Document:

ex10-1.htm

     

    Exhibit
      10.1

     

    EXECUTION
      COPY

    
       

      
        

        

      

      

       

       

       

       

       

       

      STOCK
        PURCHASE AGREEMENT

       

      Dated
        as
        of June 22, 2007

       

      Among

       

      JONES
        APPAREL GROUP, INC.,

       

      JONES
        APPAREL GROUP HOLDINGS, INC.,

       

      BARNEYS
        NEW YORK, INC.,

       

      ISTITHMAR
        BENTLEY HOLDING CO.

       

      And

       

      ISTITHMAR
        BENTLEY ACQUISITION CO.

       

       

       

       

       

       

       

      
        

        

      

      
        

        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        

      

      

      

      
        TABLE
          OF CONTENTS

         

        ARTICLE
          I

        Purchase
          and Sale of Shares; Closing

        

        
          	SECTION
                  1.01 	Purchase
                  and Sale of the Shares	1
	
                  SECTION
                    1.02.

                	
                  Closing

                	
                  2

                
	
                  SECTION
                    1.03.

                	
                  Purchase
                    Price Adjustment

                	
                  3

                
	
                  SECTION
                    1.04.

                	
                  Purchase
                    Price Settlement

                	
                  6

                
	
                  SECTION
                    1.05.

                	
                  Withholding
                    Taxes

                	
                  7

                

        

        

        ARTICLE
          II

        Representations
          and Warranties Relating to the
          Company

        

        
          	
                  SECTION
                    2.01.

                	
                  Organization,
                    Standing and Corporate Power

                	
                  8

                
	
                  SECTION
                    2.02.

                	
                  Subsidiaries

                	
                  8

                
	
                  SECTION
                    2.03.

                	
                  Capital
                    Structure; Indebtedness

                	
                  9

                
	
                  SECTION
                    2.04.

                	
                  Authority;
                    Noncontravention

                	
                  10

                
	
                  SECTION
                    2.05.

                	
                  Governmental
                    Approvals

                	
                  11

                
	
                  SECTION
                    2.06.

                	
                  No
                    Undisclosed Liabilities

                	
                  11

                
	
                  SECTION
                    2.07.

                	
                  Financial
                    Statements

                	
                  12

                
	
                  SECTION
                    2.08.

                	
                  Absence
                    of Certain Changes or Events

                	
                  12

                
	
                  SECTION
                    2.09.

                	
                  Litigation

                	
                  13

                
	
                  SECTION
                    2.10.

                	
                  Contracts

                	
                  
                    13

                  

                
	
                  SECTION
                    2.11.

                	
                  Compliance
                    with Laws

                	
                  14

                
	
                  SECTION
                    2.12.

                	
                  Environmental
                    Matters

                	
                  15

                
	
                  SECTION
                    2.13.

                	
                  Employees
                    and Labor

                	
                  
                    15

                  

                
	
                  SECTION
                    2.14.

                	
                  Employee
                    Benefit Plans

                	
                  16

                
	
                  SECTION
                    2.15.

                	
                  Tax
                    Matters

                	
                  19

                
	
                  SECTION
                    2.16.

                	
                  Real
                    Estate

                	
                  20

                
	
                  SECTION
                    2.17.

                	
                  Terminated
                    Leases

                	
                  22

                
	
                  SECTION
                    2.18.

                	
                  Sufficiency
                    of Assets; Shared Assets and
                    Services

                	
                  22

                
	
                  SECTION
                    2.19.

                	
                  Insurance

                	
                  23

                
	
                  SECTION
                    2.20.

                	
                  Intellectual
                    Property

                	
                  23

                
	
                  SECTION
                    2.21.

                	
                  Company
                    Proprietary Credit Card

                	
                  
                    24

                  

                
	
                  SECTION
                    2.22.

                	
                  Transactions
                    with Affiliates

                	
                  25

                
	
                  SECTION
                    2.23.

                	
                  Major
                    Suppliers

                	
                  
                    25

                  

                
	
                  SECTION
                    2.24.

                	
                  Brokers
                    and Other Advisors

                	
                  25

                

        

         

         

        
          
            
            

          

          
            i

            
              

            

          

          
            
            

          

        

         

         

        
          Table
            of Contents

          (continued)

          Page

        

         

        ARTICLE
          III

        Representations
          and Warranties Relating to Selling Parties
          and the Shares

        

        
          	
                  SECTION
                    3.01.

                	
                  Organization,
                    Standing and Corporate Power

                	
                  26

                
	
                  SECTION
                    3.02.

                	
                  Authority;
                    Noncontravention

                	
                  26

                
	
                  SECTION
                    3.03.

                	
                  Governmental
                    Approvals

                	
                  27

                
	
                  SECTION
                    3.04.

                	
                  Litigation

                	
                  27

                
	
                  SECTION
                    3.05.

                	
                  Brokers
                    and Other Advisors

                	
                  28

                
	
                  SECTION
                    3.06.

                	
                  The
                    Shares

                	
                  
                    28

                  

                

        

        

        ARTICLE
          IV

        Representations
          and Warranties of the Purchasing
          Parties

        

        
          	
                  SECTION
                    4.01.

                	
                  Organization,
                    Standing and Corporate Power

                	
                  28

                
	
                  SECTION
                    4.02.

                	
                  Authority;
                    Noncontravention

                	
                  28

                
	
                  SECTION
                    4.03.

                	
                  Governmental
                    Approvals

                	
                  30

                
	
                  SECTION
                    4.04.

                	
                  Litigation

                	
                  
                    30

                  

                
	
                  SECTION
                    4.05.

                	
                  Sufficient
                    Funds

                	
                  31

                
	
                  SECTION
                    4.06.

                	
                  Guarantees

                	
                  31

                
	
                  SECTION
                    4.07.

                	
                  Brokers
                    and Other Advisors

                	
                  31

                
	
                  SECTION
                    4.08.

                	
                  No
                    Additional Representations

                	
                  32

                
	
                  SECTION
                    4.09.

                	
                  No
                    Distribution

                	
                  32

                
	
                  SECTION
                    4.10.

                	
                  Withholding

                	
                  32

                

        

        

        ARTICLE
          V

        Covenants

        

        
          	
                  SECTION
                    5.01.

                	
                  Conduct
                    of Business.

                	
                  32

                
	
                  SECTION
                    5.02.

                	
                  Resignations

                	
                  36

                
	
                  SECTION
                    5.03.

                	
                  Support
                    Services

                	
                  37

                
	
                  SECTION
                    5.04.

                	
                  Financing

                	
                  37

                
	
                  SECTION
                    5.05.

                	
                  Access
                    to Information; Confidentiality

                	
                  39

                
	
                  SECTION
                    5.06.

                	
                  Reasonable
                    Best Efforts

                	
                  40

                
	
                  SECTION
                    5.07.

                	
                  Public
                    Announcements

                	
                  41

                
	
                  SECTION
                    5.08.

                	
                  Employee
                    Matters

                	
                  41

                

        

         

         

        
          
            
            

          

          
            ii

            
              

            

          

          
            
            

          

        

         

         

        
          Table
            of Contents

          (continued)

          Page

           

        

        
          	
                  SECTION
                    5.09.

                	
                  Letters
                    of Credit and Hedging Contracts

                	
                  43

                
	
                  SECTION
                    5.10.

                	
                  Release
                    of Lease Guarantees

                	
                  43

                
	
                  SECTION
                    5.11.

                	
                  Further
                    Assurances

                	
                  44

                
	
                  SECTION
                    5.12.

                	
                  Intercompany
                    Arrangements

                	
                  44

                
	
                  SECTION
                    5.13.

                	
                  No
                    Solicitation

                	
                  44

                
	
                  SECTION
                    5.14.

                	
                  Lease
                    Estoppel

                	
                  46

                

        

        

        ARTICLE
          VI

        Tax
          Matters

        

        
          	
                  SECTION
                    6.01.

                	
                  Tax
                    Indemnification

                	
                  46

                
	
                  SECTION
                    6.02.

                	
                  Apportionment
                    of Taxes

                	
                  47

                
	
                  SECTION
                    6.03.

                	
                  Tax
                    Returns

                	
                  48

                
	
                  SECTION
                    6.04.

                	
                  Survival

                	
                  48

                
	
                  SECTION
                    6.05.

                	
                  Contest

                	
                  48

                
	
                  SECTION
                    6.06.

                	
                  Cooperation
                    on Tax Matters

                	
                  49

                
	
                  SECTION
                    6.07.

                	
                  Tax
                    Effect of Indemnification Payments

                	
                  50

                

        

        

        ARTICLE
          VII

        Conditions
          Precedent

        

        
          	
                  SECTION
                    7.01.

                	
                  Conditions
                    to Each Party’s Obligation to Effect the
                    Acquisition

                	
                  50

                
	
                  SECTION
                    7.02.

                	
                  Conditions
                    to Obligations of the Purchasing
                    Parties

                	
                  50

                
	
                  SECTION
                    7.03.

                	
                  Conditions
                    to Obligation of the Selling Parties and the
                    Company

                	
                  51

                
	
                  SECTION
                    7.04.

                	
                  Frustration
                    of Closing Conditions

                	
                  52

                

        

        

         

        
          ARTICLE
            VIII

          Termination,
            Amendment and Waiver

        

        

        
          	
                  SECTION
                    8.01.

                	
                  Termination

                	
                  52

                
	
                  SECTION
                    8.02.

                	
                  Effect
                    of Termination

                	
                  54

                
	
                  SECTION
                    8.03.

                	
                  Amendment

                	
                  54

                
	
                  SECTION
                    8.04.

                	
                  Extension;
                    Waiver

                	
                  54

                
	
                  SECTION
                    8.05.

                	
                  Fees
                    and Expenses

                	
                  54

                
	
                  SECTION
                    8.06.

                	
                  Maximum
                    Recovery

                	
                  55

                

        

         

         

        
          
            
            

          

          
            iii

            
              

            

          

          
            
            

          

        

         

         

        
          Table
            of Contents

          (continued)

          Page

        

         

        ARTICLE
          IX

        Survival
          and Indemnification

        

        
          	
                  SECTION
                    9.01.

                	
                  Survival
                    of Representations, Warranties and
                    Covenants

                	
                  56

                
	
                  SECTION
                    9.02.

                	
                  Indemnification
                    by Seller Parent and
                    Seller

                	
                  56

                
	
                  SECTION
                    9.03.

                	
                  Indemnification
                    by the Purchasing Parties

                	
                  58

                
	
                  SECTION
                    9.04.

                	
                  Notice
                    of Claim; Defense

                	
                  59

                
	
                  SECTION
                    9.05.

                	
                  Potential
                    Contributors

                	
                  60

                
	
                  SECTION
                    9.06.

                	
                  Mitigation

                	
                  61

                
	
                  SECTION
                    9.07.

                	
                  Survival
                    of Indemnity

                	
                  61

                
	
                  SECTION
                    9.08.

                	
                  No
                    Duplication; Exclusive Remedy

                	
                  61

                

        

        

        ARTICLE
          X

        General
          Provisions

        

        
          	
                  SECTION
                    10.01.

                	
                  Notices

                	
                  61

                
	
                  SECTION
                    10.02.

                	
                  Definitions

                	
                  63

                
	
                  SECTION
                    10.03.

                	
                  Interpretation

                	
                  64

                
	
                  SECTION
                    10.04.

                	
                  Counterparts

                	
                  64

                
	
                  SECTION
                    10.05.

                	
                  Entire
                    Agreement; No Third-Party
                    Beneficiaries

                	
                  64

                
	
                  SECTION
                    10.06.

                	
                  Governing
                    Law

                	
                  64

                
	
                  SECTION
                    10.07.

                	
                  Assignment

                	
                  65

                
	
                  SECTION
                    10.08.

                	
                  Jurisdiction;
                    Waiver of Jury Trial

                	
                  65

                
	
                  SECTION
                    10.09.

                	
                  Specific
                    Performance

                	
                  65

                
	
                  SECTION
                    10.10.

                	
                  Obligations
                    of Seller Parent

                	
                  66

                
	
                  SECTION
                    10.11.

                	
                  Severability

                	
                  67

                

        

      

      

       

      
        
          
          

        

        
          iv

          
            

          

        

        
          
          

        

      

      
 

      Table
        of Defined Terms

      

      
        
          	
                  2004
                    Audited Financial Statements

                	
                  12

                
	
                  2005
                    Audited Financial Statements

                	
                  12

                
	
                  2006
                    Audited Financial Statements

                	
                  12

                
	
                  Accounting
                    Firm

                	
                  5

                
	
                  Acquisition

                	
                  2

                
	
                  Actual
                    Capital Expenditures

                	
                  4

                
	
                  Affected
                    Employees

                	
                  41

                
	
                  Affiliate

                	
                  63

                
	
                  Affiliated
                    Group

                	
                  19

                
	
                  Agreement

                	
                  1

                
	
                  Alternative
                    Financing

                	
                  39

                
	
                  Alternative
                    Transaction

                	
                  45

                
	
                  Audited
                    Financial Statements

                	
                  12

                
	
                  Base
                    Purchase Price

                	
                  2

                
	
                  business
                    day

                	
                  63

                
	
                  CapEx
                    Plan

                	
                  4

                
	
                  CBAs

                	
                  15

                
	
                  Claim
                    Notice

                	
                  59

                
	
                  Closing

                	
                  2

                
	
                  Closing
                    Date

                	
                  2

                
	
                  Code

                	
                  3

                
	
                  Company

                	
                  1

                
	
                  Company
                    By-laws

                	
                  8

                
	
                  Company
                    Certificate

                	
                  8

                
	
                  Company
                    Common Stock

                	
                  1

                
	
                  Company
                    Disclosure Letter

                	
                  7

                
	
                  Company
                    Facility

                	
                  21

                
	
                  Company
                    Leased Real Property

                	
                  21

                
	
                  Company
                    Leased Real Property Permits

                	
                  22

                
	
                  Company
                    Leases

                	
                  21

                
	
                  Company
                    Plans

                	
                  16

                
	
                  Company
                    Severance Plans

                	
                  17

                
	
                  Confidentiality
                    Agreement

                	
                  40

                
	
                  Contest

                	
                  48

                
	
                  Contract

                	
                  11

                
	
                  Current
                    Assets

                	
                  3

                
	
                  Current
                    Liabilities

                	
                  4

                
	
                  Debt
                    Financing

                	
                  31

                
	
                  Direct
                    Claim

                	
                  59

                
	
                  Effect

                	
                  8

                
	
                  Employee

                	
                  15

                
	
                  Employment
                    Agreement

                	
                  1

                
	
                  Environmental
                    Laws

                	
                  15

                
	
                  Equity
                    Financing

                	
                  31

                

        

         

         

        
          
            
            

          

          
            v

            
              

            

          

          
            
            

          

        

        
 

        
          Table
            of Defined Terms

          (continued)

          Page

        

         

        
          	
                  Equity
                    Funding Letter

                	
                  31

                
	
                  ERISA

                	
                  16

                
	
                  Estimated
                    Actual Capital Expenditures

                	
                  3

                
	
                  Estimated
                    Closing Net Working Capital

                	
                  3

                
	
                  Estimated
                    Closing Statement

                	
                  3

                
	Excess
                  Amount 	 5
	
                  Exchange
                    Act

                	
                  12

                
	
                  Final
                    Actual Capital Expenditures

                	
                  5

                
	
                  Final
                    Adjustment

                	
                  7

                
	
                  Final
                    Closing Net Working Capital

                	
                  5

                
	
                  Final
                    Closing Statement

                	
                  5

                
	
                  Financial
                    Statements

                	
                  12

                
	
                  Financing

                	
                  31

                
	
                  Financing
                    Commitments

                	
                  31

                
	
                  Financing
                    Modification Requirements

                	
                  38

                
	
                  GAAP

                	
                  3

                
	
                  Governmental
                    Authority

                	
                  11

                
	
                  Guarantee

                	
                  31

                
	
                  HSR
                    Act

                	
                  11

                
	
                  Indebtedness

                	
                  10

                
	
                  Indemnified
                    Party

                	
                  59

                
	
                  Indemnifying
                    Party

                	
                  59

                
	
                  Initial
                    Payment

                	
                  3

                
	
                  Initial
                    Window Termination Date

                	
                  44

                
	
                  Initiation
                    Date

                	
                  39

                
	
                  Intellectual
                    Property Rights

                	
                  24

                
	
                  IRS

                	
                  17

                
	
                  IT
                    Systems

                	
                  24

                
	
                  Key
                    Personnel

                	
                  34

                
	
                  Knowledge
                    of the Selling Parties

                	
                  63

                
	
                  Laws

                	
                  14

                
	
                  Liabilities

                	
                  12

                
	
                  Lien

                	
                  63

                
	
                  Losses

                	
                  56

                
	
                  Major
                    Supplier

                	
                  25

                
	
                  Marketing
                    Period

                	
                  39

                
	
                  Material
                    Adverse Effect

                	
                  8

                
	
                  Multiemployer
                    Plan

                	
                  17

                
	
                  Net
                    Working Capital

                	
                  3

                
	
                  Notice
                    of Disagreement

                	
                  5

                
	
                  Notice
                    of Superior Transaction

                	
                  53

                
	
                  Order

                	
                  13

                
	
                  Organizational
                    Documents

                	
                  9

                
	
                  Outside
                    Date

                	
                  52

                

        

         

         

        
          
            
            

          

          
            vi

            
              

            

          

          
            
            

          

        

        
 

        
          Table
            of Defined Terms

          (continued)

          Page

        

         

        
          	
                  Parent
                    Acquisition Proposal

                	
                  46

                
	
                  Parent
                    Acquisition Transaction Notice

                	
                  46

                
	
                  Permits

                	
                  14

                
	
                  Permitted
                    Liens

                	
                  63

                
	
                  person

                	
                  63

                
	
                  Policies

                	
                  23

                
	
                  Potential
                    Acquirer

                	
                  45

                
	
                  Potential
                    Superior Transaction Notice

                	
                  45

                
	
                  Pre-Closing
                    Covenants

                	
                  56

                
	
                  Pre-Closing
                    Period Taxes

                	
                  47

                
	
                  Pre-Closing
                    Straddle Taxes

                	
                  47

                
	
                  Proceeding

                	
                  13

                
	
                  Purchase
                    Price

                	
                  2

                
	
                  Purchaser

                	
                  1

                
	
                  Purchaser
                    Guarantor

                	
                  31

                
	
                  Purchaser
                    Indemnified Persons

                	
                  56

                
	
                  Purchaser
                    Parent

                	
                  1

                
	
                  Purchaser
                    Termination Fee

                	
                  55

                
	
                  Purchaser’s
                    Proposed Calculations

                	
                  5

                
	
                  Purchasing
                    Parties

                	
                  1

                
	
                  Related
                    Documents

                	
                  63

                
	
                  Related
                    Person

                	
                  25

                
	
                  Representatives

                	
                  5

                
	
                  Required
                    Information

                	
                  37

                
	
                  Restraints

                	
                  50

                
	
                  SEC

                	
                  12

                
	
                  Section
                    2.10 Contracts

                	
                  13

                
	
                  Seller

                	
                  1

                
	
                  Seller
                    Indemnified Persons

                	
                  58

                
	
                  Seller
                    Parent

                	
                  1

                
	
                  Seller
                    Parent Termination Fee

                	
                  55

                
	
                  Selling
                    Parties

                	
                  1

                
	
                  Shares

                	
                  1

                
	
                  Straddle
                    Period

                	
                  47

                
	
                  Subsidiary

                	
                  64

                
	
                  Superior
                    Transaction

                	
                  45

                
	
                  Target
                    Capital Expenditures

                	
                  4

                
	
                  Target
                    Net Working Capital

                	
                  4

                
	
                  Tax
                    Indemnitee

                	
                  46

                
	
                  Tax
                    Returns

                	
                  19

                
	
                  Taxes

                	
                  19

                
	
                  Third
                    Party Claim

                	
                  59

                
	
                  Transaction
                    Expenses

                	
                  2

                

        

         

         

        
          
            
            

          

          
            vii

            
              

            

          

          
            
            

          

        

        
 

        
          Table
            of Defined Terms

          (continued)

          Page

        

         

        
          	
                  Transition
                    Services Agreement

                	
                  37

                
	
                  Unaudited
                    Financial Statements

                	
                  12

                
	
                  Withholding
                    Amount

                	
                  7

                

        

      

       

       

      
        
          
          

        

        
          viii

          
            

          

        

        
          
          

        

      

    

     

    
      
STOCK
        PURCHASE AGREEMENT

       

      STOCK
        PURCHASE AGREEMENT (this “Agreement”), dated as of June 22, 2007, among
        JONES APPAREL GROUP, INC., a Pennsylvania corporation (“Seller Parent”),
        JONES APPAREL GROUP HOLDINGS, INC., a Delaware corporation (“Seller”, and
        collectively with Seller Parent, the “Selling Parties”), BARNEYS NEW
        YORK, INC., a Delaware corporation (the “Company”), ISTITHMAR BENTLEY
        HOLDING CO., a Delaware corporation (“Purchaser Parent”) and ISTITHMAR
        BENTLEY ACQUISITION CO., a Delaware corporation (“Purchaser” and together
        with Purchaser Parent, the “Purchasing Parties”).

       

      WHEREAS,
        Seller is a wholly owned Subsidiary of Seller Parent;

       

      WHEREAS,
        Purchaser is a wholly owned Subsidiary of Purchaser Parent;

       

      WHEREAS,
        Seller is the record and beneficial owner of 1,000 shares (the “Shares”)
        of common stock, par value $0.01 per share, of the Company (“Company Common
        Stock”), which constitutes all of the issued and outstanding shares of
        capital stock, voting interests and equity securities (and rights to acquire
        capital stock, voting interests or equity securities) of the
        Company;

       

      WHEREAS,
        prior to the execution and delivery of this Agreement, Purchaser Parent and
        Howard Socol have entered into an agreement (the “Employment Agreement”)
        pursuant to which Howard Socol has agreed, among other things, to continue
        his
        employment with the Company after the purchase of the Shares by Purchaser
        on the
        terms and conditions set forth therein; and

       

      WHEREAS,
        Purchaser desires to purchase from Seller, and Seller desires to sell to
        Purchaser, all of the Shares, on the terms and subject to the conditions
        contained herein;

       

      NOW,
        THEREFORE, in consideration of the foregoing and the representations,
        warranties, covenants and agreements contained in this Agreement, the parties
        hereto agree as follows:

       

      ARTICLE
        I

       

      Purchase
        and Sale of Shares; Closing

       

      SECTION
        1.01.  Purchase and Sale of the
        Shares.  (a)  On the terms and subject to the conditions
        of this Agreement, at the Closing Seller shall sell, transfer and deliver
        to
        Purchaser, and Purchaser shall purchase from Seller, the Shares, free and
        clear
        of any lien, encumbrance, mortgage, deed of trust, security interest, easement,
        conditional sale or other title retention agreement, pledge, hypothecation,
        assessment, lease, levy, charge, transfer restriction, right of first offer,
        right of first refusal, option, preemptive right, voting trust or agreement,
        proxy or set off or other adverse claim of any kind or nature, whether arising
        by agreement, statute or otherwise for an aggregate purchase price, payable
        jointly by the Purchasing Parties, of $825,000,000 (the “Base Purchase
        Price”), as adjusted in accordance with Sections 1.03, 1.04

          

      
        
          
          

        

        
          
          

          
            

          

        

        
          Table
            of Contents

        

      

       

      and
        1.05 and taking into account Section 1.01(b)
        (such adjusted amount, the “Purchase Price”).  The purchase and
        sale of the Shares is referred to in this Agreement as the
“Acquisition”.

