

(ii)                                  Subject
to Subsections (iii) and (iv), below, any Interest Period applicable to a Index
Loan, which Interest Period begins on a day for which there is no numerically
corresponding day in the calendar month during which such Interest Period ends,
shall end on the last Index Business Day of the month during which that
Interest Period ends.

(iii)                               Any Interest Period
which would otherwise end after the Revolving Credit Termination Date shall end
on the Revolving Credit Termination Date.

(iv)                              
The Lead Borrower shall not select, renew, or convert any interest rate for a
Revolving Credit Loan such that, in addition to interest at the Base Margin
Rate, there are more than Six (6) Interest Periods applicable to Index Loans at
any one time.

“Inventory”:  Includes, without limitation, “inventory” as
defined in the UCC and also all: 
packaging, advertising, and shipping materials related to any of the
foregoing, and all names or marks affixed or to be affixed thereto for
identifying or selling the same; Goods held for sale or lease or furnished or
to be furnished under a contract or contracts of sale or service by the
Obligors, or used or consumed or to be used or consumed in the  Obligors’ business; Goods of said description
in transit: returned, repossessed and rejected Goods of said description; and
all Documents (whether or not negotiable) which represent any of the foregoing.

“Inventory Advance Rate”:  The following percentages for the applicable
timeframes:

	
  Timeframe

  	
   

  	
  Percentage

  	
   

  
	
  From the Closing Date to (but not including) the
  first day of the first calendar month beginning after the first anniversary
  of the Closing Date

  	
   

  	
  100

  	
  %

  
	
  From and including the first day of the first
  calendar month beginning after the first anniversary of the Closing Date to
  (but not including) the first day of the first calendar month beginning after
  the second anniversary of the Closing Date

  	
   

  	
  95

  	
  %

  
	
  From and
  including the first day of the first calendar month beginning after the
  second anniversary of the Closing Date to Maturity

  	
   

  	
  90

  	
  %

  

 

 25
 

“Inventory Reserves”:  Such reserves as may be established from time
to time by the Collateral Agent in the Collateral Agent’s reasonable discretion
with respect to the determination (determined in accordance with customary
credit considerations) of the saleability, at Retail, of the Eligible Inventory
or which reflect such other factors as affect the market value of the Eligible
Inventory.  Without limiting the generality
of the foregoing, Inventory Reserves may include (but are not limited to)
reserves based on the following:

(i)                                     Obsolescence
(based upon Inventory on hand beyond a given number of days).

(ii)                                  Seasonality.

(iii)                               Shrinkage.

(iv)                              Imbalance.

(v)                                 Change
in Inventory character.

(vi)                              Change
in Inventory composition.

(vii)                           Change in Inventory mix.

(viii)                        Markdowns (both permanent and
point of sale)

(ix)                                Retail
markons and markups inconsistent with prior period practice and performance;
industry standards; current business plans; or advertising calendar and planned
advertising events.

(x)                                   Return
to vendors.

 26
 

(xi)                                Damage.

(xii)                             Inventory in the
possession of any bailee.

(xiii)                          Design room Inventory.

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

“Issuer”:  The issuer of any L/C.

“Landlord State”:  Initially Washington, Virginia, and
Pennsylvania and such other states in which a landlord’s claim for rent has
priority over the Encumbrances of the Collateral Agent in the Collateral.

“L/C”:  Any letter of credit, the issuance of which
is procured by the Administrative Agent for the account of any Borrower and any
acceptance made on account of such letter of credit, including without
limitation, any letter of credit presently issued by Bank of America, including
without limitation any letter of credit issued under the First Agreement,
Second Agreement, and the Special Purpose Letter of Credit.

“Lease”:  Any lease or other agreement, no matter how
styled or structured, pursuant to which any Obligor is entitled to the use or
occupancy of any space.

“Leasehold Interest”:  Shall mean the Obligors’ leasehold estate or
interest in each of the properties subject to a Lease at or upon which any
Obligor conducts business, offers any Inventory for sale, or maintains any of
the Collateral, whether or not for retail sale, together with the Obligors’
interest in any of the improvements and fixtures located upon or appurtenant to
each such estate or interest, including without limitation, any rights of the
Obligor to payment, proceeds or value of any kind or nature realized upon the
sale, transfer or assignment of any such estate or interest, whether or not
such sale, assignment or transfer occurs during any case commenced under the
Bankruptcy Code.

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

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

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

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

 27

(i)                                     Any
and all direct and indirect liabilities, debts, and obligations of the Obligors
to any Agent or the Lenders, each of every kind, nature, and description.

(ii)                                  Each
obligation to repay any loan, advance, indebtedness, note, obligation,
overdraft, or amount now or hereafter owing by the Obligors to any Agent or the
Lenders, (including all future advances whether or not made pursuant to a
commitment by any Agent or the Lenders), whether or not any of such are
liquidated, unliquidated, primary, secondary, secured, unsecured, direct,
indirect, absolute, contingent, or of any other type, nature, or description,
or by reason of any cause of action which any Agent or the Lenders, may hold
against the Obligors.

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

(iv)                              All
interest, fees, and charges and other amounts which may be charged by any Agent
or the Lenders, to the Obligors and/or which may be due from the Obligors to
any Agent or the Lenders, from time to time, including, without limitation,
interest and fees that accrue after the commencement by or against any Obligor
or any Affiliate thereof of any proceeding under the Bankruptcy Code naming
such Person as the debtor in such proceeding, regardless of whether such
interest and fees are allowed claims in such proceeding.

(v)                                 All
costs and expenses incurred or paid by any Agent or the Lenders, in respect of
any agreement between the Obligors and any Agent or the Lenders, or instrument
furnished by the Obligors to any Agent or Lenders (including, without
limitation, Costs of Collection, attorneys’ reasonable fees, including
reasonable fees and expenses of Lenders’ Special Counsel), and all court and
litigation costs and expenses).

(vi)                              Any
and all covenants of the Obligors to or with any Agent or the Lenders, and any
and all obligations of the Obligors to act or to refrain from acting in
accordance with any agreement between the Obligors and any Agent or the
Lenders, or instrument furnished by the Obligors to any Agent or the Lenders.

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

 28
 

(b)                                 Any
and all direct or indirect liabilities, debts, and obligations of the Obligors
to any Agent or the Lenders or any Affiliate of any Agent or Affiliate of the
Lenders, each of every kind, nature, and description owing on account of any
service or accommodation provided to, or for the account of any Obligors
pursuant to this or any other Loan Document, including cash management services
and the issuances of L/C’s, including without limitation the Special Purpose
Credit.

(c) Notwithstanding the
foregoing, 
Indebtedness arising solely under the Term Loan Agreement does not
constitute Liabilities as that term is defined herein.

“Liquidation”:  The exercise, by the Collateral Agent, of
those rights accorded to the Collateral Agent under the Loan Documents as a
creditor of the Obligors following and on account of the occurrence of an Event
of Default looking towards the realization on the Collateral.  Derivations of the word “Liquidation” (such
as “Liquidate”) are used with like meaning in this Agreement.

“Liquid Collateral
Investments”: The Borrower’s Investment Property in which the
Collateral Agent holds a first priority (other than a prior security interest
held by the securities intermediary maintaining a securities account in which
the Investment Property is maintained, to the extent such prior security
interest secures the securities intermediary’s customary fees and charges),
perfected, valid, and enforceable lien and security interest to secure the
Liabilities, which are not subject to any restriction on their use (other than
restrictions in favor of Collateral Agent), but excluding any Investment
Property or any other assets of any Security-Free Rabbi Trust.

“Loan Account”:  Defined in Section 2.8.

“Loan Documents”:  This Agreement, each instrument and document
executed and/or delivered as contemplated by Article III, below (including
without limitation the fee letters by and between any of the Agents and the
Borrowers or any of the Lenders and the Borrowers) and each other instrument or
document from time to time executed and/or delivered in connection with the
arrangements contemplated hereby or in connection with any transaction with any
Agent or any Affiliate of any Agent, including, without limitation, any
transaction which arises out of any cash management (including any ACH transfer
arrangements), depository, investment, letter of credit (including, without
limitation, the Special Purpose Credit), or interest rate protection, or
equipment leasing services provided by any Agent or any Affiliate of any Agent,
as each may be amended from time to time.

“Margin Adjustment Date”:  As defined in Section 2.11(f).

 29
 

“Margin Pricing Grid”:  Provides for quarterly adjustment to the
interest rate to be charged on Revolving Credit Loans based upon the level of
Pricing Adjusted Availability then existing and is shown in Section 2.11(f).

“Master Letter of Credit
Agreement”:  Defined in Section
2.18(d).

“Material Accounting Change”:  Any change in GAAP applicable to accounting
periods subsequent to the Borrowers’ fiscal year most recently completed prior
to the execution of this Agreement, if such change has a material effect on the
Borrowers’ financial condition or operating results, as reflected on financial
statements and reports prepared by or for the Borrowers, when compared with
such condition or results as if such change had not taken place, or where
preparation of the Borrowers’ statements and reports in compliance with such
change results in the breach of a financial performance covenant imposed
pursuant to Section 5.12, where such a breach would not have occurred if
such change had not taken place or visa versa.

“Material Adverse Effect”: (a) Any material adverse change in the business, prospects, operations,
results of operations, assets, liabilities or condition (financial or
otherwise) of the Obligors (taken as a whole), (b) the material impairment
of the ability of any Obligors to perform its Liabilities, or of the Agent’s
ability to enforce the Liabilities or realize upon any portion of the
Collateral, or (c) a material impairment of the priority of the liens with
respect to the Collateral.

 “Maturity Date”:   March 13, 2012, or if such day is
not a Business Day, the next succeeding Business Day.

“Mortgage”:  Includes, but not limited to, that certain
existing mortgage as described in Section 8.3, as the same may be
amended, modified, renewed, extended, replaced, restated or substituted from
time to time, executed by the Lead Borrower and PIDC Financing Corporation in
favor of the Collateral Agent, for the benefit of the Lenders.

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

“Net Capital Expenditures”:   The amount equal to:
(a) Capital Expenditures minus (b) the amount of tenant improvement
allowances received in cash, to the extent not already deducted from clause
(a) hereof.

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

“NOLV”: Net orderly liquidation
value of any item or group of items of Inventory as determined by the
Collateral Agent in accordance with customary credit

 30
 

considerations after review of the then-most recent appraisal report
prepared by an appraiser satisfactory to the Collateral Agent, as updated from
time to time as the Collateral Agent may reasonably determine.

“Nondomestic Licensing Advance Rate”:  The amount determined by the Collateral Agent’s
sole discretion from time to time as being the Nondomestic Licensing Advance
Rate.

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

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

With respect to any Lender, as indicated adjacent to such Lender’s
signature at the foot of this Agreement. 
With respect to any Person who becomes a Lender hereafter pursuant to
Section 7.2 of the Agency Agreement, as indicated in the Assignment and
Acceptance of such Person.

Each Notice Address is subject to change as provided in Section 12.1.

“Obligor”:  Individually, each Guarantor and each
Borrower, and, “Obligors”, collectively, the
Borrower and Guarantors.

“Operating Account”:   Defined in Section 7.3(a)(iii).

“Overloan”: A loan, advance, or
providing of credit support (such as the issuance of any L/C) to the extent
that, at the time it is made, it exceeds Availability immediately prior to the
making of such loan, advance, or providing of credit support.

“Participant”:  Defined in Section 14.16.

“Payment Intangible”:  Has the meaning given that term in the UCC
and also refers to any general intangible under which the Account Debtor’s
primary obligation is a monetary obligation.

“Percentage Commitment”:  As set forth on EXHIBIT 2.22,
annexed hereto, reflecting, with respect to any Lender, the ratio of (i) the
amount of the Dollar Commitment of such Lender to (ii) the aggregate amount of
the Dollar Commitments of all Lenders (as such percentage may change in
accordance with the provisions of this Agreement).

“Permissible Overloans”:  Defined in the Agency Agreement.

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

 31
 

(i)                                     immediately
prior to, and after giving effect thereto, no Suspension Event or Event of
Default shall have occurred and be continuing or would result therefrom;

(ii)                                  all
transactions in connection therewith shall be consummated in accordance with
all applicable laws and in conformity with all applicable governmental
authorizations;

(iii)                               all
of the capital stock acquired or otherwise issued by such Person or any newly
formed Subsidiary of a Borrower in connection with such acquisition shall be
pledged to Collateral Agent, for the benefit of Lenders, pursuant hereto, and
Borrowers shall have taken, or caused to be taken, as of the date such Person
becomes a Subsidiary of Borrowers, each of the Permitted Acquisition
Requirements; and

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

“Permitted Acquisition Requirements”: The
Borrowers (a) immediately causing any new Subsidiary to become a Borrower or
guarantor hereunder, as determined by the Administrative Agent, by executing
and delivering to Administrative Agent a counterpart agreement acceptable to
Administrative Agent in its discretion, (b) immediately thereupon, causing the
Collateral Agent to hold in such acquired assets or capital stock a first
priority perfected Collateral Interest (subject only to Permitted Encumbrances)
to secure the Liabilities and (c) taking all such actions and executing and
delivering, or causing to be executed and delivered, all such documents,
instruments, agreements, and certificates as Agent may require in its
discretion.

“Permitted Creation”: Any creation by
Borrowers of a Person wholly-owned by Borrowers, provided:

(i)                                     immediately
prior to, and after giving effect thereto, no Suspension Event or Event of
Default shall have occurred and be continuing or would result therefrom;

(ii)                                  all
transactions in connection therewith shall be consummated in accordance with
all applicable laws and in conformity with all applicable governmental
authorizations;

(iii)                               all
of the capital stock acquired or otherwise issued by such Person or any newly
formed Subsidiary of a Borrower in connection with such acquisition shall be
pledged to Collateral Agent, for the benefit of Lenders, pursuant hereto, and
Borrowers shall have taken, or caused to be taken, as of the date such Person
becomes a Subsidiary of Borrowers, each of the Permitted Creation Requirements;
and

 32
 

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

“Permitted Creation Requirements” The
Borrowers (a) immediately causing any new Subsidiary to become a Borrower or
guarantor hereunder, as determined by the Administrative Agent, by executing
and delivering to Administrative Agent a counterpart agreement acceptable to
Administrative Agent in its discretion, (b) immediately thereupon, causing the
Collateral Agent to hold in such acquired assets or capital stock a first
priority perfected Collateral Interest (subject only to Permitted Encumbrances)
to secure the Liabilities and (c) taking all such actions and executing and
delivering, or causing to be executed and delivered, all such documents,
instruments, agreements, and certificates as Agent may require in its discretion.

“Permitted Encumbrances”:  The following:

(a)                                  Encumbrances
in favor of the Collateral Agent.

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

(c)                                  Those Encumbrances securing the Term Loan
Facility.

(d)                                 Liens
securing the payment of taxes, either not yet overdue or the validity of which
is being contested in good faith by the Obligors and for which the Obligors
have established adequate cash reserve; non-consensual statutory liens (other
than liens securing the payment of taxes) arising in the ordinary course
of  Obligors’ business to the extent such
liens secure (i) indebtedness that is not overdue, or (ii) indebtedness
relating to claims or liabilities which are fully insured and being defended at
the sole cost and expense and at the sole risk of the insurer or are being
contested by the Obligors in good faith by appropriate proceedings diligently
pursued, in each instance prior to the commencement of foreclosure or other
similar proceedings and provided that adequate reserves therefor have been set
aside on the  Obligors’ books (provided, however, that
the inclusion of any of the foregoing as “Permitted Encumbrances” shall not
affect their respective relative priorities vis-à-vis the security interests
created herein), or (iii) zoning restrictions, easements, licenses, covenants
and other restrictions affecting the use of real property.

(e)                                  Deposits
under workmen’s compensation, unemployment insurance and social security laws,
or to secure the performance of bids, tenders, contracts (other than for the
repayment of borrowed

 33
 

money) or leases, or to secure statutory obligations
or surety or appeal bonds, or to secure indemnity, performance or other similar
bonds arising in the ordinary course of business.

(f)                                    Landlord’s
liens arising by operation of law where waivers have not been obtained.

(g)                                 Purchase
money security interests or capitalized equipment leases on any Equipment
acquired or held by the Obligors and securing Indebtedness incurred or assumed
for the purpose of financing all or any part of the cost of acquiring such
Equipment; provided  however
that (i) any such Encumbrance attaches to such property concurrently with or
within twenty (20) days after the acquisition thereof, (ii) such Encumbrance
attaches solely to the Equipment so acquired in such transaction, and (iii) the
principal amount of the Indebtedness secured thereby does not exceed 100% of
the cost of such Equipment; provided, however, that with respect to any
Indebtedness on account of purchase money security interests or capitalized
leases on or of such Equipment that arises during a period in which (x) the
outstanding principal amount of Indebtedness arising after the date hereof on
account of purchase money security interests or capitalized equipment leases on
or of such Equipment exceeds (y) $5,000,000 (the “Excess Indebtedness”), the
holder of any such Excess Indebtedness shall have agreed that the Collateral
Agent shall have the right to utilize, at no cost or expense to the Agents or
Lenders (other than a pro rated amount for the period in which the Collateral
Agent is utilizing such Equipment), such Equipment to the extent necessary or
appropriate to sell, lease or otherwise dispose of the Collateral, such
agreement to be in form and substance satisfactory to the Collateral Agent in
its sole discretion, provided further, that the foregoing proviso shall
not apply to any Equipment that is located in the headquarters portion, and not
the Domestic Distribution Center portion, of the Headquarters Facility.

(h)                                 Purchase
money security interests on any Acquired Real Property and securing
Indebtedness incurred or assumed for the purpose of financing all or any part
of the cost of acquiring such Acquired Real Property; provided
however that (i) any such Encumbrance attaches
to such Acquired Real Property concurrently with or within twenty (20) days
after the acquisition thereof, (ii) such Encumbrance attaches solely to the
Acquired Real Property so acquired in such transaction or the improvements and
fixtures thereon, and (iii) the principal amount of the Indebtedness secured
thereby does not exceed 100% of the cost of such Acquired

 34
 

Real Property, together with the improvements and
fixtures thereon.

(i)                                     Purchase
money security interests on any improvements or fixtures on Acquired Real
Property securing Indebtedness incurred or assumed for the purpose of financing
all or any part of the cost of acquiring such improvements or fixtures on the
Acquired Real Property; provided  however that (i) any such Encumbrance attaches to such
improvements or fixtures on the Acquired Real Property concurrently with or
within twenty (20) days after the acquisition thereof, (ii) such Encumbrance
attaches solely to Acquired Real Property or the improvements or fixtures
thereon, and (iii) the principal amount of the Indebtedness secured thereby
does not exceed 100% of the cost of the Acquired Real Property, together with
the improvements and fixtures thereon .

(j) Purchase money security interests on any
improvements to or fixtures on or the construction of an addition or additions
to the Headquarters Facility or additional buildings at the Headquarters
Facility securing Indebtedness incurred or assumed for the purpose of financing
all or any part of the cost of constructing, or of acquiring such additions,
improvements or fixtures on the Headquarters Facility; provided
however that (i) any such Encumbrance
attaches to such improvements or fixtures on the Headquarters Facility
concurrently with or within twenty (20) days after the acquisition thereof,
(ii) such Encumbrance attaches solely to the Headquarters Facility or the
improvements or fixtures thereon, and (iii) the principal amount of the
Indebtedness secured thereby does not exceed 100% of the cost of such
additions, improvements and fixtures provided, however, that the holder
of any such Indebtedness shall have agreed that the Collateral Agent shall have
the right to utilize the Domestic Distribution Center portion of the
Headquarters Facility, at no cost or expense to the Agents or Lenders (other
than a pro rated amount for the period in which the Collateral Agent is
utilizing such portion of the Headquarters Facility), to the extent necessary
or appropriate to sell, lease or otherwise dispose of the Collateral, such
agreement to be in form and substance satisfactory to the Collateral Agent in
its sole discretion.

(k) Inclusive of those Encumbrances (if any) listed on
EXHIBIT 4.7 in favor of landlords,
liens or security interests held by the Borrowers’ landlords for up to a
maximum of twenty (20) store locations in the aggregate.

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

 35
 

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

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

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

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

“Pricing Adjusted Availability”:
The sum of:

(i)                                     The
sum of (a) the lesser of (I) Borrowing Base A;
or (II) At any time that the Indenture Agreement restricts Indebtedness, the
sum that the Lead Borrower and those Obligors that are Restricted Subsidiaries
(as defined in the Indenture Agreement) are permitted to incur as Indebtedness
(as defined in the Indenture Agreement) hereunder on a consolidated basis
without violating the Indenture Agreement; plus (b) the average amount of
Liquid Collateral Investments for the applicable fiscal quarter (for purposes
of the calculation of this average amount, any “overnight funds” consisting of
Liquid Collateral Investments shall be included only on the date of purchase of
such overnight funds).

Minus

(ii)                                  The
aggregate unpaid balance of the Loan Account

Minus

(iii)                               The
aggregate undrawn Stated Amount of all then outstanding L/C’s.

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

“Pro Forma Fixed Charge
Coverage Ratio”: For any twelve month period, the ratio of Borrowers’
consolidated (a) EBITDA during such period minus projected Gross Non-Financed Capital Expenditures for the
following twelve month period minus projected Distributions for the
following twelve month period plus
(or minus) the projected
increase (or decrease) in total deferred rent liability for the following
twelve month period, to (b) projected cash interest expense for the
following twelve month period, plus
projected principal payments on account of current maturities of long term
Indebtedness for the following twelve month period, plus projected income taxes paid in cash for the following
twelve month period, all as determined in accordance with GAAP,  provided,
however, that contributions made by Borrowers under any Approved
Security-Free SERP into a Security-Free

 36
 

Rabbi Trustshall be treated as a reduction of EBITDA as used in the
calculation of the Pro Forma Fixed Charge Coverage Ratio, and the GAAP
Supplemental Employee Retirement Plan expense related to such Security-Free
Rabbi Trusts will not be treated as a reduction of EBITDA as used in the
calculation of the Pro Forma Fixed Charge Coverage Ratio.  Any projections used in computing Pro Forma
Fixed Charge Coverage Ratio shall be determined by the Borrowers and acceptable
to the Administrative Agent in its reasonable discretion.

“Property”:  Any interest in any kind of property or
asset, whether real, personal or mixed, or tangible or intangible.

“Pro Rata”:                                 (a)
With respect to any Lender vis-à-vis any other Lender, a fraction (expressed as
a percentage), the numerator of which shall be the amount of such Lender’s
Dollar Commitment and the denominator of which shall be the aggregate of all of
the Lenders’ Dollar Commitments, as adjusted from time to time in accordance
with the provisions of Section 7.1 of the Agency Agreement, provided  that, if all Loan
Commitments have been terminated, the numerator shall be the unpaid amount of
such Lender’s Loans and its interest in L/C exposure and the denominator shall
be the aggregate unpaid principal amount of all unpaid Loans and L/C exposure.

“Real Estate”:  Includes all real property including the
Headquarters Facility, owned or leased (as lessee or sublessee) by the
Borrowers or any of their Subsidiaries.

“Real Estate Advance Rate”:  Sixty Percent (60%).

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

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

“Regulatory Change”:  Defined in Section 2.21(c).

“Requirement of Law”:  As to any Person:

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

 37
 

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

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

“Reserve Percentage”:   The decimal equivalent of that rate
applicable to a Lender under regulations issued from time to time by the Board
of Governors of the Federal Reserve System for determining the maximum reserve
requirement of that Lender with respect to “LIBOR liabilities” as defined in
such regulations.  The Reserve Percentage
applicable to a particular Index Loan shall be based upon that in effect during
the subject Interest Period, with changes in the Reserve Percentage which take
effect during such Interest Period to take effect (and to consequently change
any interest rate determined with reference to the Reserve Percentage) if and
when such change is applicable to such loans.

“Reserves”:  The following: Availability Reserves and
Inventory Reserves.

“Revolving Credit”:   Defined in Section 2.1(a).

“Revolving Credit
Commitment Fee”:   Defined in Section
2.12.

“Revolving Credit Early
Termination Fee”:   Defined in
Section 2.15.

“Revolving Credit Loans”:  Defined in Section 2.1(a).

“Revolving Credit Loan
Ceiling”:   $65,000,000,
provided that at the written request of the Borrowers, accompanied by a
certificate of each Obligor’s respective Secretary as to the due adoption and
continued effectiveness of each corporate resolution adopted with respect to
such increase and attesting to the true signatures of each Person authorized as
a signatory to any document effecting such increase, and with the prior written
consent of the Administrative Agent in its sole discretion, the Revolving
Credit Loan Ceiling shall be increased an additional $20,000,000, in increments
of $2,500,000  up to a maximum Revolving Credit
Loan Ceiling of $85,000,000. 
Notwithstanding the foregoing, at any time that the Indenture Agreement
restricts Indebtedness, the Revolving Credit Loan Ceiling shall at no time
exceed the amount that the Indenture Agreement permits Borrowers and the
Restricted Subsidiaries (as defined in the Indenture Agreement) to incur as
Indebtedness (as defined in the Indenture Agreement) hereunder at such time.

“Revolving Credit Note”:  Defined in Section 2.9.

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

 38
 

“Second Agreement”:  That certain Amended and Restated Loan and
Security Agreement dated as of October 15, 2004, by and between Borrowers,
Guarantors, Agents, and Lenders, as amended (except as amended hereby).

“Second Mortgage Cap”: The
amount as might be agreed to from time to time between the Collateral Agent and
PIDA as constituting the extent of the mortgage lien evidenced by the PIDA
Mortgage, subject to further reduction upon Collateral Agent’s determination
that the holder of the PIDA Mortgage has agreed in writing to further
limitations on the extent of its mortgage lien in the Headquarters Facility.

“Security”:  Shall have the same meaning as in Section
2(1) of the Securities Act of 1933, as amended.

“Security-Free Rabbi Trust”:  Shall
be the grantor trusts established by Mothers Work, Inc. in accordance with
Internal Revenue Service Revenue Procedure 92-64 to accept both employer and
employee contributions made under the terms of the Approved Security-Free
SERPS, so long as the Lead Borrower has designated such grantor trust as a
Security-Free Rabbi Trust in a writing delivered to the Administrative Agent,
which writing designates the name of the trust company with whom such trust has
been established and the date of such establishment.  In no circumstances shall the
Collateral Agent or the Lenders under this Agreement have a security interest
in the assets of such grantor trusts.

“Series A Preferred Stock”: 
All shares of Series A Preferred Stock of the Lead Borrower
that were issued and then redeemed by the Lead
Borrower which shares continue to be held as of the date
hereof by certain holders pending presentation by such
holders of proper documentation to the Lead Borrower required to receive
payment in respect of such redemption.

“Special Purpose Credit”: Shall
mean the letter of credit issued under that certain Letter of Credit and
Reimbursement Agreement dated as of July 1, 1998 among the Lead Borrower, Fleet
Capital Corporation, as predecessor-in-interest to the Administrative Agent as
Lender, and Fleet National Bank, predecessor in interest to Bank of America,
related to those certain $4,000,000 Philadelphia Authority for Industrial
Development Variable/Fixed Rate Federally Taxable Economic Development Bonds
(Mothers Work, Inc. Project) Series of 1995, as it may be or may have been
amended, modified, restated, supplemented, replaced, or substituted.

“Stated Amount”:  The maximum amount for which an L/C may be
honored, less any amounts already drawn thereunder.

“Subordinated Debt”:  Includes  unsecured
Indebtedness of Borrowers that is subordinated to the Liabilities in a manner,
under terms and subject to a written agreement satisfactory to Administrative
Agent.

 39
 

“Subsidiary”:   Any corporation of which more than Fifty
Percent (50%) of the outstanding capital stock having ordinary voting power to
elect a majority of the board of directors of such corporation (irrespective of
whether at the time stock of any other class of such corporation shall have or
might have voting power by reason of the happening of any contingency) is at
the time, directly or indirectly, owned by any Obligor, or any partnership,
joint venture or limited liability company of which more than fifty percent (50%)
of the outstanding equity interests are at the time, directly or indirectly,
owned by any Obligor or any partnership of which any Obligor is a general
partner.

“Supporting Obligation”:  Has the meaning given that term in the UCC
and also refers to a Letter-of-Credit Right or secondary obligation which
supports the payment or performance of an Account, Chattel Paper, a Document, a
General Intangible, an Instrument, or Investment Property.

“Suspension Event”:  Any occurrence, circumstance, or state of facts
with respect to a Borrower which (a) is an Event of Default; or (b) would
become an Event of Default if any requisite notice were given and/or any
requisite period of time were to run and such occurrence, circumstance, or
state of facts were not cured within any applicable grace period.

“Sweep Period”: Defined in Section
7.3(e).

“Sweep Suspension”: Defined in Section
7.3(e).   

 “SwingLine Lender”: 
Bank of America or its successor, or another financial institution
designated by the Administrative Agent.

“SwingLine Loan Ceiling”:  $10,000,000.

“SwingLine Loans”:  Defined in Section 2.7(a).

“SwingLine Note”:  Defined in Section 2.7(c).

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

“Term Loan Agent”:  Bank of America, N.A. in its capacity as
agent under the Term Loan Agreement or any successor therein.

“Term Loan Collateral Agent”:  Bank of America, N.A. in its capacity as
collateral agent under the Term Loan Agreement or any successor therein.

 40
 

“Term Loan Agreement”:  That certain senior term loan facility of
even date between Borrowers and Bank of America, N.A. as Term Loan Agent.

“Term Loan Facility”:  That certain term loan facility in the
initial amount of $90,000,000, subject to increase to up to $140,000,000 as
provided under and as documented by the Term Loan Agreement.

“Term Priority Collateral”: As
defined in the Intercreditor Agreement.

“Termination Date”:  The earliest of (a) the Maturity Date; or (b)
the occurrence of any event described in Section 10.11, below; or (c) the date
set as the Termination Date in a notice by the Administrative Agent to the Lead
Borrower on account of the occurrence of any Event of Default other than as
described in Section 10.11, below; or (d) the date of the Borrowers’
termination of the Lenders’ commitments to advance Revolving Credit Loans
hereunder.

“Transfer”:  Wire transfer pursuant to the wire transfer
system maintained by the Board of Governors of the Federal Reserve Board, or as
otherwise may be agreed to from time to time by the Administrative Agent. Wire
instructions may be changed in the same manner that Notice Addresses may be
changed pursuant to Section 12.1 of this Agreement, except that no change of
the wire instructions for Transfers to the Administrative Agent shall be
effective without the consent of the Administrative Agent.

“UCC”:  The Uniform Commercial Code as presently in
effect in New York as used herein in the context of any definitions; otherwise,
as in effect from time to time is New York.

“Unused Line Fee”:   Defined in Section 2.14.

“Voting Stock”:  Includes securities of any class or classes
of a corporation the holders of which are ordinarily, in the absence of
contingencies, entitled to elect a majority of the corporate directors (or
Persons performing similar functions).

ARTICLE II. - THE REVOLVING CREDIT

2.1       Establishment of Revolving Credit.

(a)          The Lenders 
hereby establish a revolving line of credit (the “Revolving Credit”) in the Borrowers’ favor
pursuant to which the Lenders, acting through the Administrative Agent,  shall make loans and advances and otherwise
provide financial accommodations to and for the account of the Borrowers until
the Maturity Date its Pro Rata share of advances (each, a “Revolving Credit  Loan”) as provided herein in each instance equal to its
applicable Percentage Commitment of 
Availability, up to a maximum amount of its applicable Dollar
Commitment.  The obligations of each
Lender hereunder shall be several and not joint.

 41
 

(b)         Loans, advances, and financial accommodations
under the Revolving Credit shall be made with reference to the Borrowing Base
and shall be subject to Availability. 
The Borrowing Base and Availability shall be determined by the Collateral
Agent by reference to Borrowing Base Certificates furnished as provided in Section
5.4 below (subject to Reserves established by the Collateral Agent):

(c)          The commitment of each Lender to provide such
loans, advances, and financial accommodations is subject to Section 2.2.

(d)         The proceeds of borrowings under the Revolving
Credit shall be used solely to refinance the Second Agreement, to provide
financing for working capital purposes, debt prepayments (including on account
of the notes issued under the Indenture Agreement and any prepayment fees and
costs and expenses related thereto), Distributions, Capital Expenditures and
other general corporate purposes of the Borrowers, all solely to the extent
permitted by this Agreement.  No proceeds
of a borrowing under the Revolving Credit may be used, nor shall any be
requested, with a view towards the accumulation of any general fund or funded
reserve of the Borrowers other than in the ordinary course of the Borrowers’
business and consistent with the provisions of this Agreement.

2.2       Advances in Excess of Borrowing Base
(Overloans).

(a)          No Lender has any obligation to make any loan
or advance, or otherwise to provide any credit to or for the benefit of the
Borrowers where the result of such loan, advance, or credit is an Overloan
except in respect to Permissible Overloans which the Agents deem prudent.

(b)         The Lenders’ obligations, among themselves,
are subject to Section 3.3 of the Agency Agreement (which relates to
each Lender’s making amounts available to the Administrative Agent) and to
Sections 6.1(d) and 6.5(a) of the Agency Agreement (which relate to Permissible
Overloans).

(c)          The Lenders’ providing of an Overloan on any
one occasion does not affect the obligations of the Borrowers hereunder (such
as the Borrowers’ obligation to immediately repay any amount which otherwise
constitutes an Overloan) nor shall it obligate the Lenders to do so on any
other occasion.

2.3       Risks of Value of Collateral.

Any reference to a given
asset in connection with the making of loans, credits, and advances and the
providing of financial accommodations under the Revolving Credit and/or the
monitoring of compliance with the provisions hereof shall not be deemed a
determination by any Agent or the Lenders relative to the actual value of the
asset in question.  All risks concerning
the value of the Collateral are and remain upon the Obligors.  All Collateral secures the prompt, punctual,
and faithful performance of the Liabilities and, with respect to the Guarantor,
secures its Liabilities, whether or not relied upon by the Agents in connection
with the making of loans,

 42
 

credits, and advances and
the providing of financial accommodations under the Revolving Credit.

2.4       Commitment to Make Revolving Credit
Loans and Support Letters of Credit.

Subject to the provisions
of this Agreement, the Lenders shall make a loan or advance under the Revolving
Credit and the Administrative Agent shall endeavor to have an L/C issued for
the account of the Borrowers, in each instance if duly and timely requested by
the Lead Borrower as provided herein provided that:

(a)          No Overloan is then outstanding and none will
result therefrom.

(b)         No Suspension Event or Event of Default has
occurred or would result therefrom.

2.5       Revolving Credit Loan Requests.

(a)           Requests for loans and advances under the
Revolving Credit or for the continuance or conversion of an interest rate
applicable to a Revolving Credit Loan may be requested by the Lead Borrower in
such manner as may from time to time be reasonably acceptable to the
Administrative Agent.

(b)         Subject to the provisions of this Agreement,
the Lead Borrower may request a Revolving Credit Loan and elect an interest
rate and Interest Period to be applicable to that Revolving Credit Loan by
giving notice to the Administrative Agent by no later than the following:

(i)                                     If
such Revolving Credit Loan is to be or is to be converted to a Base Margin
Loan: By 1:00 p.m. on the Business Day on which the subject Revolving Credit
Loan is to be made or is to be so converted . 
Base Margin Loans requested by the Lead Borrower, other than those
resulting from the conversion of an Index Loan, shall not be less than
$10,000.00.

(ii)                                  If
such Revolving Credit Loan is to be or is to be converted to an Index
Loan:  By 1:00 p.m., three (3) Index
Business Days before the commencement of any new Interest Period or the end of
the then applicable Interest Period. 
Index Loans and conversions to Index Loans shall each be not less than
$1,000,000.00 and in increments of $500,000.00 in excess of such minimum.

(iii)                               Any
Index Loan which matures while a Suspension Event or Event of Default exists,
may be converted, at the option of the Administrative Agent, to a Base Margin
Loan notwithstanding any

 43
 

notice from
the Lead Borrower that such Revolving Credit Loan is to be continued as an
Index Loan.

(c)          Any request for a Revolving Credit Loan or
for the continuance or conversion of a Revolving Credit Loan which is made
after the applicable deadline therefor, as set forth above, shall be deemed to
have been made at the opening of business on the then next Business Day or
Index Business Day, as applicable, unless the Administrative Agent, in its
discretion, determines to deem it to have been made earlier.  Each request for a Revolving Credit Loan or for
the conversion of a Revolving Credit Loan shall be made in such manner as may
from time to time be acceptable to the Administrative Agent.

(d)          Intentionally omitted.

(e)          The Lead Borrower may request that the
Administrative Agent cause the issuance of L/C’s for the account of the
Borrowers as provided in Section 2.18.

(f)            The Administrative Agent may rely on any
request for a loan or advance, or other financial accommodation under the
Revolving Credit which the Administrative Agent, in good faith, believes to
have been made by a Person duly authorized to act on behalf of the Lead
Borrower and may decline to make any such requested loan or advance, or
issuance, or to provide any such financial accommodation pending the
Administrative Agent’s being furnished with such documentation concerning that
Person’s authority to act as may be satisfactory to the Administrative
Agent.  As an accommodation to Borrowers,
Administrative Agent may in its discretion permit telephonic requests for
Revolving Credit Loans and electronic transmittal of instructions,
authorizations, agreements or reports to Administrative Agent by Borrowers,
provided that Administrative Agent only shall accept or act upon telephonic or
electronic communications from an authorized representative of Lead Borrower,
or such other individuals identified by Lead Borrower from time to time in a
written notice delivered to Administrative Agent.  Administrative Agent and Lenders shall have
no liability to Borrowers for any loss or damage suffered by Borrowers as a
result of Administrative Agent’s honoring of any requests, execution of any
instructions, authorizations or agreements or reliance on any reports
communicated to it telephonically or electronically and purporting to have been
sent to Administrative Agent by an authorized representative of Borrowers, and
Administrative Agent shall have no duty to verify the origin of any such
communication or the authority of the Person sending it.

(g)         A request by the Lead Borrower for loan or
advance or other financial accommodation under the Revolving Credit shall be
irrevocable and shall constitute certification by each Borrower that as of the
date of such request, each of the following is true and correct:

(i)                                     There
has been no material adverse change in the Borrowers’ financial condition
(taken as a whole) from the most recent financial information furnished
Administrative Agent or any Lender pursuant to this Agreement.

 44
 

(ii)                                  Each
representation, not relating to a specific date, which is made herein or in any
of the Loan Documents is then true and correct in all material respects as of
and as if made on the date of such request (except (A) to the extent of changes
resulting from transactions contemplated or permitted by this Agreement or the
other Loan Documents and changes occurring in the ordinary course of business
which singly or in the aggregate would not reasonably be expected to have a
Material Adverse Effect and (B) to the extent that such representations and
warranties expressly relate to an earlier date).

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

(h)          If, at any time or from time to time, a
Suspension Event or Event of Default exists which is continuing,

(i)                                     The
Administrative Agent may suspend the Revolving Credit immediately, in which
event neither the Administrative Agent nor the Lenders shall be obligated
during such suspension to make any loans or advances or to provide any
financial accommodation hereunder or to seek the issuance of any L/C.

(ii)                                  The
Administrative Agent may suspend the right of the Lead Borrower to request any
Index Loan or to convert any Base Margin Loan to an Index Loan.

2.6       Making Of Revolving Credit Loans.

(a)          A loan or advance under the Revolving Credit
shall be made by the Transfer of the proceeds of such loan or advance to the
Operating Account or as otherwise instructed by the Lead Borrower.

(b)         A loan or advance shall be deemed to have been
made under the Revolving Credit (and the Borrowers shall be indebted to the
Agent or Lenders for the amount thereof immediately) upon the Administrative
Agent’s initiation of the Transfer of the proceeds of such loan or advance in
accordance with the Lead Borrower’s instructions (if such loan or advance is of
funds requested by the Lead Borrower) or the charging of the amount of such
loan to the Loan Account (in all other circumstances).

(c)          There shall not be any recourse to or
liability of the Agent or Lenders (except to the extent caused by the gross
negligence or willful misconduct of the Agent or Lenders as determined by a
court of competent jurisdiction), on account of:

(i)                                     Any
delay in the making of any loan or advance requested under the Revolving
Credit.

 45
 

(ii)                                  Any
delay by any bank or other depository institution in treating the proceeds of
any such loan or advance as collected funds.

(iii)                               Any
delay in the receipt, and/or any loss, of funds which constitute a loan or
advance under the Revolving Credit, the wire transfer of which was properly
initiated by the Agent or Lenders in accordance with wire instructions provided
to the Administrative Agent by the Lead Borrower).

2.7       SwingLine Loans.

(a)          For ease of administration of Revolving
Credit Loans, Revolving Credit Loans which are Base Margin Loans may be made by
the Administrative Agent, in its capacity as the SwingLine Lender (in the
aggregate, the “SwingLine Loans”)
in accordance with the procedures set forth in this Agreement for the making of
Revolving Credit Loans. The unpaid principal balance of the SwingLine Loans
shall not at any one time be in excess of the SwingLine Loan Ceiling (which
SwingLine Loan Ceiling is subject to amendment from time to time, by reasonable
advance notice by the Administrative Agent to the Lead Borrower).

(b)         The aggregate unpaid principal balance of
SwingLine Loans shall bear interest at the rate applicable to Base Margin Loans
and shall be repayable as a Revolving Credit Loan under the Revolving Credit.

(c)          The Borrower’s obligation to repay SwingLine
Loans may be evidenced by a Note in the form of EXHIBIT 2.7 (“SwingLine Note”),
executed by the Borrowers and payable to the Administrative Agent.  Neither the original nor a copy of the
SwingLine Note shall be required to establish or prove any Liability.   Upon the Lead Borrower being provided with
an affidavit (which shall include an indemnity reasonably satisfactory to the
Lead Borrower) from the Administrative Agent to the effect that the SwingLine
Note has been lost, mutilated, or destroyed, the Borrowers shall execute and
deliver a replacement of any SwingLine Note to the Administrative Agent.

(d)         For all purposes of this Loan Agreement, the
SwingLine Loans and the Borrower’s obligations to the Administrative Agent
constitute Revolving Credit Loans and are secured as “Liabilities.”

(e)          SwingLine Loans may be subject to periodic
settlement with the Lenders.

2.8       The Loan Account.

(a)          An account (“Loan Account”) shall be opened on the books of the
Administrative Agent in which a record shall be kept of all loans and advances
made under the Revolving Credit.

(b)         The Administrative Agent may also keep a
record (either in the Loan Account or elsewhere, as the Administrative Agent
may from time to time elect) of all interest, fees,

 46
 

service charges, costs, expenses, and other debits owed to the Agent
and the Lender on account of the Liabilities and of all credits against such
amounts so owed.

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

(d)         Except as otherwise provided herein, all fees,
service charges, costs, and expenses for which the Borrowers are obligated
hereunder are payable on demand.  In the
determination of Availability, the Administrative Agent may deem fees, service
charges, accrued interest (except for interest charged on Index Loans, which,
unless charged earlier, shall be charged on the Interest Payment Date), and
other payments which will be due and payable between the date of such
determination and the first day of the then next succeeding month as having
been advanced under the Revolving Credit whether or not such amounts are then
due and payable.

(e)          The Administrative Agent, without the request
of the Lead Borrower, may advance under the Revolving Credit any interest, fee,
service charge, or other payment to which the Agent or any Lender is entitled
from the Borrowers pursuant hereto and may charge the same to the Loan Account
notwithstanding that such amount so advanced may result in Borrowing Base being
exceeded.  Any amount which is added to
the principal balance of the Loan Account as provided in this Section 2.8(e)
shall bear interest, at the interest rate then and thereafter applicable to
Base Margin Loans.  Such action on the
part of the Administrative Agent shall not constitute a waiver of the
Administrative Agent’s right or the Borrowers’ obligations under Section
2.10(b).

(f)            Any statement rendered by the Agent or the
Lenders to the Borrowers concerning the Liabilities shall, in the absence of
manifest error, be considered correct and accepted by the Borrowers and shall
be conclusively binding upon the Borrowers unless the Lead Borrower provides
the Administrative Agent with written objection thereto within Twenty (20) days
from the mailing of such statement, which written objection shall indicate,
with particularity, the reason for such objection.  In the absence of manifest error, the Loan
Account and the Agent’s and Lenders’ books and records concerning the loan
arrangement contemplated herein and the Liabilities shall be prima facie
evidence and proof of the items described therein.

2.9       The Revolving Credit Note.

The Borrowers’ obligation
to repay loans and advances under the Revolving Credit, with interest as
provided herein, may be evidenced by a Note or Notes (each, individually, and
collectively, in the aggregate, a “Revolving Credit Note”)
in the form of EXHIBIT  2.9,
annexed hereto, executed by the Lead Borrower and the other Borrowers, payable
to the applicable Lender.  Neither the
original nor a copy of any Revolving Credit Note shall be required, however, to
establish or prove any Liability.  Upon
the Lead Borrower being provided with an affidavit (which shall include an
indemnity reasonably satisfactory to the Lead Borrower) from any Lender

 47
 

to the effect that a
Revolving Credit Note has been lost, mutilated, or destroyed, the Lead Borrower
and the other Borrowers shall execute and deliver a replacement thereof to such
Lender.

2.10                        Payment
of the Loan Account.

(a)          The Borrowers may
repay all or any portion of the principal balance of the Loan Account from time
to time until the Termination Date, without premium or penalty except as
expressly set forth herein.

(b)         The Borrowers, without notice or demand from
the Administrative Agent, shall pay the
Administrative Agent that amount, from time to time, which is necessary so that
there is no Overloan outstanding.

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

(d)         The Administrative Agent shall cause payments,
pursuant to Sections 2.10(a) and 2.10(b), to be applied in
accordance with Section 7.5(a) of this Agreement, provided that the
Administrative Agent shall cause those application of payments (if any),
pursuant to Sections 2.10(a) and 2.10(b) against Index Loans then
outstanding in such manner as results in the least cost to the Borrowers, but
shall not have any affirmative obligation to do so nor liability on account of
the Administrative Agent’s failure to have done so.  In no event shall action or inaction taken by
the Administrative Agent excuse the Borrowers from any indemnification
obligation under Section 2.10(e).

(e)          Upon the request of the Administrative Agent,
each Borrower, jointly and severally, shall indemnify the Agent and Lenders and
hold the Agent and Lenders harmless from and against any loss, cost or expense
(including loss of anticipated profits) which the Agent or Lenders may sustain
or incur (including, without limitation, by virtue of acceleration after the
occurrence of any Event of Default) as a consequence of any of the following:

(i)                                     Default
by the Borrowers in payment of the principal amount of or any interest on any
Index Loan as and when due and payable, including any such loss or expense
arising from interest or fees payable by the Agent or Lenders in order to
maintain its Index Loans.

(ii)                                  Default
by the Borrowers in making a borrowing or conversion  after the Borrowers has given (or is deemed
to have given) a request for a Revolving Credit Loan or a request to convert a
Revolving Credit Loan from one applicable interest rate to another.

(iii)                               The
making of any payment on an Index Loan or the making of any conversion of any
such Loan to a Base Margin Loan on a day that is not the last day of the
applicable Interest Period with respect

 48
 

thereto,
including interest or fees payable by the Agent and Lenders as “breakage fees”.

2.11                                                Interest On Revolving Credit Loans.

(a)          Each Revolving Credit Loan which consists of
a Base Margin Loan shall bear interest at the Base Margin Rate (determined
based upon a 365/366-day year and actual days elapsed), unless and until it is
made as, or is converted to, an Index Loan pursuant to Section 2.5 hereof.

(b)         Each Revolving Credit Loan which consists of
an Index Loan shall bear interest at the applicable Index Rate (determined
based upon a 365/366-day year and actual days elapsed).

(c)          Subject to, and in accordance with, the
provisions of this Agreement, the Lead Borrower may cause all or a part of the
unpaid principal balance of Revolving Credit Loans to bear interest at the Base
Margin Rate or the Index Rate as specified from time to time by the Lead
Borrower.

(d)          The Lead Borrower shall not select, renew, or
convert any interest rate for a Revolving Credit Loan such that there are more
than Six (6) Interest Periods applicable to the outstanding Index Loans at any
one time.

(e)          The Borrowers shall pay accrued and unpaid
interest on each Revolving Credit Loan in arrears on the applicable Interest
Payment Date therefor.  Following the
occurrence and during the continuance of any Event of Default (and whether or
not the Agent exercises the Agent’s rights on account thereof), all Revolving
Credit Loans shall bear interest, at the option of the Agent, at a rate which
is the aggregate in the case of Base Margin Loan, of the then applicable Base
Margin Rate plus Two Percent (2.00%) per annum, and in the case of Index
Loans, the then applicable Index Rate plus Two Percent (2.00%) per annum.

(f)            The Index Margin and Base Margin shall be
reset for each fiscal quarter as of the first (1st) day of such fiscal quarter (the “Margin Adjustment Date”) based upon the
Margin Pricing Grid set forth below for the prior fiscal quarter, subject to
the provisions in the definitions of “Base Margin” and “Index Margin”:

MARGIN
PRICING GRID

	
  Tier

  	
   

  	
  Pricing Adjusted

  Availability*

  	
   

  	
  INDEX

  MARGIN

  (Percentage)

  	
   

  	
  BASE

  MARGIN

  (Percentage)

  	
   

  
	
  I

  	
   

  	
  >$35,000,000

  	
   

  	
  1.00

  	
  %

  	
  0.00

  	
  %

  
	
  II

  	
   

  	
  >$17,500,000
  and <  

  	
   

  	
  1.25

  	
  %

  	
  0.00

  	
  %

  
	
   

  	
   

  	
  $

  	
  35,000,000

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  III

  	
   

  	
  <$17,
  500,000

  	
   

  	
  1.50

  	
  %

  	
  0.00

  	
  %

  
									

 

 49
 

*Pricing Adjusted
Availability will be determined based upon a Certificate by an Authorized
Officer delivered to the Administrative Agent no later than ten (10) days after
the end of each fiscal quarter certifying as to average Pricing Adjusted
Availability maintained for the prior fiscal quarter.  If there is a change in the applicable Index
Margin or Base Margin, the Administrative Agent and Borrower agree that all
such changes shall be retroactive to the Margin Adjustment Date.  Failure of the Administrative Agent to
receive such Certificate within the time frame specified shall, in addition to
any other remedy provided for in this Agreement, result in an increase in the
Index Margin and the Base Margin to the highest level set forth in the
foregoing grid, until next Margin Adjustment Date following receipt of such
Certificate demonstrating that such an increase is not required.  If an Event of Default has occurred and is
continuing at the time any reduction in the Index Margin and Base Margin is to
be implemented, that reduction shall be deferred until the next Margin
Adjustment Date following the date on which such Event of Default is waived or
cured.

2.12                                                Revolving Credit Commitment Fee.

As compensation for the respective commitments of the Lenders at the
execution of this Agreement to make loans and advances to the Borrowers under
the Revolving Credit and as compensation for the Lenders’ maintenance of
sufficient funds available for such purpose, the Lenders shall have earned as
of the Closing Date the “Revolving Credit
Commitment Fee” in the amount set forth in the Agent’s Fee Letter.

2.13                                                Intentionally Omitted.

2.14                                                Unused Line Fee.

In addition to any other
fee to be paid by the Borrowers on account of the Revolving Credit, the
Borrowers shall pay the Administrative Agent, for the benefit of the Lenders,
an “Unused Line Fee”.  The Unused Line Fee shall equal Two-Tenths of
One Percent (0.20%) per annum of the average difference, during the fiscal
quarter just ended (or relevant period with respect to the payment being made
on the Termination Date) between the Revolving Credit Loan Ceiling and the sum
of (i) the unpaid principal balance of the Loan Account and (ii) the Stated
Amount of L/Cs.  The Unused Line Fee
shall be paid in arrears, on the first day of each fiscal quarter after the
execution of this Agreement and on the Termination Date.

2.15                                                Early Termination Fee.

In the event that the
Termination Date occurs, for any reason, prior to the Maturity Date, the
Borrowers shall pay to the Administrative Agent, for the benefit of the
Lenders, the “Revolving Credit Early Termination Fee”
determined and payable as follows:

 50
 

(a)           One-Fifth of One Percent (0.20%) of the
Revolving Credit Loans as in effect immediately prior to such termination or
reduction in the event termination occurs prior to two years after the Closing
Date.

(b)   Zero
Percent (0.00%) of the Revolving Credit Loans as in effect immediately prior to
such termination or reduction in the event termination occurs after two years
after the Closing Date.

Notwithstanding the
foregoing, the Administrative Agent and Lenders agree to waive the Revolving
Credit Early Termination Fee in the event that the Borrowers refinance the
Revolving Credit with Bank of America, N.A. or any of its Affiliates, it being understood that, neither Bank of America, N.A. nor
any of its Affiliates are hereby committing to provide such refinancing.

For the avoidance of
doubt, no prepayment fees shall be payable under Section 2.15 of the Second
Agreement in connection with the execution and delivery of this Agreement as an
amendment and restatement thereof.

2.16                                                Concerning Fees.

The Borrowers
shall not be entitled to any credit, rebate or repayment of the Revolving
Credit Commitment Fee, Unused Line Fee, Revolving Credit Early Termination Fee,
or other fee earned by the Agent or Lenders pursuant to this Agreement or any
Loan Document notwithstanding any termination of this Agreement or suspension
or termination of the Agent’s or Lenders’ obligation to make loans and advances
hereunder.

2.17                                                Intentionally Omitted.

2.18                                                Procedures For Issuance Of L/C’s.

(a)          The Lead Borrower may request that the
Administrative Agent cause the issuance of L/C’s for the account of the
Borrower.  Each such request shall be in
such manner as may from time to time be acceptable to the Administrative Agent.

(b)         The Administrative Agent will endeavor to
cause the issuance of any L/C so requested by the Lead Borrower, provided that, at the time that the request is made, the
Revolving Credit has not been suspended as provided in Section 2.5(h)
and if so issued:

(i)                                     The
aggregate Stated Amount of all L/C’s then outstanding (giving effect to the
issuance of the requested L/C), does not exceed Thirty Million Dollars ($30,000,000);

(ii)                                  The
expiry of the requested L/C is not later than the earlier of Thirty (30) days
prior to the Maturity Date or the following:

(A)                              For
standby L/C’s: One (1) year from initial issuance.

 51
 

(B)                                For
documentary L/C’s: One hundred (120) days from issuance; and

(iii)                               an
Overloan will not result from the issuance of the subject L/C.

(c)          Unless otherwise agreed between the Lead
Borrower and the Administrative Agent, the Issuer of all L/C’s shall be Bank of
America and any successor to Bank of America.

(d)         The Lead Borrower shall also execute such
other documentation to apply for and support the issuance of an L/C as may be
required by Bank of America or its successor or any other  Issuer, including, without limitation, in
respect of the Special Purpose Credit. This Agreement shall control any
conflict between this Agreement and any such documentation.

(e)          There shall not be any recourse to, nor
liability of, the Agent or Lenders on account of

(i)                                     Any
delay or refusal by an Issuer to issue an L/C; or

(ii)                                  Any
action or inaction of an Issuer on account of or in respect to, any L/C.

(f)            The Borrowers shall reimburse the Issuer
for the amount of any honoring of a drawing under an L/C on the same day on
which such honoring takes place. The Borrowers authorize the Administrative
Agent and the Issuer to charge Borrowers’ Operating Account for such
purpose.  In the event the funds in the
Operating Account are not sufficient, the Administrative Agent or Lenders,
without the request of the Lead Borrower, may advance under the Revolving
Credit (and charge to the Loan Account) the amount of any honoring of any L/C
and other amount for which the Borrowers, the Lenders, the Agent, or the Issuer
becomes obligated on account of, or in respect to, any L/C.  Such advance shall be made whether or not a
Suspension Event exists or such advance would result in an Overloan.  Such action shall not constitute a waiver of
the Administrative Agent’s rights under Section 2.10(b) hereof.

2.19                                                Fees For L/C’s.

(a)          The Borrowers shall pay to the Administrative
Agent a fee, for the benefit of the Lenders, on account of each L/C procured by
the Administrative Agent, quarterly in arrears, and on the Termination Date and
on the End Date, equal to the following:

(i)                                     For
standby L/C’s:   (a) For the first
$8,500,000 of the Stated Amount of such standby L/Cs, the applicable Index
Margin less One-Half of One Percent (0.50%) per annum, of the Stated Amount of
such standby L/Cs, and (b) for the excess, if any, over $8,500,000, the
applicable Index Margin, of the Stated Amount of such standby L/Cs, in each
case payable on the Stated Amount of each outstanding standby L/C quarterly in
arrears on the first day of each fiscal quarter.