       

      (b)        The
        Purchase Price shall be reduced by any Transaction
        Expenses.  “Transaction Expenses” shall mean all expenses of
        the Company incurred prior to or on the Closing in connection with the
        preparation of this Agreement and the consummation of the transactions
        contemplated hereby, to the extent not paid prior to the Closing or accrued
        or
        recorded as a liability in Net Working Capital, including the cost of any
        audits
        of the Financial Statements and fees and disbursements of lawyers, financial
        advisors, accountants and other advisors and service providers; provided,
however, that such Transaction Expenses shall not include any expenses
        incurred in connection with the Financing.

       

      SECTION
        1.02.  Closing.  (a)  Subject
        to the terms and conditions of this Agreement, the closing of the Acquisition
        (the “Closing”) shall take place at the offices of Cravath, Swaine &
Moore, 825 Eighth Avenue, New York, New York 10019, at 9:00 a.m.
        (New York City
        time) on the fifth business day after the conditions set forth in
        Article VII have been satisfied or waived (excluding those conditions
        intended to be satisfied at the Closing, but subject to satisfaction or waiver
        of such conditions at the Closing) or at such other time or place upon which
        the
        parties may agree; provided, however, that notwithstanding the
        satisfaction or waiver of the conditions set forth in Article VII as of any
        date, the Purchasing Parties shall not be required to effect the Closing
        until
        the earlier of (i) a date during the Marketing Period specified by the
        Purchasing Parties on no less than three business days’ notice to Seller Parent
        and (ii) the third business day after the final day of the Marketing Period
        (subject, in each case, to the satisfaction or waiver of all the conditions
        set
        forth in Article VII of this Agreement, as of the date determined pursuant
        to this proviso); and provided, further, that the Purchasing
        Parties shall give Seller Parent five business days prior notice of the date
        on
        which they propose that the Closing shall occur.  The date on which
        the Closing occurs is referred to in this Agreement as the “Closing
        Date”.  The Closing shall be deemed to occur as of the close of
        business on the Closing Date or at such other time as the parties may
        agree.

       

      (b)        At
        the Closing, Seller Parent and Seller shall deliver, or cause to be delivered,
        to Purchaser:

       

      (i)    
        certificates representing the Shares, duly endorsed in blank or accompanied
        by
        stock powers duly endorsed in blank in proper form for transfer, with
        appropriate transfer tax stamps, if any, affixed;

       

      (ii)    
        a certificate or certificates covering the matters specified in
        Sections 7.02(a)(iv), 7.02(b) and 7.02(c);

       

      (iii)    a
        copy of each Related Document to which Seller Parent and each of its
        Subsidiaries (including the Company and its Subsidiaries) is a party, duly
        executed by Seller Parent or its Subsidiaries, as applicable;

       

      (iv)   
        the letters of resignation required by Section 5.02; and

       

       

      
        
          
          

        

        
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      (v)    
        a certificate from Seller Parent and Seller dated as of the Closing Date
        to the
        effect that neither Seller Parent nor Seller is a foreign person for purposes
        of
        Section 1445 of the United States Internal Revenue Code, as amended (the
“Code”).

       

      (c)        At
        the Closing, the Purchasing Parties shall deliver to Seller Parent:

       

      (i)    
        by wire transfer to a bank account designated in writing by Seller Parent
        (such
        designation to be made at least two business days prior to the Closing Date),
        immediately available funds in an amount equal to the initial payment
        (determined as provided in Section 1.03(b) below, the “Initial
        Payment”);

       

      (ii)    
        a certificate or certificates covering the matters specified in
        Sections 7.03(a) and 7.03(b); and

       

      (iii)    a
        copy of each Related Document to which the Purchasing Parties and each of
        their
        Affiliates is a party, duly executed by the Purchasing Parties or their
        Affiliates, as applicable.

       

      (d)        All
        proceedings to be taken and all documents to be executed and delivered by
        the
        Selling Parties or the Company in connection with the Closing shall be
        reasonably satisfactory in form and substance to the Purchasing Parties,
        and all
        proceedings to be taken and all documents to be executed and delivered by
        the
        Purchasing Parties in connection with the Closing shall be reasonably
        satisfactory in form and substance to Seller Parent.  All proceedings
        to be taken and all documents to be executed and delivered by any person
        at the
        Closing shall be deemed to have been taken and executed simultaneously, and
        no
        such proceedings shall be deemed taken nor any such documents deemed executed
        or
        delivered until all have been taken, executed and delivered.

       

      SECTION
        1.03.  Purchase Price
        Adjustment.  (a)  In order to calculate the Initial
        Payment, not later than two business days prior to the Closing Date, Seller
        Parent will prepare and deliver to Purchaser (i) an estimated unaudited
        consolidated balance sheet of the Company as of the close of business on
        the
        business day immediately preceding the Closing Date, prepared in accordance
        with
        United States generally accepted accounting principles (“GAAP”), applied
        in all respects consistently with the audited balance sheet of the Company
        as at
        February 3, 2007 (the “Estimated Closing Statement”), and (ii) a
        certificate signed on behalf of Seller Parent by an authorized officer of
        Seller
        Parent certifying that the balance sheet set forth in the Estimated Closing
        Statement was prepared on the basis described in clause (i) above and
        setting forth (A) the estimated amount of the Net Working
        Capital derived from the Estimated Closing Statement (the “Estimated Closing
        Net Working Capital”),  (B) an estimate of the Actual Capital
        Expenditures (the “Estimated Actual Capital Expenditures”), and
        (C) the amount of the Initial Payment.  “Net Working
        Capital” shall mean the excess of (a) the consolidated Current Assets
        of the Company as of the close of business on the business day immediately
        preceding the Closing Date, over (b) the consolidated Current
        Liabilities of the Company as of such date.  “Current Assets”
means all categories of current assets set forth as line items on
        the Estimated
        Closing Statement, as determined in accordance with Section 1.03(a) of the
        Company Disclosure Letter, specifically including all cash and cash equivalents
        and excluding fair market value of derivatives and intercompany/affiliate
        balances and deferred tax assets.  “Current Liabilities” means
        all 

       

       

      
        
          
          

        

        
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      categories
        of current liabilities set forth as line items on the Estimated Closing
        Statement, as determined in accordance with Section 1.03(a) of the Company
        Disclosure Letter, specifically excluding all debt, fair market value of
        derivatives, accrued interest, intercompany/affiliate payables and accrued
        income Taxes. “Actual Capital Expenditures” shall mean the gross
        capital expenditures (excluding all tenant allowances or similar lease
        incentives which offset gross capital expenditures) paid in cash from May
        6,
        2007 through the close of business on the last business day immediately prior
        to
        the Closing Date. “Target Capital Expenditures” shall mean the gross
        capital expenditures (excluding all tenant allowances or similar lease
        incentives which offset gross capital expenditures), the payment of which
        is
        provided for in the Company’s capital expenditure plan set forth in Section
        1.03(a) of the Company Disclosure Letter (the “CapEx Plan”), from May 6,
        2007 through the fiscal month ending immediately prior to the Closing Date
        plus an amount equal to (A) the amount of the gross capital expenditures
        (excluding all tenant allowances or similar lease incentives which offset
        gross
        capital expenditures), the payment of which is provided for in the CapEx
        Plan,
        for the fiscal month in which the Closing Date occurs multiplied by (B)
        the number of days elapsed in the fiscal month up through and including the
        last
        business day immediately prior to the Closing Date divided by (C) the
        number of days in such fiscal month.  Set forth on Section 1.03(a) of
        the Company Disclosure Letter is an example showing how the Initial Payment
        would be adjusted and Final Adjustment would be calculated based on certain
        stated assumptions relating to the capital expenditure adjustment described
        below.  Such assumptions are provided solely for the purpose of
        illustrating these calculations.

       

      (b)        The
        Initial Payment shall be an amount equal to the Base Purchase Price adjusted
        as
        follows:

       

      (i)    if
        the Estimated Closing Net Working Capital is less than $108,000,000 (the
        “Target Net Working Capital”), an amount equal to the excess of the
        Target Net Working Capital over the Estimated Closing Net Working Capital
        shall
        be deducted in calculating the Initial Payment;

       

      (ii)   if
        the Target Net Working Capital is less than the Estimated Closing Net Working
        Capital, an amount equal to the excess of the Estimated Closing Net Working
        Capital over the Target Net Working Capital shall be added in calculating
        the
        Initial Payment;

       

      (iii)  if
        the Estimated Actual Capital Expenditures are less than Target Capital
        Expenditures, an amount equal to the excess of the Target Capital Expenditures
        over the Estimated Actual Capital Expenditures shall be deducted in calculating
        the Initial Payment; and

       

      (iv)  if
        the Target Capital Expenditures are less than the Estimated Actual Capital
        Expenditures, an amount equal to the excess of the Estimated Actual Capital
        Expenditures over the Target Capital Expenditures shall be added in calculating
        the Initial Payment;

       

      provided
        that if after giving effect to the
        adjustments in clauses (i) through (iv) above, the Initial Payment would
        exceed
        $840,000,000, then such excess amount (the “Excess
        Amount”)
        shall be payable if and to the extent required by Section 1.04 and the Initial
        Payment shall be equal to $840,000,000.

       

      
        
          
          

        

        
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        (c)    (i)    Within
          45 days after the Closing Date, Purchaser shall prepare and deliver to
          Seller Parent a consolidated balance sheet of the Company as of the close
          of
          business on the business day immediately preceding the Closing Date prepared
          in
          accordance with GAAP, applied in all respects consistently with the audited
          balance sheet of the Company as at February 3, 2007 (the “Final Closing
          Statement”).

         

      

      (ii)    When
        Purchaser delivers the Final Closing Statement, Purchaser shall also deliver
        to
        Seller Parent a certificate signed on behalf of Purchaser by an authorized
        officer of Purchaser, certifying that the balance sheet set forth in the
        Final
        Closing Statement was prepared on the basis described in Section 1.03(c)(i)
        above and setting forth Purchaser’s calculations, based on the Final Closing
        Statement (“Purchaser’s Proposed Calculations”), of (A) the amount
        of Net Working Capital (the “Final Closing Net Working Capital”),
        (B) the amount of the Actual Capital Expenditures (the “Final Actual
        Capital Expenditures”) and (C) the amount of the Final
        Adjustment.

       

      (d)        During
        the 30-day period following receipt by Seller Parent of the Final Closing
        Statement, Seller Parent, any of its directors or officers, Employees or
        any
        investment banker, financial advisor, attorney, accountant, lender, agent
        or
        other representative (collectively, “Representatives”) retained by it or
        any of its Subsidiaries shall be permitted to review information of Purchaser
        and its Representatives relating to the Final Closing Statement.  The
        Final Closing Statement shall become final and binding upon the parties on
        the
        30th day following delivery thereof, unless Seller Parent gives written notice
        of its disagreement with the Final Closing Statement or with the accuracy
        of any
        of Purchaser’s Proposed Calculations (the “Notice of Disagreement”) to
        Purchaser prior to such date, which shall specify the nature of any disagreement
        so asserted.  If a Notice of Disagreement is given by Seller Parent in
        a timely manner, then the Final Closing Statement (as revised in accordance
        with
        this sentence) shall become final and binding upon Seller Parent and Purchaser
        on the earlier of (i) the date Seller Parent and Purchaser resolve in
        writing any differences they have with respect to the matters specified in
        the
        Notice of Disagreement and (ii) the date any disputed matters specified in
        the Notice of Disagreement are finally resolved in writing by a nationally
        recognized independent public accounting firm as shall be agreed upon by
        the
        parties hereto in writing, which shall not be Purchaser’s or Seller Parent’s or
        any of their respective Affiliates’ independent accountants, and which the
        parties currently expect will be Deloitte & Touche (the
“Accounting Firm”).  During the 15-day period following the
        delivery of a Notice of Disagreement, Seller Parent and Purchaser shall seek
        in
        good faith to resolve in writing any differences that they may have with
        respect
        to the matters specified in the Notice of Disagreement.  If, at the
        end of such 15-day period, Seller Parent and Purchaser are unable to so resolve
        any such differences, Seller Parent and Purchaser shall submit to the Accounting
        Firm for resolution any and all matters that remain in dispute and that were
        included in the Notice of Disagreement.  The Accounting Firm, acting
        as experts and not as arbitrators, shall be instructed to render its
        determination of all matters submitted to it within 15 days following
        submission.  Purchaser and Seller Parent agree that they shall be
        bound by the determination of the Accounting Firm.  Judgment may be
        entered upon the determination of the Accounting Firm in any court having
        jurisdiction over the party against which such determination is to be
        enforced.  The Accounting Firm shall not be authorized or permitted to
        make any determination as to the accuracy of Section 2.07 or any other
        representation or warranty in this Agreement or as to compliance by the Company,
        Seller Parent or Seller with any of their covenants in this Agreement (other
        than in Sections 1.03 and 1.04).  Any determinations by the
        Accounting Firm, and any work or analyses performed by the Accounting Firm,
        in
        connection with its resolution of any dispute under Sections 1.03 and 1.04
        shall not be admissible in evidence in any suit, action or proceeding between
        the parties, other than to the extent necessary to enforce payment obligations
        under Section 1.04.  The fees and expenses of the Accounting Firm
        incurred pursuant to this Section 1.03 shall be borne 50% by Seller Parent
        and 50% by Purchaser.  The fees and disbursements of Seller Parent’s
        advisors incurred in connection with the Final Closing Statement and any
        Notice
        of Disagreement shall be borne by Seller Parent, and the fees and expenses
        of
        Purchaser’s advisors incurred in connection with the Final Closing Statement and
        any Notice of Disagreement shall be borne by Purchaser.

       

       

      
        
          
          

        

        
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        SECTION
          1.04.  Purchase
          Price Settlement.  (a)  Subject to paragraph (b)
          below, (i) in the event that the Final Closing Net Working Capital is less
          than the Estimated Closing Net Working Capital, Seller Parent shall, within
          five
          business days following the determination of the Final Closing Net Working
          Capital pursuant to Section 1.03, pay to Purchaser an amount in cash equal
          to the Estimated Closing Net Working Capital minus the Final Closing Net
          Working
          Capital by wire transfer of immediately available U.S. funds to the account
          or
          accounts specified in writing by Purchaser no less than three business
          days
          prior to such date;

         

        (ii)  in
          the
          event that the Estimated Closing Net Working Capital is less than the Final
          Closing Net Working Capital, the Purchasing Parties shall or shall cause
          the
          Company to, within five business days following the determination of the
          Final
          Closing Net Working Capital pursuant to Section 1.03, pay to Seller Parent
          an amount in cash equal to the Final Closing Net Working Capital minus
          the
          Estimated Closing Net Working Capital by wire transfer of immediately available
          U.S. funds to the account or accounts specified in writing by Seller Parent
          pursuant to Section 1.02(c)(i);

         

        (iii)  in
          the
          event that the Final Actual Capital Expenditures are less than the Estimated
          Actual Capital Expenditures, Seller Parent shall, within five business
          days
          following the determination of the Final Actual Capital Expenditures pursuant
          to
          Section 1.03, pay to Purchaser an amount in cash equal to the Estimated
          Actual Capital Expenditures minus the Final Actual Capital Expenditures
          by wire
          transfer of immediately available U.S. funds to the account or accounts
          specified in writing by Purchaser no less than three business days prior
          to such
          date; and

         

        (iv)  in
          the
          event that the Estimated Actual Capital Expenditures are less than
          the  Final Actual Capital Expenditures, the Purchasing Parties shall
          or shall cause the Company to, within five business days following the
          determination of the  Final Actual Capital Expenditures pursuant to
          Section 1.03, pay to Seller Parent an amount in cash equal to the Final
          Actual Capital Expenditures minus the Estimated Actual Capital Expenditures
          by
          wire transfer of immediately available U.S. funds to the account or accounts
          specified in writing by Seller Parent pursuant to
          Section 1.02(c)(i).

         

        (b)  The
          payments specified above in paragraph (a) above shall be calculated on
          a net
          basis and made in one net payment (i.e., so that only one payment will
          be made
          between Seller Parent and the Purchasing Parties that takes account of
          all such
          payments) and, if there was an Excess Amount pursuant to Section 1.03(b),
          such
          net payment shall be subject to the following adjustments:

      

       

       

      
        
          
          

        

        
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        (i)  if
          the
          net amount payable pursuant to clauses (a)(i) through (iv) above is payable
          by
          Seller Parent and is greater than the Excess Amount, then such net amount
          payable by Seller Parent shall be reduced by the Excess Amount;

         

        (ii)  if
          the
          net amount payable pursuant to clauses (a)(i) through (iv) above is payable
          by
          Seller Parent and is equal to the Excess Amount, then no amount shall be
          payable
          by Seller Parent;

         

        (iii)  if
          the
          net amount payable pursuant to clauses (a)(i) through (iv) above is payable
          by
          Seller Parent and is less than the Excess Amount, then the Purchasing Parties
          shall or shall cause the Company to pay to Seller Parent an amount equal
          to the
          Excess Amount minus the net amount otherwise payable by Seller Parent;
          and

         

        (iv)  if
          the
          net amount payable pursuant to clauses (a)(i) through (iv) above is payable
          by
          the Purchasing Parties, then the Purchasing Parties shall or shall cause
          the
          Company to pay to Seller Parent an amount equal to such net amount plus
          the
          Excess Amount.

         

        (c)  The
          adjustment to the Purchase Price after Closing pursuant to this
          Section 1.04 is referred to herein as the “Final
          Adjustment”.  Following the Closing through the resolution of any
          adjustment to the Purchase Price contemplated by this Section 1.04,
          Purchaser shall afford, and shall cause the Company and its Subsidiaries
          to
          afford, to Seller Parent and any accountants, counsel or financial advisors
          retained by Seller Parent in connection with the determination of the Final
          Closing Net Working Capital and the Final Actual Capital Expenditures,
          reasonable access during normal business hours to all the properties, books,
          contracts, personnel and records of the Company, its Subsidiaries and its
          Representatives relevant to the adjustment contemplated by this
          Section 1.04.

         

      

      SECTION
        1.05.  Withholding Taxes.  Purchaser
        shall be entitled to deduct and withhold from the Purchase Price such amounts
        as
        Purchaser is required to deduct and withhold under the Code, or any provision
        of
        state, local or foreign Tax Law, with respect to the making of payment of
        such
        Purchase Price (the “Withholding Amount”).  To the extent the
        amounts are so withheld by Purchaser, such withheld amounts shall be treated
        for
        all purposes of this Agreement as having been paid to Seller Parent and shall
        be
        timely paid by Purchaser to the appropriate Taxing authority.

       

      ARTICLE
        II

       

      Representations
        and Warranties Relating to the Company

       

      Except
        as
        set forth in the disclosure letter delivered by Seller Parent to the Purchasing
        Parties dated as of the date of this Agreement (the “Company Disclosure
        Letter”) (each section of which qualifies the correspondingly numbered
        representation, warranty or covenant to the extent specified therein and
        such
        other representations, warranties or covenants to the extent it is readily
        apparent that a matter in such section is relevant to such other representation,
        warranty or covenant), each Selling Party, jointly and severally, represents
        and
        warrants to the Purchasing Parties as follows:

       

       

      
        
          
          

        

        
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        SECTION
          2.01.  Organization, Standing and Corporate
          Power.  Each of the Company and its Subsidiaries (a) is a
          corporation or limited liability company, as the case may be, duly organized,
          validly existing and in good standing under the Laws of the jurisdiction
          in
          which it is incorporated or formed, as the case may be, and (b) has all
          requisite corporate or limited liability company, as the case may be, power
          and
          authority to carry on its business as now being conducted.  Each of
          the Company and its Subsidiaries is duly qualified or licensed to do business
          and is in good standing in each jurisdiction in which the nature of its
          business
          or the ownership, leasing or operation of its properties or other assets
          makes
          such qualification or licensing necessary, other than in such jurisdictions
          where the failure to be so qualified or licensed individually or in the
          aggregate has not had and would not reasonably be expected to have a Material
          Adverse Effect.  For purposes of this Agreement, “Material Adverse
          Effect” shall mean any state of facts, circumstance, event, change,
          development, effect or occurrence (any such item, an “Effect”) (i) that
          is materially adverse to the business, consolidated results of operations,
          assets, properties or financial condition of the Company and its Subsidiaries
          taken as a whole or (ii) that impairs in any material respect the ability
          of
          either Selling Party or the Company to perform its obligations under this
          Agreement or prevents or materially impedes, interferes with, hinders or
          delays
          the consummation of the Acquisition or any of the other transactions
          contemplated hereby, except, in the case of clause (i) above, for any
          Effect to the extent such Effect results from or is attributable to (A) any
          change in conditions in the United States, foreign or global economy or
          capital
          or financial markets generally, including any change in interest or exchange
          rates, (B) any change in conditions (including any change in general legal,
          regulatory, political, economic or business conditions or any change in
          GAAP)
          in, or otherwise generally affecting, the industry in which the Company
          and its
          Subsidiaries conduct business, (C) the negotiation, execution, announcement
          or pendency of this Agreement and the transactions contemplated hereby,
          including any impact thereof on relationships, contractual or otherwise,
          with
          any customers, suppliers, distributors, partners or employees, (D) any act
          of terrorism or war (whether threatened, pending or declared), (E) any
          action taken by the Company or any of its 

      

      Subsidiaries
        with the written consent of either of the Purchasing Parties or (F) any
        failure by the Company or any of its Subsidiaries to meet projections (it
        being
        understood that, without limiting the applicability of the provisions contained
        in clause (A) or (B) above, the cause or causes of any such failure
        may be deemed either alone or in combination with other events to constitute
        a
        Material Adverse Effect and may be taken into account in determining whether
        a
        Material Adverse Effect has occurred); except in the case of clause (A),
        (B) or (D), to the extent such Effect has a disproportionate effect on the
        Company and its Subsidiaries, taken as a whole, when compared to other companies
        operating in the same industry in which the Company and its Subsidiaries
        conduct
        business; it being understood and agreed that for purposes of
        Section 2.04(b), the definition of the term “Material Adverse Effect” shall
        not include the exception set forth in the preceding
        clause (C).  The Company has made available to the Purchasing
        Parties true and complete copies of the certificate of incorporation of the
        Company as in effect on the date of this Agreement (the “Company
        Certificate”) and the By-laws of the Company as in effect on the date of
        this Agreement (the “Company By-laws”), and each equivalent
        organizational document for each of the Company’s Subsidiaries (the Company
        Certificate and the Company By-laws, together with such equivalent
        organizational documents of the Company’s Subsidiaries, the “Organizational
        Documents”).

       

      SECTION
        2.02.  Subsidiaries.  Section 2.02
        of the Company Disclosure Letter sets forth a true and complete list of all
        the
        Subsidiaries of the Company and, for each such Subsidiary, the state of
        incorporation or formation.  All the outstanding shares of capital
        stock of, or other equity or voting interests in, each such Subsidiary are
        duly
        authorized, validly issued, fully paid and nonassessable and are owned, directly
        or indirectly, by the Company free and clear of any lien, encumbrance, mortgage,
        deed of trust, security interest, easement, conditional sale or other title
        retention agreement, pledge, hypothecation, assessment, lease, levy, charge,
        transfer restriction, right of first offer, right of first refusal, option,
        preemptive right, voting trust or agreement, proxy or set off or other adverse
        claim of any kind or nature, whether arising by agreement, statute or otherwise,
        and free of any restriction on the right to vote, sell or otherwise dispose
        of
        such capital stock or other equity or voting interests.  Except for
        the capital stock of, or other equity or voting interests in, its Subsidiaries,
        the Company does not beneficially own, directly or indirectly, any capital
        stock
        of, or other equity or voting interests in, any person.

       

       

       

      
        
          
          

        

        
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        SECTION
          2.03.  Capital Structure;
          Indebtedness.  (a)  The authorized capital stock of the
          Company consists of 1,000 shares of Company Common Stock, of which 1,000
          shares
          of Company Common Stock were issued and outstanding, none of which were
          held by
          the Company or any Subsidiary of the Company, and no shares of Company
          Common
          Stock will be (x) subject to a right of repurchase by the Company,
          (y) subject to forfeiture back to the Company or (z) subject to
          transfer or lock-up restrictions, in each of cases (x), (y) and (z),
          following the consummation of the Acquisition or any of the other transactions
          contemplated by this Agreement.

         

        (b)        There
          are no outstanding options or other rights to purchase or receive Company
          Common
          Stock.  Other than the Shares and the shares of capital stock, or
          other equity voting interests in the Company’s Subsidiaries held by the Company
          or another Subsidiary of the Company, (i) there are not issued, reserved
          for issuance or outstanding any (A) shares of capital stock of, or other
          equity or voting interests in, the Company or its Subsidiaries,
          (B) securities of the Company or any of its Subsidiaries convertible into
          or exchangeable or exercisable for shares of capital stock of, or other
          equity
          or voting interests in, the Company or any of its Subsidiaries or
          (C) options, calls, warrants or other rights to acquire from the Company or
          any of its Subsidiaries any capital stock of, or other equity or voting
          interests in, or securities convertible into or exchangeable or exercisable
          for
          capital stock of, or other equity or voting interests in, the Company or
          any of
          its Subsidiaries, (ii) there exists no obligation of the Company or any of
          its Subsidiaries to issue any capital stock of, or other equity or voting
          interests in, or securities convertible into or exchangeable or exercisable
          for
          capital stock of, or other equity or voting interests in, the Company or
          any of
          its Subsidiaries and (iii) there are no outstanding stock appreciation
          rights, rights to receive shares of Company Common Stock or shares of capital
          stock of or other equity or voting interests in any Subsidiary of the Company,
          on a deferred basis or otherwise, or other rights that are linked in any
          way to
          the value of Company Common Stock or shares of capital stock of, or other
          equity
          or voting interests in, any Subsidiary of the Company issued or granted
          by the
          Company or any Subsidiary.

      

       

      (c)        All
        outstanding shares of capital stock of the Company are duly authorized, validly
        issued, fully paid and nonassessable and not subject to preemptive
        rights.  There are no Contracts of any kind to which the Company or
        any of its Subsidiaries is a party or is bound, other than the Operating
        Agreement of Barneys Asia Co. LLC, a copy of which has been provided to the
        Purchasing Parties, that obligate the Company or any of its Subsidiaries
        to
        repurchase, redeem or otherwise acquire (i) shares of capital stock of, or
        other equity or voting interests in, the Company or any of its Subsidiaries
        or
        (ii) options, warrants or other rights to acquire shares of capital stock
        of, or other equity or voting interests in, or securities convertible into
        or
        exchangeable for capital stock of, or other equity or voting interests in,
        the
        Company or any of its Subsidiaries.  Neither the Company nor any of
        its Subsidiaries is a party to any voting Contract with respect to the voting
        of
        any such securities, other than the Operating Agreement of Barneys Asia Co.
        LLC,
        a copy of which has been provided to the Purchasing Parties.  There
        are no irrevocable proxies and no voting Contracts (or Contracts to execute
        a
        written consent or a proxy) with respect to any shares of Company Common
        Stock
        or any other voting securities of the Company.

       

       

       

      
        
          
          

        

        
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        (d)        The
          Company and its Subsidiaries have no outstanding
          Indebtedness.  “Indebtedness” with respect to any person means,
          without duplication, (i) the principal of, accrued and unpaid interest on,
          and any prepayment or similar penalties and expenses in respect of,
          (A) indebtedness of such person for money borrowed (but excluding trade
          accounts payable and other accrued current liabilities) and
          (B) indebtedness evidenced by notes, debentures, bonds or other similar
          instruments for the payment of which such person is responsible or liable
          (but
          excluding trade accounts payable and other accrued current liabilities);
          (ii) all obligations of such person issued or assumed as the deferred
          purchase price of property and all conditional sale obligations of such
          person
          (but excluding trade accounts payable and other accrued current liabilities);
          (iii) all obligations of such person as lessee under leases that are
          capitalized in accordance with GAAP (but excluding capitalized tenant allowances
          and step rents contained in the Company Leases); (iv) all obligations,
          contingent or otherwise, of such person under letters of credit, surety
          bonds
          and similar instruments, in each case to the extent such obligations would
          be
          required to appear on the balance sheet of such person in accordance with
          GAAP
          (but excluding obligations relating to letters of credit listed in Section
          5.09
          of the Company Disclosure Letter and similar obligations incurred between
          the
          date hereof and the Closing Date in the ordinary course of business consistent
          with past practice); (v) all obligations of such person under or pursuant
          to
          interest rate cap contracts, swap contracts, foreign currency exchange
          contracts
          or other hedging or similar contracts (including any breakage or associated
          fees), but excluding obligations relating to hedging contracts listed in
          Section
          5.09 of the Company Disclosure Letter and similar obligations incurred
          between
          the date hereof and the Closing Date in the ordinary course of business
          consistent with past practice; (vi) all obligations of the type referred to
          in clauses (i) through (v) of any person for which such person is
          responsible or liable, directly or indirectly, as obligor, guarantor, surety
          or
          otherwise; and (vii) all obligations of the type referred to in
          clauses (i) through (vi) of other persons secured by any Lien on any
          property or asset of such person (whether or not such obligation is assumed
          by
          such person).

         

      

      SECTION
        2.04.  Authority;
        Noncontravention.  (a)  The Company has all requisite
        corporate power and authority to execute and deliver this Agreement and to
        consummate the Acquisition and the other transactions contemplated
        hereby.  The execution and delivery of this Agreement by the Company
        and the consummation of the Acquisition and the other transactions contemplated
        by this Agreement and the compliance by the Company with the provisions of
        this
        Agreement have been duly authorized by all necessary corporate action on
        the
        part of the Company, and no other corporate proceedings on the part of the
        Company are necessary to authorize or approve this Agreement or to consummate
        the Acquisition or the other transactions contemplated hereby.  This
        Agreement has been duly executed and delivered by the Company and, assuming
        the
        due authorization, execution and delivery by each of the other parties hereto,
        constitutes a legal, valid and binding obligation of the Company, enforceable
        against the Company in accordance with its terms (subject to applicable
        bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
        other Laws affecting creditors’ rights generally from time to time in
        effect).

       

      
        
          
          

        

        
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        (b)        The
          execution and delivery of this Agreement does not, and the consummation
          of the
          Acquisition and the other transactions contemplated by this Agreement and
          compliance with the provisions hereof do not and will not, conflict with,
          or
          result in any violation or breach of, or constitute a default (with or
          without
          notice or lapse of time or both) under, or give rise to a right of consent,
          termination, cancellation or acceleration of any obligation, or to the
          loss of a
          benefit under, or result in the creation of any Lien upon any of the properties
          or other assets of the Company or any of its Subsidiaries under (i) the
          Organizational Documents of the Company or any of its Subsidiaries,
          (ii) any note, loan or credit agreement, bond, debenture, note, mortgage,
          indenture, lease or other contract, agreement, instrument, obligation or
          license
          (each, including all amendments thereto, a “Contract”) to which the
          Company or any of its Subsidiaries is a party or is bound or any of their
          respective properties or other assets is bound by or subject to or otherwise
          under which the Company or any of its Subsidiaries has any rights or benefits
          or
          (iii) subject to the governmental filings and other matters referred to in
          Section 2.05, any Law applicable to the Company or any of its Subsidiaries
          or their respective properties or other assets, other than, in the case
          of
          clauses (ii) and (iii), any such conflicts, violations, breaches, defaults,
          rights, results, losses or Liens that individually or in the aggregate
          have not
          had and are not reasonably likely to have an Effect described in clause
          (ii) of
          the definition of Material Adverse Effect.

         

        SECTION
          2.05.  Governmental Approvals.  No
          consent, approval, order or authorization of, action by or in respect of,
          or
          registration, declaration or filing with, any domestic or foreign (whether
          supranational, national, federal, state, provincial, local or otherwise)
          government or any court, administrative, regulatory or other governmental
          agency, commission or authority or any nongovernmental self-regulatory
          agency,
          commission or authority (each, a “Governmental Authority”) is required by
          or with respect to the Company or any of its Subsidiaries in connection
          with the
          execution and delivery of this Agreement by the Company or the consummation
          by
          the Company of the Acquisition or any of the other transactions contemplated
          by
          this Agreement, except for (a) those required to be made pursuant to the
          Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR
          Act”) and (b) such other consents, approvals, orders, authorizations,
          registrations, declarations, permits, actions, notifications and filings
          the
          failure of which to be obtained or made individually or in the aggregate
          have
          not had and are not reasonably likely to have an Effect described in clause
          (ii)
          of the definition of Material Adverse Effect.

         

      

      SECTION
        2.06.  No Undisclosed
        Liabilities.  (a)  Neither the Company nor any of its
        Subsidiaries has any liabilities of any nature, whether accrued, absolute,
        contingent, known, unknown or otherwise (the “Liabilities”), except for
        (i) Liabilities disclosed in the balance sheet dated as of February 3,
        2007 included in the Financial Statements, (ii) Liabilities incurred in the
        ordinary course of business since February 3, 2007, (iii) Liabilities
        under Contracts that relate to obligations that have not yet been performed,
        and
        are not required to be performed, (iv) obligations relating to guarantees
        by the Company of its Subsidiaries’ obligations 

       

       

       

      
        
          
          

        

        
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      under
        the Company Leases listed on Section 2.06
        of the Company Disclosure Letter, and (v) obligations under letters of
        credit and hedging contracts disclosed pursuant to
        Section 5.09.  Neither the Company nor any of its Subsidiaries
        maintains any “off-balance sheet arrangement” within the meaning of
        Item 303(a)(4)(ii) of Regulation S-K of the Securities and Exchange
        Commission (the “SEC”).
         

        (b)        Neither
          the Company nor any of its Subsidiaries has any Liabilities or obligations
          to
          indemnify any of their respective directors, officers or other representatives
          under any of the Organizational Documents with respect to matters arising
          prior
          to the Closing Date.

         

        SECTION
          2.07.  Financial
          Statements.  (a)  Section 2.07(a) of the Company
          Disclosure Letter includes a correct and complete copy of (i)(A) the
          audited consolidated balance sheet of the Company and its Subsidiaries
          as at
          January 29, 2005, together with the audited consolidated statements of
          income and cash flows for the periods from February 1, 2004 to December 19,
          2004 and December 20, 2004 to January 29, 2005 (the “2004 Audited
          Financial Statements”), (B) the audited consolidated balance sheet of
          the Company and its Subsidiaries as at January 28, 2006, together with the
          audited consolidated statements of income and cash flows for the fiscal
          year
          ended January 28, 2006 (the “2005 Audited Financial Statements”),
          and (C) the audited consolidated balance sheet of the Company and its
          Subsidiaries as at February 3, 2007, together with the audited consolidated
          statements of income and cash flows for the fiscal year ended February 3,
          2007 (the “2006 Audited Financial Statements”, and together with the 2004
          Audited Financial Statements and the 2005 Audited Financial Statements,
          the
“Audited Financial Statements”), in each case audited by BDO Seidman, LLP
          and (ii) the unaudited consolidated balance sheet of the Company and its
          Subsidiaries as at May 5, 2007, together with the unaudited consolidated
          statement of income and cash flows for the three months ended May 5, 2007,
          reviewed by BDO Seidman, LLP (the “Unaudited Financial Statements”, and
          together with the Audited Financial Statements, the “Financial
          Statements”).  The Financial Statements were prepared in
          accordance with GAAP applied on a consistent basis throughout all periods
          involved, and fairly present the consolidated financial position and the
          consolidated results of operations and cash flows of the Company and its
          Subsidiaries, in each case as of the dates and for the periods referred
          to
          therein, subject, in the case of the Unaudited Financial Statements, to
          (A) normal year end adjustments in accordance with the Company’s and its
          Subsidiaries’ ordinary course of business and (B) the absence of footnote
          disclosures required by GAAP.  The information set forth on
          Section 2.07(a) of the Company Disclosure Letter was prepared from the
          books and records of Seller Parent and its Subsidiaries.

         

      

      (b)        None
        of the Company or any of its Subsidiaries is required to file periodic reports
        with the SEC pursuant to the Securities Exchange Act of 1934, as amended,
        and
        the rules and regulations promulgated thereunder (the “Exchange
        Act”).

       

      SECTION
        2.08.  Absence of Certain Changes or
        Events.  Since February 3, 2007, (a) the Company and its
        Subsidiaries have conducted their respective businesses in the ordinary course
        consistent with past practice and (b) through the date of this Agreement,
        there has not been any Effect that, individually or in the aggregate, has
        had or
        is reasonably likely to have a Material Adverse Effect.  No Selling Party,
        the Company or any of its Subsidiaries has taken any action between
        February 3, 2007 and the date of this Agreement that, if taken after the
        date of this Agreement, would constitute a breach of any of clauses (i),
        (ii), (iii), (v), (vi), (viii), (ix), (x), (xiii), (xiv) or (xix) of
        Section 5.01(a).

       

       

      
        
          
          

        

        
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        SECTION
          2.09.  Litigation.  Except with
          respect to Employees and Labor and Employee Benefit Plans, which are the
          subject
          of Sections 2.13 and 2.14, as of the date of this Agreement, there is no
          claim, suit, action, investigation or other legal, administrative or arbitral
          proceeding (a “Proceeding”) (a) pending or, to the Knowledge of the
          Selling Parties, threatened against the Company or any of its Subsidiaries
          or
          any of their respective properties or other assets, except for any such
          Proceeding involving claims (i) for only monetary damages not exceeding
          $200,000 or (ii) that would be covered by insurance policies maintained by
          or for the benefit of the Company and its Subsidiaries, or (b) relating to
          the Acquisition, this Agreement or any of the other transactions contemplated
          hereby.  There is no material judgment, decree, injunction, rule or
          order of any Governmental Authority (an “Order”) or arbitrator
          outstanding against, or, to the Knowledge of the Selling Parties, material
          Proceeding, notice of violation, order of forfeiture or complaint by any
          Governmental Authority involving, the Company or any of its
          Subsidiaries.

         

        SECTION
          2.10.  Contracts.  (a)  Section 2.10
          of the Company Disclosure Letter sets forth, as of the date of this Agreement,
          a
          true and complete list of, and the Company has made available to the Purchasing
          Parties true and complete copies of (collectively, “Section 2.10
          Contracts”):

         

        (i)    each
          Contract, other than purchase orders, of the Company or any of its Subsidiaries
          involving, or reasonably expected to involve, aggregate annual payments
          by or to
          the Company or any of its Subsidiaries of more than $1,000,000, other than
          any
          Contract (A) set forth on Section 2.13 or 2.14 of the Company
          Disclosure Letter or (B) of the type described in
          Section 2.10(a)(ix);

      

       

      (ii)     (A) all
        Contracts pursuant to which any Indebtedness of the Company or any of its
        Subsidiaries is outstanding or may be incurred and (B) all Contracts
        involving any “keep well” arrangements or pursuant to which the Company or any
        of its Subsidiaries has agreed to maintain any financial statement condition
        of
        another person;

       

      (iii)     all
        Contracts pursuant to which the Company or any of its Subsidiaries has agreed
        not to, or which, following the consummation of the Acquisition, could restrict
        the ability of the Purchasing Parties, including the Company and its
        Subsidiaries, to compete with any person in any business or in any geographic
        area or to engage in any business or other activity, including any restrictions
        relating to “exclusivity” or any similar requirement in favor of any person
        other than the Company or any of its Subsidiaries or pursuant to which any
        benefit is required to be given or lost as a result of so competing or
        engaging;

       

      (iv)      all
        Contracts pursuant to which the Company or any of its Subsidiaries is a party
        (A) granting another party “most favored nation” or similar status or
        (B) granting another party, or that grants the Company or any of its
        Subsidiaries, license to, or franchise in respect of, any material right,
        property or asset;

       

      
        
          
          

        

        
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        (v)        all
          joint venture, limited liability company, partnership or other similar
          Contracts
          (including all amendments thereto) in which the Company or any of its
          Subsidiaries holds an interest;

         

        (vi)       all
          Contracts relating to the acquisition or disposition of any business, operations
          or division (whether by merger, sale of stock, sale of assets or otherwise)
          to
          the extent any unresolved claims or actual or contingent express obligations
          of
          any party thereunder remain;

         

        (vii)      all
          Contracts containing outstanding material obligations relating to the settlement
          of any Proceeding involving the Company or its Subsidiaries;

         

        (viii)     all
          employment agreements between a Selling Party, the Company or any of its
          Subsidiaries, on the one hand, and any Employee of the Company or its
          Subsidiaries, on the other hand; or

         

        (ix)        all
          Contracts between the Company or any of its Subsidiaries, on the one hand,
          and a
          Major Supplier, on the other hand, other than purchase orders.

         

        (b)        Each
          of the Section 2.10 Contracts is valid and binding on the Company or its
          Subsidiary, and to the Knowledge of the Selling Parties, is in full force
          and
          effect.  Neither the Company nor any of its Subsidiaries is in
          violation of or in default under (nor, to the Knowledge of the Selling
          Parties,
          does there exist any condition which upon the passage of time or the giving
          of
          notice or both would cause such a violation of or default under) any
          Section 2.10 Contract to which it is a party or by which they or any of
          their respective properties or other assets are bound, other than
          inconsequential defaults or violations.

         

        (c)        Section 2.10(c)
          of the Company Disclosure Letter lists, as of the date of this Agreement,
          each
          claim in excess of $100,000 made by any party in connection with any
          Section 2.10 Contract which has not been settled as of the date of this
          Agreement, and an explanation of the status of such claim, including relevant
          dates, amounts and impact on caps, baskets and deductibles under any indemnity
          thereunder.

         

      

      SECTION
        2.11.  Compliance with Laws.  Except
        with respect to Environmental Laws, Employees and Labor, Employee Benefit
        Plans
        and Taxes, which are the subject of Sections 2.12, 2.13, 2.14 and 2.15,
        respectively, each of the Company and its Subsidiaries (including each and
        all
        of their operations, practices, properties and assets) is, and since January
        1,
        2005, has been, in material compliance with (a) all statutes, laws,
        ordinances, rules, regulations, judgments, orders and decrees of any
        Governmental Authority (collectively, “Laws”) and Orders applicable to
        it, its personnel, properties or other assets or its business or operations,
        including Laws relating to consumer finance or the extension of credit and
        (b) all permits, licenses, variances, exemptions, authorizations, operating
        certificates, franchises, orders and approvals of all Governmental Authorities
        (collectively, “Permits”) issued to the Company or any of its
        Subsidiaries.  None of the Company and its Subsidiaries have received,
        since January 1, 2005, a notice or other written communication alleging or
        relating to a possible material violation of any Law or Order applicable
        to it,
        its personnel, properties or other assets or its businesses or
        operations.  The Company and its Subsidiaries have in effect all
        material Permits necessary for them to own, lease or operate their properties
        and other assets and to carry on their business operations as now
        conducted.  There is no Proceeding pending, nor has the Company or its
        Subsidiaries received any written notice from any Governmental Authority,
        to
        revoke, cancel, refuse to renew or adversely modify any material
        Permit.

       

       

      
        
          
          

        

        
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        SECTION
          2.12.  Environmental
          Matters.  (a)  Each of the Company and its Subsidiaries
          is in compliance in all material respects with all applicable Environmental
          Laws, and there is no environmental Proceeding existing or pending, or,
          to the
          Knowledge of the Selling Parties, threatened, against or affecting the
          Company
          or any of its Subsidiaries alleging material noncompliance with, or that
          has
          resulted in or is reasonably likely to result in Liability under, Environmental
          Laws.  For purposes of this Agreement, “Environmental Laws”
shall mean all applicable Laws in effect as of the Closing and
          applicable
          Permits and licenses relating to the protection of the environment, natural
          resources or human health and safety.

         

        (b)        The
          Selling Parties have made available to the Purchasing Parties copies of
          all
          material environmental, health and safety reports, audits, assessments
          or other
          material communications or documentation relating to environmental, health
          or
          safety matters in their possession relating to the Company and its Subsidiaries,
          or any property owned, operated or leased by the Company and its Subsidiaries,
          including any material Phase I or Phase II Environmental Site Assessments,
          asbestos surveys or abatement reports, indoor air quality studies or remediation
          reports, or site assessment or remediation plans.

         

        SECTION
          2.13.  Employees and
          Labor.  (a)  Section 2.13(a) of the Company
          Disclosure Letter sets forth a complete and accurate list, as of the date
          of
          this Agreement, of all collective bargaining agreements and any labor union
          contracts to which the Company or any of its Subsidiaries is a party (including
          any extensions of such agreements or agreements to extend such agreement
          or
          agreements pending negotiation) and all collective bargaining agreements
          and
          labor union contracts currently being negotiated as of the date of this
          Agreement which are or would be applicable to any employees of the Company
          or
          its Subsidiaries (each, an “Employee” and such agreements, collectively,
“CBAs”).  As of the date of this Agreement, no CBA has expired
          without being either (x) renewed or (y) extended pending
          negotiations.  As of the date of this Agreement, neither the Company
          nor any of its Subsidiaries is engaged in negotiations with any labor
          organization as the collective bargaining representative of any Employees
          for an
          initial collective bargaining agreement.  To the Knowledge of the
          Selling Parties, as of the date of this Agreement, (i) no officer or Employee
          is
          being represented by a works’ council or a labor organization other than those
          that are parties to the CBAs and (ii) there are no labor unions, except
          UNITE
          HERE or its subordinate Joint Boards or local unions, presently engaging
          in any
          organizing activity with respect to any Employee.  There are, and for
          the three years preceding the date of this Agreement there have been, no
          strikes, organized slowdowns, work stoppages or lockouts or other material
          labor
          disputes pending, or to the Knowledge of the Selling Parties, threatened
          against
          or involving the Company or any of its Subsidiaries.