 52
 

(ii)                                  For
documentary L/C’s:  The applicable Index
Margin less One-Half of One Percent (0.50%) per annum, payable on the weighted
average of the Stated Amount of such documentary L/C outstanding at any time
during the period since the then most recent payment of such fee, payable
quarterly in arrears, on the first day of each fiscal quarter, and on the End
Date.

(iii)                               Notwithstanding
Subsections (i) and (ii), above, following the occurrence of any Event of
Default (and whether or not the Administrative Agent exercises the
Administrative Agent’s rights on account thereof), the above fees, at the
option of the Administrative Agent, shall be Two Percent (2.00%) per annum
above the applicable rates above.

(b)         In addition to the fee to be paid as provided
in Section 2.19(a), above, the Borrowers shall pay to the Administrative
Agent (or to the Issuer, if so requested by Administrative Agent), on demand,
all issuance, processing, negotiation, amendment, and administrative fees and
other amounts charged by the Issuer on account of, or in respect to, any L/C.

(c)          If any change in any law, executive order or
regulation, or any directive of any administrative or governmental authority
(whether or not having the force of law), or in the interpretation thereof by
any court or administrative or governmental authority charged with the administration
thereof, shall either:

(i)                                     impose,
modify or deem applicable any reserve, special deposit or similar requirements
against letters of credit heretofore or hereafter issued by any Issuer or with
respect to which the Agent, the Lenders or any Issuer has an obligation to lend
to fund drawings under any L/C; or

(ii)                                  impose
on any Issuer any other condition or requirements relating to any such letters
of credit;

and the result of any
event referred to in Section 2.19(c)(i) or 2.19(c)(ii), above,
shall be to increase the cost to the Agent, the Lenders or any Issuer issuing
or maintaining any L/C (which increase in cost shall be the result of such
Issuer’s reasonable allocation among that Issuer’s letter of credit customers
of the aggregate of such cost increases resulting from such events), then, upon
demand by the Administrative Agent and delivery by the Administrative Agent to
the Lead Borrower of a certificate of an officer of the Administrative Agent or
the subject Issuer describing such change in law, executive order, regulation,
directive, or interpretation thereof, its effect on such Issuer, and the basis
for determining such increased costs and their allocation, the Borrowers shall
immediately pay to the Administrative Agent, from time to time as specified by
the Administrative Agent, such amounts as shall be sufficient to compensate the
Agent, the Lenders or the subject Issuer for such increased cost.  Any Issuer’s determination of costs incurred
under Section 2.19(c)(i) or 2.19(c)(ii), above, and the
allocation, if any, of such costs

 53

among the Borrowers and
other letter of credit customers of such Issuer, if done in good faith and made
on an equitable basis and in accordance with such officer’s certificate, shall
be conclusive and binding on the Borrowers.

2.20                CONCERNING L/C’S.

(a)   None of the
Issuer, the Issuer’s correspondents, or any advising, negotiating, or paying
bank with respect to any L/C shall be responsible in any way for:

(i)            The performance by any beneficiary under any
L/C of that beneficiary’s obligations to any Borrower.

(ii)           The form, sufficiency, correctness,
genuineness, authority of any person signing, falsification, or the legal
effect of, any documents called for under any L/C if such documents on their
face appear to be in order.

(b)   The Issuer
may honor, as complying with the terms of any L/C and of any drawing
thereunder, any drafts or other documents otherwise in order, but signed or
issued by an administrator, executor, conservator, trustee in bankruptcy,
debtor in possession, assignee for the benefit of creditors, liquidator,
receiver, or other legal representative of the party authorized under such L/C
to draw or issue such drafts or other documents.

(c)   Unless the
Lead Borrower on behalf of itself and the other Borrowers instructs any Issuer
otherwise, in the particular instance, the Lead Borrower hereby authorizes any
Issuer to:

(i)            Select an advising bank;

(ii)           Select a paying bank; and

(iii)          Select a negotiating bank.

(d)   All
directions, correspondence, and funds transfers relating to any L/C are at the
risk of the Borrowers.  The Issuer shall
have discharged the Issuer’s obligations under any L/C or the drawing
thereunder which includes payment instructions if the Issuer initiates the
method of payment called for thereby (or initiates any other commercially reasonable
and comparable method). None of the Agent, the Lenders or the Issuer shall have
any responsibility for any inaccuracy, interruption, error, or delay in
transmission or delivery by post, telegraph or cable, or for any inaccuracy of
translation, excepting gross negligence or willful misconduct.

(e)   The Agent’s,
the Lenders’ and the Issuer’s rights, powers, privileges and immunities
specified in or arising under this Agreement are in addition to any heretofore
or at any time hereafter otherwise created or arising, whether by statute or
rule of law or contract.

(f)    Except to
the extent otherwise expressly provided hereunder or agreed to in writing by
the Issuer and the Lead Borrower, the L/C will be governed by either, at the
election of

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the Issuer, the Uniform Customs and Practice for Documentary Credits,
International Chamber of Commerce, Publication No. 500, and any subsequent
revisions thereof, or the International Standby Practices – ISP 98,
International Chamber of Commerce Publication, No 590, and subsequent revisions
thereto.

The
obligations of the Borrowers under this Agreement with respect to L/C’s are
absolute, unconditional, and irrevocable and shall be performed strictly in
accordance with the terms hereof under all circumstances, whatsoever including,
without limitation, the following:

(i)            Any lack of validity or enforceability or
restriction, restraint, or stay in the enforcement of this Agreement, any L/C,
or any other agreement or instrument relating thereto;

(ii)           Any amendment or waiver of, or consent to the
departure from, any L/C;

(iii)          The existence of any claim, set-off,
defense, or other right which the Borrowers may have at any time against the
beneficiary of any L/C; and

(iv)          Any good faith honoring of a drawing under
any L/C, which drawing possibly could have been dishonored based upon a strict
construction of the terms of the L/C.

2.21                CHANGED CIRCUMSTANCES.

(a)   Subject to
the provisions of this Agreement, the Borrowers shall have the option (A) as of
any date, to convert all or any part of Base Margin Loans to, or request that
new Revolving Credit Loans be made as, Index Loans of various Interest Periods,
(B) as of the last day of any Interest Period, to continue all or any portion
of the relevant Index Loans as Index Loans; (C) as of the last day of any
Interest Period, to convert all or any portion of the Index Loans to Base
Margin Loans; and (D) at any time, to request new Revolving Credit Loans as
Base Margin Loans; provided, that Revolving Credit Loans may not be continued as
or converted to Index Loans, if the continuation or conversion thereof would
violate the provisions of Sections 2.21(b) or 2.21(c) of this
Agreement or if an Event of Default has occurred and is continuing.

(b)   The
Administrative Agent’s determination of the Index Rate as provided above shall
be conclusive.  Furthermore, if the
Administrative Agent or the Lenders determines, in good faith (which
determination shall be conclusive), prior to the commencement of any Interest
Period that (A) U.S. Dollar deposits of sufficient amount and maturity for
funding the Revolving Credit Loans are not available to the Administrative
Agent or the Lenders in the London Interbank Eurodollar market in the ordinary
course of business, or (B) by reason of circumstances affecting the London
Interbank Eurodollar market, adequate and fair means do not exist for
ascertaining the rate of interest to be applicable to the Revolving Credit
Loans requested by the Borrowers to be Index Loans or the Revolving Credit
Loans bearing interest at the rates set forth in this Agreement shall not
represent the effective pricing to the Administrative Agent for U.S.

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Dollar deposits of a comparable amount for the relevant period (such as
for example, but not limited to, official reserve requirements required by
Regulation D to the extent not given effect in determining the rate), the
Administrative Agent shall promptly notify the Lead Borrower and (1) all
existing Index Loans shall convert to Base Margin Loans upon the end of the
applicable Interest Period, and (2) no additional Index Loans shall be made
until such circumstances are cured.

(c)   If, after
the date hereof, the introduction of, or any change in any applicable law,
treaty, rule, regulation or guideline or in the interpretation or administration
thereof by any governmental authority or any central bank or other fiscal,
monetary or other authority having jurisdiction over the Agent, the Lenders or
their respective lending offices (a “Regulatory Change”),
shall, in the opinion of counsel to the Agent or the Lenders, make it unlawful
for the Agent or the Lenders to make or maintain Index Loans, then the
Administrative Agent shall promptly notify the Lead Borrower and (A) the Index
Loans shall immediately convert to Base Margin Loans on the last Business Day
of the then existing Interest Period or on such earlier date as required by law
and (B) no additional Index Loans shall be made until such circumstance is
cured.

(d)   If, for any
reason, an Index Loan is paid prior to the last Business Day of any Interest
Period or if an Index Loan does not occur on a date specified by the Lead
Borrower in its request (other than as a result of a default by the Agent or
the Lenders), the Borrowers agree to indemnify the Agent and the Lenders
against any loss (including any loss on redeployment of the deposits or other
funds acquired by the Agent or the Lenders to fund or maintain such Index Rate
Loan) cost or expense incurred by the Agent or the Lenders as a result of such
prepayment or failure to occur.

(e)   If any
Regulatory Change (whether or not having the force of law) shall (A) impose,
modify or deem applicable any assessment, reserve, special deposit or similar
requirement against assets held by, or deposits in or for the account of or
loans by, or any other acquisition of funds or disbursements by, the Agent or
the Lenders; (B) subject the Agent, the Lenders or the Index Loans to any Tax
or change the basis of taxation of payments to the Agent or the Lenders of
principal or interest due from the Borrowers to the Agent or the Lenders
hereunder (other than a change in the taxation of the overall net income of the
Agent or the Lenders); or (C) impose on the Agent or the Lenders any other
condition regarding the Index Loans or the Agent’s or Lenders’ funding thereof,
and the Administrative Agent or Lenders shall determine (which determination
shall be conclusive) that the result of the foregoing is to increase the cost
to the Agent or the Lenders of making or maintaining the Index Loans or to
reduce the amount of principal or interest received by the Agent or Lenders
hereunder, then the Borrowers shall pay to the Agent or the Lenders, on demand,
such additional amounts as the Administrative Agent or the Lenders shall, from
time to time, determine are sufficient to compensate and indemnify the Agent or
Lenders from such increased cost or reduced amount.  Each Lender will use reasonable efforts to
designate a different lending office for the Liabilities if such designation
will avoid the need for, or reduce the amount of such compensation and will
not, in the reasonable opinion of such Lender (including, without limitation,
by reason of any economic, legal, or regulatory cost or disadvantage that such
Lender may bear or suffer by reason of such designation).

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(f)    The Agent
and Lenders shall receive payments of amounts of principal of and interest with
respect to the Index Loans free and clear of, and without deduction for, any
Taxes.  If (A) the Agent or any Lender
shall be subject to any Tax in respect of any Index Loans or any part thereof
or, (B) the Borrowers shall be required to withhold or deduct any Tax from any
such amount, the Index Rate applicable to such Index Loans shall be adjusted by
the Administrative Agent or such Lender to reflect all additional costs incurred
by the Agent or such Lender in connection with the payment by the Agent or such
Lender or the withholding by the Borrowers of such Tax and the Borrowers shall
provide the Agent or such Lender with a statement detailing the amount of any
such Tax actually paid by the Borrowers. Determination by the Administrative
Agent or such Lender of the amount of such costs shall be conclusive absent
manifest error.  If after any such
adjustment any part of any Tax paid by the Agent or such Lender is subsequently
recovered by the Agent or such Lender, the Agent or such Lender, as applicable,
shall reimburse the Borrowers to the extent of the amount so recovered.  A certificate of an officer of the
Administrative Agent or such Lender setting forth the amount of such recovery
and the basis therefor shall be conclusive absent manifest error.

2.22                LENDERS’ COMMITMENTS.

(a)   Subject to
Section 7.1 of the Agency Agreement (which provides for assignments and
assumptions of commitments), each Lender’s “Percentage Commitment”,
and “Dollar Commitment” is set forth on EXHIBIT 2.22(a).

(b)   The
obligations of each Lender are several and not joint.  No Lender shall have any obligation to make
any loan or advance under the Revolving Credit in excess of the lesser of the
following:

(i)            that Lender’s Percentage Commitment of the
subject loan or advance or of Availability; and

(ii)           that Lender’s unused Dollar Commitment.

(c)   No Lender
shall have any liability to the Borrowers on account of the failure of any
other Lender to provide any loan or advance under the Revolving Credit nor any
obligation to make up any shortfall which may be created by such failure.

(d)   The Dollar
Commitments, Percentage Commitments, and identities of the Lenders may be
changed, from time to time by the reallocation or assignment of Dollar
Commitments and Percentage Commitments amongst the Lenders or with other
Persons who become “Lenders”, provided,
however unless an Event of
Default has occurred (in which event, no consent of the Lead Borrower is
required) any assignment to a Person not then a Lender shall be subject to the
prior written consent of the Lead Borrower (not to be unreasonably withheld),
which consent will be deemed given unless the Lead Borrower provides the
Administrative Agent with written objection, not more than Five (5) Business
Days after the Administrative Agent shall have given the Lead Borrower written
notice of a proposed assignment.

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(e)   Upon written
notice given the Lead Borrower from time to time by the Administrative Agent,
of any assignment or allocation referenced in Section 2.22(d):

(i)            The Lead Borrower and the other Borrowers, if
required by the Administrative Agent, shall execute one or more Revolving
Credit Notes (which notes shall replace any Revolving Credit Notes theretofore provided
by the Borrowers) to reflect such changed Dollar Commitments, Percentage
Commitments, and identities and shall deliver such Revolving Credit Notes to
the Administrative Agent (which promptly thereafter shall cancel and deliver to
the Lead Borrower the Revolving Credit Notes so replaced, if any).   In the event that the Administrative Agent
does not require the delivery of Revolving Credit Notes or that in the event
that a Revolving Credit Note is to be exchanged following its acceleration or
the entry of an order for relief under the Bankruptcy Code with respect to the
Borrowers, the Administrative Agent, in lieu of causing the Lead Borrower to
execute one or more new Revolving Credit Notes, may issue the Administrative
Agent’s Certificate confirming the resulting Dollar Commitments and Percentage
Commitments.

(ii)           Such change shall be effective from the
effective date specified in such written notice and any Person added as a
Lender shall have all rights and privileges of a Lender hereunder thereafter as
if such Person had been a signatory to this Agreement and any other Loan
Document to which a Lender is a signatory and any Person removed as a Lender
shall be relieved of any obligations or responsibilities of a Lender hereunder
thereafter.

2.23                DESIGNATION OF LEAD BORROWER AS BORROWERS’ AGENT.

(a)   Each
Borrower hereby irrevocably designates and appoints the Lead Borrower as that
Borrower’s agent to obtain loans and advances under the Revolving Credit, the
proceeds of which shall be available to each Borrower for those uses as those
set forth in this Agreement.  As the
disclosed principal for its agent, each Borrower shall be obligated to the
Agent and Lenders on account of loans and advances so made as if made directly
by the Agent or Lenders to that Borrower, notwithstanding the manner by which
such loans and advances are recorded on the books and records of the Lead
Borrower and of any Borrower.

(b)   Each
Borrower recognizes that credit available to it under the Revolving Credit is
in excess of and on better terms than it otherwise could obtain on and for its
own account and that one of the reasons therefor is its joining in the credit
facility contemplated herein with all other Borrowers.  Consequently, each Borrower hereby assumes
and agrees to discharge all Liabilities of each of the other Borrowers as if
the Borrower which is so assuming and agreeing were each of the other
Borrowers.

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(c)   The Lead
Borrower shall act as a conduit for each Borrower (including itself, as a
“Borrower”) on whose behalf the Lead Borrower has requested a Revolving Credit
Loan.

(d)   The proceeds
of each loan and advance provided under the Revolving Credit which is requested
by the Lead Borrower shall be deposited into the Operating Account or as
otherwise indicated by the Lead Borrower. 
The Lead Borrower shall cause the transfer of the proceeds thereof to
the Borrower(s) on whose behalf such loan and advance was obtained.  The Agent and Lenders shall not have any
obligation to assure the proper application of such proceeds.

ARTICLE III. — CONDITIONS
PRECEDENT:

As a condition to
the effectiveness of this Agreement, the establishment of the Revolving Credit,
the procurement of the initial L/C issued hereunder, and the making of the
first loan under the Revolving Credit, each of the documents respectively
described in Sections 3.1 through and including 3.4 (each in form and substance
satisfactory to the Agent) shall have been delivered to the Agent, and the
conditions respectively described in Sections 3.5 through and including 3.10,
shall have been satisfied as of the Closing Date:

3.1  CORPORATE DUE DILIGENCE.

(a)   A
Certificate of corporate good standing issued with respect to each Obligor by
the Secretary of State of the State in which that Obligor was organized.

(b)   Certificates
of qualification to do business as a foreign corporation, issued by the
Secretary(ies) of State of each State in which such Obligor’s conduct of
business or ownership of assets of requires such qualification, except where
the failure to so qualify would not have a Material Adverse Effect.

(c)   A
Certificate of each Obligor’s respective Secretary as to the due adoption and
continued effectiveness of, each corporate resolution adopted in connection
with the establishment of the loan arrangement contemplated by the Loan
Documents and attesting to the true signatures of each Person authorized as a
signatory to any of the Loan Documents, such certificate to set forth the text
of each such resolution in an attachment thereto.

3.2  OPINION.

An opinion of
counsel to the Obligors in form and substance satisfactory to the Agent.

3.3  OFFICERS’ CERTIFICATES.

Certificates
executed by the Chief Executive Officer, Chief Operating Officer, President or
Chief Financial Officer of each Obligor stating that the representations and
warranties made by such Obligor to the Agent in the Loan Documents are true and
complete in all material respects as of the date of such certificate, and that
no event has occurred which is or which, solely with the giving of notice or
passage of time (or both), would be an Event of Default.

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3.4  ADDITIONAL DOCUMENTS.

Such additional
instruments and documents as the Agent or its counsel reasonably may require or
request including, without limitation, the following:

(a)   Loan
Documents.  Each of the Loan Documents shall have been
duly executed and delivered by the respective parties thereto shall be in full
force and effect and shall be in form and substance satisfactory to Agent.

(b)   Assignment. An assignment of Fleet Retail Group, LLC’s
right, title and interest in and to the Second Agreement.

(c)   Agency
Agreement.  An executed copy of the Agency Agreement
dated as of the Closing Date, by and between the Administrative Agent, the
Collateral Agent and the Lenders.

(d)   Certificates of Insurance.  (a) A certificate of insurance from an
independent insurance broker dated as of the Closing Date, identifying
insurers, types of insurance, insurance limits, policy terms and otherwise
describing the insurance obtained in accordance with this Agreement, and (b) copies
of all policies evidencing such insurance.

(e)   Blocked Account Agreements.

(i) Duly executed and delivered amendment to the
Blocked Account Agreement by and between Collateral Agent, Lead Borrower and
JPMorgan Chase Bank, N.A., successor-in-interest to Bank One, N.A., in form and
substance satisfactory to Collateral Agent,

(ii)  Duly
executed and delivered notification to Wells Fargo Bank, N.A., with respect to
the Blocked Account Agreement by and between Collateral Agent, Lead Borrower
and Wells Fargo Bank, N.A., in form and substance satisfactory to Collateral
Agent; and

(iii) Subject to Section 7.3(a)(ii) duly executed and
delivered Blocked Account Agreement by and between Collateral Agent, Term Loan
Agent, Lead Borrower and Wachovia Bank, N.A., in form and substance
satisfactory to Collateral Agent.

(f)    Credit Card Notifications.  Delivery of notification, executed on behalf
of the Borrowers, to each of the Borrowers’ credit card processors of notice
(in form satisfactory to Collateral Agent), which notice provides that payment
of all credit card charges submitted by the Borrowers to that processor and any
other amount payable to the Borrowers by such processor shall be directed to
the Operating Account or as otherwise designated from time to time by the
Collateral Agent.

(g)   Borrowing Base Certificate.  Delivery of the initial Borrowing Base
Certificate dated as of the Closing Date.

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

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

(j)    Collateral Agent’s Fee
Letter.  Side Letter dated as of the
Closing Date by and between the Collateral Agent and the Borrowers.

(k)   Trademark Security Agreement.  Duly executed and delivered Amended and
Restated Trademark Security Agreement dated as of the Closing Date, by and
between Obligors, Term Loan Agent, and Collateral Agent.

(l)    Landlord Waivers.  Duly executed and delivered notifications to
the landlords in connection with the Collateral Access Agreements for the
Domestic Distribution Centers, in form and substance reasonably satisfactory to
the Collateral Agent, together with any waiver and subordination agreements
required under the Term Loan Agreement.

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

(n)   Lender’s Fee Letter.  Side Letter dated as of the Closing Date by
and between the Lender and the Borrowers.

(o)   Assignment of Mortgage.  Delivery of an Assignment of Original
Mortgage for the Headquarters Facility from Fleet Retail Group, Inc. to
Collateral Agent, in form and substance satisfactory to Collateral Agent.

(p)   Customs Broker Agreement.  Duly executed and delivered notifications to
each of Barthco International, Jose David Gonzalez, Excel and Garden City
Customs Services, regarding the Custom Broker Agreement by and between each
such party, respectively, Lead Borrower, and the Collateral Agent, each in form
and substance satisfactory to Collateral Agent.

(q)   DDA Notifications.  Delivery of notification, executed on behalf
of a Borrower, to each depository institution in which any DDA is maintained
(in form satisfactory to Collateral Agent).

(r)    Date-down to  Title
Policy. 
A date-down endorsement to the existing loan policy of title
insurance issued by Commonwealth Land Title Insurance Company with respect

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to the Mortgaged Property, subject to the
exceptions set forth in the existing title policy for the Mortgaged Property
and such other exceptions as may be acceptable to Collateral Agent and
confirming that all real estate taxes are paid through the date of such
date-down.

(s)   Mortgage Amendment.  The Collateral Agent, the term Lender, the
Lead Borrower and PIDCFC shall have recorded an amendment to the Mortgage in
form and substance satisfactory to the Collateral Agent (the “Mortgage
Amendment”) to reflect the Term Loan Agreement as being secured by a fourth
priority mortgage.

(t)    Subordination Amendment.  PIDA shall have amended its existing
Subordination Agreement with Collateral Agent (as successor in interest to
Fleet Capital Corporation) in order to confirm the effect of the Mortgage
Amendment and its relative priority of the obligations described above and to
determine the Second Mortgage Cap;

(u)   Authorization/Incumbency.  Borrower shall have provided copies or
originals as appropriate of the resolutions of the board of directors of the
Lead Borrower, PIDA, and PIDCFC and any other usual evidence of authority and
incumbency for the Lead Borrower, PIDA, and PIDCFC to enter into all documents
related to the Mortgage Amendment and the amendment to the Subordination
Agreement; and

(v)   Intercreditor Agreement.  The Intercreditor Agreement with the Term Loan
Agent and the Term Loan Collateral Agent with respect to the Term Loan
Facility, together with the Term Loan Agreement and all documentation required
for the Term Loan Facility, each in form and substance satisfactory to the
Administrative Agent and the Collateral Agent.

3.5  REPRESENTATIONS AND WARRANTIES.

Each of the
representations made by or on behalf of the Obligors in this Agreement or in
any of the other Loan Documents or in any other report, statement, document, or
paper provided by or on behalf of the Borrowers shall be true and complete as
of the date as of which such representation or warranty was made, except to the
extent it specifically relates solely to an earlier date.

3.6  MINIMUM DAY ONE EXCESS AVAILABILITY.

On the Closing
Date, after giving effect to any initial funding under the Revolving Credit,
all then held checks (if any), accounts payable which are beyond credit terms
then accorded the Borrowers, overdrafts, any charges to the Loan Account made
in connection with the establishment of the credit facility contemplated
hereby; and L/C’s to be issued at, or immediately subsequent to, such
establishment, Excess Availability shall not be less than $20,000,000.

3.7  ALL FEES AND EXPENSES PAID.

All fees due at or
immediately after the first funding under the Revolving Credit and all costs
and expenses incurred by the Agent and Lenders in connection with the
establishment of

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the credit facility
contemplated hereby (including the reasonable fees and expenses of counsel to
the Agent and Lenders and including all fees under the Collateral Agent’s fee
letter and the Revolving Credit Commitment Fee) shall have been paid in full.

3.8  NO BORROWER DEFAULT.

No Suspension
Event or Event of Default has occurred which is continuing.

3.9  NO ADVERSE CHANGE.

No event shall
have occurred or failed to occur, which occurrence or failure is or could have
a materially adverse effect upon the Borrowers’ financial condition when
compared with such financial condition or circumstances at June 30, 2004.

3.10                FINALIZATION OF TERM LOAN FACILITY

Documentation
providing for the Term Loan Facility is finalized and acceptable to the
Administrative Agent in all respects, and an intercreditor agreement respecting
the Term Loan Facility is finalized and acceptable to the Administrative Agent
in all respects.

3.11                VALIDITY OF LIENS.

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

3.12                DOCUMENTS.

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

ARTICLE IV. - GENERAL
REPRESENTATIONS, COVENANTS AND WARRANTIES:

To induce the
Agent and Lenders to establish the credit facility contemplated herein and to
make loans and advances and to provide financial accommodations under this
Agreement (each of which loans shall be deemed to have been made in reliance
thereupon) the Obligors, in addition to all other representations, warranties,
and covenants made by the Obligors in any other Loan Document, represents,
warrants, and covenants as follows:

4.1  PAYMENT AND PERFORMANCE OF LIABILITIES.

The Obligors shall
pay each Liability when due (or when demanded, if payable on demand) and shall
promptly, punctually, and faithfully perform each other Liability.

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4.2  DUE ORGANIZATION. CORPORATE AUTHORIZATION. NO
CONFLICTS.

(a)   The exact
name of each Obligor, as set forth in each Obligor’s organizational documents,
is set forth in EXHIBIT
4.2 hereof.  Each Obligor presently is and shall hereafter
remain in good standing as the type of entity indicated on EXHIBIT 4.2 hereof and be duly organized under the laws
of the state of its incorporation indicated in EXHIBIT 4.2 hereof
and shall hereafter remain duly qualified and in good standing in every other
State in which, by reason of the nature or location of that Obligor’s assets or
operation of that Borrower’s business, such qualification may be necessary,
except where the failure to so qualify or be in good standing would not have a
Material Adverse Effect.  EXHIBIT 4.2 accurately describes the corporate structure
of the Obligors and any Affiliates, including the identity of shareholders
holding more than 25% of the issued and outstanding stock having the right to
vote, limited and general partners, or members, as the case may be.

(b)   Each
Affiliate of the Obligors is listed on EXHIBIT 4.2. The Lead Borrower shall provide the
Administrative Agent with prior written notice of any entity’s becoming or
ceasing to be an Affiliate (provided, however, that with respect to any
Affiliate that become or cease to become Affiliate solely due to issuances or
exchanges of the publicly-traded stock of the Lead Borrower, the Lead Borrower
shall provide the Administrative Agent with written notice thereof on or before
the thirtieth (30th) day of the next month thereafter).

(c)   No Obligor
shall change its State of incorporation or its taxpayer identification number
without twenty-one (21) days prior written notice to Administrative Agent and
its counsel, provided that no such change shall occur unless no Suspension
Event has occurred that is continuing.

(d)   Each Obligor
has all requisite corporate power and authority to execute and deliver all Loan
Documents to which the Obligor is a party and has and will hereafter retain all
requisite corporate power to perform all Liabilities.

(e)   The
execution and delivery by each Obligor or by the Lead Borrower of each Loan
Document on behalf of each Obligor that is a party thereto, such Obligor’s
consummation of the transactions contemplated by such Loan Documents
(including, without limitation, the creation of Collateral Interests by such
Obligor to secure the Liabilities), such Borrower’s performance under such Loan
Document, the borrowings hereunder, and the use of the proceeds thereof:

(i)            Have been duly authorized by all necessary
corporate action on the part of such Obligor;

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

(iii)          Will not result in the creation or imposition
of, or the obligation to create or impose, any Encumbrance upon any assets of
such

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Obligor
pursuant to any Requirement of Law or obligation of such Obligor, except
pursuant to the Loan Documents and the Term Loan Agreement.

(f)    The Loan
Documents have been duly executed and delivered by the Lead Borrower and the
other Borrowers or by the Lead Borrower on behalf of itself and the other
Borrowers and by the Guarantor, as the case may be and are the legal, valid and
binding obligations of the Obligors, enforceable against the Obligors in
accordance with their respective terms, except to the extent enforceability may
be limited by applicable bankruptcy, insolvency, moratorium, or other similar
laws affecting the enforcement of creditors’ rights generally and by general
principles of equity.

4.3  TRADE NAMES.

(a)   EXHIBIT
4.3 is a listing of:

(i)            All names under which each Obligor has
conducted its business within the past Five (5) years, and

(ii)           All entities and/or persons with whom each
Obligor ever consolidated or merged within the past five (5) years, or from
whom each Obligor ever acquired in a single transaction or in a series of
related transactions substantially all of such entity’s or Person’s assets
within the past five (5) years.

(b)   The Lead
Borrower will provide the Administrative Agent with not less than twenty-one
(21) days prior written notice (with reasonable particularity) of any change to
any Obligor’s name from that under which such Obligor is conducting its
business at the execution of this Agreement and such Obligor will not effect
such change unless no Suspension Event has occurred that is continuing.

4.4  INFRASTRUCTURE.

(a)   The Obligor
have and will maintain a sufficient infrastructure to conduct their business as
presently conducted and as contemplated to be conducted as described in the
Business Plan.

(b)   Each Obligor
owns and possesses, or has the right to use (and will hereafter own, possess,
or have such right to use) all patents, industrial designs, trademarks, trade
names, trade styles, brand names, service marks, logos, copyrights, trade
secrets, know-how, confidential information, and other intellectual or
proprietary property of any third Person necessary for the Obligors’ conduct of
the Obligor’ business, except where such failure could not reasonably be
expected to have a Material Adverse Effect.

(c)   The conduct
by the Obligors of the Obligors’ business does not presently infringe (nor will
the Obligors conduct their business in the future so as to infringe) the
patents, industrial designs, trademarks, trade names, trade styles, brand
names, service marks, logos,

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copyrights, trade secrets, know-how, confidential information, or other
intellectual or proprietary property of any third Person, except where the
infringement could not reasonably be expected to have a Material Adverse
Effect.

4.5  GUARANTOR.

The Guarantor will
not conduct any business in the United States or hold any assets in the United
States, other than (i) holding the leases for certain stores in Canada that
sell the Borrowers’ inventory; and (ii) holding assets in the corporate
headquarters portion of the Headquarters Facility.

4.6  LOCATIONS.

(a)   The
Collateral, and the books, records, and papers of the Obligors pertaining
thereto, are kept and maintained solely at the Obligors’ chief executive
offices and those locations which are listed on EXHIBIT 4.6(a),
which includes, with respect to each such location, the name and address of the
landlord on the Lease which covers such location (or an indication that the
Obligors own the subject location) and of all service bureaus with which any
such records are maintained.  The
Obligors shall supplement EXHIBIT
4.6(a) on a monthly basis
after the date hereof to reflect any Permitted Store Openings/Closings,
additional Domestic Distribution Centers (for which prior notice has been given
pursuant to the definition thereof), or new chief executive offices.

(b)   The Obligors
shall not remove any of the Collateral from such chief executive office or
those locations listed on EXHIBIT
4.6(a) except to:

(i)            accomplish the Costa Rican Transaction;

(ii)           accomplish sales of Inventory in the ordinary
course of business;

(iii)          move Inventory from one such location to
another such location;

(iv)          utilize such of the Collateral as is removed
from such locations in the ordinary course of business (such as motor
vehicles); or

(v)           move Inventory from one store to another
store in connection with Permitted Store Openings/Closings.

(c)   The
Borrowers shall use their reasonable efforts to provide the Collateral Agent
with Landlord Waivers or subordinations, in substantially the form annexed
hereto as EXHIBIT 4.6(c) for each of the Borrowers’ locations in any
of the Landlord States or the chief executive office (if it is not located in
the Headquarters Facility) or any new Domestic Distribution Center.  The Collateral Agent may establish an
Availability Reserve for each such location as to which such a waiver is not so
delivered, which Availability Reserve shall be reduced or eliminated upon
delivery of a waiver for such location.

(d)   The
Borrowers will not:

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

(ii)           Commit to, or open or close any location at
which the Borrowers maintains, offers for sales, or stores any of the
Collateral, except that (A) the Borrowers may open or close, in their business
judgment, locations within department or specialty stores or other locations in
which a Borrower leases or licenses a portion of the space in such store; and
(B) the Borrowers may: (I) open, during any Fiscal Year, new stores in an
amount not to exceed Twenty Percent (20%) of the number of stores (other than
locations within department or specialty stores or other locations in which a
Borrower leases or licenses a portion of the space in such store) existing as
of the first day of such Fiscal Year (including stores that have closed since
such first day), and (II) close, during any Fiscal Year, stores in an amount
not to exceed Twenty Percent (20%) of the number of stores (other than
locations within department or specialty stores or other locations in which a
Borrower leases or licenses a portion of the space in such store) existing as
of the first day of such Fiscal Year (not including stores that have opened
since such first day) (“Permitted Store Openings/Closings”).

(e)   No tangible
personal property of the Borrowers is in the care or custody of any third party
or stored or entrusted with a bailee or other third party and none shall
hereafter be placed under such care, custody, storage, or entrustment, except
(i) as otherwise disclosed pursuant to, or permitted by, this Section 4.6, (ii)
for Inventory located in department or specialty stores or other locations in
which a Borrower leases or licenses a portion of the space in such store; (iii)
for goods in control of a customs broker, which has entered into a Customs
Brokers Agreement, (iv) for work-in-progress at contractors (whether or not in
the United States), and (v) to the extent such goods do not constitute Eligible
Inventory, Eligible In-Transit Inventory or Eligible L/C Inventory, any raw
materials at contractors (whether or not in the United States), finished goods
out for re-working, and goods in transit.

4.7  TITLE TO ASSETS.

(a)   The Obligors
are, and shall hereafter remain, the owners of the Collateral free and clear of
all Encumbrances other than Encumbrances or exceptions to ownership listed on EXHIBIT 4.7(a) and other Permitted Encumbrances. The
Obligors do not and shall not have possession of any property on consignment to
the Obligors.

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

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

(ii)           Equipment subject to (a) Capital Leases or
purchase money security interests comprised in each case of Permitted
Encumbrances; and (b) operating leases.

(c)   The Obligors
do not have any goods, documents of title or other Collateral in the custody,
control, or possession of a third party, except as set forth in EXHIBIT 4.7(d) and except for goods located in the United
States in transit to a location of the Borrowers permitted herein or in the
ordinary course of business of the Obligors in the possession of the carrier
transporting such goods.  In the event
that any goods, documents of the title or other Collateral are at any time
after the date hereof in the custody, control or possession of any other person
not referred to in EXHIBIT
4.7(d) or such carriers,
Obligors shall promptly notify the Collateral Agent thereof in writing.  Promptly upon Collateral Agent’s request, the
Obligors shall deliver to the Agent a collateral access agreement, in form and
substance acceptable to the Collateral Agent in its sole discretion, duly
authorized, executed and delivered by such person and Borrowers.

(d)   EXHIBIT
4.7(d) is a schedule of all
customs brokers employed by the Obligors for the transport of goods in the
ordinary course of the business of the Obligors.  The Obligors shall not employ any other
customs brokers unless (i) the Obligors have provided the Collateral Agent with
thirty (30) days prior notice thereof and (ii) such customs broker has executed
and delivered to the Collateral Agent a Customs Broker Agreement.  The Collateral Agent shall not give notice to
any of the Obligors’ customs brokers to follow the instructions of the
Collateral Agent as provided in any Customs Brokers Agreement except upon or
following the occurrence and during the continuance of an Event of Default and
not in violation of the Intercreditor Agreement.

4.8  INDEBTEDNESS.

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

(i)            Any Indebtedness under the Revolving Credit
or the Term Loan Facility;

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

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

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

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(v)           unsecured Indebtedness
up to the aggregate amount of $75,000,000;

(vi)          Indebtedness of
Guarantor to Borrowers up to the amount equal to Fifteen Million Dollars
($15,000,000) less the amount of
any capital contributions or other investments by Borrowers to Guarantor or its
Subsidiaries made after the date hereof, in the aggregate;

(vii)         Any unsecured
Indebtedness related to the redemption of the Series A Preferred Stock, in the
maximum aggregate amount of $800,000;

(viii)        Indebtedness to finance
the construction of an addition or additions to the Headquarters Facility or
additional buildings on the Headquarters Facility premises or to acquire
fixtures for the Headquarters Facility to the extent secured by Permitted
Encumbrances described in clause (j) of the definition thereof; and

(ix)          Any Indebtedness between
any of the Borrowers.

provided,
that, the amount of any Capital Leases and Indebtedness for
Equipment is in compliance with the provision on Capital Expenditures set forth
in EXHIBIT 5.12(a).

(b)   The Obligors
shall not permit more than 25% of that portion of the aggregate of their
Indebtedness for the purchase of goods or services which is not the subject of
a good faith dispute to remain unpaid more than 30 days beyond then current
trade terms provided to the subject Borrower by the supplier of such goods and
services.

(c)           The Obligors shall not
prepay Indebtedness except (i) the Liabilities; (ii) Indebtedness under the
Term Loan Agreement as follows: (A) other than in connection with a Liquidation
and not in contravention of the Intercreditor Agreement: (1) mandatory
prepayments of Indebtedness under the Term Loan Agreement; and (2) so long as
no Suspension Event or Event of Default has occurred and is continuing,
voluntary prepayments of Indebtedness under the Term Loan Agreement but only to
the extent that, upon and after giving effect thereto, pro forma Excess
Availability would not be less than 22.5% of the Borrowing Base; or (B) in
connection with a Liquidation, prepayments of Indebtedness under the Term Loan
Agreement in accordance with the Intercreditor Agreement; (iii) not in
contravention of any intercreditor or subordination agreement as may be in
effect with respect to other Indebtedness, and so long as no Suspension Event
or Event of Default has occurred and is continuing, prepayments of such other
Indebtedness but only to the extent that, upon and after giving effect thereto,
pro forma Excess Availability would not be less than 22.5% of the Borrowing
Base; or (iv) prepayments associated with the redemption of the Series A
Preferred Stock, in the maximum aggregate amount of $800,000.

(d)           Except for prepayments
permitted under Section 4.8(c), the Borrowers shall not make any payment of any
part or all of any Subordinated Debt or take any other action

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or omit to take any other
action in respect of any Subordinated Debt in contravention of the written
terms of any instrument evidencing such Subordinated Debt, or enter into any
agreement (written or oral) which could in any way be considered to amend,
modify or terminate any instrument or agreement evidencing or relating to
Subordinated Debt.

4.9  INSURANCE.

(a)   EXHIBIT 4.9, is a schedule of all insurance policies
owned by the Obligors or under which the Obligors are the named insured.  Each of such policies is in full force and
effect.  The Obligors are not in material
default or violation of any such policy and, to the Obligors’ knowledge, no
issuer is in material default or violation of any such policy.

(b)   The Obligors
shall have and maintain at all times insurance covering such risks, in such
amounts, containing such terms, in such form, and for such periods customary
for entities in similar industries and in similar locations as Obligors, and
written by such companies as may be reasonably satisfactory to the Agent.

(c)   All
insurance carried by the Obligors shall provide for a minimum of thirty (30)
days’ written notice of cancellation to the Collateral Agent and all such
insurance which covers the Collateral shall include an endorsement in favor of
the Collateral Agent that is reasonably acceptable to the Collateral Agent.

(d)   The coverage
reflected on EXHIBIT 4.9 presently satisfies the foregoing
requirements, it being recognized by the
Obligors, however, that such requirements may change hereafter to
reflect changing circumstances.

(e)   The Obligors
shall furnish the Agent from time to time with certificates or other evidence
reasonably satisfactory to the Agent regarding compliance by the Borrowers with
the foregoing requirements.

(f)    In the
event of the failure by the Obligors to maintain insurance as required herein,
the Collateral Agent, at its option, may obtain such insurance, provided, however,
the Collateral Agent’s obtaining of such insurance shall not constitute a cure
or waiver of any Event of Default occasioned by the Obligors’ failure to have
maintained such insurance.

(g)   The Lead
Borrower shall advise the Collateral Agent of each claim in excess of
$1,000,000 (or, following the occurrence and during the continuance of an Event
of Default, $100,000) made by any Obligor under any policy of insurance which
covers the Collateral and will permit the Collateral Agent, at the Collateral
Agent’s option in each instance, to the exclusion of the Obligors, to conduct
the adjustment of each such claim in excess of such amounts (and, at the
Collateral Agent’s option in each instance, of all claims following the
occurrence of any Event of Default). 
Upon and following the occurrence and during the continuation of an
Event of Default, the Obligors hereby appoint the Collateral Agent as the
Obligors’ attorney in fact to obtain, adjust, settle, and cancel any insurance
described in this section and to endorse in favor of the Collateral Agent any
and all drafts and other instruments

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with respect to such insurance. 
The within appointment, being coupled with an interest, is irrevocable
until this Agreement is terminated by a written instrument executed by a duly
authorized officer of the Collateral Agent. The Agent shall not be liable on
account of any exercise pursuant to said power except where there has been a
final judicial determination (in a proceeding in which the Agent had an
opportunity to be heard) that such exercise was conducted in a grossly
negligent manner or in willful misconduct. 
The Administrative Agent may apply any proceeds of such insurance
against the Liabilities, whether or not such have matured, in such order of
application as the Administrative Agent may determine.  The Administrative Agent’s and Collateral
Agent’s rights under this Section 4.09(g) shall be subject to the Intercreditor
Agreement.

4.10                LICENSES; MATERIAL CONTRACTS.

EXHIBIT
4.10 is a schedule of all presently effective material
agreements and licenses, distributorships, franchises, and similar agreements,
copies of which have previously been delivered (in final, executed form,
subject to such exceptions as are satisfactory to the Administrative Agent) to
the Administrative Agent.  Each
agreement, license, distributorship, franchise, and similar agreement issued to
the Obligor, or to which the Obligor is a party is in full force and effect in
each case except those the failure of which to be in full force and effect do
not have a Material Adverse Effect.  No
party to any such license or agreement is in default or violation thereof in
each case except those the default or violation of which do not have a Material
Adverse Effect. The Obligors have not received any notice or threat of
cancellation of any such license or agreement.

4.11                LEASES.

EXHIBIT
4.11 is a schedule of all
presently effective Capital Leases and includes a list of all other presently
effective Leases.  Each of such Leases
and Capital Leases is in full force and effect. 
No party to any such Lease or Capital Lease is in default or violation
of any such Lease or Capital Lease and none of the Obligors have received any
notice or threat of cancellation of any such Lease or Capital Lease which in
any such case could reasonably be expected to have a Material Adverse
Effect.  After the occurrence and during
the continuance of an Event of Default, the Obligors hereby authorize the Agent
at any time and from time to time to contact any of the Obligors’ landlords in
order to confirm the continued compliance by any Obligor with the terms and
conditions of the Lease(s) between such Borrower and that landlord and to
discuss such issues, concerning such Obligor’s occupancy under such Lease(s),
as the Agent may reasonably determine.

4.12                REQUIREMENTS OF LAW.

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

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4.13                LABOR RELATIONS.

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

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

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

(ii)           Any proceeding against or affecting any
Obligor relating to the alleged violation of any Requirement of Law pertaining
to labor relations or National Labor Relations Board, the Equal Employment
Opportunity Commission, or any comparable governmental body, organizational
activity, or other labor or employment dispute against or affecting any Obligor,
which, if determined adversely to such Obligor could not have a Material
Adverse Effect;

(iii)          Any lockout of any employees by any Obligor,
(and no such action is contemplated by any Obligor); or

(iv)          Any application for the certification of a
collective bargaining agent.

(c)   No work
stoppage or other labor dispute exists, and, to Obligors’ knowledge, no event
has occurred or circumstance exists that could provide the basis for any work
stoppage or other labor dispute.

(d)   Each
Obligor:

(i)            (A) Has complied in all material respects
with all Requirements of Law relating to employment, equal employment
opportunity, nondiscrimination, immigration, wages, hours, benefits, and
occupational safety and health, except such noncompliance which would not reasonably
be expected to have a Material Adverse Effect; and (B) has complied in all
material respects with all Requirements of Law relating to collective
bargaining, the payment of social security and similar taxes, and plant
closing.

(ii)           Is not liable for the payment of more than a de minimus amount of compensation,
damages, taxes, fines, penalties, or other amounts, however designated, for
such Obligor’s failure to comply with any Requirement of Law referenced in
Section 4.12.

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4.14                MAINTAIN PROPERTIES.

Each Obligor
shall:

(a)   Keep the
Collateral in good order and repair (ordinary reasonable wear and tear and
insured casualty excepted);

(b)   Not suffer
or cause the waste or destruction of any material part of the Collateral;

(c)   Not use any
of the Collateral in material violation of any policy of insurance thereon; and

(d)   Not sell,
lease, or otherwise dispose of any of the Collateral, other than the following:

(i)            The Costa Rican Transaction

(ii)           The sale of Inventory in compliance with this
Agreement;

(iii)          The disposal of Equipment which is obsolete,
worn out, or damaged beyond repair, which Equipment is replaced to the extent
necessary to preserve or improve the operating efficiency of such Borrower;

(iv)          The turning over to the Agent of all Receipts
as provided herein; and

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

4.15                TAXES.

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

(b)   No agreement
is extant which waives or extends any statute of limitations applicable to the
right of the Internal Revenue Service or any state taxing authority to assert a

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deficiency or make any other claim for or in respect to any Federal or
state taxes.  No issue has been raised in
any such examination which, by application of similar principles, reasonably
could be expected to result in the assertion of a deficiency for any fiscal
year open for examination, assessment, or claim by any Federal or state or
local taxing authority.

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

(d)   The Obligors
have, and hereafter shall: pay, as they become due and payable, all taxes and
unemployment contributions and other charges of any kind or nature levied,
assessed or claimed against any Obligor or the Collateral by any person or
entity whose claim could result in an Encumbrance upon any asset of any Obligor
or by any governmental authority (other than taxes and charges being contested
in good faith and for which adequate reserves have been established); properly
exercise any trust responsibilities imposed upon the Obligors by reason of
withholding from employees’ pay or by reason of the Obligors’ receipt of sales
tax or other funds for the account of any third party; timely make all
contributions and other payments as may be required pursuant to any Employee
Benefit Plan now or hereafter established by the Obligors; and timely file all
tax and other returns and other reports with each governmental authority to
whom the Obligors are obligated to so file, except in those cases where
extensions have been granted or are permitted of which the Obligors have given
the Administrative Agent written notice.

(e)   At its
option, the Agent may, but shall not be obligated to, pay any taxes,
unemployment contributions, and any and all other charges levied or assessed
upon the Obligors or the Collateral by any person or entity or governmental
authority (provided that, if no Liabilities (other than Liabilities solely
attributable to the L/C’s) are outstanding, then Agent may pay such amounts
only if the Obligors have not paid them when due), and make any contributions
or other payments on account of the Obligors’ Employee Benefit Plan as the Agent,
in the Agent’s discretion, may deem necessary or desirable, to protect,
maintain, preserve, collect, or realize upon any or all of the Collateral or
the value thereof or any right or remedy pertaining thereto, provided, however,
the Agent’s making of any such payment shall not constitute a cure or waiver of
any Event of Default occasioned by the Obligors’ failure to have made such
payment.

4.16                NO MARGIN STOCK OR SECURITIES.

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

4.17                ERISA.

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

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(a)   Violate or
fail to be in material compliance with Employee Benefit Plan maintained by the
Obligors;

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

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

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

(e)   Accumulate
any material funding deficiency within the meaning of ERISA;

(f)    Terminate
any Employee Benefit Plan such that a lien could be asserted against any assets
of the Obligors on account thereof pursuant to ERISA; or

(g)   Be a member
of, contribute to, or have any obligation under any Employee Benefit Plan which
is a multiemployer plan within the meaning of Section 4001(a) of ERISA.

4.18                HAZARDOUS MATERIALS AND ENVIRONMENTAL COMPLIANCE.

(a)   The Obligors
have never:

(i)            Been legally responsible for any release or
threat of release of any Hazardous Material; or

(ii)           Received notification of any release or
threat of release of any Hazardous Material from any site or vessel occupied or
operated by the Borrowers and/or of the incurrence of any expense or loss in
connection with the assessment, containment, or removal of any release or
threat of release of any Hazardous Material from any such site or vessel.

(b)   The Obligors
shall:

(i)            Dispose of any Hazardous Material only in
compliance with all Environmental Laws; and

(ii)           Not store on any site or vessel occupied or
operated by the Obligors and not transport or arrange for the transport of any
Hazardous Material, except if such storage or transport is in the ordinary
course of the Obligors’ business and is in compliance with all Environmental
Laws.

(c)   The Lead
Borrower shall provide the Administrative Agent with written notice upon
obtaining knowledge of any expense or loss incurred by any governmental
authority or

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other Person in connection with the assessment, containment, or removal
of any Hazardous Material, for which expense or loss the Borrowers may be
liable.

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

(i)            none of the Borrowers,
their Subsidiaries or any operator of the Headquarters Facility and the
Domestic Distribution Facilities or any operations thereon is in violation, or
alleged violation, of any judgment, decree, order, law, license, rule or
regulation pertaining to environmental matters, including without limitation,
those arising under the Resource Conservation and Recovery Act (“RCRA”), the Comprehensive Environmental
Response, Compensation and Liability Act of 1980 as amended (“CERCLA”), the Superfund Amendments and
Reauthorization Act of 1986 (“SARA”),
the Federal Clean Water Act, the Federal Clean Air Act, the Toxic Substances
Control Act, or any state, local or foreign law, statute, regulation,
ordinance, order or decree relating to health, safety or the environment
(hereinafter “Environmental Laws”),
which violation would have a material adverse effect on the environment or a
Material Adverse Effect, provided that for operators or operation prior to the
time that Borrowers owned or operated such real estate, said representation
shall be limited to Borrower’s knowledge;

(ii)           neither the Borrowers
nor any of their Subsidiaries has received notice from any third party
including, without limitation, any Governmental Authority, (A) that any one of
them has been identified by the United States Environmental Protection Agency
(“EPA”) as a potentially
responsible party under CERCLA with respect to a site listed on the National
Priorities List, 40 C.F.R. Part 300 Appendix B; (B) that any hazardous waste,
as defined by 42 U.S.C. §6903(5), any hazardous substances as defined by 42
U.S.C. §9601(14), any pollutant or contaminant as defined by 42 U.S.C.
§9601(33) and any toxic substances, oil or hazardous materials or other
chemicals or substances regulated by any Environmental Laws (“Hazardous Substances”) which any one of
them has generated, transported or disposed of has been found at any site at
which a Governmental Authority has conducted or has ordered that any Borrowers
or any of their Subsidiaries conduct a remedial investigation, removal or other
response action pursuant

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to any Environmental Law; or (iii) that it is or shall
be a named party to any claim, action, cause of action, complaint, or legal or
administrative proceeding (in each case, contingent or otherwise) arising out
of any third party’s incurrence of costs, expenses, losses or damages of any
kind whatsoever in connection with the release of Hazardous Substances;

(iii)          except as set forth on EXHIBIT 4.18 attached hereto: (A) no
portion of the Headquarters Facility and the Domestic Distribution Facilities
has been used for the handling, processing, storage or disposal of Hazardous
Substances except in accordance with applicable Environmental Laws; and no
underground tank or other underground storage receptacle for Hazardous
Substances is located on any portion of the Headquarters Facility and the
Domestic Distribution Facilities; (B) in the course of any activities conducted
by the Borrowers, their Subsidiaries or operators of its properties, no
Hazardous Substances have been generated or are being used on the Headquarters
Facility and the Domestic Distribution Facilities except in accordance with
applicable Environmental Laws; (C) there have been no releases (i.e. any past
or present releasing, spilling, leaking, pumping, pouring, emitting, emptying,
discharging, injecting, escaping, disposing or dumping) or threatened releases
of Hazardous Substances on, upon, into or from the properties of the Borrowers
or their Subsidiaries, which releases would have a material adverse effect on
the value of any of the Headquarters Facility and the Domestic Distribution
Facilities or adjacent properties or the environment; (iv) to the best of the
Borrowers’ knowledge, there have been no releases on, upon, from or into any
real property in the vicinity of any of the Headquarters Facility and the
Domestic Distribution Facilities which, through soil or groundwater
contamination, may have come to be located on, and which would have a material
adverse effect on the value of, the Headquarters Facility and the Domestic
Distribution Facilities ; and (v) in addition, any Hazardous Substances that
have been generated on any of the Headquarters Facility and the Domestic
Distribution Facilities have been transported offsite only by carriers having
an identification number issued by the EPA (or the equivalent thereof in any
foreign jurisdiction), treated or disposed of only by treatment or disposal
facilities maintaining valid permits as required under applicable Environmental
Laws, which transporters and facilities have been and are, to the best of the
Borrowers’ knowledge, operating in compliance with such permits and applicable
Environmental Laws provided that for purposes of this clause (iii),
representations relating to real property for a period prior to the

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operation or occupation by Borrowers shall be to
Borrowers’ knowledge; and

(iv)          none of the Borrowers and their Subsidiaries, any
Mortgaged Property or the Headquarters Facility and the Domestic Distribution
Facilities is subject to any applicable Environmental Law requiring the
performance of Hazardous Substances site assessments, or the removal or
remediation of Hazardous Substances, or the giving of notice to any
Governmental Authority or the recording or delivery to other Persons of an
environmental disclosure document or statement by virtue of the transactions
set forth herein and contemplated hereby, or as a condition to the recording of
any Mortgage or to the effectiveness of any other transactions contemplated
hereby.

4.19                LITIGATION.

Except as described in EXHIBIT
4.19 there is not presently pending or threatened by or against any
Obligor any suit, action, proceeding, or investigation which, if determined
adversely to such Obligor, would have a Material Adverse Effect.

4.20                DIVIDENDS; INVESTMENTS; CORPORATE ACTION.

(a)  The Obligors
shall not, except as set forth in EXHIBIT
4.20:

(i)  Pay any cash dividend or make any other
distribution in respect of any class of the Obligors’ capital stock (except as
permitted in Section 4.20(b));

(ii)  Redeem, retire, purchase, or acquire any
Obligor’s capital stock or Securities, except as permitted under Section
4.20(b), and, in any event, unless such stock repurchases are approved by the
Lead Borrower’s Board of Directors and be no be less favorable to the Borrowers
than those which would have been charged and imposed in an arms length
transaction;

(iii)  Invest in or purchase any stock or securities
or rights to purchase any such stock or securities, of any corporation or other
entity (except (A) in Eligible Liquid Collateral, (B) investments (including,
without limitation, capital contributions and loans) to Guarantor or its
Subsidiaries, in an aggregate amount not to exceed Fifteen Million Dollars
($15,000,000) (without duplication of the advances permitted under Section
4.21(e) hereof) in the aggregate after the Closing Date; (C) as permitted in
Section 4.20(c); (D) so long as there has not occurred a Suspension Event or an
Event of Default, and no Suspension Event or Event of Default would result
therefrom, contributions under one or more Approved Security-Free SERPS to the
related Security-Free Rabbi Trusts in the amount of not more than $4,000,000
per annum, and not more than $10,000,000 in the aggregate, and subject to
delivery of a certificate to the Administrative Agent demonstrating pro forma
compliance with Section 5.12 hereof upon and following the

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making
of such contributions); (E) investments of the assets held in any Security-Free
Rabbi Trusts pursuant to Approved Security-Free SERPs; and (F) fixed income
instruments or fixed income equity securities, in each case rated A- or better
by a rating agency acceptable to Administrative Agent with intermediate to
perpetual maturities that (i) are structured with frequent short-term auction
periods of the type described in EXHIBIT 4.20
and that meet the qualifications with respect thereto as set forth therein; and
(ii) are subject to the first-priority security interest in favor of the Term
Loan Collateral Agent and a security interest in favor of the Collateral Agent
second only in priority to the Term Loan Collateral Agent to the extent and in
the degree set forth in the Intercreditor Agreement pursuant to Section
8.3(d)(ii);

(iv) 
Merge or consolidate or be merged or consolidated with or into any other
corporation or other entity (except as permitted in Section 4.20(c));

(v) 
Consolidate any of the Obligors’ operations with those of any other
corporation or other entity (other than with any other present or future
Obligor) (except as part of a Permitted Acquisition or Permitted Creation);

(vi) 
Organize any Affiliate (except as permitted in Section 4.20(c)), or
create any Affiliate, except pursuant to a Permitted Creation;

(vii)  Subordinate any debts or obligations owed to
the Obligors by any third party to any other debts owed by such third party to
any other Person;

(viii)  Acquire any assets other than in the ordinary
course and conduct of the Obligors’ business as conducted at the execution of
this Agreement (except as permitted in Section 4.20(c)); or

(ix)  Make any
Loans except as permitted in Section 4.21.