         

      

      (b)        Each
        of the Company and its Subsidiaries is in material compliance with all Laws
        applicable to the Company and its Subsidiaries regarding the terms and
        conditions of employment or other employment-related matters, including without
        limitation Laws relating to discrimination, fair labor standards, wage and
        hour,
        terms and conditions of employment practices and occupational health and
        safety
        or wrongful discharge, and as of the date of this Agreement there are no
        material complaints, lawsuits or other Proceedings pending or, to the Knowledge
        of the Selling Parties, threatened against the Company or its Subsidiaries
        brought by or on behalf of any applicant for employment, any current or former
        Employee or any class of the foregoing, relating to any such Laws, or alleging
        breach of any express or implied contract of employment or wrongful termination
        of employment, or alleging any other discriminatory, wrongful or tortious
        conduct in connection with the employment relationship.

       

       

       

      
        
          
          

        

        
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        (c)        As
          of the date of this Agreement, no material grievance, arbitration demand
          or
          Proceeding, whether or not filed pursuant to a CBA, is pending or, to the
          Knowledge of the Selling Parties, is threatened, against the Company or
          any of
          its Subsidiaries that involves an attempt by any labor organization to
          extend
          its jurisdiction or representation rights, or (except in the case of CBAs
          listed
          on Section 2.13(a) of the Company Disclosure Letter and the labor
          organizations that are parties thereto) apply its collective bargaining
          agreement to the Company or any of its Subsidiaries. 

         

        SECTION
          2.14.  Employee Benefit
          Plans.  (a)  Section 2.14(a) of the Company
          Disclosure Letter sets forth a true and complete list, as of the date of
          this
          Agreement, of all “employee benefit plans” as defined in Section 3(3) of
          the Employee Retirement Income Security Act of 1974, as amended (“ERISA”)
          and all other material compensation, bonus, pension, profit sharing, deferred
          compensation, incentive compensation, stock ownership, stock purchase,
          stock
          option, phantom stock or other equity-based, retirement, post-retirement
          health
          or life insurance, vacation, disability, death benefit, hospitalization,
          medical, employment, retention, consulting, change in control, salary
          continuation, termination, severance or other employee benefit plans, programs,
          policies, practices, arrangements, agreements, funds, commitments or payroll
          practices maintained, sponsored or contributed to or required to be maintained,
          sponsored or contributed to by the Company or any of its Subsidiaries or
          to
          which the Company or any of its Subsidiaries contributes or is obligated
          to
          contribute or under which the Company or any of its Subsidiaries has any
          Liability (including a Liability arising out of an indemnification, guarantee,
          hold harmless or similar agreement), with respect to any current or former
          Employee, officer or director of the Company or any of its Subsidiaries
          or any
          beneficiary or dependent thereof, other than Multiemployer Plans and CBAs
          (the
“Company
          Plans”).  None of the Company Plans provides for post-employment
          life or health insurance benefits or coverage for any participant or any
          beneficiary of a participant, except as may be required under the Consolidated
          Omnibus Budget Reconciliation Act of 1985, as amended, or at the expense
          of the
          participant or the participant’s beneficiary.  There has been no
          written communication to Employees of the Company or its Subsidiaries that
          promises or guarantees such Employees retiree health or life insurance
          benefits
          or other retiree death benefits on a permanent basis.  As of the date
          of this Agreement, neither the Company nor any of its Subsidiaries has
          announced
          any intent or commitment to create or implement any additional employee
          benefit
          plan or to amend, modify or terminate any Company Plan.  Each Company
          Plan that is an employee welfare benefit plan may by its terms be amended
          or
          terminated on and after the Closing Date without the incurrence of any
          material
          cost or Liability by the Company or its Subsidiaries (it being understood
          that
          the obligations of Purchaser pursuant to Section 5.08 hereof apply
          notwithstanding the foregoing representation).

      

       

       

      
        
          
          

        

        
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        (b)        True,
          correct and complete copies of the following documents with respect to
          each of
          the Company Plans have been made available to the Purchasing Parties by
          the
          Company, to the extent applicable:  (i) such Company Plan (or,
          with respect to any Company Plan that is not in writing, a written description
          of the terms thereof), all amendments thereto and related trust documents,
          insurance contracts or other documentation of any related funding arrangement,
          and amendments thereto, (ii) the most recent Forms 5500 and all schedules
          thereto and the two most recent annual reports, actuarial reports and/or
          financial reports, (iii) the most recent Internal Revenue Service (the
          “IRS”) determination letter, if applicable, and any communication from
          or
          with the IRS relating to such letter or the subject matter thereof,
          (iv) summary plan descriptions, if applicable, (v) any material
          communication between the Company or any of its Subsidiaries and any
          Governmental Authority and (vi) communications that are not themselves
          Company
          Plans or CBAs, with one or more participants in any Company Plan, that
          would
          reasonably be expected to result, individually or in the aggregate, in
          material
          Liability to the Company in excess of the Company’s obligations under any
          Company Plan or CBA.

         

        (c)        Section 2.14(c)
          of the Company Disclosure Letter sets forth, as of the date of this Agreement,
          a
          true and complete list of each “multiemployer plan” (within the meaning of
          Section 3(37) and Section 4001(a)(3) of ERISA) maintained or
          contributed to by the Company or any of its Subsidiaries, or to which the
          Company or any of its Subsidiaries is obligated to contribute or has any
          Liability (a “Multiemployer Plan”).  For purposes of this
          Agreement, the term “Multiemployer Plan” shall be deemed to include the Barneys
          Retail/Employees Union Health Fund.  Neither the Company nor any of
          its Subsidiaries has (i) incurred, or is reasonably likely to incur, a
“complete withdrawal” or a “partial withdrawal” (as such terms are defined in
          Sections 4203 and 4205, respectively, of ERISA) with respect to any
          Multiemployer Plan or (ii) received any notice, as of the date of this
          Agreement, or otherwise reasonably expects that any Multiemployer Plan
          is or
          will be “insolvent” or in “reorganization” (within the meaning of
          Sections 4241 and 4245, respectively, of ERISA).  The Company has
          provided the Purchasing Parties with the most recent estimates requested
          by the
          Company (it being understood that no such estimates were requested by the
          Company in connection with this Agreement or the transactions contemplated
          hereby) of the potential withdrawal liability to which the Company or any
          Subsidiary would be subject if the Company or any Subsidiary were to withdraw
          from each Multiemployer Plan.

      

       

      (d)        Section 2.14(d)
        of the Company Disclosure Letter sets forth a true and complete list, as
        of the
        date of this Agreement, of (i) each Company Plan that provides severance,
        termination, retention, change in control or similar benefits (the “Company
        Severance Plans”) and (ii) the levels of Employees who participate in
        each such Company Severance Plan.

       

      (e)        Neither
        the Company nor its Subsidiaries (i) maintains or contributes to, or has
        maintained or contributed to, (x) any “employee benefit plan” (other than a
        Multiemployer Plan) within the meaning of Section 3(3) of ERISA that is
        subject to Section 302 or Title IV of ERISA or Section 412 of the Code
        or (y) any “multiple employer plan” within the meaning of
        Sections 4063/4064 of ERISA or Section 413(c) of the Code or
        (ii) has incurred or, to the Knowledge of the Selling Parties, is
        reasonably likely to incur, any Liability pursuant to Section 412 of the
        Code or Title I or Title IV of ERISA (other than Liability for premiums to
        the
        Pension Benefit Guaranty Corporation arising in the ordinary course of
        business).  Neither the Company nor any of its Subsidiaries has, in
        the past five years, engaged in any transaction described in Section 4069
        or 4212(c) of ERISA that would reasonably be expected to result in the
        incurrence of a Liability by the Company or its Subsidiaries on or after
        the
        Closing.

       

       

       

      
        
          
          

        

        
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        (f)        Each
          Company Plan has been maintained in all material respects in accordance
          with its
          terms and in compliance in all material respects with all provisions of
          ERISA,
          the Code (including in each case rules and regulations thereunder) and
          other
          applicable Laws with respect to such Company Plan.  Other than routine
          claims for benefits, there is no pending or, to the Knowledge of the Selling
          Parties, threatened material audit or material Proceeding relating to any
          Company Plan. With respect to each Company Plan for which financial statements
          are required by ERISA, to the Knowledge of the Selling Parties, there has
          been
          no material adverse change in the financial status of such Company Plan
          since
          the date of the most recent such statements provided to the Purchasing
          Parties
          by the Company.  To the Knowledge of the Selling Parties, no
“prohibited transaction,” breach of fiduciary duty or similar action or omission
          has resulted in or is reasonably likely to result in the imposition of
          any
          material Liability, Tax or penalty on the Company or any of its Subsidiaries,
          or
          in any requirement for the posting of security with respect to a Company
          Plan or
          imposition of any Lien on the assets of the Company or any of its Subsidiaries
          with respect to a Company Plan, under ERISA, the Code or other applicable
          Law.

         

        (g)        Each
          Company Plan that is intended to qualify under Section 401 of the Code has
          been given a favorable determination letter from the IRS with respect to
          such
          qualification, and, to the Knowledge of the Selling Parties, nothing has
          occurred with respect to the operation of the Company Plans that has caused
          or
          is reasonably likely to cause the loss of such qualification or exemption
          or the
          imposition of any material Liability, penalty or Tax under ERISA or the
          Code.

         

        (h)        Except
          for failures to make contributions that individually or in the aggregate
          would
          not reasonably be expected to result in material Liability to the Company
          or any
          of its Subsidiaries, all contributions (including all employer contributions
          and
          employee salary reduction contributions) required to have been made by
          the
          Company or its Subsidiaries under any of the Company Plans (or in the case
          of
          any Multiemployer Plan, the applicable CBA or other governing Contract)
          or by
          Law to any funds or trusts established under a Company Plan or Multiemployer
          Plan or in connection therewith have been made by the due date thereof
          (including any valid extensions) and any payments not yet due have been
          accurately reflected in the consolidated balance sheet included in the
          Financial
          Statements.

         

      

      (i)        Neither
        the execution and delivery of this Agreement nor the consummation of the
        Acquisition or any other transaction contemplated by this Agreement will
        (i) entitle any Employee or any director or independent contractor of the
        Company or any of its Subsidiaries to, or increase any, severance, change
        in
        control, termination or other compensation or benefits; (ii) increase the
        amount or value of any benefit or compensation otherwise payable or required
        to
        be provided to any such Employee, director or independent contractor;
        (iii) accelerate the time of payment or vesting or trigger any payment or
        funding (through a grantor trust or otherwise) of any such compensation or
        benefits under, or trigger any other material obligation pursuant to any
        Company
        Plan; or (iv) result in any amount failing to be deductible by reason of
        Section 280G of the Code.

       

       

      
        
          
          

        

        
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        (j)        On
          or following the consummation of the transactions contemplated by this
          Agreement, none of the Company nor any of its Subsidiaries would reasonably
          be
          expected to incur any Liability under Title IV of ERISA as a result of
          being
          treated as a single employer with Seller Parent or its Affiliates (other
          than
          the Company and its Subsidiaries) for purposes of Section 414(b), (c),
          (m) or
          (o) of the Code or Section 4212(c) or 4069 of ERISA.

         

        SECTION
          2.15.  Tax
          Matters.  (a)  Each of the Company, its Subsidiaries and
          any consolidated, combined, unitary, affiliated or aggregate group of which
          the
          Company or any of its Subsidiaries is a member (an “Affiliated Group”)
          has timely filed (taking into account any extension of time within which
          to
          file) all material federal, state, local and foreign income and franchise
          Tax
          Returns required to be filed by it and has paid all Taxes shown to be due
          on
          such Tax Returns, and all such Tax Returns are true and complete in all
          material
          respects.  For purposes of this Agreement, (i) “Taxes”
shall mean all federal, state and local, domestic and foreign,
          income,
          employment, withholding, escheats, property, unclaimed property, real property
          transfer, transfer gains, transfer, sales, excise and other taxes, tariffs
          or
          governmental charges of any nature whatsoever, including any interest,
          penalties
          or additions with respect thereto, imposed by any Governmental Authority,
          including any Liability for the payment of any amounts of the type described
          above as a result of being a member of an Affiliated Group or as a result
          of
          being party to any tax sharing agreement with any of the Selling Parties,
          any of
          their Subsidiaries, or any member of any such Affiliated Group, or as a
          result
          of any express or implied obligation to indemnify any such other person
          with
          respect to the payment of any amounts of the type described above, and
          (ii) “Tax Returns” shall mean any return, declaration, report, claim
          for refund, or information return or statement relating to taxes, including
          any
          schedule or attachment thereto, and including any amendment
          thereof.

         

        (b)        No
          deficiencies for any Taxes have been proposed, asserted or assessed against
          the
          Company, any of its Subsidiaries or any Affiliated Group that are still
          pending
          and none of the Selling Parties, the Company or its Subsidiaries is currently
          involved with or has received any notice of any threatened or proposed
          Tax
          audit, examination, refund litigation, investigation, claim, administrative
          proceeding or adjustment in controversy with respect to the Company or
          any of
          its Subsidiaries.

         

      

      (c)        The
        federal income Tax Returns of the Affiliated Group of which the Company and
        its
        Subsidiaries are currently a member have been examined by and settled with
        the
        IRS (or the applicable statute of limitations has expired) for all years
        through
        December 31, 2004.

       

      (d)        Neither
        the Company nor any of its Subsidiaries has constituted either a “distributing
        corporation” or a “controlled corporation” (in each case, within the meaning of
        Section 355(a)(1)(A) of the Code) in a distribution of stock qualifying for
        tax-free treatment under Section 355(e) of the Code (A) in the two
        years preceding the date of this Agreement or (B) in a distribution that
        could otherwise constitute part of a “plan” or “series of related transactions”
(within the meaning of Section 355(e) of the Code) in conjunction with the
        Acquisition.

       

      (e)        No
        material claim has been made by any Tax authority in a jurisdiction where
        the
        Company or any of its Subsidiaries has not filed a Tax Return that it is
        or may
        be subject to Tax by such jurisdiction, nor to the Knowledge of the Selling
        Parties is any such assertion threatened.

       

       

      
        
          
          

        

        
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          (f)        As
            of the date of this Agreement, there is no outstanding request for any
            extension
            of time within which to pay any Taxes or file any Tax Returns, and no
            waiver,
            extension or comparable consent regarding the application of the statute
            of
            limitations with respect to any Taxes or Tax Return is outstanding, nor
            is any
            request for any such waiver or consent pending.

           

          (g)        As
            of the date of this Agreement, the Company and each of its Subsidiaries
            have
            withheld and paid all Taxes required to be withheld in connection with
            any
            amounts paid or owing to any employee, creditor, independent contractor
            or other
            third party except where failure to do so has not had and is not reasonably
            likely to have, individually or in the aggregate with any other such
            failure or
            failures, a Material Adverse Effect.  The Company and each of its
            Subsidiaries has complied with all information reporting and backup withholding
            obligations with respect to such payments.

           

          (h)        The
            Company has not been a United States real property holding corporation
            within
            the meaning of Section 897(c)(2) of the Code during the applicable period
            specified in Section 897(c)(1)(A)(ii) of the Code.

           

          (i)        There
            are no Liens (other than Permitted Liens) for Taxes upon the Company
            and its
            Subsidiaries.

           

          (j)        Neither
            the Company nor any of its Subsidiaries, with respect to the income and
            activities of the Company and its Subsidiaries, have been required to
            file any
            foreign Tax Returns.

           

        

        (k)        None
          of the Selling Parties, with respect to the Company and each of its
          Subsidiaries, or the Company and each of its Subsidiaries, has agreed to
          make,
          nor is required to make, any adjustments with respect to any taxable period
          ending after the Closing Date pursuant to Section 481(a) of the Code or any
          similar provision of state or local law by reason of a change in accounting
          method initiated by it or any other relevant party.  To the Knowledge
          of the Selling Parties, the IRS has no currently outstanding proposed adjustment
          or change in accounting with respect to the Company and its Subsidiaries,
          and
          none of the Selling Parties, the Company or its Subsidiaries has any application
          pending with any Governmental Authority requesting permission for any changes
          in
          Tax accounting methods that relate to the business or assets of the Company
          or
          any of its Subsidiaries.

      

       

      (l)        None
        of the Selling Parties (with respect to the Company and its Subsidiaries),
        the
        Company, or its Subsidiaries has “participated” in a “reportable transaction”
within the meaning of Treasury Regulation section 1.6011-4(b).

       

      SECTION
        2.16.  Real
        Estate.  (a)  None of the Company or any of its
        Subsidiaries owns any real property.

       

       

       

      
        
          
          

        

        
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        (b)        Section 2.16(b)
          of the Company Disclosure Letter sets forth a true, correct and complete
          list of
          the common address and current use of all real property leased, subleased,
          licensed or otherwise used or occupied (whether as a tenant, subtenant,
          or
          pursuant to other occupancy arrangements) by the Company and its Subsidiaries
          (collectively, the “Company Leased Real Property”) pursuant to leases,
          subleases, licenses and other occupancy agreements, including all amendments,
          modifications and supplements with respect to any of the foregoing (the
          “Company Leases”) under which the Company or any of its Subsidiaries is a
          tenant, subtenant or occupant, and for each Company Lease indicates whether
          or
          not the consent of the landlord will be required in connection with the
          transactions contemplated by this Agreement.  The Company or one of
          its Subsidiaries (either directly or indirectly) holds a valid and existing
          leasehold or subleasehold interest, as applicable, in the Company Leased
          Real
          Property under each of the Company Leases.  The Selling Parties have
          delivered or made available to the Purchasing Parties true, correct and
          complete
          copies of each of the Company Leases.  With respect to each Company
          Lease:  (i) such Company Lease is, and, assuming the receipt of
          the consents set forth in Section 2.16(b) of the Company Disclosure Letter
          and
          the provision of any notices required under the Company Leases, upon the
          consummation of the transactions contemplated by this Agreement will be,
          (A) in full force and effect, (B) the legal, valid, and binding
          obligation of the Company or the applicable Subsidiary, and (C) current
          with respect to rent and other sums and charges payable by the Company
          or such
          Subsidiary pursuant to the Company Lease, (ii) none of the Company or any
          of its Subsidiaries is in material default, taking into account any notice
          and
          cure period, under such Company Lease, to the Knowledge of the Selling
          Parties,
          no other party to a Company Lease is in material default, taking into account
          any notice and cure period, under such Company Lease and, to the Knowledge
          of
          the Selling Parties, no event has occurred that, with notice or lapse of
          time,
          or both, would constitute a material breach or default by the Company or
          any of
          its Subsidiaries or permit termination under such Company Lease by any
          party
          thereto, (iii) the terms of such Company Lease have not been modified in
          any respect, except to the extent that such modifications are set forth
          in the
          documents previously delivered or made available to the Purchasing Parties
          or
          disclosed to the Purchasing Parties in Section 2.16(b) of the Company
          Disclosure Letter, and none of the Selling Parties, the Company
          or its Subsidiaries is currently in negotiations with any landlord to cancel
          or
          terminate any Company Lease prior to the end of the stated term of such
          Company
          Lease, (iv) none of the Selling Parties, the Company or any of its
          Subsidiaries has assigned, transferred, conveyed, mortgaged, deeded in
          trust or
          granted any security interest in its leasehold interest in such Company
          Lease,
          and, other than the Company Leases, none of the Company Leased Real Property
          is
          subject to any lease, sublease, license or other agreement which grants,
          from
          the Company or one of its Subsidiaries, to any other person, any right
          to the
          use, occupancy or enjoyment of such Company Leased Real Property or any
          part
          thereof and (v) each guaranty by the Company or any of its Subsidiaries, if
          any, with respect to a Company Lease is in full force and
          effect.

      

       

      (c)        None
        of the Selling Parties, the Company or any of its Subsidiaries has received
        written notice of any violation by the Company or any of its Subsidiaries
        of any
        existing Law, applicable to any store, distribution facility or warehouse
        facility operated by the Company or any of its Subsidiaries pursuant to a
        Company Lease (each, a “Company Facility”), which violation would be
        reasonably likely to materially adversely affect the present use and operation
        of the Company Leased Real Property.

       

       

      
        
          
          

        

        
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        (d)        None
          of the Selling Parties, the Company or any of its Subsidiaries has received
          written notice of and, to the Knowledge of the Selling Parties, there are
          no
          pending condemnation or eminent domain Proceedings that affect any Company
          Leased Real Property.

         

        (e)        None
          of the Selling Parties, the Company or its Subsidiaries has received written
          notice of any Proceeding and, to the Knowledge of the Selling Parties,
          there is
          no Proceeding threatened or pending against the Company or its Subsidiaries
          with
          respect to any rights or interests of the Company or its Subsidiaries in
          any
          portion of the Company Leased Real Property.  None of the Selling
          Parties, the Company or any of its Subsidiaries has received written notice
          of
          the existence of any outstanding or pending Order and, to the Knowledge
          of the
          Selling Parties, there are no extant Orders relating to the lease, use,
          occupancy or operation by the Company or its Subsidiaries of the Company
          Leased
          Real Property, which Orders would be reasonably likely to materially adversely
          affect the present use and operation of the Company Leased Real
          Property.

         

        (f)        To
          the Knowledge of the Selling Parties, the current use of the Company Leased
          Real
          Property by the Company or any of its Subsidiaries does not violate any
          instrument of record affecting such Company Leased Real Property, which
          violations would be reasonably likely to materially adversely affect the
          present
          use and operation of the Company Leased Real Property.  Since January
          1, 2005, 
          no material damage or destruction has occurred with respect to any of the
          Company Leased Real Property which has not been substantially repaired
          prior to
          the date of this Agreement.

         

        (g)        All
          Permits required to be obtained by the Company or its Subsidiaries, if
          any
          (collectively, the “Company Leased Real Property Permits”), to continue
          the present use and operation of the Company Leased Real Property, have
          been
          issued to the Company or such Subsidiary and are, as of the date of this
          Agreement, in full force and effect, except for any lapses, terminations
          or
          non-issuances of Company Leased Real Property Permits which would not reasonably
          be likely to materially adversely affect the present use and operation
          of the
          Company Leased Real Property.  None of the Selling Parties, the
          Company or its Subsidiaries has received any written notice from a Governmental
          Entity having jurisdiction over the Company Leased Real Property threatening
          a
          suspension, revocation or cancellation of any Company Leased Real Property
          Permit that would be reasonably likely to materially adversely affect the
          present use and operation of the Company Leased Real Property as a
          whole.

         

      

      SECTION
        2.17.  Terminated Leases.  None of
        the Company or any Subsidiary has, or will have, any Liability of any kind
        related to the closing of any Company Facility with respect to which the
        Company
        or any of its Subsidiaries has terminated, or prior to the Closing Date will
        terminate, its leasehold or subleasehold interest, except to the extent reserved
        against in the balance sheet dated February 3, 2007 or disclosed in the
        notes to the Financial Statements.  None of the Selling Parties, the
        Company or any of its Subsidiaries has received any notice of any such Liability
        (whether actual, pending or threatened).

       

      SECTION
        2.18.  Sufficiency of Assets; Shared Assets and
        Services.  The Company or its Subsidiaries have, and, assuming the
        provision of services under the Transition Services Agreement, following
        the
        Closing will have, good title to, or a valid leasehold interest in, or license
        or right to use all of the assets necessary, and such assets are in such
        condition and repair (ordinary wear and tear excepted) as is sufficient,
        in all
        material respects, to operate the business of the Company and its
        Subsidiaries after the Closing Date in substantially the same manner as
        presently conducted.  Section 2.18 of the Company Disclosure
        Letter contains a complete and accurate list as of the date of this Agreement
        of
        (i) all the material assets used or held for use by the Company or its
        Subsidiaries that the Selling Parties or their Affiliate (other than the
        Company
        and its Subsidiaries) owns, leases, licenses, has a right to use or otherwise
        uses and (ii) the material services provided by the Selling Parties or
        their Affiliates (other than the Company and its Subsidiaries) to the Company
        and its Subsidiaries.