(b)  Borrowers may
make dividends, distributions and common stock buybacks provided that (A) no
Suspension Event or Event of Default has occurred which is continuing at the
time of such dividend, distribution, or buyback, and (B) upon and after giving
effect thereto, pro forma Excess Availability is at least 22.5% of Borrowing
Base.  Lead Borrower may repurchase
capital stock held by officers, directors, and employees in an amount not to
exceed $5,000,000 in the aggregate per annum provided that upon and after
giving effect thereto, pro forma Excess Availability is at least 15% of the
Borrowing Base and such purchase is approved by the Lead Borrower’s Board of
Directors and conducted on an arm’s length basis.

(c)  So long as
there is no Suspension Event that has occurred or would occur as a result
thereof, and the pro forma Excess Availability is at least 22.5% of the
Borrowing Base upon and after giving effect thereto, the Borrowers may make
Permitted Acquisitions and Permitted Creations, provided, that, the aggregate
amount of consideration for all Permitted Acquisitions and Permitted Creations
(including all Indebtedness incurred, repaid or assumed in connection with all
acquisitions occurring after the Closing Date and net of cash and cash
equivalents acquired), cash paid, and capital stock issued or expended in
respect of all such

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acquisitions after the
Closing Date shall not exceed $75,000,000 (exclusive of any consideration
delivered to another Borrower, whether such Borrower is now a Borrower or
becomes a Borrower prior to delivery of such consideration (whether in the form
of cash of capital stock)) in the aggregate following the Closing Date.

4.21                LOANS.

The Obligors shall
not make any loans or advances to, nor acquire the Indebtedness of, any Person,
provided, however, the foregoing
does not prohibit any of the following:

(a)   Advance
payments made to the Obligors’ suppliers in the ordinary course; and

(b)   Advances to
the Obligors’ officers, employees, and salespersons with respect to reasonable
expenses to be incurred by such officers, employees, and salespersons for the
benefit of the Obligors, which expenses are properly substantiated by the
person seeking such advance and properly reimbursable by the Obligors.

(c)   Additional
advances to the Obligors’ employees approved by the Chief Financial Officer, in
an amount not more than $1,000,000 in the aggregate.

(d)   Advances
from a Borrower to another Borrower.

(e)   Advances to
Guarantors and their Subsidiaries, in an aggregate amount not to exceed Fifteen
Million Dollars ($15,000,000) (without duplication of the investments permitted
under Section 4.20(a)(iii)(B)).

4.22                PROTECTION OF ASSETS.

The Agent may in
its discretion from time to time, discharge any tax or Encumbrance on any of
the Collateral, or take any other action which the Agent may deem necessary or
desirable to repair, insure, maintain, preserve, collect, or realize upon any
of the Collateral.  The Agent shall not
have any obligation to undertake any of the foregoing and shall have no
liability on account of any action so undertaken except where there is a
specific finding in a judicial proceeding (in which the Agent has had an
opportunity to be heard), from which finding no further appeal is available,
that the Agent had acted in actual bad faith or in a grossly negligent
manner.  The Borrowers shall pay to the
Administrative Agent, on demand, or the Administrative Agent, in its
discretion, may add to the Loan Account, all amounts paid or incurred by the
Agent pursuant to this Section 4.22. 
The obligation of the Borrowers to pay such amounts is a Liability.

4.23                Line of Business.

The Obligors shall
not engage in any business other than the business in which it is currently
engaged or a business reasonably related thereto, or such other lines of
business as may be consented to by the Administrative Agent.

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4.24                Affiliate
Transactions.

The Obligors shall not make any payment, nor give any value to any
Affiliate except for goods and services actually purchased by the Obligors
from, or sold by the Borrowers to, such Affiliate for a price and on terms
which shall be no be less favorable to the Borrowers than those which would
have been charged and imposed in an arms length transaction, other than the
investments permitted under clauses (B), (C), (D), and (E) of Section
4.20(a)(iii) and dividends, distributions and common stock buybacks and
repurchases permitted by Section 4.20(b).

4.25                Further
Assurances.

(a)   Other than
property and assets in Canada and as otherwise provided in this Agreement, the
Obligors are not the owner of, nor have they any interest in, any property or
asset in which a Collateral Interest is required to be granted hereunder which,
immediately upon the satisfaction of the conditions precedent to the
effectiveness of the credit facility contemplated hereby (Article III) will not
be subject to perfected Collateral Interests in favor of the Collateral Agent
(subject only to Permitted Encumbrances) to secure the Liabilities.

(b)   The Obligors
will not hereafter acquire any asset or any interest in property in which a
Collateral Interest is required to be granted hereunder which is not,
immediately upon such acquisition, subject to such a perfected Collateral
Interest in favor of the Collateral Agent (subject only to Permitted
Encumbrances) to secure the Liabilities.

(c)   The Obligors
shall execute and deliver to the Agent such instruments, documents, and papers,
and shall do all such things from time to time hereafter as the Agent may
reasonably request to carry into effect the provisions and intent of this
Agreement; to protect and perfect the Agent’s Collateral Interests in the
Collateral; and to comply with all applicable statutes and laws; and facilitate
the collection of the Receivables Collateral. 
The Obligors shall execute all such instruments as may be reasonably
required by the Agent with respect to the recordation and/or perfection of the
Collateral Interests created or contemplated herein.

(d)   The Obligors
hereby designate the Agent as and for the Obligors’ true and lawful attorney,
with full power of substitution, to sign and file any financing statements in
order to perfect or protect the Agent’s Collateral Interests in the Collateral.

(e)   A carbon,
photographic, or other reproduction of this Agreement or of any financing
statement or other instrument executed pursuant to this Section 4.25 shall
be sufficient for filing to perfect the security interests granted herein.

4.26                Adequacy OF
Disclosure.

(a)   All
financial statements furnished to the Agent or the Lenders by the Obligors have
been prepared in accordance with GAAP consistently applied and present fairly the
Consolidated condition of the Obligors at the date(s) thereof and the
Consolidated results of operations and cash flows of the Obligors for the
period(s) covered subject, in the
case of interim financials, to normal year end adjustments.  There has been no change in the financial
condition, results of operations, or cash flows of the Obligors since the
date(s) of such financial statements,

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other than changes in the ordinary course of business, which changes
have not been materially adverse, either singularly or in the aggregate.

(b)   The Obligors
do not have any contingent obligations or obligation under any Lease or Capital
Lease which is not noted in the Obligors’ most recent Consolidated financial
statements furnished to the Agent or the Lenders prior to the execution of this
Agreement which would have a Material Adverse Effect.

(c)   No document, instrument, agreement, or paper now or hereafter given the
Agent or the Lenders by or on behalf of the Obligors or any guarantor of the
Liabilities in connection with the execution of this Agreement by the Agent or
Lenders contains or will contain any untrue statement of a material fact or
omits or will omit to state a material fact necessary in order to make the
statements therein not misleading.  There
is no fact known to the Borrowers which has, or which, in the foreseeable
future could have, a Material Adverse Effect which has not been disclosed in
writing to the Agent or Lenders.

4.27                No
Restrictions on Liabilities.

No Obligor shall
enter into or become subject to, directly or indirectly, any agreement (other
than the Indenture Agreement, as in effect as of the date hereof and without
giving effect to any subsequent amendment, modification, replacement, or
substitution thereof) prohibiting or restricting (other than with respect to
Permitted Encumbrances), in any manner (including, without limitation, by way
of covenant, representation, or event of default) any of the following:

(a)   The granting
of Collateral Interests in favor of the Agent on any asset of any Obligor; or

(b)   The
incurrence of any of the Liabilities.

4.28                Other
Covenants.

No Obligor shall
indirectly do or cause to be done any act which, if done directly by such
Obligor or Obligors, would breach any covenant contained in this Agreement.

ARTICLE V. - FINANCIAL REPORTING
AND PERFORMANCE COVENANTS:

5.1  Maintain Records.

The Obligors
shall:

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

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(b)   Timely
provide the Agent with those financial reports, statements, and schedules
required by this Article V or otherwise, each of which reports, statements and
schedules shall be prepared, to the extent applicable, in accordance with GAAP
applied consistently with prior periods to fairly reflect the financial
condition of the Obligors at the close of, and its results of operations for,
the period(s) covered therein.

(c)   At all
times, keep accurate current records of the Collateral including, without
limitation, accurate current stock, cost, and sales records of its Inventory,
accurately and sufficiently itemizing and describing the kinds, types, and
quantities of Inventory and the cost and selling prices thereof.

(d)   At all
times, retain independent certified public accountants who are reasonably
satisfactory to the Administrative Agent and instruct such accountants to fully
cooperate with, and be available to, the Administrative Agent to discuss the
Obligors’ financial performance, financial condition, operating results,
controls, and such other matters, within the scope of the retention of such
accountants, as may be raised by the Administrative Agent.

(e)   Not change
their respective fiscal years, tax identification numbers, or state of
incorporation, except as set forth herein.

5.2  Access to Records.

(a)   The Obligors
shall accord the Agent and the Agent’s representatives access from time to time
as the Agent and such representatives may require to all properties owned by or
over which any Obligor has control.  The
Agent and such representatives shall have the right, and the Obligors will
permit the Agent and the Agent’s representatives from time to time (upon prior
notice and during normal business hours, if prior to the occurrence and
continuance of a Suspension Event) as Agent and such representatives may
request, to examine, inspect, copy, and make extracts from any and all of the
Obligors’ books, records, electronically stored data, papers, and files.  The Obligors shall make all of the Obligors’
copying facilities available to the Agent and the Agent’s representatives.

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

(i)            Subject to Section 14.26, inspect, copy,
duplicate, review, cause to be reduced to hard copy, run off, draw off, and
otherwise use any and all computer or electronically stored information or data
which relates to the Obligors, whether maintained by Obligors or by any service
bureau, contractor, accountant, or other person, and directs any such service
bureau, contractor, accountant, or other person who maintains such information
for the Obligor fully to cooperate with the Agent and the Agent’s
representatives with respect thereto.

(ii)           Verify at any time the Collateral or any
portion thereof, including upon and following the occurrence and during the
continuance of any Suspension Event: verification with Account Debtors, and/or

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with
the Borrowers’ computer billing companies, collection agencies, and accountants
and to sign the name of the Obligors on any notice to the Obligors’ Account
Debtors or verification of the Collateral.

(iii)          Deliver to the Term Loan Administrative
Agent, the Term Loan Collateral Agent, and the Term Lenders under the Term Loan
Facility any and all information regarding the Obligors, including without
limitation, copies of materials relating to appraisals, commercial finance
audits, and items delivered or obtained hereunder or in connection with the
Loan Documents.

5.3  Immediate Notice to Agent.

(a)   The Lead
Borrower shall provide the Administrative Agent and Collateral Agent with
written notice promptly upon the occurrence of any of the following events,
which written notice shall be with reasonable particularity as to the facts and
circumstances in respect of which such notice is being given:

(i)            Any change in the Authorized Officers.

(ii)           The completion of any physical count of all
or a material portion of the Obligor’s Inventory (together with a copy of the
results thereof certified by the Lead Borrower).

(iii)          Any cessation by the Obligors of their making
payment to its creditors generally as the Obligors’ debts become due.

(iv)          Any failure by the Obligors to pay rent at
any forty or more of the Borrowers’ locations, which failure continues for more
than Ten (10) days following the last day on which such rent was payable.

(v)           Any material adverse change in the business,
operations, or financial affairs of the Obligors.

(vi)          The existence of any Suspension Event or
Event of Default.

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

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

(ix)           Any
violation of any Environmental Law that the Obligors or any of their
Subsidiaries reports in writing or is reportable by such Person in writing (or
for which any written report supplemental to

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any oral report is made) to any Governmental Authority
and upon becoming aware thereof, of any inquiry, proceeding, investigation, or
other action, including a notice from any agency of potential environmental
liability, of any Governmental Authority.

(b)   The Lead
Borrower shall:

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

(ii)           At the reasonable request of the
Administrative Agent, from time to time, provide the Agent with copies of all
advertising (including copies of all print advertising and duplicate tapes of
all video and radio advertising).

(iii)          Provide the Administrative Agent, when
received by the Obligors, with a copy of any management letter or similar
communications from any accountant of the Obligors.

5.4  Borrowing Base Certificate.

The Lead Borrower
shall provide the Collateral Agent by 11:30 a.m., on the tenth Business Day of
each month, with a “Borrowing Base
Certificate” (in the form of EXHIBIT
5.4 as such form may be revised
from time to time by the Collateral Agent), reflecting the Obligor’s condition
on the last Business Day of the reporting period immediately prior to the date
when furnished, provided that, for any week that Excess Availability is less
than 15% of the Borrowing Base, the Lead Borrower shall provide the Agent by
11:30 a.m., weekly, on the Second (2nd) Business Day of the following week,
with such Borrowing Base Certificate reflecting the Borrower’s condition on the
last Business Day of the prior week. Such Certificate shall be signed by an
Authorized Officer and may be sent to the Agent by facsimile or email (with
electronic signature) transmission.  Such
weekly Borrowing Base Certificates shall be required until Excess Availability
has next exceeded 20% of the Borrowing Base for 20 consecutive Business Days,
at which point monthly Borrowing Base Certificates shall again be required in
accordance with this Section.  Each
Borrowing Base Certificate shall contain a certification that no Obligor has
entered into any agreements,of the type described in clause (a)(ii) of the
definition of “Borrowing Base A”, or amendments or modifications to agreements
of such type, other than (i) agreements that have been delivered to the
Administrative Agent prior to the delivery of such Borrowing Base Certificate;
or (ii) agreements that are delivered to the Administrative Agent concurrently
with such Borrowing Base Certificate.

5.5  Weekly Reports.

In the event that
a Borrowing Base Certificate is required weekly, then, in addition, on a weekly
basis, on Tuesday of each week (as of the then immediately preceding Saturday)
the Lead Borrower shall provide the Collateral Agent with a flash inventory and
accounts receivable

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collateral report (each
in such form as may be specified from time to time by the Collateral Agent). Such
report may be sent to the Collateral Agent by facsimile transmission, provided
that the original thereof is forwarded to the Collateral Agent on the date of
such transmission.

5.6  Monthly Reports.

(a)   Monthly, the
Lead Borrower shall provide the Collateral Agent with original counterparts of
the following (each in such form as the Collateral Agent from time to time may
specify):

(i)            Within Fifteen (15) days of the end of the
previous month:

(A)          A “Stock Ledger Report”.

(B)           A “General Ledger Inventory Report”.

(C)           Reconciliation between stock ledger and
general ledger as of the end of the subject month.

(D)          A leased department inventory report (for
locations within department or specialty stores or other locations in which a
Borrower leases or licenses a portion of the space in such store).

(E)           L/C inventory and in-transit inventory report
(if in the Borrowing Base).

(F)           A “General Ledger Accounts Receivable
Report”.

(G)           A “General Ledger Other Accounts Receivable
Report”.

(H)          An aging of the Borrowers’ Accounts.

(I)            An aging of the Borrowers’ accounts payable.

(J)            Third party statements as to Eligible Liquid
Collateral and Liquid Collateral Investments.

(K)          A Gross Margin reconciliation.

(L)           A store activity report.

(ii)           Within Thirty (30) days of the end of the
previous month:

(A)          The Officer’s Compliance Certificate
described in Section 5.9.

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(B)           An
internally prepared financial statement of the Borrowers’ financial condition
and the results of its operations for, the period ending with the end of the subject
month, which financial statement shall include, at a minimum, a consolidated
balance sheet, income statement, cash flow and comparison to the Business Plan,
which statement shall be certified by the Lead Borrower’s chief financial
officer or chief operating officer as fairly presenting the financial position
of the Borrowers in accordance with GAAP (subject to year-end audit
adjustments).

(C)           In addition, if Accounts in an aggregate face amount in excess of
$500,000 become newly ineligible because they fall within one of the specified
categories of ineligibility set forth in the definition of Eligible Accounts or
otherwise established by Administrative Agent, Borrowers shall notify the
Administrative Agent of such occurrence no later than the sixth Business Day
following such occurrence and the Borrowing Base shall thereupon be adjusted to
reflect such occurrence.

(D)          After
Excess Availability falls below 25% of the Borrowing Base and until Excess
Availability has next exceeded 25% of the Borrowing Base for 40 consecutive
Business Days, the Borrower shall deliver a report as to the Fixed Charge
Coverage Ratio as of the then most recent month ended, for the 12 month period
ending with such month.

(b)   For purposes
of Section 5.6(a)(i), above, the first “previous month” in respect of
which the items required by that Section shall be provided shall be September
2004, and for purposes of Section 5.6(a)(ii), above, the first “previous
month” in respect of which the items required by that Section shall be provided
shall be August 2004.

(c)   Until
otherwise requested by the Administrative Agent, the items required by Sections
5.6(a)(i), and 5.6(a)(ii)(C) may be delivered in electronic format.

5.7  Quarterly Reports.

Quarterly, within
Forty Five (45) days following the end of each of the Borrower’s first three
fiscal quarters, the Borrowers shall provide the Agent with an original
counterpart of a management prepared financial statement of the Borrowers for
the period from the beginning of the Borrowers’ then current fiscal year
through the end of the subject quarter, with comparative information for the
same period of the previous fiscal year, which statement shall include, at a
minimum, a consolidated balance sheet, income statement (if requested, on a
company specific and on a “consolidating” basis), and cash flows and
comparisons for the corresponding quarter of the then immediately previous
year, as well as to the Business Plan.

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5.8  Annual Reports.

(a)   Annually,
within 90 days following the end of the Borrowers’ fiscal year, the Lead
Borrower shall furnish the Agent with the following:

(i)            Borrowers’ Consolidated annual financial
statement, which statement shall have been prepared by, and bear the
unqualified opinion of, the Borrowers’ independent certified public accountants
(i.e. said statement shall be “certified” by such accountants) and shall
include, at a minimum (with comparative information for the then prior fiscal
year) a balance sheet, income statement, statement of changes in shareholders’
equity, and cash flows; and

(ii)           The Officer’s Compliance Certificate
described in Section 5.9.

(b)   Each annual
statement shall be accompanied by such accountant’s certificate indicating
that, in conducting the audit for such annual statement, nothing came to the
attention of such accountants to believe that any Suspension Event relating to
the financial performance covenants imposed pursuant to Section 5.12 had occurred during the subject fiscal year
(or if one or more had occurred, the facts and circumstances thereof).

5.9  Officers’ Certificates.

(a)   The Lead
Borrower shall cause its Authorized Officer to certify, in the form attached
hereto as EXHIBIT 5.9 (the “Officer’s Compliance Certificate”) in connection with those monthly and annual statements to be
furnished pursuant to this Agreement that:

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

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

(B)           Material Accounting Changes (in which event,
such certificate shall include a schedule (in reasonable detail) of the effect
of each such Material Accounting Change) not previously specifically taken into
account in the determination of the financial performance covenant imposed
pursuant to Section 5.12.

(ii)           No Suspension Event or Event of Default has
occurred which is continuing, or if such event has occurred, its nature (in
reasonable

 88
 

detail)
and the steps (if any) being taken or contemplated by the Borrowers to be taken
on account thereof.

(iii)          The Borrowers were in compliance (or had
failed to comply) as of the date of the applicable statement with each of the
financial performance covenants included in Section 5.12 hereof; such
certification to be accompanied by calculations demonstrating such compliance
or failure to comply.

5.10                Inventories,
Appraisals, and Audits.

(a)   The
Collateral Agent may, at the expense of the Borrowers, participate in and/or
observe each inventory and any cycle count of the Collateral which is
undertaken on behalf of the Borrowers (provided that any expenses of Collateral
Agent for which Collateral Agent seeks reimbursement shall be reasonable
expenses).  No Borrower may, without the
prior written consent of the Collateral Agent, change the methodology to be
followed in connection with the conduct of and reporting on the results of such
inventory from the methodology employed by the Borrowers as of the date of this
Agreement.

(b)   The
Borrowers, at their expense, shall cause each store location, warehouse, and
distribution center to have not less than One (1) physical inventory or cycle
count in each Twelve (12) month period to be undertaken consistent with current
practice, while this Agreement is in effect (the scheduling of which shall be
subject to the Collateral Agent’s reasonable discretion), and in reasonable
cocoperation with the Term Collateral Agent conducted by such inventory takers
as are reasonably satisfactory to the Collateral Agent and following such
methodology as may be reasonably satisfactory to the Agent.

(i)            The Lead Borrower shall provide the
Collateral Agent with a copy of the preliminary results of each such inventory
(as well as of any other physical inventory undertaken by the Borrowers) within
Ten (10) days after its completion.

(ii)           The Lead Borrower shall provide the
Collateral Agent with a reconciliation of the results of each such inventory
(as well as of any other physical inventory undertaken by the Borrowers) to the
Borrowers’ books and records within Thirty (30) days following the completion
of such inventory.

(iii)          The Collateral Agent, in its discretion and
in reasonable cooperation with the Term Loan Collateral Agent, following the
occurrence of and during the continuance of a Suspension Event, may cause such
additional inventories to be taken as the Collateral Agent determines (each, at
the expense of the Borrowers).

(c)   If at any
time during any 12-month period Excess Availability falls below 60% of the
Borrowing Base for at least 15 consecutive Business Days, the Collateral Agent

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contemplates obtaining up to One (1) appraisal (at the expense of the
Borrowers) of the Borrowers’ Inventory at any time during such 12-month period,
and if at any time during any 12-month period Excess Availability falls below
30% of the Borrowing Base for at least 5 consecutive Business Days, the
Collateral Agent contemplates obtaining up to One (1) additional appraisal (at
the expense of the Borrowers) of the Borrowers’ Inventory at any time during
such 12-month period , but in its discretion, may obtain additional appraisals
of the Borrowers’ Inventory and Real Estate in the event it deems it reasonably
necessary in its discretion (such additional appraisals, if not conducted after
and during the continuance of an Event of Default, shall be at Collateral Agent’s
expense).  In addition, the Collateral
Agent may obtain in reasonable cooperation with the Term Loan Collateral Agent,
an appraisal of the Headquarters Facility (at the expense of the Borrower) at
any time after the Borrower incurs additional Indebtedness after the date
hereof secured by the Headquarters Facility in excess of $1,000,000.

(d)   If at any
time during any 12-month period Excess Availability falls below 60% of the
Borrowing Base for at least 15 consecutive Business Days, the Collateral Agent
contemplates conducting One (1) commercial finance audit (at the expense of the
Borrowers) of the Borrowers’ books and records, and if at any time during any
12-month period Excess Availability falls below 30% of the Borrowing Base for
at least 5 consecutive Business Days, the Collateral Agent contemplates
obtaining up to One (1) additional commercial finance audit (at the expense of
the Borrowers), but in its discretion, may obtain more in the event it deems it
reasonably necessary in its discretion (such additional commercial finance
audits, if not conducted after and during the continuance of an Event of
Default, shall be at Collateral Agent’s expense).

5.11                Additional
Financial Information.

(a)   In addition
to all other information required to be provided pursuant to this Article V,
the Lead Borrower promptly shall provide the Agent (and any guarantor of the
Liabilities), such other and additional information concerning the Obligors,
the Collateral, the operation of the Obligors’ business, and the Obligors’
financial condition, including financial reports and statements (including
supporting schedules), as the Agent may from time to time reasonably request
from the Lead Borrower.

(b)   The Lead
Borrower may provide the Agent,
from time to time hereafter, with updated forecasts of the Obligors’
anticipated performance and operating results.

(c)   The Lead
Borrower shall, no later than Thirty (30) days prior to the end of each of the
Borrowers’ fiscal years, furnish the Administrative Agent with a draft updated
and extended forecast (which forecast shall be proposed by the Lead Borrower to
become the Business Plan as provided in clause (5.11(d) below) which shall go
out at least through the end of the then next fiscal year and shall include a
Consolidated income statement, balance sheet, and statement of cash flow, by
month, as well as components of the Borrowing Base and shall include
assumptions as are reasonably satisfactory to the Agent, each prepared in
conformity with GAAP and consistent with the Borrowers’ then current practices,
and the Lead Borrower shall, no later than Sixty (60) days after the end of
each of the Borrowers’ fiscal years, furnish the Agent with a final updated and
extended forecast which shall go out at least through the end of the then

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next fiscal year and shall include a Consolidated income statement,
balance sheet, and statement of cash flow, by month, as well as components of
the Borrowing Base and shall include assumptions as are reasonably satisfactory
to the Agent, each prepared in conformity with GAAP and consistent with the
Borrowers’ then current practices,.

(d)   The
Administrative Agent, following the receipt of any of such forecast, may, but
shall not be under any obligation to, accept in writing such forecast (in which
event, such forecast shall become the Business Plan).

(e)   Intentionally
omitted.

(f)    Promptly
after the sending or filing thereof, as the case may be, the Obligors shall
deliver to the Administrative Agent copies of any proxy statements, financial
statements or reports which Obligors have sent to shareholders qua shareholders
and copies of any regular, periodic and special reports or registration
statements which Obligors file with the Securities and Exchange Commission of
any governmental authority which may be substituted therefore, or any national
securities exchange.

(g)   The Obligors
recognize that all appraisals, inventories, analysis, financial information,
and other materials which the Agent may obtain, develop, or receive with
respect to the Obligors is confidential to the Agent and that, except as
otherwise provided herein, the Obligors are not entitled to receipt of any of
such appraisals, inventories, analysis, financial information, and other
materials, nor copies or extracts thereof or therefrom.

5.12                Financial
Performance Covenants.

The Borrowers
shall observe and comply with those financial performance covenants set forth
on EXHIBIT 5.12(a) certain of
which covenants are based on the Business Plan set forth on EXHIBIT 5.12(b).  Compliance with such financial performance
covenants shall be made as if no Material Accounting Changes had been made
(other than any Material Accounting Changes specifically taken into account in
the setting of such covenants).  The
Administrative Agent may determine the Borrowers’ compliance with such
covenants based upon financial reports and statements provided by the Lead
Borrower to the Administrative Agent (whether or not such financial reports and
statements are required to be furnished pursuant to this Agreement) as well as
by reference to interim financial information provided to, or developed by, the
Administrative Agent.

ARTICLE VI. - USE AND COLLECTION
OF COLLATERAL:

6.1  Use of Inventory Collateral.

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

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

6.2  Inventory Quality.

All Inventory now
owned or hereafter acquired by the Borrowers is and will be of good and
merchantable quality and free from defects (other than defects within customary
trade tolerances or for purchases of “irregular” Inventory in accordance with
current practices).

6.3  Adjustments and Allowances.

The Borrowers may
grant such allowances or other adjustments to the Borrowers’ Account Debtors
(exclusive of extending the time for payment of any Account or Account
Receivable, which shall not be done except in the ordinary course of the
Borrowers’ business) as the Borrowers may reasonably deem to accord with sound
business practice, provided, however, upon the occurrence and during
the continuance of an Event of Default, the authority granted the Borrowers
pursuant to this Section 6.3 may be limited or terminated by the
Collateral Agent at any time in the Collateral Agent’s discretion.

6.4  Validity of Accounts.

(a)   The amount
of each Account shown on the books, records, and invoices of the Borrowers
represented as owing by each Account Debtor is and will be the correct amount
actually owing by such Account Debtor and shall have been fully earned by
performance by the Borrowers.

(b)   Upon and
following the occurrence and during the continuance of any Suspension Event,
the Collateral Agent from time to time may verify in reasonable cooperation
with the Term Loan Collateral Agent the Receivables Collateral directly with
the Borrowers’ Account Debtors, such verification to be undertaken in keeping
with commercially reasonable commercial lending standards.

(c)   The
Borrowers have no knowledge of any impairment of the validity or collectibility
of any material portion of the Accounts (and no knowledge of any impairment of
the validity or collectibility of any of the Eligible Accounts or Eligible
Credit Card Receivables) and the Lead Borrower shall notify the Collateral
Agent of any such fact immediately after any Borrower becomes aware of any such
impairment.

(d)   Except with
respect to performance bonds in respect of construction contracts, up to an
aggregate maximum of $2,500,000, for which the sole collateral is the
Borrower’s cash, the Borrowers shall not post any bond to secure any Borrowers’
performance under any agreement to which any Borrower is a party nor cause any
surety, guarantor, or other third party obligee to become liable to perform any
obligation of any Borrower (other than to the Agent or the Term Loan Agent) in
the event of such Borrower’s failure so to perform.

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6.5  Notification to Account Debtors.

The Collateral
Agent shall have the right (upon and following the occurrence and during the
continuance of any Suspension Event) to notify any of the Borrowers’ Account
Debtors to make payment directly to the Collateral Agent and to collect all
amounts due on account of the Collateral.

ARTICLE VII. -  CASH MANAGEMENT; PAYMENT OF LIABILITIES:

7.1  Depository Accounts.

(a)   Annexed
hereto as EXHIBIT 7.1 is a Schedule of all present DDA’s, which
includes, with respect to each depository (i) the name and address of that
depository; (ii) the account number(s) of the account(s) maintained with such
depository; and (iii) a contact person at such depository.

(b)   The Lead
Borrower shall deliver the following to the Collateral Agent, as a condition to
the effectiveness of this Agreement:

(i)            With respect to DDA’s that are not Blocked
Accounts, the Operating Account, or Exempt DDA’s, notification, executed on
behalf of the Obligors, to each depository institution with which any DDA is
maintained, in form satisfactory to the Collateral Agent of the Collateral
Agent’s interest in such DDA.

(ii)           With respect to DDA’s that are Blocked Accounts
or the Operating Account, a Blocked Account Agreement with any depository
institution at which such accounts are maintained.

(c)   The Obligors
will not establish any DDA hereafter (other than an Exempt DDA) unless,
contemporaneous with such establishment, the Lead Borrower delivers the
following to the Collateral Agent:

(i)            With respect to DDA’s that are not Blocked
Accounts, the Operating Account, or Exempt DDA’s, notification to the
depository at which such DDA is established if the same would have been
required pursuant to Section 7.1(b)(i) if the subject DDA were open at
the execution of this Agreement; and

(ii)           With respect to DDA’s that are Blocked
Accounts or the Operating Account, a Blocked Account Agreement executed on
behalf of the depository at which such DDA is established if the same would
have been required pursuant to Section 7.1(b)(ii) if the DDA were open
at the execution of this Agreement.

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7.2  Credit Card Receipts.

(a)   Annexed
hereto as EXHIBIT 7.2, is a Schedule which describes all arrangements
to which the Obligors are a party with respect to the payment to the Obligors
of the proceeds of credit card charges for sales by the Obligors.

(b)   The Obligors
shall deliver to the Collateral Agent, as a condition to the effectiveness of
this Agreement, notification, executed on behalf of the Obligors, to each of
the Obligors’ credit card clearinghouses and processors of notice (in form
satisfactory to the Collateral Agent), which notice provides that payment of
all credit card charges submitted by the Obligors to that clearinghouse or
other processor and any other amount payable to the Obligors by such
clearinghouse or other processor shall be directed to the Operating Account, or
if a Sweep Period is effect, as otherwise designated from time to time by the
Collateral Agent.  The Obligors shall not
change such direction or designation except upon and with the prior written
consent of the Collateral Agent.

7.3  The Concentration, Blocked, and Operating Accounts.

(a)   The
following checking accounts have been or will be established (and are so
referred to herein):

(i)            The “Concentration Account”:
Established by the Administrative Agent with Fleet National Bank.

(ii)           The “Blocked Account(s)”:
Established by each of the Obligors with (A) JPMorgan Chase Bank, N.A., Wells
Fargo Bank, N.A., and Bank of America, and upon and following the date that is
60 days after the date hereof, Wachovia Bank, N.A. (provided that the accounts
at Wachovia Bank, N.A. shall not become Blocked Accounts if, after the Borrower
has used best efforts to cause Wachovia Bank, N.A. to enter into a Blocked
Account Agreement acceptable to the Collateral Agent and the Term Loan
Collateral Agent, Wachovia Bank, N.A. has not entered into such an agreement)  or (B) any other banks satisfactory to the
Administrative Agent, into which deposits from other DDA’s must be directed and
from which the Obligors shall not make disbursements other than to the
Operating Account or the Concentration Account.

(iii)          The “Operating Account”:  Established by each of the Obligors with
Fleet National Bank, from which only disbursements may be made and into which
advances under the Revolving Credit may be deposited or deposits from the
Blocked Account(s) may be made.

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(b)   The contents
of each DDA and of the Blocked Account constitutes Collateral and Proceeds of
Collateral. The contents of the Concentration Account constitutes the
Administrative Agent’s property.

(c)   The Obligors
shall not establish any Blocked Account hereafter except upon not less than
thirty (30) days written notice to the Collateral Agent and the delivery to the
Collateral Agent of a Blocked Account Agreement with respect thereto.

(d)   The Obligors
shall pay all fees and charges of, and maintain such impressed balances as may
be required by the depository in which any account is opened as required hereby
(even if such account is opened by and/or is the property of the Agent).

(e)   Notwithstanding
anything to the contrary contained in this Section 7.3 or elsewhere in
this Agreement, each Blocked Account Agreement shall provide (except as the
Collateral Agent may otherwise agree in writing) that, until Collateral Agent
has notified the financial institution maintaining such Blocked Account in
writing to forward by daily sweep all amounts in the applicable Blocked Account
to the Concentration Account, all amounts in the applicable Blocked Account
shall be forwarded pursuant to the instructions of the applicable Obligor given
to the depository institution maintaining such Blocked Account from time to time.  Collateral Agent shall be entitled, at its
election, to give the aforementioned notification to such financial
institution, or to request that the Obligors deliver such a notification to
such financial institution under Section 7.3(f), at any time after either (i)
the occurrence and during the continuance of an Event of Default, or (ii)
except as specified in Section 7.3(g)(1), Excess Availability (A) has been less
than 15% of the Borrowing Base for 5 consecutive Business Days; or (B) Excess
Availability has been less than 12.5% of the Borrowing Base at any time (the
period during which the Collateral Agent may give such a notice, a “Sweep
Period”); provided, however, that, subject to the following
sentence, each Sweep Period will be suspended at the election of Lead Borrower
within Five (5) Business Days of:  (y)
Agent’s and Lenders’ written waiver of any relevant Event of Default; or (z)
Borrowers’ Excess Availability exceeding 30% of the Borrowing Base for Sixty
(60) consecutive days (a “Sweep
Suspension”).  A Sweep Suspension will be permitted to occur
only Two (2) times during the effectiveness of this Agreement, such that in the
event that Excess Availability is (A) less than 15% of the Borrowing Base for 5
consecutive business days; or (B) less than 12.5% of the Borrowing Base at any
time, or an Event of Default occurs after a second Sweep Suspension has
occurred, no Sweep Suspension will be effective and the Sweep Period shall
continue in effect.

(f)    Except as
set forth in Section 7.3(g)(1), the Obligors agree that, at any time or from
time to time during a Sweep Period that the Collateral Agent requests that the
Obligors deliver to such a financial institution an instruction to forward by
daily sweep all amounts in the applicable Blocked Account to the Concentration
Account, the Obligors shall immediately upon such a request deliver such an
instruction to such financial institution and deliver a written copy thereof to
the Collateral Agent.

(g)   Notwithstanding
anything to the contrary in Sections 7.3(e) or 7.3(f), with respect to the Lead
Borrower’s Blocked Accounts numbered 1417650388 and 1000008202 at the Bank of
America, N.A., the Collateral Agent agrees that:

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(1)
if a Sweep Period is triggered solely by an event under clause (ii) of Section
7.3(e) above, then the Collateral Agent shall, prior to sending the instruction
described in Section 7.3(e) to Bank of America, N.A., request that the Obligors
deliver such an instruction, and the Collateral Agent shall, in such a
circumstance, itself send such an instruction to Bank of America, N.A. only if
the Obligors have failed to demonstrate to Collateral Agent, prior to 5:00 p.m.
(Boston time) on the Business Day following the date of such request, that the
Obligors have delivered the requested instruction; and

(2)
if the Collateral Agent itself has delivered an instruction to Bank of America,
N.A. to forward by daily sweep all amounts in the applicable Blocked Account to
the Concentration Account, the Collateral Agent agrees that if and when either
or both of the two (2) permitted Sweep Suspensions becomes effective, it shall
thereafter, at the request of the Lead Borrower, and until the commencement of
a subsequent Sweep Period, either: (a) instruct the Bank of America to cause
amounts at such Blocked Accounts to be redirected to the Operating Account,
instead of the Concentration Account; (b) subject to Bank of America, N.A.’s
agreement to do so, enter into a new Blocked Account Agreement with the Bank of
America, N.A. substantially in the form of the Blocked Account Agreement dated
as of or about even date herewith, with such changes thereto as may be
reasonably requested by the parties, with respect to the such Blocked Accounts
or new Blocked Accounts at Bank of America, N.A.; or (c) take such other steps
to redirect amounts at such Blocked Accounts to the Operating Account or as the
Lead Borrower and the Collateral Agent may otherwise agree in writing in their
sole discretion.

7.4  Proceeds and Collection of Accounts.

(a)   All Receipts
constitute Collateral and proceeds of Collateral and shall be held in trust by
the Obligors for the Collateral Agent, shall not be commingled with any of the
Obligors’ other funds, and shall be deposited and/or transferred only to a
Blocked Account, the Operating Account, or the Concentration Account, or
another DDA permitted hereunder (and, in such case, only if the funds in such
DDA are deposited and/or transferred to a Blocked Account, Operating Account,
or Concentration Account).

(b)   The Obligors
shall cause the ACH or wire transfer to a Blocked Account or the Operating
Account, as designated by Collateral Agent (or, during any Sweep Period, shall
permit the Agent to cause such daily ACH or wire transfers to a Blocked Account
or the Operating Account), no less frequently than weekly (and, during any
Sweep Period, no less frequently than daily) (and whether or not there is then
an outstanding balance in the Loan Account) of the following:

(i)            The contents of each DDA (other than any
Exempt DDA, the Blocked Accounts, or the Operating Account).  Each such transfer to be net of any minimum
balance, not to exceed $2,500 multiplied by the number of stores from which
receipts are deposited into

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such
DDA, as may be required to be maintained in the subject DDA by the bank at
which such DDA is maintained.

(ii)           The proceeds of all credit card charges not
otherwise provided for pursuant hereto.

Telephone advice
(confirmed by written notice) shall be provided to the Collateral Agent on each
Business Day on which any such transfer is made.

(c)   During any
Sweep Period, whether or not any Liabilities are then outstanding, the
Borrowers shall cause the daily ACH or wire transfer to the Concentration
Account, or as otherwise designated by Collateral Agent (or shall permit the
Collateral Agent to cause such daily ACH or wire transfers to the Concentration
Account or as otherwise designated by Collateral Agent), of then entire ledger
balance of each Blocked Account or the Operating Account, net of such minimum
balance, not to exceed $2,500, as may be required to be maintained in the
Blocked Account or the Operating Account by the depository which the Blocked
Account or the Operating Account is maintained.

(d)   In the event
that, notwithstanding the provisions of this Section 7.4, the Obligors
receive or otherwise have dominion and control of any Receipts, or any proceeds
or collections of any Collateral, such Receipts, proceeds, and collections
shall be held in trust by the Obligors for the Collateral Agent and shall not
be commingled with any of the Obligors’ other funds or deposited in any account
of the Borrowers other than as set forth herein or as instructed by the
Collateral Agent.

(e)  Notwithstanding the provision of this Article
VII, the proceeds of any Term Priority Collateral shall be delivered to the
Term Loan Collateral Agent to the extent required by the Intercreditor
Agreement.

7.5  Payment of Liabilities.

(a)   On each
Business Day, the Administrative Agent shall apply the then collected balance,
if any, of the Concentration Account (net of fees charged, and of such minimum
balances as may be required by the bank at which the Concentration Account is
maintained) first, towards the unpaid balance of SwingLine Loans, second,
towards the unpaid balance of the Loan Account and third towards all other
Liabilities.

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

(i)            Funds shall be deemed to have been deposited
to the Concentration Account on the Business Day on which deposited, provided
that notice of such deposit is available to the Administrative Agent by 2:00
p.m. on that Business Day.

(ii)           Funds paid to the Agent, other than by
deposit to the Concentration Account, shall be deemed to have been received on
the Business

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Day
when they are good and collected funds, provided
that notice of such payment is available to the Agent by 2:00 p.m.
on that Business Day.

(iii)          If notice of a deposit to the Concentration
Account (Section 7.5(b)(i)) or payment (Section 7.5(b)(ii)) is
not available to the Agent until after 2:00 p.m. on a Business Day, such
deposit or payment shall be deemed to have been made at 9:00 a.m. on the then
next Business Day.

(iv)          All deposits to the Concentration Account and
other payments to the Agent are subject to clearance and collection.

(c)   The
Administrative Agent shall transfer to the Operating Account any surplus in the
Concentration Account remaining after the application towards the Liabilities
referred to in Section 7.5(a), above (less those amount which are to be
netted out, as provided therein) provided,
however, in the event that a Suspension Event or Event of Default
exists and/or one or more L/C’s are then outstanding, then the Agent may
establish a funded reserve of up to 110% of the aggregate Stated Amounts of
such L/C’s.  Such funded reserve shall
either be (i) returned to the Borrowers provided
that, no Suspension Event or Event of Default exists or (ii) applied
towards the Liabilities following Acceleration.

7.6  The Operating Account and Disbursement Account.

Except as
otherwise specifically provided in, or permitted by, this Agreement, all checks
shall be drawn by the Borrowers upon, and other disbursements shall be made by
the Borrowers solely from, the Operating Account or Exempt DDAs.

ARTICLE VIII. -  GRANT OF SECURITY INTEREST:

8.1  Grant of Security Interest.

To secure the
Obligors’ prompt, punctual, and faithful performance and payment of all and
each of the Liabilities, each Obligor hereby grants to the Collateral Agent,
for the benefit of the Agents and the Lenders, a continuing security interest
in and to, and assigns to the Collateral Agent certain assets as set forth
below of the Obligors, and each item thereof, whether now owned or now due, or
in which that Obligor has an interest, or hereafter acquired, arising, or to
become due, or in which that Obligor obtains an interest, and all products,
Proceeds, substitutions, and accessions of or to any of the following (all of
which, together with any other property in which the Agent may in the future be
granted a security interest, is referred to herein as the “Collateral”):

(a)   All
Accounts.

(b)   All
Inventory.

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(c)   All General
Intangibles.

(d)   All Goods.

(e)   All Chattel
Paper.

(f)    All
Leasehold Interests.

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

(h)   All
Letter-of-Credit Rights.

(i)    All Payment
Intangibles.

(j)    All
Supporting Obligations.

(k)   All books,
records, and information relating to the Collateral and/or to the operation of
the Obligors’ business, and all rights of access to such books, records, and
information, and all property in which such books, records, and information are
stored, recorded, and maintained.

(l)    All
Investment Property, Instruments, Documents, Documents of Title, Deposit Accounts,
policies and certificates of insurance, deposits, impressed accounts,
compensating balances, money, cash, or other property.

(m)  All
commercial tort claims.

(n)   All
insurance proceeds, refunds, and premium rebates, including, without
limitation, proceeds of fire and credit insurance, whether any of such
proceeds, refunds, and premium rebates arise out of any of the foregoing (
8.1(a) through 8.1(n)) or otherwise.

(o)   All
supporting obligations and all present and future liens, security interests,
rights, remedies, title and interest in, to and in respect of Accounts and
other Collateral, including (i) rights and remedies relating to guaranties,
contracts of suretyship, letter of credit and credit and other insurance
related to the Collateral, (ii) rights of stoppage in transit, replevin,
repossession, reclamation and other rights and remedies of an unpaid vendor,
lien or secured party, (iii) goods described in invoices, documents, contracts
or instruments with respect thereto, or otherwise representing or evidencing,
Accounts or other Collateral, including returned, repossessed and reclaimed
goods, and (iv) deposits by and property of Account Debtors or other persons
securing the obligations of Account Debtors.

(p)  All proceeds of the foregoing.

For the avoidance of
doubt, the term “Collateral” shall never include contributions to any
Security-Free Rabbi Trusts pursuant to the related Approved Security-Free SERPs
where such

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contributions occurred at
a time when there was no Suspension Event or Event of Default that had occurred
and was continuing as of such date.  If a
Suspension Event or Event of Default occurs, then the assets held in a
Security-Free Rabbi Trust shall constitute “Collateral” to the extent such assets
were contributed during the continuance of a Suspension Event or Event of
Default; provided that contributions made to any Security-Free Rabbi Trusts
pursuant to the related Approved Security-Free SERPs prior to, or after the
waiver of or cure of, a Suspension Event or Event of Default, shall not
constitute “Collateral”.

8.2  Extent and Duration of Security Interest.

The security
interest created and granted herein is in addition to, and supplemental of, any
security interest previously granted by the Obligors to the Agent and shall
continue in full force and effect applicable to all Liabilities until all
Liabilities have been paid and/or satisfied in full, the Commitment of the
Lenders to make loans and other financial accommodations has been terminated,
and the security interest granted herein is specifically terminated in writing
by a duly authorized officer of the Collateral Agent.

8.3  Perfection of Security Interests.

(a)   Each of the
Obligors agrees to take all action that the Collateral Agent may request as a
matter of nonbankruptcy law to perfect and protect the Collateral Agent’s
Collateral Interest in the Collateral and for such Collateral Interest to
obtain the priority therefore contemplated hereby, including, without
limitation, executing and delivering such documents and instruments, financing
statements, obtaining such notices and assents of third parties, obtaining
governmental approvals and providing such other instruments and documents in
recordable form as the Collateral Agent may request.  Obligors irrevocably and unconditionally
authorize the Collateral Agent to file at any time and from time to time such
financing statements with respect to the Collateral naming the Collateral Agent
or its designee as the secured party and Obligors as debtors, as Collateral
Agent may require, together with any amendment and continuations with respect
thereto, that (a) indicate the Collateral (i) as “all assets of such Obligor”
or words of similar effect, regardless of whether any particular asset
comprised in the Collateral falls within the scope of Article 9 of the Uniform
Commercial Code of the State of New York or such jurisdiction, or (ii) as being
of an equal or lesser scope or with greater detail, and (b) provide any other
information required by part 5 of Article 9 of the Uniform Commercial Code of
any jurisdiction for the sufficiency or filing office acceptance of any
financing statement or amendment, including (i) whether such Obligor is an
organization, the type of organization and any organization identification
number issued to such Obligor and, (ii) in the case of a financing statement
filed as a fixture filing, if any, a sufficient description of real property to
which the Collateral relates.  Such
Obligor agrees to furnish any such information to the Collateral Agent promptly
upon the Agent’s request.  Obligors
hereby authorize Collateral Agent to adopt on behalf of Obligors any symbol
required for authenticating any electronic filing.  In no event shall Obligors at any time file,
or permit or cause to be filed, any correction statement or termination
statement with respect to any financing statement (or amendment or continuation
with respect thereto) naming Collateral Agent or its designee as secured party
and Obligors as debtors.

 100
 

(b)   No Obligor
has any Chattel Paper (whether tangible or electronic) or instruments as of the
date hereof.  In the event that any
Obligor shall be entitled to or shall receive any Chattel Paper or instrument
after the date hereof, such Obligor or the Lead Obligor shall promptly notify
Collateral Agent thereof in writing. 
Promptly upon the receipt thereof by or on behalf of such Obligor
(including by any agent or representative), such Obligor or the Lead Borrower
shall deliver, or cause to be delivered to Collateral Agent, all tangible
Chattel Paper and instruments that such Obligor or may at any time acquire,
accompanied by such instruments of transfer or assignment duly executed in
blank as Collateral Agent may from time to time specify, in each case except as
Collateral Agent may otherwise agree.  At
Collateral Agent’s option, such Obligor or the Lead Borrower shall, or
Collateral Agent may at any time on behalf of such Obligor, cause the original
of any such instrument or Chattel Paper to be conspicuously marked in a form
and manner acceptable to Collateral Agent with the following legend referring
to Chattel Paper or instruments as applicable: “This [chattel
paper][instrument] is subject to the security interest of [name of Collateral
Agent] and any sale, transfer, assignment or encumbrance of this [chattel
paper][instrument] violates the rights of such secured party.”

(c)   In the event
that any Obligor shall at any time hold or acquire an interest in any
electronic Chattel Paper or any “transferable record” (as such term is defined
in Section 201 of the Federal Electronic Signatures in Global and National
Commerce Act or in Section 16 of the Uniform Electronic Transactions Act as in
effect in any relevant jurisdiction), such Obligor or the Lead Borrower shall
promptly notify Collateral Agent thereof in writing.  Promptly upon Collateral Agent’s request,
such Obligor or the Lead Borrower shall take, or cause to be taken, such
actions as Collateral Agent may reasonably request to give Collateral Agent
control of such electronic Chattel Paper under Section 9-105 of the UCC and
control of such transferable record under Section 201 of the Federal Electronic
Signatures in Global and National Commerce Act or, as the case may be, Section
16 of the Uniform Electronic Transactions Act, as in effect in such jurisdiction.

(d)   Except as
set forth on Exhibit 8.3(d), no Obligor owns or holds, directly or indirectly,
beneficially or as record owner or both, any Investment Property, as of the
date hereof, or has any investment account, securities account, commodity
account or other similar account with any bank or other financial institution
or other securities intermediary or commodity intermediary as of the date
hereof.

(i)            In the event that any Obligor shall be
entitled to or shall at any time after the date hereof hold or acquire any
certificated securities, such Obligor or the Lead Borrower shall promptly
endorse, assign and deliver the same to Collateral Agent, accompanied by such
instruments of transfer or assignment duly executed in blank as Collateral
Agent may from time to time specify.  If
any securities, now or hereafter acquired by any Obligor are uncertificated and
are issued to any Obligor or its nominee directly by the issuer thereof, such
Obligor shall immediately notify Collateral Agent thereof and shall as Collateral
Agent may specify, either (A) cause the issuer to agree to comply with
instructions from Collateral Agent as to such securities, without further
consent of such Obligor or such

 101
 

nominee,
or (B) arrange for Collateral Agent to become the registered owner of the
securities.

(ii)           No Obligor shall, directly or indirectly, after the date hereof open,
establish or maintain any investment account, securities account, commodity
account or any other similar account (other than a deposit account) with any securities
intermediary or commodity intermediary unless each of the following conditions
is satisfied:  (A)  Collateral Agent shall have received not less
than Five (5) Business Days prior written notice of the intention of a Obligor
to open or establish such account which notice shall specify in reasonable
detail and specificity acceptable to Collateral Agent the name of the account,
the owner of the account, the name and address of the securities intermediary
or commodity intermediary at which such account is to be opened or established,
the individual at such intermediary with whom such Obligor is dealing and the
purpose of the account, (B) the securities intermediary or commodity
intermediary (as the case may be) where such account is opened or maintained
shall be acceptable to Collateral Agent, and (C) on or before the opening of
such investment account, securities account or other similar account with a
securities intermediary or commodity intermediary, such Obligor or the Lead
Borrower shall as Collateral Agent may specify either (1) execute and deliver,
and cause to be executed and delivered to Collateral Agent, an investment
property control agreement (in form and substance acceptable to the Collateral
Agent in its reasonable discretion)  with
respect thereto duly authorized, executed and delivered by such Obligor or the
Lead Borrower and such securities intermediary or commodity intermediary or (2)
arrange for Collateral Agent to become the entitlement holder with respect to
such investment property on terms and conditions acceptable to Collateral
Agent.

(e)   No Obligor
is the beneficiary or otherwise entitled to any Letter of Credit Rights as of
the date hereof.  In the event that any
Obligor shall be entitled to or shall receive any Letter of Credit Rights, such
Obligor or the Lead Borrower shall promptly notify Collateral Agent thereof in
writing.  Such Obligor or the Lead
Borrower shall immediately, as Collateral Agent may specify, either (i)
deliver, or cause to be delivered to Collateral Agent, with respect to any such
letter of credit, banker’s acceptance or similar instrument, the written
agreement of the issuer and any other nominated person obligated to make any
payment in respect thereof (including any confirming or negotiating bank), in
form and substance satisfactory to Collateral Agent, consenting to the
assignment of the proceeds of the letter of credit to Collateral Agent by such
Obligor and agreeing to make all payments thereon directly to Collateral Agent
or as Collateral Agent may otherwise direct or (ii) cause Collateral Agent to
become, at such Obligor’s expense, the transferee beneficiary of the letter of
credit, banker’s acceptance or similar instrument (as the case may be).

 102
 

(f)    No Obligor
has any commercial tort claims as of the date hereof.  In the event that any Obligor shall at any
time after the date hereof have any commercial tort claims, such Obligor or the
Lead Borrower shall promptly notify Collateral Agent thereof in writing, which
notice shall (i) set forth in reasonable detail the basis for and nature of
such commercial tort claim and (ii) include the express grant by such Obligor
to Collateral Agent of a security interest in such commercial tort claim (and
the proceeds thereof).  In the event that
such notice does not include such grant of a security interest, the sending
thereof by such Obligor to Collateral Agent shall be deemed to constitute such
grant to Collateral Agent.  Upon the
sending of such notice, any commercial tort claim described therein shall
constitute part of the Collateral and shall be deemed included therein.  Without limiting the authorization of Agent
otherwise provided herein or otherwise arising by the execution by Obligors of
this Agreement, Agent is hereby irrevocably authorized from time to time and at
any time to file such financing statements naming Agent or its designee as
secured party and Obligors as debtors, or any amendments to any financing
statements, covering any such commercial tort claim as Collateral. In addition,
Obligors shall promptly upon Agent’s request, execute and deliver, or cause to
be executed and delivered, to Agent such other agreements, documents and
instruments as Agent may require in connection with such commercial tort claim.

(g)   The Obligors
hereby covenant and agree that each Leasehold Interest shall at all times be
free and clear of all liens, claims and encumbrances of any nature or
description (other than Permitted Encumbrances) and no other creditor of the
estate (secured or unsecured) shall be entitled to encumber any Leasehold
Interest without the express written consent of the Collateral Agent.

(h)  The due and punctual payment and performance
of the Obligations shall also be secured by the Encumbrance created by the
Mortgage upon the Headquarters Facility of Lead Borrower described therein.

(i)            Notwithstanding
anything herein to the contrary, the Obligors (I) may hold assets consisting of
Chattel Paper, Letter of Credit Rights, and commercial tort claims in an
aggregate amount not to exceed $50,000 in which the Collateral Agent’s security
interest has not been perfected; and (II) may hold assets consisting of
Investment Property in an aggregate amount not to exceed $10,000 in which the
Collateral Agent’s security interest has not been perfected.

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

9.1  Appointment as Attorney-In-Fact.

The Obligors
hereby irrevocably constitutes and appoints the Collateral Agent as the
Obligor’s true and lawful attorney, with full power of substitution, following
the occurrence and during the continuance of an Event of Default subject to the
terms of the Intercreditor Agreement, to convert the Collateral into cash at
the sole risk, cost, and expense of the Obligors, but for the ratable benefit
of the Collateral Agent. The rights and powers granted the Collateral

 103
 

Agent by this appointment
include but are not limited to the right and power, following the occurrence
and during the continuance of an Event of Default, to:

(a)   Prosecute,
defend, compromise, or release any action relating to the Collateral.

(b)   Sign change
of address forms to change the address to which the Obligors’ mail is to be
sent to such address as the Collateral Agent shall designate; receive and open
the Obligors’ mail; remove any Receivables Collateral and Proceeds of
Collateral therefrom and turn over the balance of such mail either to the
Obligors or to any trustee in bankruptcy, receiver, assignee for the benefit of
creditors of the Obligors, or other legal representative of the Obligors whom
the Collateral Agent determines to be the appropriate person to whom to so turn
over such mail.