       

      
        
          
          

        

        
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        SECTION
          2.19.  Insurance.  (a)  Section 2.19(a)
          of the Company Disclosure Letter sets forth an accurate and complete list
          of the
          policies of insurance maintained as of the date of this Agreement by or
          for the
          benefit of the Company and its Subsidiaries (including any policies of
          insurance
          maintained for purposes of providing benefits such as workers’ compensation and
          employers’ liability coverage) (collectively, the “Policies”) as well as
          a description of all risks that the Company and its Subsidiaries designate
          as
“self-insured”.  To the Knowledge of the Selling Parties, as of the
          date of this Agreement no insurer on any such Policy has been declared
          insolvent
          or placed in receivership, conservatorship or liquidation.

         

        (b)        Section 2.19(b)
          of the Company Disclosure Letter sets forth a list of all pending claims
          as of
          the date of this Agreement (including with respect to insurance obtained
          but not
          currently maintained) and the claims history (for filed claims) for the
          Company
          and its Subsidiaries since January 1, 2005 (including with respect to insurance
          obtained but not currently maintained), in each case with respect to each
          claim
          (or series of related claims) involving amounts in excess of
          $250,000.  None of the Company or any of its Subsidiaries has been
          refused any insurance coverage with respect to any material aspect of its
          operations, nor has its coverage been limited in any material respect by
          any
          insurance carrier to which it, or either of the Selling Parties on its
          behalf,
          has applied for insurance.  As of the date of this Agreement, there is
          no claim by the Company or any of its Subsidiaries, or by either of the
          Selling
          Parties on its behalf, pending under any such Policies as to which coverage
          has
          been questioned, denied or disputed by the underwriters of such
          Policies.

         

      

      SECTION
        2.20.  Intellectual
        Property.  (a)  Section 2.20 of the Company Disclosure
        Letter set forth the Company’s and its Subsidiaries’ trademark status as of the
        date of this Agreement.  Each of the Company and its Subsidiaries
        owns, or is validly licensed or otherwise has the right to use, all Intellectual
        Property Rights that are used in the conduct of the business of the Company
        and
        its Subsidiaries, in each case free and clear of all Liens other than Permitted
        Liens.  No trademark that is material to the Company’s business as
        currently conducted is subject to lapse or abandonment.  All right,
        title and interest to the “Barneys” and “Barneys New York” trademarks are owned
        by the Company and are not subject to any Liens (other than Permitted Liens)
        or
        licenses.

       

      (b)        To
        the Knowledge of the Selling Parties, neither the Company nor any of its
        Subsidiaries has infringed upon or misappropriated in any material respect
        any
        Intellectual Property Rights of any other person.  As of the date of
        this Agreement, no material claims are pending or, to the Knowledge of the
        Selling Parties, threatened that the Company or any of its Subsidiaries is
        infringing or misappropriating the rights of any person with regard to any
        Intellectual Property Right.

       

      
        
          
          

        

        
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        (c)        To
          the Knowledge of the Selling Parties, no person or persons are infringing
          in any
          material respect the rights of the Company or any of its Subsidiaries with
          respect to any Intellectual Property Right owned by the Company or any
          of its
          Subsidiaries.  As of the date of this Agreement, no material claims
          are pending or, to the Knowledge of the Selling Parties, are threatened
          against
          the Company or any of its Subsidiaries with regard to the ownership by
          the
          Company or any of its Subsidiaries of any Intellectual Property
          Rights.

         

        (d)        As
          used in this Agreement, “Intellectual Property Rights” shall mean
          patents, trademarks (registered or unregistered), trade secrets, copyrights,
          trade names, domain names, service marks, brand names, trade dress, and
          other
          indications of origin, together with the goodwill associated with the foregoing
          and registrations of, and applications to register, the foregoing, including
          any
          extension, modification or renewal of any such registration or
          application.

         

        (e)        The
          IT Systems owned or licensed by the Company and its Subsidiaries together
          with
          the IT Systems to be used by Seller Parent or any of its Subsidiaries in
          the
          performance of their obligations under, or which the Purchasing Parties
          are to
          be provided the benefit of pursuant to the terms of, the Transition Services
          Agreement constitute all the IT Systems that are material to the conduct
          of the
          business of the Company and its Subsidiaries, taken as a whole.  As
          used in this Agreement, “IT Systems” shall mean computer software
          programs, including all source code and object code therein and all designs
          and
          documentation related thereto.

         

        (f)        All
          renewal and maintenance fees that are due and payable for the Intellectual
          Property Rights used by the Company have been paid and, to the Knowledge
          of the
          Selling Parties, all Intellectual Property Rights owned by the Company
          and its
          Subsidiaries are valid, subsisting and enforceable.

         

        SECTION
          2.21.  Company Proprietary Credit
          Card.  (a)  Each of the “Barneys” credit card accounts
          has been solicited, originated, created, maintained, and serviced by the
          Company
          and its Subsidiaries in compliance, in all material respects, with (i) the
          applicable credit card Contract between the Company or its applicable Subsidiary
          and the person for whom such account has been established and to whom such
          credit card has been issued and (ii) the applicable policies, procedures
          and practices pursuant to which the Company or any of its Subsidiaries
          manages
          its rights, title and interest in and to such accounts and receivables
          related
          to such account and underwrites, establishes, administers, processes, services,
          collects, terminates or charges-off such accounts and such
          receivables.

         

      

      (b)        Prior
        to the date of this Agreement, the Company has made available to the Purchasing
        Parties true and complete copies of each form of credit card Contract and
        other
        documentation provided to holders of “Barneys” credit cards, and each such form
        contains all material terms of the Contract between the Company or its
        applicable Subsidiary and such holder.

       

      (c)        The
        Company and its Subsidiaries have reasonable procedures and protections in
        place
        regarding the collection, use and dissemination of personal data or other
        information concerning customers.  Since January 1, 2005 there has
        been no material breach with respect to the systems of the Company and its
        Subsidiaries resulting in the loss of personal data or other information
        concerning customers.

       

       

      
        
          
          

        

        
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        SECTION
          2.22.  Transactions with
          Affiliates.  None of the Selling Parties or any of their
          Affiliates (other than the Company and its Subsidiaries) or any executive
          officer or director, as applicable, of the Company or its Subsidiaries
          or any
          member of his or her immediate family or any of his or her Affiliates (each
          a
“Related Person”) (a) owes any amount to the Company or its
          Subsidiaries (other than in respect of extensions of credit in the ordinary
          course of business for goods or services purchased from the Company or
          any of
          its Subsidiaries or advances for travel expenses), nor does the Company
          or its
          Subsidiaries owe any amount to, nor has the Company or its Subsidiaries
          committed to make a loan or extend or guarantee credit to or for the benefit
          of,
          any Related Person (other than in respect of extensions of credit in the
          ordinary course of business for goods or services purchased from the Company
          or
          any of its Subsidiaries or advances for travel expenses), other than payments
          of
          salaries and benefits in the ordinary course and intercompany Indebtedness
          to be
          terminated pursuant to Section 5.12 or (b) is involved in any business
          arrangement (other than employment or acting as a director) or other
          relationship with the Company or its Subsidiaries in which such Related
          Person
          had, or will have, a direct or indirect material interest, other than
          (i) sales of goods or services by the Company or any of its Subsidiaries to
          any Related Person in the ordinary course of business, (ii) extensions
          of credit
          related to such sales, (iii) advances for travel expenses, (iv) the shared
          services described in Section 2.18, (v) intercompany Indebtedness to be
          terminated pursuant to Section 5.12 and (vi) purchases by the Company or
          its Subsidiaries of goods for resale from Seller Parent or its
          Subsidiaries.

         

        SECTION
          2.23.  Major Suppliers.  None of the
          Selling Parties, the Company or any of its Subsidiaries is engaged, as
          of the
          date of this Agreement, in any material dispute with any Major
          Supplier.  During the period from February 3, 2007 to the date of this
          Agreement, no Major Supplier has terminated or materially reduced or indicated
          its intention to terminate or materially reduce (as compared to the same
          period
          in the prior year) its business relations with the Company or its Subsidiaries
          or requested any material and adverse change in the terms on which it supplies
          merchandise for the Company or its Subsidiaries.  A “Major
          Supplier” means any merchandise vendor to the Company or its Subsidiaries to
          whom the Company or its Subsidiaries paid, in the aggregate, more than
          $3,000,000 during the fiscal year ended February 3, 2007.

         

      

      SECTION
        2.24.  Brokers and Other
        Advisors.  No broker, investment banker, financial advisor or
        other person, other than Goldman, Sachs & Co., the fees and expenses of
        which will be paid by Seller Parent, is entitled to any broker’s, finder’s,
        financial advisor’s or other similar fee or commission in connection with the
        transactions contemplated by this Agreement based upon arrangements made
        by or
        on behalf of the Company.

       

       

      
        
          
          

        

        
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        ARTICLE
          III

         

        Representations
          and Warranties

        Relating
          to Selling Parties and the Shares

         

        Except
          as
          set forth in the Company Disclosure Letter, each Selling Party, jointly
          and
          severally, represents and warrants to the Purchasing Parties as
          follows:

         

        SECTION
          3.01.  Organization, Standing and Corporate
          Power.  Seller Parent is a corporation duly organized, validly
          existing and in good standing under the Laws of Pennsylvania and has all
          requisite corporate power and authority to carry on its business as now
          being
          conducted.  Seller is a corporation duly organized, validly existing
          and in good standing under the Laws of Delaware and has all requisite corporate
          power and authority to carry on its business as now being
          conducted.

         

        SECTION
          3.02.  Authority;
          Noncontravention.  (a)  The Selling Parties have all
          requisite corporate power and authority to execute and deliver this Agreement,
          and each Selling Party and each of its Affiliates has, or prior to the
          execution
          thereof, will have, all requisite power and authority to execute and deliver
          each Related Document to which such Selling Party or such Affiliate is
          a party
          or will be a party, and to consummate the Acquisition and the other transactions
          contemplated hereby and thereby.  The execution and delivery of this
          Agreement and each Related Document to which it is a party or will be a
          party by
          the Selling Parties and their respective Affiliates (to the extent a party
          thereto), and the consummation of the Acquisition and the other transactions
          contemplated hereby and thereby, and the compliance by the Selling Parties
          and
          their respective Affiliates (to the extent a party thereto) with the provisions
          of this Agreement and each Related Document to which it is a party or will
          be a
          party have been (and in the case of the Related Documents, will be) duly
          authorized by all necessary corporate action on the part of the Selling
          Parties
          and their respective Affiliates (to the extent a party thereto) and no
          other
          corporate proceedings on the part of the Selling Parties and their respective
          Affiliates (to the extent a party thereto) are necessary to authorize or
          approve
          this Agreement or the Related Documents to which such Selling Party or
          Affiliate
          is a party or will be a party, or to consummate the Acquisition or the
          other
          transactions contemplated hereby and thereby.  This Agreement has been
          duly executed and delivered by the Selling Parties and, assuming the due
          authorization, execution and delivery by the other parties hereto, constitutes
          a
          legal, valid and binding obligation of the Selling Parties, enforceable
          against
          the Selling Parties in accordance with its terms (subject to applicable
          bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium
          and

other Laws affecting creditors’ rights generally from time to time
        in effect).  Each Related Document to which a Selling Party or its
        Affiliate is a party or will be a party has been or will be duly executed
        and
        delivered by such Selling Party or such Affiliate (to the extent a party
        thereto) and, assuming the due authorization, execution and delivery by the
        other parties hereto, constitutes or will constitute a legal, valid and binding
        obligation of the applicable Selling Party or its Affiliate, enforceable
        against
        such Selling Party or its Affiliate in accordance with its terms (subject
        to
        applicable bankruptcy, insolvency, fraudulent transfer, reorganization,
        moratorium and other Laws affecting creditors’ rights generally from time to
        time in effect).

       

      
        
          
          

        

        
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        (b)        The
          execution and delivery of this Agreement and each Related Document to which
          it
          is a party or will be a party does not, and the consummation of the Acquisition
          and the other transactions contemplated hereby and the performance of its
          obligations and compliance with the provisions hereof and thereof do not
          and
          will not, conflict with, or result in any violation or breach of, or constitute
          a default (with or without notice or lapse of time or both) under, or give
          rise
          to a right of termination, cancellation or acceleration of any obligation,
          or to
          the loss of a benefit under, or result in the creation of any Lien upon
          any of
          the properties or other assets of the Selling Parties or any of their Affiliates
          (to the extent a party thereto) under (i) their Organizational Documents,
          (ii) any Contract to which the Selling Parties or their respective
          Affiliates (as applicable) are party or are bound or any of their respective
          properties or other assets is bound by or subject to or otherwise under
          which
          the Selling Parties have any rights or benefits, or (iii) subject to the
          governmental filings and other matters referred to in Section 3.03, any Law
          applicable to the Selling Parties or their Affiliates (as applicable) or
          properties or other assets, other than, in the case of clauses (i), (ii)
          and (iii) above, any such conflicts, violations, breaches, defaults, rights,
          results, losses or Liens that individually or in the aggregate are not
          reasonably likely to impair in any material respect the ability of the
          Selling
          Parties to perform their obligations under this Agreement or the Related
          Documents or prevent or materially impede, interfere with, hinder or delay
          the
          consummation of the Acquisition or any of the other transactions contemplated
          by
          this Agreement or the Related Documents to which such Selling Party or
          Affiliate
          is a party or will be a party.

         

        SECTION
          3.03.  Governmental Approvals.  No
          consent, approval, order or authorization of, action by or in respect of,
          or
          registration, declaration or filing with, any Governmental Authority is
          required
          by or with respect to the Selling Parties or their Affiliates in connection
          with
          the execution and delivery of this Agreement or any Related Document to
          which it
          is a party or will be a party, by the Selling Parties or their Affiliates
          or the
          consummation by the Selling Parties or their Affiliates of the Acquisition
          or
          any of the other transactions contemplated by this Agreement or the Related
          Documents to which it is a party or will be a party, except for (a) those
          required to be made pursuant to the HSR Act, (b) the filing with the SEC of
          such reports under the Exchange Act as may be required in connection with
          this
          Agreement or the Related Documents, the Acquisition and the other transactions
          contemplated hereby and thereby and (c) such other consents, approvals,
          orders,
          authorizations, registrations, declarations, permits, actions, notifications
          and
          filings the failure of which to be obtained or made individually or in
          the
          aggregate have not had and are not reasonably likely to have an Effect
          described
          in clause (ii) of the definition of Material Adverse Effect.

         

      

      SECTION
        3.04.  Litigation.  As of the date of
        this Agreement, there is no Proceeding pending or, to the Knowledge of the
        Selling Parties, threatened against or affecting the Selling Parties or any
        of
        their Affiliates that individually or in the aggregate is reasonably likely
        to
        impair in any material respect the ability of the Selling Parties or any
        of
        their Affiliates to perform their obligations under this Agreement or any
        Related Document to which any of them is a party or will be a party or prevent
        or materially impede, interfere with, hinder or delay the consummation of
        the
        Acquisition or any of the other transactions contemplated by this Agreement
        or
        any Related Document to which any of them is a party or will be a party,
        nor is
        there any judgment, decree, injunction, rule or order of any Governmental
        Authority or arbitrator outstanding, or, to the Knowledge of the Selling
        Parties, investigation, Proceeding, notice of violation, order of forfeiture
        or
        complaint by any Governmental Authority involving the Selling Parties or
        any of
        their Affiliates that individually or in the aggregate is reasonably likely
        to
        impair in any material respect the ability of the Selling Parties or any
        of
        their Affiliates to perform their obligations under this Agreement or any
        Related Document to which any of them is a party or will be a party or prevent
        or materially impede, interfere with, hinder or delay the consummation of
        the
        Acquisition or any of the other transactions contemplated by this Agreement
        or
        any Related Document to which any of them is a party or will be a
        party.

       

      
        
          
          

        

        
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        SECTION
          3.05.  Brokers and Other
          Advisors.  No broker, investment banker, financial advisor or
          other person, other than Goldman, Sachs & Co., the fees and expenses of
          which will be paid by Seller Parent, is entitled to any broker’s, finder’s,
          financial advisor’s or other similar fee or commission in connection with the
          transactions contemplated by this Agreement based upon arrangements made
          by or
          on behalf of the Selling Parties or the Company.

         

        SECTION
          3.06.  The Shares.  Seller has good
          and valid title to the Shares, free and clear of any lien, encumbrance,
          mortgage, deed of trust, security interest, easement, conditional sale
          or other
          title retention agreement, pledge, hypothecation, assessment, lease, levy,
          charge, transfer restriction, right of first offer, right of first refusal,
          option, preemptive right, voting trust or agreement, proxy or set off or
          other
          adverse claim of any kind or nature, whether arising by agreement, statute
          or
          otherwise.  Assuming Purchaser has the requisite power and authority
          to be the lawful owner of the Shares, upon delivery to Purchaser at the
          Closing
          of certificates representing the Shares, duly endorsed by Seller for transfer
          to
          Purchaser, and upon Seller Parent’s receipt of the Closing Date Amount, good and
          valid title to the Shares will pass to Purchaser, free and clear of any
          lien,
          encumbrance, mortgage, deed of trust, security interest, easement, conditional
          sale or other title retention agreement, pledge, hypothecation, assessment,
          lease, levy, charge, transfer restriction, right of first offer, right
          of first
          refusal, option, preemptive right, voting trust or agreement, proxy or
          set off
          or other adverse claim of any kind or nature, whether arising by agreement,
          statute or otherwise, other than those arising from acts of Purchaser or
          its
          Affiliates.  Other than this Agreement, the Shares are not subject to
          any voting trust agreement or other Contract, including any Contract restricting
          or otherwise relating to the voting, dividend rights or disposition of
          the
          Shares.

         

      

      ARTICLE
        IV

       

      Representations
        and Warranties of the Purchasing Parties

       

      Each
        of
        the Purchasing Parties, jointly and severally, represents and warrants to
        the
        Selling Parties as follows:

       

      SECTION
        4.01.  Organization, Standing and Corporate
        Power.  Each Purchasing Party is an entity duly organized, validly
        existing and in good standing, to the extent applicable, under the Laws of
        the
        State of Delaware and has all requisite corporate power and authority to
        carry
        on its business as now being conducted.

       

      SECTION
        4.02.  Authority;
        Noncontravention.  (a)  Each Purchasing Party and each
        of its respective Affiliates (as applicable) has all requisite power and
        authority to execute and deliver this Agreement and has, or prior to the
        execution thereof, will have, all requisite power and authority to execute
        and
        deliver each Related Document to which such Purchasing Party or such Affiliate
        is a party or will be a party, and to consummate the Acquisition and the
        other
        transactions contemplated hereby and thereby, including the
        Financing.  The execution and delivery of this Agreement and each
        Related Document to which it is a party, or will be a party by the Purchasing
        Parties and their respective Affiliates (to the extent a party thereto) and
        the
        consummation of the Acquisition and any of the other transactions contemplated
        hereby and thereby, including the Financing, and the compliance by the
        Purchasing Parties and their respective Affiliates with the provisions of
        this
        Agreement and each Related Document to which such Purchasing Party or such
        Affiliate is a party or will be a party have been (and in the case of the
        Related Documents, will be) duly authorized by all necessary corporate or
        other
        action on the part of the Purchasing Parties and their respective Affiliates,
        and no other corporate or other proceedings on the part of the Purchasing
        Parties or any of their respective Affiliates is necessary to authorize or
        approve this Agreement or any Related Document to which such Purchasing Party
        or
        such Affiliate is a party or will be a party, or to consummate the Acquisition
        or the other transactions contemplated hereby and thereby, including the
        Financing.  This Agreement has been duly executed and delivered by the
        Purchasing Parties and, assuming the due authorization, execution and delivery
        by the other parties hereto, constitutes a legal, valid and binding obligation
        of the Purchasing Parties, enforceable against the Purchasing Parties in
        accordance with its terms (subject to applicable bankruptcy, insolvency,
        fraudulent transfer, reorganization, moratorium and other Laws affecting
        creditors’ rights generally from time to time in effect).  Each
        Related Document to which a Purchasing Party or any of its respective Affiliates
        is a party or will be a party has been or will be duly executed and delivered
        by
        such Purchasing Party and such Affiliates (as applicable), and constitutes
        or
        will constitute a legal, valid and binding obligation of such Purchasing
        Party
        and such Affiliates (as applicable), enforceable against such Purchasing
        Party
        and such Affiliates (as applicable) in accordance with its terms (subject
        to
        applicable bankruptcy, insolvency, fraudulent transfer, reorganization,
        moratorium and other Laws affecting creditors’ rights generally from time to
        time in effect).

       

       

      
        
          
          

        

        
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        (b)        The
          execution and delivery of this Agreement and each Related Document to which
          a
          Purchasing Party or any of its Affiliates is a party or will be a party
          does
          not, and the consummation of the Acquisition and any of the other transactions
          contemplated hereby, including the Financing, and the performance of their
          obligations and compliance with the provisions hereof and thereof do not
          and
          will not, conflict with, or result in any violation or breach of, or constitute
          a default (with or without notice or lapse of time or both) under, or give
          rise
          to a right of termination, cancellation or acceleration of any obligation,
          or to
          the loss of a benefit under, or result in the creation of any Lien upon
          any of
          the properties 
or other assets of such Purchasing Party or any of
        its Affiliates (as applicable) under (i) the Organizational Documents of
        such Purchasing Party or any of its Affiliates (as applicable), (ii) any
        Contract to which such Purchasing Party or any of its Affiliates (as applicable)
        is a party or is bound or any of their respective properties or other assets
        is
        bound by or subject to or otherwise under which such Purchasing Party or
        any of
        its Affiliates (as applicable) has any rights or benefits or (iii) subject
        to the governmental filings and other matters referred to in Section 4.03,
        any Law applicable to such Purchasing Party or any of its Affiliates (as
        applicable) or properties or other assets, other than, in the case of
        clauses (i), (ii) and (iii) above, any such conflicts, violations,
        breaches, defaults, rights, results, losses or Liens that individually or
        in the
        aggregate are not reasonably likely to impair in any material respect the
        ability of such Purchasing Party or any of its Affiliates (as applicable)
        to
        perform their obligations under this Agreement or any Related Document to
        which
        such Purchasing Party or such Affiliate is a party or will be a party, or
        prevent or materially impede, interfere with, hinder or delay the consummation
        of the Acquisition or any of the other transactions contemplated by this
        Agreement, including the Financing, or any Related Document to which such
        Purchasing Party or such Affiliate is a party or will be a party.

       

       

      
        
          
          

        

        
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      SECTION
        4.03.  Governmental Approvals.  No
        consent, approval, order or authorization of, action by or in respect of,
        or
        registration, declaration or filing with, any Governmental Authority is required
        by or with respect to the Purchasing Parties or their respective Affiliates
        (as
        applicable) in connection with the execution and delivery of this Agreement
        or
        any Related Document to which a Purchasing Party or any of its Affiliates
        is a
        party or will be a party, by such Purchasing Party or such Affiliate or the
        consummation by the Purchasing Parties of the Acquisition or any of the other
        transactions contemplated by this Agreement, including the Financing, or
        any
        Related Document to which such Purchasing Party or such Affiliate is a party
        or
        will be a party, except for (i) those required to be made pursuant to the
        HSR Act and (ii) such other consents, approvals, orders, authorizations,
        registrations, declarations, permits, actions, notifications and filings
        the
        failure of which to be obtained or made individually or in the aggregate
        is not
        reasonably likely to impair in any material respect the ability of such
        Purchasing Party or its Affiliates (as applicable) to perform their obligations
        under this Agreement or any Related Document to which such Purchasing Party
        or
        such Affiliate is a party or will be a party, or prevent or materially impede,
        interfere with, hinder or delay the consummation of the Acquisition or any
        of
        the other transactions contemplated by this Agreement, including the Financing,
        or any Related Document to which such Purchasing Party or such Affiliate
        is a
        party or will be a party.

       

      SECTION
        4.04.  Litigation.  As of the date of
        this Agreement, there is no Proceeding pending or, to the knowledge of the
        Purchasing Parties, threatened against or affecting the Purchasing Parties
        or
        any of their respective Affiliates that individually or in the aggregate
        is
        reasonably likely to impair in any material respect the ability of the
        Purchasing Parties or their respective Affiliates to perform their obligations
        under this Agreement or any Related Documents to which a Purchasing Party
        or any
        of its Affiliates is a party or will be a party or prevent or materially
        impede,
        interfere with, hinder or delay the consummation of the Acquisition or any
        of
        the other transactions contemplated by this Agreement, including the Financing,
        or any Related Document to which a Purchasing Party or any of its Affiliates
        is
        a party or will be a party, nor is there any judgment, decree, injunction,
        rule
        or order of any Governmental Authority or arbitrator outstanding, or, to
        the
        knowledge of the Purchasing Parties, investigation, Proceeding, notice of
        violation, order of forfeiture or complaint by any Governmental Authority
        involving the Purchasing Parties or any of their respective Affiliates that
        individually or in the aggregate is reasonably likely to impair in any material
        respect the ability of the Purchasing Parties or their respective Affiliates
        to
        perform their obligations under this Agreement or any Related Document to
        which
        a Purchasing Party or any of its Affiliates is a party or will be a party,
        or
        prevent or materially impede, interfere with, hinder or delay the consummation
        of the Acquisition or any of the other transactions contemplated by this
        Agreement, including the Financing, or any Related Document to which a
        Purchasing Party or any of its Affiliates a party or will be a
        party.

       

       

      
        
          
          

        

        
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      SECTION
        4.05.  Sufficient Funds.  The
        Purchasing Parties have delivered to Seller Parent true and complete copies
        of
        (i) an executed commitment letter from Purchaser Guarantor (the “Equity
        Funding Letter”) to provide equity financing in an aggregate amount
        of at least $345,500,000 (the “Equity Financing”) and
        (ii) executed debt commitment letters from Citigroup Global Markets Inc.
        (the “Financing Commitments”), pursuant to which Citigroup Global Markets
        Inc. has agreed to provide or cause to be provided at least $505,000,000
        at
        Closing (the “Debt Financing”, and, together with the Equity Financing,
        the “Financing”).  The Purchasing Parties have disclosed and
        made available to the Selling Parties all other agreements, arrangements
        or
        understandings (whether oral or written) related to the Financing,
provided that the Purchasing Parties may redact in such documents the fee
        amounts payable to their financing sources under the Financing
        Commitments.  Such fee amounts are customary for debt financings
        similar to the Debt Financing.  Except as otherwise permitted by this
        Agreement, none of the Equity Funding Letter or Financing Commitments has
        been
        or will be amended or modified, and the respective commitments contained
        in the
        Equity Funding Letter and the Financing Commitments have not been withdrawn
        or
        rescinded in any respect as of the date of this Agreement.  Except to
        the extent amended in accordance with its terms, the Equity Funding Letter
        is in
        full force and effect and is a legal, valid and binding obligation of the
        Purchasing Parties that are party thereto and the other party
        thereto.  Each of the Financing Commitments is in full force and
        effect and is a legal, valid and binding obligation of the Purchasing Parties
        and, to the knowledge of the Purchasing Parties, the other parties
        thereto.  As of the date of this Agreement, no event has occurred
        which, with or without notice, lapse of time or both, would constitute a
        default
        or breach on the part of the Purchasing Parties or their respective Affiliates
        under any term or condition of the Equity Funding Letter or the Financing
        Commitments.  There are no conditions precedent relating to the
        funding of the full amount of the Financing, other than as set forth in the
        Equity Funding Letter and the Financing Commitments.  As of the date
        of this Agreement, the Purchasing Parties have no reason to believe that
        any of
        the conditions relating to the funding of the full amount of the Financing
        will
        not be satisfied on or prior to the Closing Date.  The Purchasing
        Parties have fully paid any and all commitment fees or other fees required
        by
        the Financing Commitments to be paid on or prior to the date of this Agreement
        and shall in the future pay any such fees as they become due.  The
        Financing, when funded in accordance with the Equity Funding Letter and the
        Financing Commitments, will provide Purchaser with funds sufficient to
        consummate the Acquisition and the other transactions contemplated by this
        Agreement and to pay all related fees and expenses.  The fees and
        expenses of the Purchasing Parties in connection with the Acquisition, the
        Financing and any related transactions will not exceed the amount set forth
        on
        Section 4.05 of the Company Disclosure Letter.

       

      SECTION
        4.06.  Guarantees.  The Purchasing
        Parties have delivered to Seller Parent the limited guarantee of Istithmar
        PJSC
        (“Purchaser Guarantor”), dated as of the date hereof, with respect to
        certain matters as specified therein (the “Guarantee”), which Guarantee
        is in full force and effect and is a legal, valid and binding obligation
        of
        Purchaser Guarantor.

       

      
        SECTION
          4.07.  Brokers and Other
          Advisors.  No broker, investment banker, financial advisor or
          other person, other than Peter J. Solomon Company, the fees and expenses
          of
          which will be paid by the Purchasing Parties, is entitled to any broker’s,
          finder’s, financial advisor’s or other similar fee or commission in connection
          with the transactions contemplated by this Agreement based upon arrangements
          made by or on behalf of the Purchasing Parties.

         

         

         

      

      
        
          
          

        

        
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      SECTION
        4.08.  No Additional
        Representations.  The Purchasing Parties acknowledge that they and
        their Representatives have been permitted full and complete access to the
        books
        and records, facilities, equipment, contracts and other properties and assets
        of
        or with respect to the Company and the Subsidiaries of the Company that it
        and
        its Representatives have desired or requested to see or review, and that
        it and
        its Representatives have had a full opportunity to meet with the officers
        and
        employees of the Company and the Subsidiaries of the Company to discuss the
        business of the Company and the Subsidiaries of the Company.  The
        Purchasing Parties acknowledge that none of the Selling Parties, the Company,
        their respective Representatives or any other person has made any representation
        or warranty, expressed or implied, with respect to the Company and the
        Subsidiaries of the Company or the accuracy or completeness of any information
        regarding the Company and the Subsidiaries of the Company furnished or made
        available to the Purchasing Parties and their Representatives, except as
        expressly set forth in this Agreement, and none of the Selling Parties, the
        Company, their respective Representatives or any other person shall have
        or be
        subject to any Liability to the Purchasing Parties or any other person resulting
        from the distribution to the Purchasing Parties, or the Purchasing Parties’ use
        of, any such information, including any information, documents or material
        made
        available in any “data rooms” or management presentations or in any other form
        in expectation of the transactions contemplated hereby.

       

      SECTION
        4.09.  No Distribution.  The Shares
        being acquired by Purchaser hereunder are being acquired for Purchaser’s own
        account, for investment only and not with a view to any public distribution
        thereof, and Purchaser shall not offer to sell or otherwise dispose of the
        Shares so acquired by it in violation of any of the registration requirements
        of
        the Securities Act of 1933, as amended, and the rules and regulations
        promulgated thereunder.  Purchaser acknowledges that the Selling
        Parties have informed it that the Shares have not been registered under the
        Securities Act and may not be sold until they have been registered, unless
        an
        exemption from such registration is available.

       

      SECTION
        4.10.  Withholding.  The Purchasing
        Parties are not aware of any basis for, or facts that would give rise to
        a basis
        for, determination of any Withholding Amount within the meaning of Section
        1.05
        of this Agreement.

       

      ARTICLE
        V

       

      Covenants

       

      SECTION
        5.01.  Conduct of
        Business.  

       

      (a)        Conduct
        of Business by the Company.  During the period from the date of
        this Agreement to the Closing Date, except (A) as expressly permitted by
        Section 5.01 of the Company Disclosure Letter, (B) as consented to in
        writing by the Purchasing Parties (which consent shall not be unreasonably
        withheld, delayed or conditioned), (C) as expressly required or permitted
        by this Agreement or (D) as required by applicable Law, the Seller Parent
        shall cause the Company and each of the Company’s Subsidiaries to (i) carry
        on its businesses and operations in all material respects in the ordinary
        course
        consistent with past practice, (ii) continue all advertising, pricing,
        sales, inventory, receivables, payables, customer credit and proprietary
        credit
        card operations and currency hedging practices, in all material respects
        in the

       

       

       

      
        
          
          

        

        
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      ordinary
        course consistent with past practice (to the extent consistent with this
        Section 5.01(a)) and (iii) use its reasonable best efforts to preserve
        intact its assets, brands, licenses, technology, Intellectual Property Rights
        and business organizations, keep available the services of its current officers
        and Employees and preserve in all material respects in accordance with past
        practice its relationships with suppliers, licensors, licensees, distributors
        and others having business dealings with it and maintain its franchises,
        rights
        and Permits, with the intention that its goodwill and ongoing business shall
        be
        unimpaired as of the Closing Date.  Without limiting the generality of
        the foregoing, during the period from the date of this Agreement to the Closing
        Date, except as consented to in writing by the Purchasing Parties or as
        expressly permitted by the applicable subsection of Section 5.01 of the
        Company Disclosure Letter or as expressly required or permitted by this
        Agreement or as required by applicable Law, the Seller Parent will not permit
        the Company or any of the Company’s Subsidiaries to:

       

      (i)     (A) declare,
        set aside or pay any dividends on, or make any other distributions (whether
        in
        cash, stock, property or other assets) in respect of, any of its capital
        stock,
        or other equity or voting interests, other than dividends or distributions
        by
        the Company or a direct or indirect wholly owned Subsidiary of the Company
        to
        its parent, (B) split, combine or reclassify any of its capital stock, or
        other equity or voting interests, or issue or authorize the issuance of any
        other securities in respect of, in lieu of or in substitution for shares
        of its
        capital stock, or other equity or voting interests, or (C) purchase, redeem
        or otherwise acquire any shares of capital stock, or other equity or voting
        interests or any other securities of the Company or its Subsidiaries or any
        warrants, options or other rights to acquire any such shares or other
        securities;

       

      (ii)    issue,
        deliver, sell, grant, pledge or otherwise encumber or subject to any lien,
        encumbrance, mortgage, deed of trust, security interest, easement, conditional
        sale or other title retention agreement, pledge, hypothecation, assessment,
        lease, levy, charge, transfer restriction, right of first offer, right of
        first
        refusal, option, preemptive right, voting trust or agreement, proxy or set
        off
        or other adverse claim of any kind or nature, whether arising by agreement,
        statute or otherwise, any shares of its capital stock, any other equity or
        voting interests or any securities convertible into, or exchangeable for,
        or any
        warrants, options or other rights to acquire or receive, any such shares,
        interests or securities or any “phantom” stock, “phantom” stock rights or
        awards, stock appreciation rights, stock-based performance units or any other
        rights that are linked in any way to the price of Company Common Stock or
        the
        value of the Company or any part thereof;

       

      
        (iii)   amend
          or modify the Company Certificate or Company By-laws or the comparable
          charter
          or organizational documents of any Subsidiary of the Company;

         

        (iv)   acquire
          any assets (including equity or debt securities), individually, in excess
          of
          $200,000 or, in the aggregate, in excess of $1,000,000, other than assets
          acquired in the ordinary course of business consistent with past
          practice;

         

        (v)    sell,
          lease, license, mortgage, sell and leaseback or otherwise encumber or subject
          to
          any Lien (other than Permitted Liens) or otherwise dispose of any of its
          properties or other assets or any interest therein to a third party, other
          than
          (A) the sale of assets having a market value not in excess of $300,000
          individually or $500,000 in the aggregate  and (B) sales of
          inventory or other assets in the ordinary course of business consistent
          with
          past practice;

         

      

       

      
        
          
          

        

        
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      (vi)   (A) incur
        or assume any Indebtedness (other than any incurrence of Indebtedness
        (1) associated with the issuance of letters of credit on behalf of the
        Company or any of its Subsidiaries, which letters of credit are issued in
        the
        ordinary course of business consistent with past practice, (2) associated
        with foreign currency transactions entered into in the ordinary course of
        business consistent with past practice or (3) owing to Seller Parent or its
        Subsidiaries that will be terminated in accordance with Section 5.12) or
        issue or sell any debt securities or warrants, options or other rights to
        acquire any debt securities of the Company or any of its Subsidiaries or
        (B) make any loans, advances (other than in the ordinary course of business
        consistent with past practice) or capital contributions to, or investments
        in,
        any other person, other than the Company or any direct or indirect wholly
        owned
        Subsidiary of the Company;

       

      (vii)  incur
        any capital expenditure, or any Liabilities in connection therewith, in excess
        of $750,000 except to the extent such expenditure, obligation or Liability
        is
        reflected on the Company’s capital expenditure plan set forth in Section
        5.01(a)(vii) of the Company Disclosure Letter; provided, that the
        Purchasing Parties shall not unreasonably withhold, delay or condition their
        consent to any request by Seller Parent with respect to the
        foregoing;

       

      (viii) make
        any amendment, change or other modification to the policies, procedures or
        practices of the Company or any of its Subsidiaries in respect of which it
        (A) manages its rights, title and interest in and to the “Barneys” credit
        card accounts and receivables related to such accounts or (B) underwrites,
        establishes, administers, processes, services, collects, terminates or
        charges-off such accounts and such receivables other than, in the case of
        clause (A) or (B), (1) as required by Law, (2) increases in late
        fees payable by cardholders, (3) in the ordinary course of business
        consistent with past practice or (4) other immaterial amendments, changes
        or modifications; provided, that the Purchasing Parties shall not
        unreasonably withhold, delay or condition their consent to any request by
        Seller
        Parent with respect to the foregoing;

       

      
        (ix)    except
          (A) as required by the terms of any Company Plan, Multiemployer Plan or
          CBA as
          in effect on the date of this Agreement, (B) increases in cash compensation
          in
          the ordinary course of business consistent with past practice, (C) increases
          to
          retain any Employee that has notified the Company or its Subsidiaries that
          he or
          she intends to terminate his or her employment with the Company or its
          Subsidiaries, (D) the entry into of employment agreements with new hires
          in the
          ordinary course of business consistent with past practice and (E) any amendment
          to any Company Plan that is made to maintain the qualified status of such
          Company Plan or its continued compliance with applicable Law, (1) increase
          the
          compensation (including bonuses or other benefits) payable or to become
          payable
          to any of the directors of the Company, Employees of the Company at the
          level of
          senior vice president and above or the Creative Director of the Company
          (collectively, the “Key Personnel”); (2) enter into, terminate, adopt,
          materially amend or materially increase the benefits under any Company
          Plan or,
          other than any such entry, termination, adoption, amendment or increase
          that
          results in an increase to employer contributions of not more than 3%, any
          Multiemployer Plan, or enter into any plan or arrangement that would be
          considered a Company Plan if it were in existence on the date of this Agreement;
          or (3) accelerate, fund or secure the vesting or payment of compensation
          (including bonuses or other benefits under any Company Plan); provided,
          that (I) the exception in clause (D) hereof shall not apply with respect
          to the
          Key Personnel, provided that the Purchasing Parties shall not
          unreasonably withhold, delay or condition their consent to any request
          by the
          Company to take any of the actions that would otherwise have been permitted
          if
          clause (D) did apply to Key Personnel and shall be deemed to have consented
          to
          the action so requested if the Purchasing Parties have not responded by
          the end
          of the third business day following the date of such request and (II) the
          exceptions in clauses (B) and (C) hereof shall only apply with respect
          to the
          Key Personnel to the extent that the increases described therein together
          do not
          exceed $35,000 for any individual or $175,000 in the aggregate (for the
          avoidance of doubt, this Section 5.01(a)(ix) shall not pertain to any action
          by
          any director or employee of the Company or any of its Subsidiaries that
          such
          director or employee is required to take, or to refrain from taking, in
          accordance with his or her fiduciary duties as a trustee or fiduciary of
          a
          Multiemployer Plan);

         

         

      

       

      
        
          
          

        

        
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      (x)     terminate
        (other than for cause) any of the Key Personnel;

       

      (xi)    enter
        into any transaction with or for the benefit of any Related Person other
        than
        (i) sales of goods or services by the Company or any of its Subsidiaries
        to any
        Related Person in the ordinary course of business, (ii) extensions of credit
        related to such sales, (iii) advances for travel expenses, (iv) the shared
        services described in Section 2.18, (v) intercompany Indebtedness to be
        terminated pursuant to Section 5.12 and (vi) purchases by the Company or
        its Subsidiaries of goods for resale from Seller Parent or its
        Subsidiaries;

       

      (xii)   enter
        into, assume or amend in any material respect, terminate or waive, or assign
        any
        material rights under any Section 2.10 Contract or other Contract or
        commitment that would be a Section 2.10 Contract if entered into, or if
        such amendment, termination or waiver was effected, prior to the date hereof,
        other than in the ordinary course of business consistent with past
        practice;

       

      (xiii)  make,
        change or rescind any material election with respect to Taxes (other than
        to the
        extent consistent with past practice) or enter into any settlement or compromise
        of any material Tax liability or refund;

       

      
        (xiv)  except
          as required by GAAP or applicable Law, make any change in its fiscal year,
          revalue any of its material assets or make material changes in financial
          or tax
          accounting methods, principles or practices;

         

        (xv)   materially
          modify, amend, terminate or permit the lapse of any material lease relating
          to
          any Company Leased Real Property except in the ordinary course of business
          consistent with past practice;

         

        (xvi)  enter
          into any lease relating to any property that would be Company Leased Real
          Property if such lease were entered into as of the date of this
          Agreement;

         

        (xvii) fail
          to maintain the Policies or any replacement insurance policies upon any
          of its
          assets or properties in such amounts and of such kinds comparable to those
          in
          effect as of the date of this Agreement, fail to properly report to the
          applicable insurer any Proceeding or other matter that would be covered
          under
          the Policies as of the date of this Agreement or take any action that would
          prejudice the ability of the Company to obtain insurance policies equivalent
          to
          the Policies after the Closing;

         

         

      

       

      
        
          
          

        

        
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      (xviii)
        change in any material respect the policies or practices regarding the
        inventory, accounts receivable or accounts payable or fail to manage its
        working
        capital in accordance with past practice;

       

      (xix)   adopt
        or approve a plan of complete or partial liquidation, dissolution, merger,
        consolidation, restructuring, or other restructuring;

       

      (xx)    allow
        to lapse, or fail to make any applications for renewal as and when required,
        of
        any Permits necessary for the conduct of its business or the operation of
        any of
        its facilities;

       

      (xxi)   transfer
        any asset (other than cash) of the Company or its Subsidiaries to any of
        the
        Selling Parties or their respective Affiliates (other than the Company and
        its
        Subsidiaries) or cease providing any service currently provided by the Selling
        Parties or their respective Affiliates (other than the Company and its
        Subsidiaries) to the Company and its Subsidiaries; or

       

      (xxii)  resolve,
        authorize, agree or commit to take any of the foregoing actions.

       

      (b)        Certain
        Tax Matters.  (i) The Selling Parties, the Company and its
        Subsidiaries will cause any tax sharing agreement or similar arrangement
        with
        respect to Taxes involving the Company or its Subsidiaries to be terminated
        effective as of the Closing Date, to the extent any such agreement or
        arrangement relates to the Company or any of its Subsidiaries, and after
        the
        Closing Date the Company shall have no obligation under any such agreement
        or
        arrangement for any past, present, or future period; (ii) Seller shall
        deliver to the Purchasing Parties a non-foreign affidavit dated as of the
        Closing Date, sworn under penalty of perjury and in form and substance required
        under the Treasury Regulations issued pursuant to Section 1445 of the Code
        stating that Seller is not a “Foreign Person” as defined in Section 1445 of
        the Code; and (iii) all transfer, documentary, sales, use, stamp,
        registration and other such Taxes, and all conveyance fees, recording charges
        and other fees and charges (including any penalties and interest) incurred
        in
        connection with consummation of the Acquisition or any of the other transactions
        contemplated by this Agreement, shall be paid by Seller Parent and
        Seller when due, and the Selling Parties will, at their own expense, file
        all necessary Tax Returns and other documentation with respect to all such
        Taxes, fees and charges, and, if required by applicable law, the Purchaser
        will,
        and will cause its Affiliates to, join in the execution of any such Tax Returns
        and other documentation.

       

      
        SECTION
          5.02.  Resignations.  At the Closing,
          the Selling Parties shall cause to be delivered to the Purchasing Parties
          duly
          signed letters of resignation from each member of the Board of Directors
          and
          each officer of the Company and its Subsidiaries that is specified on
          Schedule 5.02 of the Purchasing Parties Disclosure Schedule or that may be
          designated by the Purchasing Parties in a letter delivered to Seller Parent
          no
          later than the business day prior to the Closing, each to be effective
          as of the
          Closing.

         

      

       

      
        
          
          

        

        
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      SECTION
        5.03.  Support Services.  Other than
        the services provided under the Transition Services Agreement between Seller
        Parent and the Purchasing Parties (the “Transition Services Agreement”)
        substantially in the form set forth in Section 5.03 of the Company
        Disclosure Letter, the Purchasing Parties acknowledge that all the support
        services disclosed in Section 2.18 of the Company Disclosure Letter will be
        terminated as of the Closing Date.