(c)   Endorse the
name of the Obligors in favor of the Collateral Agent upon any and all checks,
drafts, notes, acceptances, or other items or instruments; sign and endorse the
name of the Obligors on, and receive as secured party, any of the Collateral,
any invoices, schedules of Collateral, freight or express receipts, or bills of
lading, storage receipts, warehouse receipts, or other documents of title
respectively relating to the Collateral.

(d)   Sign the
name of the Obligors on any notice to the Obligors’ Account Debtors or
verification of the Receivables Collateral; sign the Obligors’ name on any
Proof of Claim in Bankruptcy against Account Debtors, and on notices of lien, claims
of mechanic’s liens, or assignments or releases of mechanic’s liens securing
the Accounts.

(e)   Take all
such action as may be necessary to obtain the payment of any letter of credit
and/or banker’s acceptance of which any Obligor is a beneficiary.

(f)    Repair,
manufacture, assemble, complete, package, deliver, alter or supply goods, if
any, necessary to fulfill in whole or in part the purchase order of any
customer of the Borrowers.

(g)   Use, license
or transfer any or all General Intangibles of the Obligors.

9.2  No Obligation to Act.

The Collateral
Agent shall not be obligated to do any of the acts or to exercise any of the
powers authorized by Section 9.1 herein, but if the Collateral Agent
elects to do any such act or to exercise any of such powers, it shall not be
accountable for more than it actually receives as a result of such exercise of
power, and shall not be responsible to the Obligors for any act or omission to
act except for any act or omission to act as to which there is a final determination
made in a judicial proceeding (in which proceeding the Collateral Agent has had
an opportunity to be heard) which determination includes a specific finding
that the subject act or omission to act had been grossly negligent or in actual
bad faith.

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ARTICLE X. -  EVENTS OF DEFAULT:

The occurrence of
any event described in this Article X respectively shall constitute an “Event of Default” herein.  Upon the occurrence of any Event of Default
described in Section 10.11, any and all Liabilities shall become due and
payable without any further act on the part of the Agent. Upon the occurrence
of any other Event of Default, the Administrative Agent may by written notice
to the Lead Borrower declare any and all Liabilities immediately due and
payable and thereupon any and all such Liabilities shall become immediately due
and payable.  The occurrence of any Event
of Default shall also constitute, without notice or demand, a default under all
other agreements between the Agent or Lenders and the Obligors and instruments
and papers heretofore, now or hereafter given the Agent or Lenders.

10.1                Failure to
Pay Revolving Credit.

The failure by the
Obligors to pay any amount when due under the Revolving Credit.

10.2                Failure To
Make Other Payments.

The failure by the
Obligors to pay when due (or upon demand, if payable on demand) any payment
Liability other than under the Revolving Credit.

10.3                Failure to
Perform Covenant or Liability (No Grace Period).

The failure by the
Obligors to promptly, punctually, faithfully and timely perform, discharge, or
comply with any covenant or Liability not otherwise described in Section 10.1
or Section 10.2 hereof, and included in any of the following provisions hereof:

	
  Section

  	
  Relates to:

  
	
   

  	
   

  
	
  4.3(b)

  	
  Notice of Name Change

  
	
   

  	
   

  
	
  4.6

  	
  Location of Collateral

  
	
   

  	
   

  
	
  4.7

  	
  Title to Assets

  
	
   

  	
   

  
	
  4.8

  	
  Indebtedness

  
	
   

  	
   

  
	
  4.9

  	
  Insurance Policies

  
	
   

  	
   

  
	
  4.15

  	
  Pay taxes

  
	
   

  	
   

  
	
  4.20

  	
  Dividends, Investments, Corporate Actions

  
	
   

  	
   

  
	
  4.24

  	
  Affiliate Transactions

  
	
   

  	
   

  
	
  4.25

  	
  Further Assurances

  

 

 105

 

 

	
  6.1

  	
  Use of Collateral

  
	
   

  	
   

  
	
  Article V

  	
  Reporting Requirements and Financial Performance
  Covenants

  
	
   

  	
   

  
	
  Article VII

  	
  Cash Management

  

 

10.4                Failure to
Perform Covenant or Liability (Grace Period).

The failure by the
Obligors, within Thirty (30) days following the earlier of the Obligors’
knowledge of a breach of any covenant or Liability not described in any of Sections
10.1, 10.2, or 10.3 or of the Lead Borrower’s receipt of
written notice from the Administrative Agent of the breach thereof, to
promptly, punctually, faithfully and timely perform, discharge or comply with
any such covenant or Liability not otherwise described in Sections 10.1, 10.2,
or 10.3.

10.5                Misrepresentation.

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

10.6                Acceleration
of Other Debt. Breach of Lease.

(a)   (i) The occurrence of any event
such that any Indebtedness under the Term Loan Facility could be accelerated
(whether or not any action is taken on account of such occurrence), provided
that such event shall cease to be an Event of Default if, at any time prior to
the end of the tenth (10th) day
after the commencement of a Liquidation, the occurrence of such event has been
waived such that it has not caused and could not then cause acceleration under
the Term Loan Facility.

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

(b)   The occurrence of any of the
following with respect to Leases on which any Borrower is the lessee or is
obligated:

(i)            An aggregate of more than $500,000 in rent
is then overdue, except to the extent being contested in good faith and for
which adequate reserves have been established by such Obligor.

 106
 

(ii)           Default and the expiry of any applicable grace
period with respect to more than Twenty (20) Leases of retail stores, except if
the existence of such default is disputed in good faith by the Obligors and the
applicable landlord has been stayed or agreed in writing to forbear from
instituting proceedings to recover possession of the leased premises or
otherwise terminate the subject Lease or Obligors’ rights to peaceful
possession of the subject premises.

(iii)          Default and the expiry of any applicable
grace period of any Lease of any warehouse or distribution center.

10.7                Default Under
Other Agreements.

The occurrence of any
breach or default under any agreement (including any Loan Document other than
this Loan Agreement) between the Agent and the Obligors or instrument given by
the Obligors to the Agent and the expiry, without cure, of any applicable grace
period (notwithstanding that the subject Agent may not have exercised all or
any of its rights on account of such breach or default).

10.8                Intentionally
Omitted.

10.9                Attachment;
Judgment; Restraint of Business.

(a)   The service of process upon the
Agent or the Lenders or any Participant seeking to attach, by trustee, manse,
or other process, any of an Obligor’s funds on deposit with, or assets of such
Obligor in the possession of, the Agent or the Lenders or such Participant.

(b)   The entry of any judgment
against any Obligor or group of Obligors (which, if a money judgment, is in
excess of $1,000,000 singly, or in the aggregate), which judgment is not
satisfied (if a money judgment) or appealed from (with execution or similar
process stayed) within any applicable appeal period.

(c)   The entry of any order or the
imposition of any other process having the force of law, the effect of which is
to restrain in any material way the conduct by any Obligor of its business in
the ordinary course.

10.10              Business
Failure.

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

 107
 

or agreement by, against,
or including any Obligor which seeks or intends to accomplish a reorganization
or arrangement with creditors; and/or the initiation by or on behalf of such
Obligor of the liquidation or winding up of all or any part of such Obligor’s
business or operations.

10.11              Bankruptcy.

The failure by any
Obligor to generally pay its debts as they mature; adjudication of bankruptcy
or insolvency relative to any Obligor; the entry of an order for relief or
similar order with respect to any Obligor in any proceeding pursuant to the
Bankruptcy Code or any other federal bankruptcy law; the filing of any complaint,
application, or petition by any Obligor initiating any matter in which such
Obligor is or may be granted any relief from the debts of that Obligor pursuant
to the Bankruptcy Code or any other insolvency statute or procedure; the filing
of any complaint, application, or petition against any Obligor initiating any
matter in which the Obligor is or may be granted any relief from the debts of
that Obligor pursuant to the Bankruptcy Code or any other insolvency statute or
procedure.

10.12              Default by
Guarantor or Affiliate.

The occurrence of any of
the foregoing Events of Default with respect to any guarantor or endorser, or
surety of the Liabilities, or the occurrence of any of the foregoing Events of
Default with respect to any Subsidiary, or Affiliate (other than an Affiliate
that is an Affiliate solely due to ownership of the Lead Borrower’s
publicly-traded stock) of any Obligor, as if such guarantor, endorser, surety,
Subsidiary, or Affiliate were the “ Obligor “ described therein.

10.13              Indictment -
Forfeiture.

The indictment of, or
institution of any legal process or proceeding against, any Obligor or any
member of any Obligor’s senior management, under any federal, state, municipal,
and other civil or criminal statute, rule, regulation, order, or other requirement
having the force of law where the relief, penalties, or remedies sought or
available include the forfeiture of any property of any Obligor and/or the
imposition of any stay or other order, the effect of which could be to restrain
in any material way the conduct by that Obligor of its business in the ordinary
course.

10.14              Termination
of Guaranty.

The termination or
attempted termination (other than a mere request for consent to termination) of
any guaranty by any guarantor of the Liabilities.

10.15              Challenge to
Loan Documents.

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

 108
 

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

10.16              Intentionally
Omitted.

10.17              Change in
Control.

Any Change in Control.

10.18              Uninsured
Losses.

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

10.19              ERISA.

A reportable event
shall occur which Agent, in its sole discretion, shall determine in good faith
constitutes grounds for the termination by the Pension Benefit Guaranty
Corporation of any Plan or for the appointment by the appropriate United Stated
district court of a trustee for any Plan, or if any Plan shall be terminated in
a “distress termination” pursuant to Section 4041(c) or any such trustee shall
be requested or appointed, or if any Obligor is in “default” (as defined in
Section 4219(c)(5) of ERISA) with respect to payments to a Multiemployer Plan
resulting from such Obligor’s complete or partial withdrawal from such Plan.

ARTICLE XI. - RIGHTS AND REMEDIES
UPON DEFAULT:

Upon the occurrence of any
Event of Default described in Section 10.11 and upon Acceleration, and
at all times thereafter, the Agent shall have the following rights and remedies
in addition to all of the rights, remedies, powers, privileges, and discretions
available to Agent prior to the occurrence of an Event of Default.  Such rights and remedies shall be subject in
each case to the Intercreditor Agreement.

11.1                Rights of
Enforcement.

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

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

 109
 

(b)   To give notice to any of the
Obligors’ customs brokers to follow the instructions of the Collateral Agent as
provided in any Customs Brokers Agreement.

(c)   To collect the Receivables
Collateral with or without the taking of possession of any of the Collateral.

(d)   To take possession of all or
any portion of the Collateral.

(e)   To sell, lease, or otherwise
dispose of any or all of the Collateral, in its then condition or following
such preparation or processing as the Collateral Agent deems advisable and with
or without the taking of possession of any of the Collateral.

(f)    To conduct one or more going
out of business sales which include the sale or other disposition of the
Collateral.

(g)   To apply the Receivables
Collateral or the Proceeds of the Collateral towards (but not necessarily in
complete satisfaction of) the Liabilities.

(h)   To exercise all or any of the
rights, remedies, powers, privileges, and discretions under all or any of the
Loan Documents.

11.2                Sale of
Collateral.

(a)   Any sale or other disposition
of the Collateral may be at public or private sale upon such terms and in such
manner as the Collateral Agent deems advisable, having due regard to compliance
with any statute or regulation which might affect, limit, or apply to the
Collateral Agent’s disposition of the Collateral.

(b)   The Collateral Agent, in the
exercise of the Collateral Agent’s rights and remedies upon default, may
conduct one or more going out of business sales, in the Collateral Agent’s own
right or by one or more agents and contractors. Such sale(s) may be conducted
upon any premises owned, leased, or occupied by any Obligor.  The Collateral Agent and any such agent or
contractor, in conjunction with any such sale, may augment the Inventory with
other goods (all of which other goods shall remain the sole property of the
Collateral Agent or such agent or contractor). 
Any amounts realized from the sale of such goods which constitute
augmentations to the Inventory (net of an allocable share of the costs and
expenses incurred in their disposition) shall be the sole property of the
Collateral Agent or such agent or contractor and neither the Obligors nor any
Person claiming under or in right of the Obligors shall have any interest
therein.

(c)   Unless the Collateral is
perishable or threatens to decline speedily in value, or is of a type
customarily sold on a recognized market (in which event the Collateral Agent
shall provide the Lead Borrower with such notice as may be practicable under
the circumstances), the Collateral Agent shall give the Lead Borrower at least
Ten (10) days prior written notice of the date, time, and place of any proposed
public sale, and of the date after which any private sale or other disposition
of the Collateral may be made.  The
Obligors agree that such written notice shall satisfy all requirements for
notice to the Obligors which are imposed under the UCC or

 110
 

other applicable law with respect to the
exercise of the Collateral Agent’s rights and remedies upon default.

(d)   The Collateral Agent or the
Lenders may credit bid and may purchase the Collateral, or any portion of it at
any sale held under this Article XI.

(e)   If any of the Collateral is
sold, leased, or otherwise disposed of by the Collateral Agent on credit, the
Liabilities shall not be deemed to have been reduced as a result thereof unless
and until payment is finally received thereon by the Collateral Agent.

11.3                Occupation of
Business Location.

In connection with the
Collateral Agent’s exercise of the Collateral Agent’s rights under this Article
XI, the Collateral Agent may enter upon, occupy, and use any premises owned or
occupied by any Obligor, and may exclude the Obligors from such premises or
portion thereof as may have been so entered upon, occupied, or used by the
Collateral Agent.  The Collateral Agent
shall not be required to remove any of the Collateral from any such premises
upon the Agent’s taking possession thereof, and may render any Collateral
unusable to the Obligors.  In no event
shall the Agent be liable to the Obligors for use or occupancy by the
Collateral Agent of any premises pursuant to this Article XI, nor for any
charge (such as wages for the Obligors’ employees and utilities) incurred in
connection with the Collateral Agent’s exercise of the Agent’s Rights and
Remedies.

11.4                Grant of
Nonexclusive License.

Each Obligor hereby
grants to the Collateral Agent a royalty free nonexclusive irrevocable license
to use, apply, and affix any trademark, trade name, logo, or the like in which
that Obligor now or hereafter has rights, such license being with respect to
the Collateral Agent’s exercise of the rights hereunder including, without
limitation, in connection with any completion of the manufacture of Inventory
or sale or other disposition of Inventory.

11.5                Assembly of
Collateral.

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

11.6                Rights and
Remedies.

The rights, remedies,
powers, privileges, and discretions of the Agent hereunder, under any other
Loan Document or under applicable law (herein, the “Agent’s
Rights and Remedies”) shall be cumulative and not exclusive of any
rights or remedies which it would otherwise have.  No delay or omission by the Agent in
exercising or enforcing any of the Agent’s Rights and Remedies shall operate
as, or constitute, a waiver thereof.  No
waiver by the Agent of any Event of Default or of any default under any other
agreement shall operate as a waiver of any other default hereunder or under any
other agreement.  No single or partial
exercise of any of the Agent’s Rights or Remedies, and no express or implied
agreement or transaction of whatever

 111
 

nature entered into
between the Agent and any person, at any time, shall preclude the other or
further exercise of the Agent’s Rights and Remedies.  No waiver by the Agent of any of the Agent’s
Rights and Remedies on any one occasion shall be deemed a waiver on any
subsequent occasion, nor shall it be deemed a continuing waiver.  The Agent’s Rights and Remedies may be
exercised at such time or times and in such order of preference as the Agent
may determine. The Agent’s Rights and Remedies may be exercised without resort
or regard to any other source of satisfaction of the Liabilities.

ARTICLE XII. - NOTICES:

12.1                Notice
Addresses.

All notices, demands, and
other communications made in respect of this Agreement (other than a request
for a loan or advance or other financial accommodation under the Revolving
Credit) shall be made to the following addresses, each of which may be changed
upon Seven (7) days written notice to all others given by certified mail,
return receipt requested:

If
to the Agent:

Bank
of America, N.A.

100
Federal Street

Boston,
MA  02110

Attention:  Sally A. Sheehan, Managing Director

Fax:  (617) 434-4339

With a
copy to:

Brown
Rudnick Berlack Israels LLP

One
Financial Center

Boston,
MA 02111

Attention:  Andrew P. Strehle, Esquire

Fax:  617 856-8201

If to the Lenders:

Bank of America, N.A.

100 Federal Street

Boston, MA  02110

Attention:  Sally A. Sheehan, Managing Director

Fax:  (617) 434-4339

If to the Obligors:

c/o
Lead Borrower

Mothers Work, Inc.

456 North Fifth Street

Philadelphia, PA  19123

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

Fax: (215) 923-0975

With a
copy to:

Pepper
Hamilton LLP

3000
Two Logan Square

Eighteenth
and Arch Streets

Philadelphia,
PA  19103-2799

Attention:  David G. Smith, Esquire

Fax:  (215) 981-4750

12.2                Notice Given.

(a)   Except as otherwise
specifically provided herein, notices shall be deemed made and correspondence
received, as follows (all times being local to the place of delivery or
receipt):

(i)            By mail: the sooner of when actually
received or Three (3) days following deposit in the United States mail, postage
prepaid.

(ii)           By recognized overnight express delivery:
the Business Day following the day when sent.

(iii)          By Hand: If delivered on a Business Day after
9:00 a.m. and no later than Three (3) hours prior to the close of customary
business hours of the recipient, when delivered.  Otherwise, at the opening of the then next Business
Day.

(iv)          By Facsimile transmission (which must include
a header on which the party sending such transmission is indicated): If sent on
a Business Day after 9:00 a.m. and no later than Three (3) hours prior to the
close of customary business hours of the recipient, One (1) hour after being
sent.  Otherwise, at the opening of the
then next Business Day.

(b)   Rejection or refusal to accept
delivery and inability to deliver because of a changed address or facsimile
number for which no due notice was given shall each be deemed receipt of the notice
sent.

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

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ARTICLE XIII. - TERM:

13.1                Termination
of Revolving Credit.

The Revolving Credit
shall remain in effect (subject to suspension as provided in Section 2.5(h)
hereof) until the Termination Date.

13.2                Actions On
Termination.

On the Termination Date,
the Borrowers shall pay the Administrative Agent (whether or not then due), in
immediately available funds, all then Liabilities including, without
limitation: the entire balance of the Loan Account (including the unpaid
principal balance of the Revolving Credit Loans); any then remaining
installments of the Revolving Credit Commitment Fee; any payments due on
account of the indemnification obligations included in Section 2.10(e);
any accrued and unpaid Unused Line Fee; and all unreimbursed costs and expenses
of Agent for which the Borrowers are responsible; and shall make such
arrangements concerning any L/C’s then outstanding are reasonably satisfactory
to the Administrative Agent.  Until such
payment, all provisions of this Agreement, other than those contained in
Article II which place an obligation on the Agent to make any loans or advances
or to provide financial accommodations under the Revolving Credit or otherwise,
shall remain in full force and effect until all Liabilities shall have been
paid in full.  The release by the
Collateral Agent of the Collateral Interests granted the Agent by the Obligors
hereunder may be upon such conditions and indemnifications as the Collateral
Agent may require.

ARTICLE XIV. - GENERAL:

14.1                Protection of
Collateral.

The Agent has no duty as
to the collection or protection of the Collateral beyond the safe custody of
such of the Collateral as may come into the possession of the Agent.

14.2                Publicity.

The Administrative Agent,
at its expense, may issue a “tombstone” notice of the establishment of the
credit facility contemplated by this Agreement and may make reference to the
Obligors (and may utilize any logo or other distinctive symbol associated with
the Borrowers) in connection with any advertising, promotion, or marketing
undertaken by the Administrative Agent.

14.3                Successors
and Assigns.

This Agreement shall be binding
upon the Obligors and the Obligors’ representatives, successors, and assigns
and shall inure to the benefit of the Agent and the Lenders and their
respective successors and assigns, provided, however, no trustee or other fiduciary appointed with respect
to the Obligors shall have any rights hereunder.  In the event that the Agent or Lenders
assigns or transfers its rights under this Agreement, the assignee shall
thereupon succeed to and become vested with all rights, powers, privileges, and
duties of such assignor hereunder and such assignor shall thereupon be
discharged and relieved from its duties and obligations hereunder.

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14.4                Severability.

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

14.5                Amendments;
Course of Dealing.

(a)   This Agreement and the other
Loan Documents incorporate all discussions and negotiations between the
Obligors, the Agent and the Lenders, either express or implied, concerning the
matters included herein and in such other instruments, any custom, usage, or
course of dealings to the contrary notwithstanding.  No such discussions, negotiations, custom,
usage, or course of dealings shall limit, modify, or otherwise affect the
provisions thereof.  No failure by the
Agent or Lenders to give notice to the Lead Borrower of the Obligors’ having
failed to observe and comply with any warranty or covenant included in any Loan
Document shall constitute a waiver of such warranty or covenant or the
amendment of the subject Loan Document. 
No change made by the Agent to the manner by which Availability is
determined shall obligate the Agent to continue to determine Availability in
that manner.

(b)   The Obligors may undertake any
action otherwise prohibited hereby, and may omit to take any action otherwise
required hereby, upon and with the express prior written consent of the Agent.
No consent, modification, amendment, or waiver of any provision of any Loan
Document shall be effective unless executed in writing by or on behalf of the
party to be charged with such modification, amendment, or waiver (and if such
party is the Agent then by a duly authorized officer thereof).  Notwithstanding the foregoing sentence, any
increase in the Revolving Credit Loan Ceiling, up to a maximum of $85,000,000,
shall be deemed effective upon and with express written consent of the
Borrowers and the Administrative Agent and those Lenders that agree in writing
to increase their Revolving Credit Commitments in connection with such
increase. Any modification, amendment, or waiver provided by the Administrative
Agent shall be in reliance upon all representations and warranties theretofore
made to the Administrative Agent by or on behalf of the Borrowers (and any
guarantor, endorser, or surety of the Liabilities) and consequently may be rescinded
in the event that any of such representations or warranties was not true and
complete in all material respects when given.

14.6                Power of
Attorney.

In connection with all
powers of attorney included in this Agreement, the Obligors hereby grant unto
the Agent full power to do any and all things necessary or appropriate in
connection with the exercise of such powers as fully and effectually as the
Obligors might or could do, hereby ratifying all that said attorney shall do or
cause to be done by virtue of this Agreement. 
No power of attorney set forth in this Agreement shall be affected by
any disability or incapacity suffered by the Obligors and each shall survive
the same. All powers conferred upon the Agent by this Agreement, being coupled
with an interest, shall be irrevocable until this Agreement is terminated by a
written instrument executed by a duly authorized officer of the Agent.

 115
 

14.7                Application
of Proceeds.

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

14.8                Increased
Costs.

If the Administrative
Agent or Lenders shall have determined that the adoption of any law, rule or
regulation regarding capital adequacy, or any change therein or in the
interpretation or application thereof, or compliance by the Agent or Lenders
with any request or directive regarding capital adequacy (whether or not having
the force of law) from any central bank or governmental authority enacted after
the date hereof, does or shall have the effect of reducing the rate of return
on such party’s capital as a consequence of its obligations hereunder to a
level below that which the Agent or Lenders could have achieved but for such
adoption, change or compliance (taking into consideration the Agent’s or
Lenders’ policies with respect to capital adequacy) by a material amount, then
from time to time, after submission by the Administrative Agent or Lenders to
the Lead Borrower of a written demand therefor (“Capital
Adequacy Demand”) together with the certificate described below, the
Borrowers shall pay to the Agent or Lenders, as applicable, such additional
amount or amounts (“Capital Adequacy Charge”)
as will compensate the Agent or Lenders for such reduction, such Capital
Adequacy Demand to be made with reasonable promptness following such
determination.  A certificate of the
Administrative Agent or Lenders claiming entitlement to payment as set forth
above shall be conclusive.  Such
certificate shall set forth the nature of the occurrence giving rise to such
reduction, the amount of the Capital Adequacy Charge to be paid to the Agent or
Lenders, and the method by which such amount was determined.  In determining such amount, the
Administrative Agent or Lenders may use any reasonable averaging and
attribution method, applied on a non-discriminatory basis.

14.9                Costs and
Expenses of the Agent and Lenders.

The Borrowers shall pay
from time to time on demand all Costs of Collection and all reasonable costs,
expenses, and disbursements of (including attorneys’ reasonable fees and
expenses) which are incurred by the Agent and Lenders in connection with the
preparation, negotiation, execution, and delivery of this Agreement and of any
other Loan Documents, and all other reasonable costs, expenses, and
disbursements which may be incurred connection with or in respect to the credit
facility contemplated hereby or which otherwise are incurred with respect to
the Liabilities.

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

 116
 

(b)   The Borrowers authorize the
Administrative Agent to pay all such fees and expenses and in the
Administrative Agent’s discretion, to add such fees and expenses to the Loan
Account.

(c)   The undertaking on the part of
the Borrowers in this Section 14.9 shall survive payment of the
Liabilities and/or any termination, release, or discharge executed by the Agent
in favor of the Borrowers, other than a termination, release, or discharge
which makes specific reference to this Section 14.9.

14.10              Copies and
Facsimiles.

This Agreement and all
documents which relate thereto, which have been or may be hereinafter furnished
the Agent or the Lenders may be reproduced by the Agent or Lenders by any
photographic, microfilm, xerographic, digital imaging, or other process, and
such Person making such reproduction may destroy any document so
reproduced.  Any such reproduction shall
be admissible in evidence as the original itself in any judicial or
administrative proceeding (whether or not the original is in existence and
whether or not such reproduction was made in the regular course of business).
Any facsimile which bears proof of transmission shall be binding on the party
which or on whose behalf such transmission was initiated and likewise shall be
so admissible in evidence as if the original of such facsimile had been
delivered to the party which or on whose behalf such transmission was received.

14.11              New York Law.

This Agreement and all
rights and obligations hereunder, including matters of construction, validity,
and performance, shall be governed by the law of the State of New York.

14.12              Consent to
Jurisdiction.

(a)   Each Obligor agrees that any
legal action, proceeding, case, or controversy against the Obligors with
respect to any Loan Document may be brought in the Supreme Court for New York
County or in the United States District Court, Southern District of New York,
sitting in New York City, New York, or the Superior Court of Suffolk County,
Massachusetts or in the United States District Court, District of
Massachusetts, sitting in Boston, Massachusetts, as the Agent may elect in the
Agent’s sole discretion.  By execution
and delivery of this Agreement, each Borrower, for itself and in respect of its
property, accepts, submits, and consents generally and unconditionally, to the
jurisdiction of the aforesaid courts.

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

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

 117
 

(d)   Nothing herein shall affect the
right of the Agent to bring legal actions or proceedings in any other competent
jurisdiction.

(e)   Each Obligor agrees that any
action commenced by any Borrower asserting any claim arising under or in
connection with this Agreement or any other Loan Document shall be brought
solely in the Superior Court of Suffolk County, Massachusetts or in the United
States District Court, District of Massachusetts, sitting in Boston,
Massachusetts, and that such Courts shall have exclusive jurisdiction with
respect to any such action.

14.13              Indemnification.

The Obligors shall
indemnify, defend, and hold the Agent and Lenders and any Participant and any
of their respective employees, officers, or agents (each, an “Indemnified Person”) harmless of and from any claim brought
or threatened against any Indemnified Person by the Borrowers, any guarantor or
endorser of the Liabilities, or any other Person (as well as from attorneys’
reasonable fees, expenses, and disbursements in connection therewith) on
account of the relationship of any Obligor or of any other guarantor or
endorser of the Liabilities (each of claims which may be defended, compromised,
settled, or pursued by the Indemnified Person with counsel of the Agent’s or
Lenders’ or Participant’s (as the case may be) selection, but at the expense of
the Obligors) other than any claim as to which a final determination is made in
a judicial proceeding (in which the Agent, Lenders and any other Indemnified
Person has had an opportunity to be heard), which determination includes a
specific finding that the Indemnified Person seeking indemnification had acted
in a grossly negligent manner or in actual bad faith.  This indemnification shall survive payment of
the Liabilities and/or any termination, release, or discharge executed by the
Agent or Lenders in favor of the Obligors, other than a termination, release,
or discharge duly executed on behalf of the Agent or Lenders which makes
specific reference to this Section 14.13.