       

      SECTION
        5.04.  Financing.  (a)  Prior
        to the Closing, the Company shall provide and shall cause each Subsidiary
        of the
        Company and their respective Representatives to provide, and each Selling
        Party
        shall cause the Company and each Subsidiary of the Company and their respective
        Representatives to provide, all cooperation in connection with the Debt
        Financing reasonably requested by the Purchasing Parties, provided that
        such requested cooperation does not unreasonably interfere with the ongoing
        operations of the Selling Parties and their Subsidiaries (including the Company
        and its Subsidiaries), including (i) participation in meetings,
        presentations, road shows, due diligence sessions and sessions with rating
        agencies, (ii) assisting with the preparation of materials for rating
        agency presentations and offering documents, private placement memoranda,
        bank
        information memoranda, prospectuses, business projections and similar documents
        required in connection with the Debt Financing, including execution and delivery
        of customary representation letters in connection with bank information
        memoranda, (iii) executing and delivering, as of the Closing, any pledge
        and security documents, other definitive financing documents, other certificates
        or documents as may be reasonably requested by the Purchasing Parties (including
        a certificate of the Chief Financial Officer of the Company with respect
        to
        solvency matters) and otherwise reasonably facilitating the pledging of
        collateral, (iv) as promptly as practical, furnishing the Purchasing
        Parties and their financing sources with financial and other pertinent
        information regarding the Company as may be reasonably requested by the
        Purchasing Parties, including all related financial statements, and financial
        data and other information of the type and form customarily included in private
        placements under Rule 144A under the Securities Act to consummate the
        offering(s) of debt securities contemplated by the Financing Commitments
        (the
“Required Information”), (v) using reasonable best efforts to
        (y) obtain accountants’ comfort letters, accountants’ consents and legal
        opinions and (z) with respect to any properties for which the Purchasing
        Parties’ lenders request surveys and/or mortgagee title insurance, using
        reasonable best efforts to obtain title insurance in customary form for
        commercial real estate transactions and providing the Purchasing Parties
        and
        their agents with reasonable access to the applicable properties in connection
        with the Purchasing Parties’ surveys, in either of clause (y) or (z), at
        the Purchasing Parties’ expense, as reasonably requested by the Purchasing
        Parties; (vi) permitting the prospective lenders involved in the Debt
        Financing to identify and evaluate the Company’s and its Subsidiaries’ assets,
        cash management and accounting systems, policies and procedures relating
        thereto
        for the purposes of establishing collateral arrangements; (vii) permitting
        the Purchasing Parties to perform an appraisal of the inventory of the Company
        and its Subsidiaries customary for the type of financing contemplated by
        the
        Debt Financing; (viii) without limitation of Section 5.06, using
        reasonable best efforts to obtain waivers, consents, estoppels and approvals
        from other parties to Company Leases and Contracts and to arrange discussions
        among the Purchasing Parties and their financing sources with other parties
        to
        material leases, encumbrances and contracts, and (ix) taking all reasonable
        actions necessary to permit the consummation of the Financing contemplated
        by
        the Financing Commitments; provided, that none of the Selling Parties or
        any of their Subsidiaries (including the Company and its Subsidiaries) shall
        be
        required to pay any commitment or other similar fee or incur any other liability
        in connection with the Debt Financing.  The Purchasing Parties shall,

       

       

      
        
          
          

        

        
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      promptly
        upon request by the Seller Parent, reimburse Seller Parent for all reasonable
        out-of-pocket costs incurred by the Selling Parties or any of their Subsidiaries
        (including the Company and its Subsidiaries) in connection with such
        cooperation, including any payments or concessions made in connection with
        clauses (viii) and (ix) above.  The Purchasing Parties shall indemnify
        and hold harmless the Selling Parties, their Subsidiaries (including the
        Company
        and its Subsidiaries) and their respective Representatives from and against
        any
        and all losses suffered or incurred by them in connection with (1) any action
        taken by them at the request of the Purchasing Parties pursuant to this Section
        5.04 or in connection with the arrangement of the Debt Financing and (2)
        any
        information utilized in connection therewith (other than information provided
        by
        the Selling Parties and their Subsidiaries (including the Company and its
        Subsidiaries)).  All non-public or otherwise confidential information
        regarding the Company obtained by the Purchasing Parties pursuant to this
        Section 5.04 shall be kept confidential in accordance with the
        Confidentiality Agreement; provided, however, that the Purchasing
        Parties and their Representatives shall be permitted to disclose information
        as
        necessary and consistent with customary practices in connection with the
        Debt
        Financing upon the prior written consent of Seller Parent (such consent not
        to
        be unreasonably withheld, conditioned or delayed).  The Selling
        Parties shall cause the Company and its Subsidiaries and their Representatives
        to update, when requested by the Purchasing Parties, any such Required
        Information to be included in an offering document to be used in connection
        with
        such Financing in order to ensure that such Required Information does not
        contain any untrue statement of a material fact or omit to state any material
        fact necessary in order to make the statements contained therein not
        misleading.

       

                  (b)        The
        Purchasing Parties shall use, and shall cause their Affiliates to use, their
        reasonable best efforts to take, or cause to be taken, all actions and to
        do, or
        cause to be done, all things necessary, proper or advisable to arrange the
        Debt
        Financing on the terms and conditions described in the Financing Commitments
        (provided that the Purchasing Parties may replace or amend the Financing
        Commitments to add lenders, lead arrangers, bookrunners, syndication agents
        or
        similar entities who had not executed the Financing Commitments as of the
        date
        hereof, or otherwise replace or amend the Financing Commitments so long as
        (a) after such actions, the Financing Commitments do not include any
        additional conditions precedent that are not contained in the Financing
        Commitments provided to Seller Parent as of the date of this Agreement, other
        than inconsequential additional conditions, and (b) such actions are not
        reasonably likely to delay, or diminish the likelihood of, the Purchasing
        Parties obtaining the Debt Financing (clauses (a) and (b) together being
        referred to as the “Financing Modification Requirements”); for purposes
        of this Agreement, the term “Financing Commitments” shall be deemed to
        include any such replacement or amended financing), including using reasonable
        best efforts to (i) maintain in effect the Financing Commitments or any
        Alternative Financing, (ii) satisfy on a timely basis all conditions
        applicable to the Purchasing Parties to obtaining the Financing set forth
        therein (including by consummating the equity financing contemplated by the
        Equity Funding Letter), (iii) negotiate and enter into definitive
        agreements with respect thereto on the terms and conditions contemplated
        by the
        Financing Commitments (including the related flex provisions) or any Alternative
        Financing, (iv) consummate the Debt Financing on the terms and conditions
        contemplated by the Financing Commitments or any Alternative Financing at
        or
        prior to Closing and (v) complete an appraisal of the inventory of the Company
        and its Subsidiaries customary for the type of financing contemplated by
        the
        Debt Financing as soon as practicable.  In the event any portion of
        the Debt Financing becomes unavailable on the terms and conditions contemplated
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      their
        reasonable best efforts to arrange to obtain alternative financing from
        alternative sources in an amount sufficient to consummate the transactions
        contemplated by this Agreement on terms and conditions that are not materially
        less beneficial to the Purchasing Parties than those contained in the Financing
        Commitments as in effect on the date of this Agreement as determined in the
        reasonable good faith judgment of the Purchasing Parties and consistent with
        the
        Financing Modification Requirements (any such alternative financing actually
        obtained by the Purchasing Parties, “Alternative Financing”) as promptly
        as practicable following the occurrence of such event but no later than the
        last
        day of the Marketing Period.  Nothing in this Agreement shall prohibit
        the Purchasing Parties from entering into agreements relating to the Financing
        or the operation of the Purchasing Parties, including adding other equity
        providers or operating partners, subject in each case to the Financing
        Modification Requirements.  The Purchasing Parties shall have the
        right to amend the Financing Commitments or any Alternative Financing in
        their
        sole discretion; provided that such amendments are consistent with the
        Financing Modification Requirements.

       

      (c)        For
        purposes of this Agreement, “Marketing Period” shall mean the first
        period of 30 consecutive calendar days after the Initiation Date
        (i) throughout which (A) the Purchasing Parties and their Debt
        Financing sources shall have the Required Information (provided that any
        such
        Required Information to be included in an offering document to be used in
        connection with such Debt Financing shall be updated as reasonably requested
        to
        ensure that the Required Information does not contain any untrue statement
        of a
        material fact or omit to state any material fact necessary in order to make
        the
        statements contained therein not misleading) and (B) nothing has occurred
        and no condition exists that would cause any of the conditions set forth
        in
        Section 7.01 and Section 7.02 to fail to be satisfied, assuming the
        Closing were to be scheduled for any time during such 30 consecutive
        calendar day period, and (ii) at the end of which the conditions set forth
        in Section 7.01 and Section 7.02 shall be satisfied.  For
        purposes of this Agreement, “Initiation Date” shall mean the earliest
        date on which both (x) the Company shall have delivered or caused to be
        delivered the Required Information to the Purchasing Parties and their financing
        sources and (y) the Purchasing Parties shall have completed an appraisal
        of the
        inventory of the Company and its Subsidiaries customary for the type of
        financing contemplated by the Debt Financing.  The Purchasing Parties
        shall keep Seller Parent informed on a reasonably current basis of the status
        of
        its efforts to arrange the Debt Financing and provide to Seller Parent copies
        of
        documents related to the Debt Financing as Seller Parent reasonably requests;
        provided that the Purchasing Parties may redact in such documents the fee
        amounts payable to their financing sources under the Financing
        Commitments.  The Purchasing Parties shall give Seller Parent prompt
        notice of any material breach by any party of the Financing Commitments of
        which
        the Purchasing Parties become aware, or any termination of the Financing
        Commitments.

       

      
        SECTION
          5.05.  Access to Information;
          Confidentiality.  Subject to applicable Laws relating to the
          exchange of information, the Seller Parent shall, and shall cause the Company,
          each of its Subsidiaries and each of their respective Representatives to,
          afford, upon reasonable advance notice, to the Purchasing Parties and the
          Purchasing Parties’ Representatives, reasonable access during normal business
          hours during the period prior to the Closing Date or the termination of
          this
          Agreement to all of the Company’s and its Subsidiaries’ properties and other
          assets, books, contracts, records (including accountants’ work papers and Tax
          Returns), directors, officers, Employees and attorneys and, during such
          period,
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      shall
        cause the Company, each of its Subsidiaries and each of their respective
        Representatives to, furnish promptly to the Purchasing Parties all other
        information concerning the Company’s and its Subsidiaries’ business, properties
        and personnel as the Purchasing Parties may reasonably request.  As
        soon as reasonably practicable following the date of this Agreement, the
        Company
        shall request an updated estimate of the potential withdrawal liability to
        which
        the Company or any Subsidiary would be subject if the Company or any Subsidiary
        were to withdraw from each Multiemployer Plan and shall promptly furnish
        to the
        Purchasing Parties any information it receives in response to such
        request.  Except for disclosures expressly permitted by the terms of
        the confidentiality agreement, dated as of October 19, 2006, between an
        Affiliate of the Purchasing Parties and Seller Parent (as it may be amended
        from
        time to time, the “Confidentiality Agreement”). The Purchasing Parties
        shall hold, and shall cause their Representatives and financing sources to
        hold,
        all information received from the Selling Parties and the Company, directly
        or
        indirectly, under this Agreement or otherwise in confidence in accordance
        with
        the Confidentiality Agreement.

       

      SECTION
        5.06.  Reasonable Best
        Efforts.  (a)  Upon the terms and subject to the
        conditions set forth in this Agreement, each of the parties agrees to use,
        except as otherwise provided below, its reasonable best efforts to take,
        or
        cause to be taken, all actions, and to do, or cause to be done, and to assist
        and cooperate with the other parties in doing, all things necessary, proper
        or
        advisable to consummate, in the most expeditious manner reasonably practicable,
        the Acquisition and the other transactions contemplated by this Agreement,
        including using reasonable best efforts to accomplish the
        following:  (i) the taking of all acts necessary to cause the
        conditions to Closing to be satisfied as promptly as reasonably practicable,
        (ii) the obtaining of all necessary actions or nonactions, waivers,
        consents, approvals, orders and authorizations from, and the giving of any
        necessary notices to, Governmental Authorities and the making of all necessary
        registrations, declarations and filings (including filings with Governmental
        Authorities, if any), and the taking of all acts as may be necessary to obtain
        any such action, nonaction, waiver, consent, approval, order or authorization,
        (iii) the obtaining of all necessary consents from any third party required
        by any Contract or Company Lease; provided, however, that the
        Purchasing Parties and their Affiliates shall not be required to, and the
        Selling Parties and their Affiliates shall not be required to, make any material
        payment or provide any material value, enter into any Contract (or amend
        any
        existing Contract) that is materially disadvantageous to the Selling Parties
        and
        their Affiliates or the Purchasing Parties and their Affiliates or otherwise
        take any other action that is adverse to the Selling Parties or their Affiliates
        or the Purchasing Parties or their Affiliates in any material respect, and
        (iv) the execution and delivery of any additional instruments necessary to
        consummate the transactions contemplated by, and to fully carry out the purposes
        of, this Agreement.

      
         

        (b)        In
          addition to and without limitation of the foregoing, each of Seller Parent
          and
          Purchaser undertakes and agrees to file as promptly as practicable after
          the
          date of this Agreement all necessary filings pursuant to the HSR Act with
          the
          United States Federal Trade Commission and the Antitrust Division of the
          United
          States Department of Justice (and shall file as promptly as practicable
          any form
          or report required by any other Governmental Authority relating to antitrust,
          competition, trade or other regulatory matters).  Each of Purchaser
          and the Company shall (i) respond as promptly as practicable to any
          inquiries or requests received from any Governmental Authority for additional
          information or documentation and (ii) not extend any waiting period under
          the HSR Act or enter into any Contract with any Governmental Authority
          

      

       

       

       

      
        
          
          

        

        
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      not
        to
        consummate the transactions contemplated by this Agreement, except with the
        written consent of the other parties hereto.  Each party hereto shall
        (x) promptly notify the other party of any written communication to that
        party or its Affiliates from any Governmental Authority concerning this
        Agreement or the Acquisition and, subject to applicable Law, permit the other
        party to review in advance any proposed written communication to any of the
        foregoing, (y) not agree to participate, or to permit its Affiliates to
        participate, in any substantive meeting or discussion with any Governmental
        Authority with respect to any filings, investigation or inquiry concerning
        this
        Agreement or the Acquisition unless it consults with the other party in advance
        and, to the extent permitted by such Governmental Authority, gives the other
        party the opportunity to attend and participate thereat, and (z) furnish
        the other party with copies of all correspondence, filings and communications
        (and memoranda setting forth the substance thereof) between them and their
        Affiliates and their respective Representatives, on the one hand, and any
        Governmental Authority or members of their respective staffs, on the other
        hand,
        with respect to this Agreement and the Acquisition (except that the Selling
        Parties and the Company shall be under no obligation of any kind to provide
        the
        Purchasing Parties documents, material or other information relating to the
        valuation of the Company or to alternatives to the proposed Acquisition and
        this
        Agreement, and the Purchasing Parties shall not be obligated to disclose
        to the
        Selling Parties or the Company any nonpublic information about the Purchasing
        Parties’ or their Affiliates’ existing business or operations).

       

      SECTION
        5.07.  Public Announcements.  The
        Purchasing Parties and Seller Parent shall consult with each other before
        issuing, and give each other the opportunity to review and comment upon,
        any
        press release or other public statements with respect to this Agreement,
        the
        Acquisition and the other transactions contemplated hereby and thereby, and
        shall not issue any such press release or make any such public statement
        without
        the consent of the other party, such consent not to be unreasonably withheld
        or
        delayed, except as may be required by applicable Law, court process or by
        obligations pursuant to any listing agreement with any national securities
        exchange or national securities quotation system.  The parties agree
        that the initial press releases to be issued with respect to the transactions
        contemplated by this Agreement shall be in the forms heretofore agreed to
        by the
        parties and in the case of Seller Parent’s initial press release, shall not
        constitute a solicitation under Section 5.13.

      
         

        SECTION
          5.08.  Employee
          Matters.  (a)  During the period beginning on the
          Closing Date and ending on December 31, 2008, Employees who continue their
          employment with Purchaser or its Affiliates (including the Company after
          the
          Closing Date) after the Closing Date (“Affected Employees”) shall receive
          compensation and employee benefits that are no less favorable in the aggregate
          than the compensation and benefits such Affected Employees received immediately
          prior to the Closing, other than equity-based compensation.  Without
          limiting the foregoing, during the period beginning on the Closing Date
          and
          ending on December 31, 2008, Purchaser shall, or shall cause the Company
          to,
          maintain the Company Severance Plans or a severance plan or plans of Purchaser
          providing substantially the same benefits to Affected Employees as would
          have
          been provided to such Affected Employees under the Company Severance Plans
          in
          which they participated immediately prior to the Closing (or, to the extent
          that
          Affected Employees participated in the Jones Severance Plan immediately
          prior to
          the Closing, a severance plan or plans of Purchaser providing substantially
          the
          same benefits payable under substantially the same circumstances to Affected
          Employees as would have been provided to such Affected Employees under
          the Jones
          Severance Plan), and shall not amend or permit the amendment of any such
          plans
          in a manner that is adverse to any Affected Employee.

         

      

       

      
        
          
          

        

        
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      (b)        From
        and after the Closing Date, Purchaser shall, or shall cause its Affiliates
        (including the Company after the Closing) to, (i) honor, in accordance with
        their terms, all Company Plans, all existing Contracts with Company or its
        Subsidiaries, on the one hand, and any Affected Employee, on the other hand,
        and
        all obligations, including any rights or benefits arising as a result of
        the
        Acquisition (either alone or in combination with any other event), other
        than
        with respect to equity-based compensation, (ii) recognize all the Affected
        Employees’ accrued and unused vacation and other paid time-off benefits
        consistent with the terms of the vacation or similar policies of the Company
        and
        any of its Subsidiaries as in effect immediately prior to the Closing,
        (iii) pay all annual bonuses that are payable to Affected Employees under
        the annual bonus plans applicable to the Affected Employees, including the
        annual bonus plans as in effect as of immediately prior to the Closing, with
        respect to the fiscal year in which the Closing occurs, including bonuses
        accrued before the Closing Date under such annual bonus plans to the extent
        that
        such accruals are accurately reflected in the Final Closing Statement and
        (iv) with respect to any Affected Employee whose employment with Purchaser
        or its Affiliates is terminated by the Company without cause prior to the
        payment of the annual bonuses in clause (iii), pay such Affected Employees
        a pro rated target bonus under such annual bonus plans, such pro ration to
        be
        based on the number of days that have elapsed prior to such termination in
        the
        fiscal year in which the Closing occurs (provided that with respect to
        each Affected Employee such payment shall be offset by any duplicative benefit
        in the nature of bonus pay provided to such Affected Employee by the Company
        pursuant to any severance plan, employment agreement or other arrangement
        then
        in effect and provided, further that the foregoing is intended to
        apply solely with respect to duplicative payments in the nature of bonus
        pay and
        that nothing in this sentence is intended or shall be construed or applied
        to
        restrict Purchaser’s obligation to provide or cause to be provided, as the case
        may be, both (x) severance benefits that are not in the nature of bonus pay
        and (y) pro rated target bonuses, as required pursuant to
        Section 5.08(a) and this Section 5.08(b), respectively).

       

      (c)        For
        purposes of each employee benefit plan of Purchaser or its Affiliates in
        which
        any Affected Employee is eligible to participate after the Closing, including
        for purposes of eligibility, vesting and benefit levels and accruals, Purchaser
        shall, or shall cause its Affiliates to, treat the service of such Affected
        Employee with the Company and any of its Subsidiaries (or any predecessor
        employer) prior to the Closing as service with Purchaser and its
        Affiliates.  Purchaser shall, or shall cause its Affiliates to, waive
        any pre-existing condition exclusions, evidence of insurability provisions,
        waiting period requirements or any similar provision under any of the welfare
        plans maintained by Purchaser or any of its 
        Affiliates
          in which Affected Employees participate following the Closing Date to the
          extent
          such limitations and restrictions were waived or satisfied under the applicable
          Company Plan immediately prior to the Closing Date.  In addition,
          Affected Employees shall receive credit for any co-payments, deductibles
          and
          annual out-of-pocket expenses incurred under the welfare plans of the Company
          or
          any of its Affiliates during the calendar year in which the Closing Date
          occurs,
          but prior to the Closing Date, for purposes of the corresponding co-payments,
          deductibles and annual out-of-pocket expenses under welfare plans of Purchaser
          or any of its Affiliates for the calendar year in which the Closing Date
          occurs.

         

      

       

       

      
        
          
          

        

        
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        (d)        The
          Purchasing Parties agree that any agreement they have entered into or may
          enter
          into prior to Closing with any director, officer or Employee of the Company
          or
          its Subsidiaries or the Creative Director of the Company will not become
          effective until the Closing.

         

      

      (e)        The
        Company shall promptly notify the Purchasing Parties of any entry into,
        termination of, adoption of, material amendment of or material increase of
        the
        benefits under the Multiemployer Plans referenced in Section 5.01(a)(2) of
        the
        Company Disclosure Letter.

       

      SECTION
        5.09.  Letters of Credit and Hedging
        Contracts.  (a)  Section 5.09 of the Company
        Disclosure Letter contains a complete and accurate list of all letters of
        credit
        and hedging contracts to which the Company or any of its Subsidiaries is
        a party
        as of the date of this Agreement, which shall be updated in writing by Seller
        Parent prior to Closing.  On or before the Closing Date, Purchaser
        shall, or shall cause a Subsidiary of Purchaser to, provide the Selling Parties
        with a stand-by letter of credit issued by a bank reasonably acceptable to
        the
        Selling Parties against any loss, payment or reimbursement obligation arising
        from any outstanding letter of credit issued for the benefit of the Company
        or a
        Subsidiary of the Company or any foreign exchange hedging contract of the
        Company or its Subsidiaries that is guaranteed by Seller Parent or its
        Subsidiaries (other than the Company and its Subsidiaries).  The
        Purchasing Parties shall indemnify the Selling Parties and their Subsidiaries
        against all claims and Liabilities arising under any such letter of credit
        or
        hedging contract from and after the Closing Date.

       

      (b)        For
        so long as Purchaser is in compliance with its obligations under
        Section 5.09(a), each Selling Party shall, and shall cause their respective
        Affiliates to, maintain in full force and effect and perform its obligations
        under each letter of credit that is issued for the benefit of the Company
        or a
        Subsidiary of the Company and each guarantee by Seller Parent or its Affiliate
        of a foreign exchange hedging contract of the Company or its Subsidiary
        following the Closing until such letter of credit or hedging contract expires
        or
        is terminated by (i) such Selling Party at the request of Purchaser or
        (ii) the counterparty thereto.  At the time of Closing, Seller
        Parent and its Subsidiaries (other than the Company and its Subsidiaries)
        may
        remove the Company and its Subsidiaries from its letter of credit facility
        and
        terminate any arrangements to provide credit support to the Company and its
        Subsidiaries under any letters of credit or guarantees and the Company and
        its
        Subsidiaries will cooperate in terminating such credit
        support.  Following the Closing, Seller Parent and its Subsidiaries
        shall no longer provide any credit support to the Company, other than any
        outstanding letters of credit and hedging arrangements required to be maintained
        pursuant to this Section 5.09(b) (so long as the Purchasing Parties are in
        compliance with their obligations under Section 5.09(a)).

      
         

        SECTION
          5.10.  Release of Lease
          Guarantees.  On or before the Closing Date, (i) Purchaser
          shall use reasonable best efforts to arrange, at its sole cost and expense,
          for replacement arrangements, effective as of the Closing Date, for all
          lease
          guarantees provided by the Selling Parties or any of their Subsidiaries
          (other
          than the Company and its Subsidiaries) for the benefit of the Company or
          any of
          its Subsidiaries with respect to any Leased Property, which guarantees
          are
          listed in Section 5.10 of the Company Disclosure Letter, including such
          reasonable and customary replacement guarantees or letters of credit, as
          the
          applicable landlord shall require and (ii) Purchaser shall use reasonable
          best efforts to obtain releases from the applicable landlords indicating
          that
          the Selling Parties and their Subsidiaries shall have no Liability with
          respect
          to such lease guarantee effective as of the Closing Date, in each case
          reasonably satisfactory to the Selling Parties.  The Purchasing
          Parties shall indemnify the Selling Parties and their Subsidiaries against
          all
          claims, Liabilities, damages, Liens, judgments, and expenses arising out
          of,
          involving, or in connection with any such lease guarantee from and after
          the
          Closing Date.