14.14              Rules of
Construction.

The following rules of
construction shall be applied in the interpretation, construction, and
enforcement of this Agreement and of the other Loan Documents:

(a)   Unless otherwise specifically
provided for herein, interest and any fee or charge which is stated as a per
annum percentage shall be calculated based on a 365/366 day year and actual
days elapsed.

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

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

 118
 

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

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

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

(g)   Text which follows the words “including,
without limitation” (or similar words) is illustrative and not limiting.

(h)   Except where the context
otherwise requires or where the relevant subsections are joined by “or”,
compliance with any Section or provision of any Loan Document which constitutes
a warranty or covenant requires compliance with all subsections (if any) of
that Section or provision.  Except where
the context otherwise requires, compliance with any warranty or covenant of any
Loan Document which includes subsections which are joined by “or” may be
accomplished by compliance with any of such subsections.

(i)    Text which is shown in italics, shown in bold,
shown IN ALL CAPITAL LETTERS, or in any combination of the foregoing, shall be
deemed to be conspicuous.

(j)    The words “may not” are
prohibitive and not permissive.

(k)   The word “or” is not exclusive.

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

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

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

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

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

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

 119
 

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

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

(ii)           The word “from” means “from and including”.

(iii)          The words “to” and “until” each mean “to, but
excluding”.

(iv)          The word “through” means “to and including”.

(s)   The Loan Documents shall be
construed and interpreted in a harmonious manner and in keeping with the
intentions set forth in Section 19.15 hereof, provided, however, in the
event of any inconsistency between the provisions of this Agreement and any
other Loan Document, the provisions of this Agreement shall govern and control.

14.15              Intent.

It is intended that:

(a)   This Agreement take effect as a
sealed instrument.

(b)   The scope of the Collateral
Interests created by any Obligor to secure the Liabilities be broadly construed
in favor of the Agent and that they cover all assets of each Borrower.

(c)   All Collateral Interests
created in favor of the Agent at any time and from time to time by any Obligor
secure all Liabilities, whether now existing or contemplated or hereafter
arising.

(d)   Except as specifically limited
herein, all reasonable costs, expenses, and disbursements incurred by the Agent
and, to the extent provide herein, the Lenders, in connection with such Person’s
relationship(s) with the Obligors shall be borne by the Obligors.

14.16              Participations.

The Agent or Lenders may
sell participations to one or more financial institutions (a “Participant”) all or a portion of the Agent’s or Lenders’
rights and obligations under this Agreement, provided, however, that except with the consent of the
Borrowers (which may not be unreasonably withheld or delayed), the only rights granted to
the participant pursuant to such participation arrangements with respect to
waivers, amendments or modifications of the Loan

 120
 

Documents shall be the rights to
approve waivers, amendments or modifications that would reduce the principal of
or the interest rate on any Loans, extend the term or increase the amount of
the Commitment of such Lender as it relates to such participant, increase the
availability of Loans or L/C’s to the Borrowers, reduce the amount of any fees
to which such participant is entitled, or extend any regularly scheduled
payment date for principal or interest.  No such sale of a
participation shall relieve the Agent or Lenders from the Agent’s or Lenders’
obligations hereunder.

14.17              Right of Set-Off.

Any and all deposits or
other sums at any time credited by or due to the Obligors from the Agent,
Lenders or any Participant or from any Affiliate of any of the foregoing, and
any cash, securities, instruments or other property of the Obligors in the
possession of any of the foregoing, whether for safekeeping or otherwise
(regardless of the reason such Person had received the same), to the extent
permitted by law, shall at all times constitute security for all Liabilities
and for any and all obligations of the Obligors to the Agent, Lenders or any
Participant or such Affiliate and may be applied or set off against the
Liabilities and against such obligations at any time, whether or not such are
then due and whether or not other collateral is then available to the Agent.

14.18              Pledges To
Federal Reserve Banks.

Nothing included in this
Agreement shall prevent or limit the Agent or Lenders from pledging all or any
portion of that Agent’s or any Lender’s interest and rights under this Agreement
to any funding source of such Agent or Lender or, to the extent that the Agent
or Lenders is subject to any of the twelve Federal Reserve Banks organized
under §4 of the Federal Reserve Act (12 U.S.C. §341), from pledging all or any
portion of that Agent’s or Lenders’ interest and rights under this Agreement, provided, however, neither such pledge nor the enforcement
thereof shall release the Agent or Lenders from their respective obligations
hereunder or under any of the Loan Documents.

14.19              Maximum Interest
Rate.

Regardless of any
provision of any Loan Document, the Agent and Lenders shall not be entitled to
contract for, charge, receive, collect, or apply as interest on any Liability,
any amount in excess of the maximum rate imposed by applicable law.  Any payment which is made which, if treated
as interest on a Liability would result in such interest’s exceeding such
maximum rate shall be held, to the extent of such excess, as additional
collateral for the Liabilities as if such excess were “Collateral.”

14.20              Waivers.

(a)   Each Borrower (and all
guarantors, endorsers, and sureties of the Liabilities) make each of the
waivers included in Section 14.20(b), below, knowingly, voluntarily, and
intentionally, and understands that Agent and Lenders, in establishing the
facilities contemplated

 121
 

hereby and in providing loans and other
financial accommodations to or for the account of the Borrowers as provided
herein, whether not or in the future, is relying on such waivers.

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

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

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

(iii)          THE RIGHT TO A JURY IN ANY TRIAL OF ANY CASE
OR CONTROVERSY IN WHICH THE AGENT OR LENDER IS OR BECOMES A PARTY (WHETHER SUCH
CASE OR CONTROVERSY IS INITIATED BY OR AGAINST THE AGENT OR LENDER OR IN WHICH
THE AGENT OR LENDER IS JOINED AS A PARTY LITIGANT), WHICH CASE OR CONTROVERSY
ARISES OUT OF OR IS IN RESPECT OF, ANY RELATIONSHIP AMONGST OR BETWEEN ANY
BORROWER OR ANY OTHER PERSON AND THE AGENT OR LENDER LIKEWISE WAIVES THE RIGHT
TO A JURY IN ANY TRIAL OF ANY SUCH CASE OR CONTROVERSY).

(iv)          Any defense, counterclaim, set-off,
recoupment, or other basis on which the amount of any Liability, as stated on
the books and records of the Agent or Lenders, could be reduced or claimed to
be paid otherwise than in accordance with the tenor of and written terms of
such Liability.

(v)           Any claim to consequential, special, or
punitive damages.

14.21              Counterparts.

This Agreement, any of
the Loan Documents, and any amendments, waivers, consents or supplements may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which, when so executed and delivered, shall be
deemed an original, but all of which counterparts together shall constitute but
one agreement.

14.22              Electronic
Submissions.

Upon not less than Thirty
(30) days’ prior written notice (the “Approved Electronic Form
Notice”), the Agent may permit or require that any of the documents,
certificates, forms,

 122
 

deliveries or other
communications, authorized, required or contemplated by this Agreement or the
Loan Documents, be submitted to the Agent in “Approved
Electronic Form” (as hereafter defined), subject to any reasonable
terms, conditions and requirements in the applicable Approved Electronic Forms
Notice.  For purposes hereof “Electronic Form” means e-mail, e-mail attachments, data
submitted on web-based forms or any other communication method that delivers
machine readable data or information to the Agent, and “Approved
Electronic Form” means an Electronic Form that has been approved in
writing by the Agent (which approval has not been revoked or modified by the
Agent) and sent to the Borrowers in an Approved Electronic Form Notice.  Except as otherwise specifically provided in
the applicable Approved Electronic Form Notice, any submissions made in an
applicable Approved Electronic Form shall have the same force and effect that
the same submissions would have had if they had been submitted in any other
applicable form authorized, required or contemplated by this Agreement or the
Loan Documents.

14.23              Bank of
America, N.A.. as Agent.

The Lenders have
appointed the Agent as their agent to act on their behalf under the credit
facility pursuant to the terms of the “Agency Agreement”,
so referred to herein, between the Lenders and the Agent.  If at any time the Lenders or the Agent
elects to terminate the agency relationship, the Lenders or the Agent shall give
Thirty (30) days written notice of such event to the Lead Borrower.  Thereafter, all rights and obligations of the
Agent contained in this Agreement and the other Loan Documents shall revert to
the Lenders or another Agent, if appointed by the Lenders.

14.24              Joint
Borrower Provisions.

(a)   Each Borrower represents to the
Agent and Lenders that it is an integral part of a consolidated enterprise, and
that each Borrower will receive direct and indirect benefits from the
availability of the joint credit facility provided for herein, and from the
ability to access the collective credit resources of the consolidated
enterprise that are Borrowers.

(b)   Each Borrower is, and at all
times shall be, jointly and severally liable for each and every one of the
Liabilities hereunder, regardless of which Borrower requested, received, used,
or directly enjoyed the benefit of the extensions of credit hereunder.  All of the Collateral shall secure all of the
Liabilities.  Each Borrower’s Liabilities
are independent obligations and are absolute and unconditional.  Each Borrower, to the extent permitted by
law, hereby waives any defense to such Liabilities that may arise by reason of
the disability or other defense or cessation of liability of any other Borrower
for any reason other than payment in full. 
Each Borrower also waives any defense to such Liabilities that it may
have as a result of the Agent’s election of or failure to exercise any right,
power, or remedy, including, without limitation, the failure to proceed first against
such other Borrower or any security it holds for such other Borrower’s
Liabilities under any Loan Document, if any. 
Without limiting the generality of the foregoing, each Borrower
expressly waives all demands and notices whatsoever (except for any demands or
notices, if any, that such Borrower expressly is entitled to receive pursuant
to the

 123
 

terms of any Loan Document), and agrees that
the Agent may, without notice (except for such notice, if any, as such Borrower
expressly is entitled to receive pursuant to the terms of any Loan Document)
and without releasing the liability of such Borrower, extend for the benefit of
any other Borrower the time for making any payment, waive or extend the
performance of any agreement or make any settlement of any agreement for the
benefit of any other Borrower, and may proceed against each Borrower, directly
and independently of any other Borrower, as such obligee may elect in
accordance with this Agreement.

(c)   Each Borrower acknowledges that
the Liabilities of such Borrower undertaken herein or in the other Loan
Documents, and the grants of security interests and liens by such Borrower to
secure Liabilities of the other Borrower could be construed to consist, at
least in part, of the guaranty of Liabilities of the other Borrower and, in
full recognition of that fact, each Borrower consents and agrees as hereinafter
set forth in the balance of this Section 14.24.  The consents, waivers, and agreements of the
Borrowers that are contained in the balance of this Section 14.24 are
intended to deal with the suretyship aspects of the transactions evidenced by
the Loan Documents (to the extent that a Borrower may be deemed a guarantor or
surety for the Liabilities of another Borrower) and thus are intended to be
effective and applicable only to the extent that any Borrower has agreed to
answer for the Liabilities of another Borrower or has granted a lien or
security interest in Collateral to secure the Liabilities of another
Borrower.  Conversely, the consents,
waivers, and agreements of the Borrowers that are contained in the balance of
this Section 14.24 shall not be applicable to the direct Liabilities of
a Borrower with respect to credit extended directly to such Borrower, and shall
not be applicable to security interests or liens on Collateral of a Borrower
given to directly secure direct Liabilities of such Borrower where no aspect of
guaranty or suretyship is involved.  Each
Borrower consents and agrees that the Lenders may, at any time and from time to
time, without notice or demand, whether before or after any actual or purported
termination, repudiation or revocation of this Agreement by any one or more
Borrowers, and without affecting the enforceability or continuing effectiveness
hereof as to such Borrower, in accordance with the terms of the Loan
Documents:  (a) supplement, restate,
modify, amend, increase, decrease, extend, renew, accelerate or otherwise
change the time for payment or the terms of the Liabilities or any part
thereof, including any increase or decrease of the rate(s) of interest thereon;
(b) supplement, restate, modify, amend, increase, decrease or waive, or
enter into or give any agreement, approval or consent with respect to, the
Liabilities or any part thereof, or any of the Loan Documents or any security
or guarantees granted or entered into by any Person(s) other than such
Borrower, or any condition, covenant, default, remedy, right, representation or
term thereof or thereunder; (c) accept new or additional instruments,
documents or agreements in exchange for or relative to any of the Loan
Documents or the Liabilities or any part thereof, (d) accept partial
payments on the Liabilities; (e) receive and hold additional security or
guarantees for the Liabilities or any part thereof, (f) release, reconvey,
terminate, waive, abandon, fail to perfect, subordinate, exchange, substitute,
transfer or enforce any security or guarantees, and apply any security and
direct the order or manner of sale thereof as the Lenders in their sole and
absolute discretion may determine; (g) release any other Person
(including, without limitation, any other Borrower) from any personal liability
with respect to the Liabilities or any part thereof, (h) with respect to
any Person other than such Borrower (including, without limitation, any other
Borrower), settle, release on terms satisfactory to the Lenders or by operation
of applicable laws or otherwise

 124
 

liquidate or enforce any Liabilities and any
security therefor or guaranty thereof in any manner, consent to the transfer of
any security and bid and purchase at any sale; or (i) consent to the
merger, change or any other restructuring or termination of the corporate or
partnership existence of any other Borrower or any other Person, and
correspondingly agree, in accordance with all applicable provisions of the Loan
Documents, to the restructure of the Liabilities, and any such merger, change,
restructuring or termination shall not affect the liability of any Borrower or
the continuing effectiveness hereof, or the enforceability hereof with respect
to all or any part of the Liabilities.

(d)   Upon the occurrence and during
the continuance of any Event of Default, the Agent may enforce the Loan
Documents independently as to each Borrower and independently of any other
remedy the Agent at any time may have or hold in connection with the
Liabilities, and it shall not be necessary for the Agent to marshal assets in
favor of any Borrower or any other Person or to proceed upon or against or
exhaust any security or remedy before proceeding to enforce this Agreement or
any other Loan Documents.  Each Borrower
expressly waives any right to require the Agent to marshal assets in favor of
any Borrower or any other Person or to proceed against any other Borrower or
any Collateral provided by any Person, and agrees that the Agent may proceed
against Borrowers or any Collateral in such order as they shall determine in
their sole and absolute discretion, subject to the terms hereof.

(e)   The Agent may file a separate
action or actions against any Borrower, whether action is brought or prosecuted
with respect to any security or against any other Person, or whether any other
Person is joined in any such action or actions. 
Each Borrower agrees, for itself, that the Agent and any other Borrower,
or any Affiliate of any other Borrower (other than such Borrower itself), may
deal with each other in connection with the Liabilities or otherwise, or alter
any contracts or agreements now or hereafter existing between any of them, in
any manner whatsoever, all without in any way altering or affecting the
continuing efficacy as to such Borrower of the Loan Documents.

(f)    The Agent’s rights hereunder
shall be reinstated and revived, and the enforceability of this Agreement shall
continue, with respect to any amount at any time paid on account of the
Liabilities which thereafter shall be required to be restored or returned by
the Agent (including, without limitation, the restoration or return of any
amount pursuant to a court order or judgment (whether or not final or non-appealable),
or pursuant to a good faith settlement of a pending or threatened avoidance or
recovery action, or pursuant to good faith compliance with a demand made by a
Person believed to be entitled to pursue an avoidance or recovery action (such
as a bankruptcy trustee or a Person having the avoiding powers of a bankruptcy
trustee, or similar avoiding powers), and without requiring the Agent to oppose
or litigate avoidance or recovery demands or actions that it believes in good
faith to be meritorious or worthy of settlement or compliance, or pursue or
exhaust appeals), all as though such amount had not been paid.  The rights and priorities of the Agent
created or granted herein and the enforceability of the Loan Documents at all
times shall remain effective to cover the full amount of all the Liabilities
even though the Liabilities, including any part thereof or any other security
or guaranty therefor, may be or hereafter may become invalid or otherwise
unenforceable as against any Borrower and whether or not any other Borrower
shall have any personal liability with respect thereto.

 125
 

(g)   To the maximum extent permitted
by applicable law, each Borrower, for itself, expressly waives any and all
defenses now or hereafter arising or that otherwise might be asserted by reason
of (a) any disability or other defense of any other Borrower with respect
to the Liabilities or with respect to the enforceability of the Agent’s
security interest in or Encumbrance on any collateral securing any of the
Liabilities (including, without limitation, the Collateral), (b) the
unenforceability or invalidity of any security or guaranty for the Liabilities
or the lack of perfection or continuing perfection or failure of priority of
any security for the Liabilities, (c) the cessation for any cause
whatsoever of the liability of any other Borrower (other than by reason of the
full payment and performance of all Liabilities), (d) any failure of the
Agent to give notice of sale or other disposition of Collateral to any other Borrower
or any other Person other than such waiving Borrower, or any defect in any
notice that may be given to any other Borrower for any other Person other than
such waiving Borrower, in connection with any sale or disposition of any
collateral securing the Liabilities or any of them (including, without
limitation, the Collateral), (e) any failure of the Agent to comply with
applicable law in connection with the sale or other disposition of any
collateral or other security for any Liabilities that is owned by another
Borrower or by any other Person other than such waiving Borrower, including any
failure of the Agent to conduct a commercially reasonable sale or other
disposition of any such collateral or other security for any Liabilities,
(f) any act or omission of the Agent or others that directly or indirectly
results in or aids the discharge or release of any other Borrower, or the
Liabilities of any other Borrower, or any security or guaranty therefor, by
operation of law or otherwise, or (g) any law which provides that the
obligation of a surety or guarantor must neither be larger in amount nor in
other respects more burdensome than that of the principal or which reduces a
surety’s or guarantor’s obligation in proportion to the principal
obligation.  Until such time, if any, as
all of the Liabilities (other than contingent Liabilities and indemnities which
survive repayment of the Loans) have been paid and performed in full and no
portion of any commitment of the Lenders to any Borrower under any Loan
Document remains in effect, no Borrower shall have any right of subrogation,
contribution, reimbursement or indemnity, and each Borrower expressly waives
any right to enforce any remedy that the Agent now have or hereafter may have
against any other Person and waives the benefit of, or any right to participate
in, any collateral now or hereafter held by the Agent.  Except to the extent expressly provided for
in any Loan Document, each Borrower expressly waives, to the maximum extent
permitted by applicable law, all rights or entitlements to presentments,
demands for payment or performance, notices of nonpayment or nonperformance,
protests, notices of protest, notices of dishonor and all other notices or
demands of any kind or nature whatsoever with respect to the Liabilities, and
all notices of acceptance of the Loan Documents or of the existence, creation
or incurring of new or additional Liabilities.

(h)   Each Borrower hereby agrees to
keep each other Borrower fully apprised at all times as to the status of its
business, affairs, finances, and financial condition, and its ability to
perform its Liabilities under the Loan Documents, and in particular as to any
adverse developments with respect thereto. 
Each Borrower hereby agrees to undertake to keep itself apprised at all
times as to the status of the business, affairs, finances, and financial
condition of each other Borrower, and of the ability of each other Borrower to
perform its Liabilities under the Loan Documents, and in particular as to any
adverse developments with respect to any thereof.  Each Borrower hereby agrees, in light of the
foregoing mutual covenants to inform each other,

 126
 

and to keep themselves and each other
informed as to such matters, that the Agent shall have no duty to inform any
Borrower of any information pertaining to the business, affairs, finances, or
financial condition of any other Borrower, or pertaining to the ability of any
other Borrower to perform its Liabilities under the Loan Documents, even if
such information is adverse, and even if such information might influence the
decision of one or more of the Borrowers to continue to be jointly and
severally liable for, or to provide Collateral for, Liabilities of one or more
of the other Borrowers.  To the fullest
extent permitted by applicable law, each Borrower hereby expressly waives any
duty of the Agent to inform any Borrower of any such information.

(i)    Borrowers and each of them
warrant and agree that each of the waivers and consents set forth herein are
made after consultation with legal counsel and with full knowledge of their
significance and consequences, with the understanding that events giving rise
to any defense or right waived may diminish, or otherwise adversely affect
rights that Borrowers otherwise may have against other Borrowers, the Agent or
others, or against Collateral, and that, under the circumstances, the waivers
and consents herein given are reasonable. 
If any of the waivers or consents herein is determined to be contrary to
any applicable law or public policy, such waivers and consents shall be
effective to the maximum extent permitted by law.

14.25              Transitional
Arrangements.

This Agreement shall, on and as of the Closing Date,
supersede the Second Agreement, in its entirety, except as provided in this
Section 14.25.  On the Closing Date, the
rights and obligations of the parties under the First Agreement shall be
subsumed within and governed by this Agreement, provided, however,

(a)    that each of the “Revolving Credit Loans”
(as defined in the Second Agreement) outstanding under the Second Agreement on
the Closing Date shall continue to bear interest up to the Closing Date at the
rate at which they bear interest under the Second Agreement and, on and after
the Closing Date, all of such Loans under the Second Agreement shall be
converted to Revolving Credit Loans hereunder and shall bear interest at the
rates set forth hereunder;

(b)    that any letter of credit or L/C
outstanding under the Second Agreement on the Closing Date shall for the
purposes of this Agreement, together with the Special Purpose Credit, be a L/C
hereunder;

(c)    that each
and every other Loan Document under the Second Agreement shall, unless
explicitly restated, substituted or replaced in connection herewith, continue
in full force and effect and that any and all references therein to the Second
Agreement shall be deemed to constitute references to this Agreement; and

(d)   all fees,
letter of credit fees and other fees and expenses owing or accruing under or in
respect of the Second Agreement shall be calculated as of the Closing Date
(prorated in the case of any fractional periods), and shall be paid in
accordance with the method and on the dates, specified in the Second Agreement,
as if the Second Agreement were still in effect.

 127
 

14.26              Confidentiality.

(a)   Obligors and each Lender will
maintain, as confidential (other than to their respective attorneys, agents,
accountants, participants and prospective participants) all of the following:

(i)            Proprietary approaches, techniques, and
methods of analysis which are applied by any Agent in the administration of the
credit facility contemplated by this Agreement.

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

(b)           Agent and each Lender
will maintain, as confidential (other than to their respective attorneys,
agents, accountants, participants and prospective participants) all
confidential information provided by the Obligors pursuant to the Loan
Documents, except that such confidential information may be disclosed by Agent
or such Lender (a) to its Affiliates and to its and its Affiliates’
respective partners, directors, officers, employees, agents, advisors and representatives
(it being understood that the Persons to whom such disclosure is made will be informed
of the confidential nature of such information and instructed to keep such
information confidential), (b) to the extent requested by any regulatory
authority purporting to have jurisdiction over it (including any
self-regulatory authority, such as the National Association of Insurance
Commissioners), (c) to the extent required by applicable laws or
regulations or by any subpoena or similar legal process, (d) to any other party
hereto, (e) in connection with the exercise of any remedies hereunder or under
any other Loan Document or any action or proceeding relating to this Agreement
or any other Loan Document or the enforcement of rights hereunder or
thereunder, (f) subject to an agreement containing provisions substantially the
same as those of this Section, to (i) any assignee of or Participant in, or any
prospective assignee of or Participant in, any of its rights or obligations
under this Agreement or (ii) any actual or prospective counterparty (or its
advisors) to any swap or derivative transaction relating to the Borrowers and
their obligations, (g) with the consent of the Borrowers or (h) to the
extent such information (i) becomes publicly available other than as a
result of a breach of this Section or (ii) becomes available to the Agent,
any Lender or any of their respective Affiliates on a nonconfidential basis
from a source other than the Borrowers..

(c)           Nothing included herein shall prohibit the
disclosure of any such information as may be required to be provided by
judicial process or by regulatory authorities having jurisdiction over any
party to this Agreement.

[REMAINDER OF PAGE
INTENTIONALLY BLANK]

 128
 

Signature
Page to Loan and Security Agreement

	
  

  	
  MOTHERS WORK, INC.

  
	
   

  	
  (“Lead Borrower”)

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Edward M. Krell

  
	
   

  	
   

  	
  Edward M. Krell

  
	
   

  	
   

  	
  Executive Vice President –

  
	
   

  	
   

  	
  Chief Financial Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  CAVE SPRINGS, INC.

  
	
   

  	
  (a “Borrower”)

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Edward M. Krell

  
	
   

  	
   

  	
  Edward M. Krell

  
	
   

  	
   

  	
  Executive Vice President –

  
	
   

  	
   

  	
  Chief Financial Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  MOTHERS WORK CANADA, INC.

  
	
   

  	
  (a “Guarantor”)

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Edward M. Krell

  
	
   

  	
   

  	
  Edward M. Krell

  
	
   

  	
   

  	
  Treasurer

  
	
   

  	
   

  	
   

  

 

 129

 

	
  

  	
  Signature Page to Loan and Security Agreement

  
	
   

  	
   

  
	
   

  	
   

  
	
  

  	
  BANK OF AMERICA, N.A.

  
	
   

  	
  (“Lender”)

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Christine Hutchinson

  
	
   

  	
  Print Name:

  	
  Christine Hutchinson

  
	
   

  	
  Title:

  	
  Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  BANK OF AMERICA, N.A.

  
	
   

  	
  (“Administrative Agent”)

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Christine Hutchinson

  
	
   

  	
  Print Name:

  	
  Christine Hutchinson

  
	
   

  	
  Title:

  	
  Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  BANK OF AMERICA, N.A.

  
	
   

  	
  (“Collateral Agent”)

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Christine Hutchinson

  
	
   

  	
  Print Name:

  	
  Christine Hutchinson

  
	
   

  	
  Title:

  	
  Vice President

  
				

 

 1

EXHIBIT
5.12(a)

Financial
Covenants

This Exhibit is
attached to and made part of that certain 
Second Amended and Restated Loan and Security Agreement between Bank of
America, N.A., as Administrative Agent, Collateral Agent, and Lender, the other
Lenders party thereto, and Mothers Work, Inc., as Lead Borrower, and the other
Borrowers and Guarantors party thereto, dated as of March 13, 2007.  Capitalized terms used in this Exhibit and
not separately defined herein shall have the meanings ascribed under the Second
Amended and Restated Loan and Security Agreement.

1)  Fixed Charge Coverage Ratio

At any time or
from time to time that Excess Availability is less than 10% of the Borrowing
Base on any day; then the Fixed Charge Coverage Ratio, based on the then-most
recent month ended, must equal or exceed the following:  during the periods set forth below:

	
  Period

  	
   

  	
  Minimum Fixed Charge Coverage Ratio

  
	
   

  	
   

  	
   

  
	
  For each period of twelve consecutive months ending
  on each month through and including the period of twelve consecutive months
  ending on September 30, 2008

  	
   

  	
  1.000 to 1.000

  
	
   

  	
   

  	
   

  
	
  For each period of twelve consecutive months ending
  on each month from and after the period of twelve consecutive months ending
  on October 31, 2008 through and including the period of twelve consecutive
  months ending on September 30, 2009

  	
   

  	
  1.025 to 1.000

  
	
   

  	
   

  	
   

  
	
  For each period of twelve consecutive months ending
  on each month from and after the period of twelve consecutive months ending
  on October 31, 2009 through and including the period of twelve consecutive
  months ending on September 30, 2010

  	
   

  	
  1.050 to 1.000

  
	
   

  	
   

  	
   

  
	
  For each period of twelve consecutive months ending
  on each month from and after the period of twelve consecutive months ending
  on October 31, 2010

  	
   

  	
  1.100 to 1.000

  

 

 1
 

2)  Capital Expenditures

Borrowers may
incur Capital Expenditures in their discretion, provided that:

(A) for any fiscal
year as to which the Borrowers’ projected pro forma Excess Availability, as
provided under Section 5.11(c), is at least 10% of the Borrowing Base, this
Section (2) shall not limit the Borrowers’ incurrence of  Capital Expenditures in their discretion,
unless actual Excess Availability falls below 10% of the Borrowing Base  during such fiscal year (in which case clause
(B) shall apply); and

(B) during any
fiscal year in which Excess Availability actually falls below 10% of the
Borrowing Base, Borrowers shall not permit Net Capital Expenditures to exceed
$35,000,000.

If, for any fiscal year
in which clause (B) applies, the Borrowers actually incur less than $35,000,000
in Net Capital Expenditures, the Borrowers may, in addition to the $35,000,000
that Borrowers may incur in the following year, incur additional Net Capital
Expenditures in an amount equal to the lesser of (i) Fifty Percent (50%) of the
unused amount of Net Capital Expenditures (below the $35,000,000 maximum) from
the previous fiscal year, or (ii) $10,000,000.

 2

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