         

      

       

      
        
          
          

        

        
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      SECTION
        5.11.  Further Assurances.  From
        time to time, as and when requested by any party, each party shall execute
        and
        deliver, or cause to be executed and delivered, all such documents and
        instruments and shall take, or cause to be taken, all such further or other
        actions (subject to Section 5.06), as such other party may reasonably deem
        necessary or desirable to consummate the transactions contemplated by this
        Agreement, including, in the case of the Selling Parties, executing and
        delivering to the Purchasing Parties such assignments, deeds, bills of sale,
        consents and other instruments as the Purchasing Parties or their counsel
        may
        reasonably request as necessary or desirable for such purpose.

       

      SECTION
        5.12.  Intercompany
        Arrangements.  The Selling Parties and the Purchasing Parties
        acknowledge and agree that, as of the Closing, any contract, lease, license,
        commitment, account or arrangement (other than those entered pursuant to
        the
        terms of this Agreement) between the Company or its Subsidiaries, on the
        one
        hand, and the Selling Parties or any of their Subsidiaries (exclusive of
        the
        Company and its Subsidiaries as of the Closing), on the other hand, shall
        be
        terminated and be of no further force or effect, notwithstanding any terms
        thereof to the contrary, other than accounts payable relating to purchases
        by
        the Company or its Subsidiaries of goods for resale from Seller Parent or
        its
        Subsidiaries pursuant to agreements or arrangements disclosed in Section
        5.12 of
        the Company Disclosure Letter, to the extent reflected (along with the related
        inventory) in determining Net Working Capital.  The Selling Parties
        and their Affiliates shall retain, satisfy, terminate and/or convert to equity
        all pre-Closing intercompany payables, receivables, obligations, Contracts
        or
        other Liabilities, other than accounts payable relating to purchases by the
        Company or its Subsidiaries of goods for resale from Seller Parent or its
        Subsidiaries.

       

      SECTION
        5.13.  No
        Solicitation.  (a)  The parties hereto shall not, and
        shall cause their Subsidiaries (including, in the case of the Selling Parties,
        the Company) and their respective Representatives and Subsidiaries not to
        (i) solicit, initiate or knowingly encourage any inquiries or the making of
        any offer or proposal regarding any Alternative Transaction or (ii) enter
        into, continue or participate in any discussions or negotiations regarding,
        or
        furnish to any person any nonpublic information relating to the Company in
        connection with, or otherwise cooperate with a person or group making any
        offer
        or proposal regarding any Alternative Transaction or (iii) execute or enter
        into any letter of intent, memorandum of understanding, agreement in principle,
        merger agreement, acquisition agreement, option agreement, joint venture
        agreement, partnership agreement or other similar Contract constituting,
        providing for or related to any Alternative Transaction other than, in the
        case
        of the Selling Parties, in connection with the termination of this Agreement
        as
        provided for in Section 8.01(g).

      
         

        (b)        Notwithstanding
          the provisions of Section 5.13(a), in response to a bona fide inquiry,
          proposal or offer relating to any Alternative Transaction received after
          the
          date of this Agreement and prior to July 22, 2007 (the “Initial Window
          Termination Date”), and such bona fide inquiry, proposal or offer was
          unsolicited after the date of this Agreement, the Selling Parties may furnish
          information relating to the Company and its Subsidiaries (so long as all
          such

         

      

       

       

      
        
          
          

        

        
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      information
        has previously been made available to the Purchasing Parties or is made
        available to the Purchasing Parties prior to or concurrently with the time
        it is
        made available to such person or group), or enter into discussions or
        negotiations with, the person or group that has made such unsolicited bona
        fide
        inquiry, proposal or offer (the “Potential Acquirer”) provided that each
        of the following conditions are met: (i) such person or group first
        executes a confidentiality agreement substantially in the form of, and with
        terms no less favorable to the Selling Parties than, the Confidentiality
        Agreement, (ii) the Selling Parties and their Subsidiaries have theretofore
        complied with this Section 5.13 in all respects, (iii) the Board of
        Directors of Seller Parent determines in good faith (after consultation with
        its
        outside financial advisor and outside counsel) that such unsolicited bona
        fide
        inquiry, proposal or offer constitutes or is reasonably likely to lead to
        a
        Superior Transaction and (iv) the Selling Parties have provided the
        Purchasing Parties with prior written notice (any such notice, a “Potential
        Superior Transaction Notice”) (A) that any information is requested or
        any discussions or negotiations are sought to be initiated relating to an
        Alternative Transaction, (B) of the identity of the Potential Acquirer and
        any other terms of such request, inquiry or Alternative Transaction (which
        notice shall include any written materials containing such communication)
        and
        (C) of its intent to take any such action.

       

      (c)        Without
        limiting Section 5.13(a), if the Selling Parties or any of their respective
        Affiliates or any of their respective Representatives participates in
        discussions or negotiations with, or provides information to, a Potential
        Acquirer, the Selling Parties will keep the Purchasing Parties advised on
        a
        substantially current basis of any material developments with respect
        thereto.

       

      (d)        The
        Selling Parties shall, and shall cause their respective Affiliates and their
        respective Representatives to, immediately cease and cause to be terminated
        any
        existing activities, discussions, or negotiations with any persons other
        than
        the Purchasing Parties and their Affiliates conducted prior to the date hereof
        with respect to any Alternative Transaction.

       

      (e)        For
        purposes of this Agreement, “Alternative Transaction” means any
        (i) direct or indirect acquisition (other than any acquisition of the
        shares of Seller Parent) of any of the Shares or any other voting or equity
        interest in the Company by any person (including by means of a spin-off,
        split-off or public offering), (ii) merger, consolidation,
        recapitalization, liquidation, dissolution or similar transaction directly
        or
        indirectly involving the Company, (iii) direct or indirect sale or other
        disposition of all or a substantial portion of the assets of the Company,
        and
        (iv) other transaction that would reasonably be expected to impede,
        interfere with, prevent, materially delay or limit the economic benefit to
        the
        Purchasing Parties of, the transactions contemplated by this Agreement;
provided, however, that the term Alternative Transaction shall not
        include a transaction contemplated by a Parent Acquisition
        Proposal.

      
         

        (f)        For
          purposes of this Agreement, a “Superior Transaction” means any
          Alternative Transaction that (i) if consummated would result in the
          acquisition, directly or indirectly, by any person (other than the Purchasing
          Parties) of at least 50% of the Shares or of the assets of the Company,
          (ii) is on terms that the Board of Directors of Seller Parent has
          determined in its good faith judgment (after consultation with its outside
          financial advisor and outside counsel) are more favorable to Seller Parent
          from
          a financial point of view than this Agreement and (iii) which the Board of
          Directors of Seller Parent has determined in good faith (after consultation
          with
          its outside financial advisor and outside counsel) is reasonably capable
          of
          being consummated.

         

      

       

      
        
          
          

        

        
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      (g)        For
        purposes of this Agreement, a “Parent Acquisition Proposal” shall mean
        any bona fide inquiry, proposal or offer relating to, or that is reasonably
        likely to lead to, a transaction which results in a third party or group
        of
        third parties owning directly or indirectly more than 50% of the voting
        securities of Seller Parent (or of the shares of the surviving entity in
        a
        merger or the direct or indirect parent of the surviving entity in a merger)
        or
        all or substantially all of the assets of Seller Parent.

       

      (h)        If
        Seller Parent intends to furnish information relating to the Company and
        its
        Subsidiaries or enter into discussions or negotiations with, the person or
        group
        that has made a Parent Acquisition Proposal, Seller Parent shall provide
        the
        Purchasing Parties with prior written notice (any such notice, a “Parent
        Acquisition Transaction Notice”)  (A) that any information is
        requested or any discussions or negotiations are sought to be initiated relating
        to such Parent Acquisition Proposal, (B) of the identity of the potential
        acquirer and any other terms of such Parent Acquisition Proposal (which notice
        shall include any written materials containing such communication) and
        (C) of its intent to take any such action; provided that Seller
        Parent shall not be required to provide such notice for a Parent Acquisition
        Proposal that would allow the Acquisition to be consummated and would not
        impede
        or delay the consummation of the Acquisition.

       

      (i)        Notwithstanding
        anything in this Agreement to the contrary, in no event shall the Selling
        Parties be required to close the transactions contemplated by this Agreement
        prior to the Initial Window Termination Date (or, if a Potential Superior
        Transaction Notice or Parent Acquisition Transaction Notice has been given
        to
        Buyer in accordance with Section 5.13(b) or (h), respectively, on or prior
        to the Initial Window Termination Date, prior to August 11, 2007).

       

      SECTION
        5.14.  Lease Estoppel.  To the
        extent permissible under the terms of those leases set forth on
        Section 5.14 of the Company Disclosure Letter, Seller Parent or the Company
        shall request and use reasonable best efforts to obtain a lessor’s estoppel
        certificate substantially in the form of the lessor’s estoppel certificate set
        forth in Section 5.14 of the Company Disclosure Letter in accordance with
        each of such leases.

      
         

        ARTICLE
          VI

         

        Tax
          Matters

         

        SECTION
          6.01.  Tax
          Indemnification.  (a)  Seller Parent and Seller shall be
          jointly and severally responsible for and shall pay, and shall jointly
          and
          severally indemnify and hold the Purchasing Parties, the Company and their
          respective Subsidiaries (each a “Tax Indemnitee”) harmless from, any and
          all Taxes levied or imposed on the Company or any of its Subsidiaries in
          respect
          of its income, business, property or operations or for which the Company
          or any
          of its Subsidiaries may otherwise be liable (i) that are allocated to
          Seller Parent and Seller pursuant to Section 6.02; (ii) for which the
          Company or any of its Subsidiaries may otherwise be liable as a result
          of being
          included in a consolidated group of which the Company or any of its Subsidiaries
          was a member prior to the Closing Date pursuant to Treasury Regulations
          Section 1.1502-6 or any analogous provision of state, local or foreign Tax
          Law; (iii) that arise from or relate to the breach by the Selling Parties
          of Section 2.15(k); or (iv) that are attributable to the failure to
          pay any real estate transfer taxes in any period prior to the Closing Date
          or to
          any breach of Section 5.01(b)(iii).

         

         

      

       

      
        
          
          

        

        
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      (b)        Amounts
        payable pursuant to this Section 6.01 shall be determined so as to hold the
        Tax Indemnitee harmless on an after-tax basis. For this purpose, any tax
        benefits shall be computed based on the amount of any benefit actually realized;
        provided, however, that if a Tax benefit attributable to an amount
        paid pursuant to this Section 6.01 is actually realized after the payment
        date of such amount paid, the party realizing such Tax benefit shall promptly
        pay it to the other party.

       

      (c)        Any
        indemnity payment required to be made by Seller Parent or Seller pursuant
        to
        this Article VI shall be paid to the Purchasing Parties no later than five
        business days prior to the date on which Tax with respect to such item would
        be
        due.

       

      SECTION
        6.02.  Apportionment of
        Taxes.  (a)  In order to apportion appropriately any
        Taxes relating to a period that includes the Closing Date, Seller Parent,
        Seller
        and Purchaser shall, to the extent permitted by applicable Law, elect with
        the
        relevant Taxing authority to treat for all purposes the Closing Date as the
        last
        day of a taxable period of the Company, and such period shall be treated
        as a
        period ending prior to or on the Closing Date for purposes of this
        Agreement.

       

      (b)        Seller
        Parent and Seller shall be liable for any Pre-Closing Period
        Taxes.  For purposes of this Agreement, “Pre-Closing Period
        Taxes” means, except to the extent reflected in the determination of Net
        Working Capital:

       

      (i)     with
        respect to Taxes imposed upon the Company or any of its Subsidiaries with
        respect to taxable periods ending prior to or on the Closing Date, all Taxes
        due
        for such taxable period (regardless of whether such Taxes are due and payable
        at
        Closing); and

       

      (ii)    with
        respect to Taxes imposed upon the Company or any of its Subsidiaries with
        respect to taxable periods beginning before and ending after the Closing
        Date
        (each, a “Straddle Period”), the portion of any such Taxes that is
        allocable to the portion of the Straddle Period ending on the Closing Date
        (such
        Taxes, the “Pre-Closing Straddle Taxes”), determined in accordance with
        the following:

      
         

        (A)     In
          the case of Taxes that are either (1) based upon or related to income,
          receipts or shareholders’ equity or (2) imposed in connection with any
          sale, transfer or assignment or any deemed sale, transfer or assignment
          of
          property (real or personal, tangible or intangible), including any transaction
          contemplated by this Agreement (regardless of whether such transaction
          occurs
          before or after the Closing Date) or undertaken to implement this Agreement,
          Pre-Closing Period Straddle Taxes shall be deemed equal to the amount that
          would
          be payable if the Tax year ended on the Closing Date.  For purposes of
          this clause (A), any exemption, deduction, credit or other item that is
          calculated on an annual basis shall be allocated to the portion of the
          Straddle
          Period ending on the Closing Date on a pro rata basis determined by
          multiplying the entire amount of such item allocated to the Straddle Period
          by a
          fraction, the numerator of which is the number of calendar days in the
          portion
          of the Straddle Period ending on the Closing Date and the denominator of
          which
          is the number of calendar days in the entire Straddle Period.

         

      

       

      
        
          
          

        

        
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      (B)      In
        the case of Taxes (other than those described in clause (A) above) imposed
        on a periodic basis with respect to the Company or any of its Subsidiaries
        or
        otherwise measured by the level of any item, Pre-Closing Straddle Taxes shall
        be
        deemed to equal (1) the aggregate amount of such Taxes for the entire
        Straddle Period (or, in the case of Taxes determined on an arrears basis,
        the
        amount of such Taxes for the immediately preceding Tax period) multiplied
        by (2) a fraction, the numerator of which is the number of calendar
        days in the portion of the Straddle Period ending on the Closing Date and
        the
        denominator of which is the number of calendar days in the entire Straddle
        Period.

       

      SECTION
        6.03.  Tax
        Returns.  (a)  (i) Seller Parent and Seller shall
        be responsible for the timely filing (taking into account any extensions
        received from the relevant tax authorities) of all Tax Returns required by
        Law
        (A) to be filed by the Company or any of its Subsidiaries on or prior to
        the Closing Date, or (B) to include the Company and its Subsidiaries in a
        consolidated, combined or unitary Tax Return filed by Seller Parent, Seller
        or
        any Affiliate (other than any Tax Indemnitee) with respect to any taxable
        period
        ending prior to or including the Closing Date; (ii) such Tax Returns shall
        be
        true, correct and complete in all material respects; and (iii) to the extent
        any
        Taxes indicated as due and payable on such Tax Returns constitute Pre-Closing
        Period Taxes or are the responsibility of the Seller Parent and Seller pursuant
        to this Agreement, such Taxes shall be paid or will be paid by the Seller
        Parent
        and Seller as and when required by Law.  Unless a different treatment
        of any item is required by an intervening change in applicable Law, (x) such
        Tax
        Returns shall be prepared on a basis consistent with those prepared for prior
        taxable periods on the Closing Date and (y) no Tax Returns with respect to
        pre-Closing period Taxes shall be amended if such amendment could adversely
        affect the Purchasing Parties or the Company or any of their respective
        Subsidiaries in any taxable period ending after the Closing
        Date.  

       

      (b)        The
        Company, or, where applicable, its Subsidiaries, shall be responsible for
        the
        timely filing (taking into account any extensions received from the relevant
        tax
        authorities) of Tax Returns which are required by Law to be filed by any
        the
        Company or its Subsidiaries after the Closing Date.

      
         

        SECTION
          6.04.  Survival.  All obligations and
          representations under this Article VI and Section 2.15(k) shall
          survive the Closing hereunder and continue until 30 days following the
          expiration of the statute of limitations, including any applicable extensions
          or
          waivers thereof, on assessment of the relevant Tax.  

         

        SECTION
          6.05.  Contest.  (a)  For
          purposes of this Agreement, a “Contest” is any audit, Proceeding or other
          dispute with respect to any Tax matter that affects the Company or any
          of its
          Subsidiaries.  Unless Purchaser has previously received written notice
          from Seller Parent of the existence of such Contest, Purchaser shall promptly
          give written notice to Seller Parent of the existence of any Contest relating
          to
          a Tax matter that is or may be Seller Parent’s, Seller’s or their Affiliate’s
          full or shared responsibility under this Agreement, but no failure to give
          such
          notice shall relieve Seller Parent, Seller or such Affiliate of any Liability
          hereunder except to the extent, if any, that the rights of Seller Parent,
          Seller
          or such Affiliate with respect to such claim are actually
          prejudiced.  Unless Seller Parent has previously received written
          notice from Purchaser of the existence of such Contest, Seller Parent shall
          promptly give written notice to Purchaser of the existence of any
          Contest.

         

      

       

      
        
          
          

        

        
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      (b)        Purchaser,
        on the one hand, Seller Parent on the other, agrees, in each case at no cost
        to
        the other party, to cooperate with the other and the other’s representatives in
        a prompt and timely manner in connection with any Contest.  Such
        cooperation shall include, but not be limited to, making available to the
        other
        party, during normal business hours, all books, records, returns, documents,
        files, other information (including, without limitation, working papers and
        schedules), officers or employees (without substantial interruption of
        employment) or other relevant information necessary or useful in connection
        with
        any Contest requiring any such books, records and files.

       

      (c)        In
        the case of any Contest relating to a Tax matter arising in a period ending
        on
        or before the Closing Date, Seller Parent shall have the right to represent
        the
        Company’s interests in, to employ counsel of its choice at its expense, and to
        control the conduct of such Contest.  Seller Parent shall have the
        right to settle or dispose of any Contest relating to such Tax matter;
provided, however, that no settlement or other disposition of any
        Contest that may have an adverse effect on any Taxes payable by the Purchasing
        Parties, the Company or any of their respective Subsidiaries during any taxable
        period ending after the Closing Date in any manner or to any extent (including,
        but not limited to, the imposition of income tax deficiencies, the reduction
        of
        asset basis or cost adjustments and the reduction of loss or credit carryovers),
        except if such effect would be de minimis, shall be agreed to without the
        Purchasing Parties’ prior written consent, which consent shall not be
        unreasonably withheld.

       

      (d)        In
        the case of any Contest relating to a Tax Return for a Straddle Period, but
        only
        to the extent such Tax matter relates to Taxes for which Seller Parent may
        be
        required to indemnify Purchaser pursuant to this Agreement, Purchaser and
        Seller
        Parent shall jointly represent their interests in any Contest, shall employ
        counsel of their mutual choice and shall cooperate with the other and the
        other’s representatives in a prompt and timely manner in connection with any
        Contest.  The parties shall mutually agree on any settlement or other
        disposition of the Contest.  Any such Contest expenses shall be shared
        by the parties to the extent they relate to a Tax matter, shall be borne
        by
        Purchaser and Seller Parent in the same proportion as such related Taxes
        are
        borne economically by Purchaser and Seller Parent.

       

      
        (e)        Purchaser
          shall have the right to control the conduct of any Contest in its sole
          discretion with respect to any other Tax matter.

         

        SECTION
          6.06.  Cooperation on Tax
          Matters.  After the date of the Agreement, Seller Parent,
          Purchaser, and the Company shall, and shall cause their respective Affiliates
          to, cooperate fully as and to the extent reasonably requested by the other
          party, (a) with regard to any qualification or filing requirements or
          similar requirements relating to Taxes for the purpose of minimizing such
          Taxes,
          and (b) in connection with the filing of Tax Returns of the Company or any
          of its Subsidiaries and any audit, litigation or other Proceeding with
          respect
          to Taxes. Such cooperation shall include, but not be limited to, the retention
          and (upon the other party’s request) the provision of records and information
          reasonably relevant to any such audit, litigation or other Proceeding and
          making
          Employees available on a mutually convenient basis to provide additional
          information and explanation of any material provided hereunder.  The
          Company, Seller Parent and Purchaser shall (i) retain all books and records
          with respect to Tax matters pertinent to each of the Company and its
          Subsidiaries relating to any taxable period beginning before the Closing
          Date
          until expiration of the statute of limitations (and, to the extent notified
          by
          Purchaser or Seller Parent, any extensions thereof) of the respective taxable
          periods, and to abide by all record retention agreements entered into with
          any
          Tax authority and (ii) give the other party reasonable written notice prior
          to transferring, destroying or discarding any such books and records and,
          if the
          other party so requests, shall allow the requesting party to take possession
          of
          such books and records.

      

       

      
        
          
          

        

        
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      SECTION
        6.07.  Tax Effect of Indemnification
        Payments.  All indemnification payments made pursuant to
        Article VI shall be treated for all Tax purposes as adjustments to the
        consideration paid with respect to the Shares.

       

      ARTICLE
        VII

       

      Conditions
        Precedent

       

      SECTION
        7.01.  Conditions to Each Party’s Obligation to
        Effect the Acquisition.  The respective obligation of each party
        hereto to effect the Acquisition is subject to the satisfaction or waiver
        by
        such party on or prior to the Closing Date of the following
        conditions:

       

      (a)        Antitrust.  The
        waiting period (and any extension thereof) applicable to the Acquisition
        under
        the HSR Act shall have been terminated or shall have expired.

       

      (b)        No
        Injunctions or Restraints.  No (i) Order (whether temporary,
        preliminary or permanent) or other legal restraint issued by any Governmental
        Authority or (ii) Law that, in either case, has the effect of preventing
        the consummation of the Acquisition or the performance of the other material
        transactions contemplated by this Agreement or any Related Document, including
        the Financing (collectively, “Restraints”) shall be in
        effect.

       

      (c)        No
        Proceedings.  No Proceeding initiated by a Governmental Authority
        that seeks the issuance or promulgation of a Restraint shall be
        pending.

      
         

        SECTION
          7.02.  Conditions to Obligations of the Purchasing
          Parties.  The obligations of the Purchasing Parties to effect the
          Acquisition are further subject to the satisfaction or waiver on or prior
          to the
          Closing Date of the following conditions:

         

        (a)        Representations
          and Warranties.  (i)  The representations and warranties
          contained in Article II of this Agreement (other than those referred to in
          clause (ii) or (iii) below), disregarding all qualifications and exceptions
          contained therein relating to materiality or Material Adverse Effect, shall
          be
          true and correct as of the date of this Agreement and as of the Closing
          Date
          with the same effect as if made on and as of the Closing Date (except that
          the
          accuracy of representations and warranties that by their terms speak as
          of a
          specified date will be determined as of such date), except where the failure
          to
          be true and correct has not had and is not reasonably likely to have,
          individually or in the aggregate, a Material Adverse Effect;

         

      

       

      
        
          
          

        

        
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      (ii)     the
        representations and warranties contained in Section 2.01 (Organization,
        Standing and Corporate Power); Section 2.03(d) (Indebtedness);
        Section 2.04 (Authority; Noncontravention); Section 2.24 (Brokers and
        Other Advisors) and Article III (other than those referred to in
        clause (iii) below) shall be true and correct in all material respects as
        of the date of this Agreement and as of the Closing Date with the same effect
        as
        if made on and as of the Closing Date (except that the accuracy of
        representations and warranties that by their terms speak as of a specified
        date
        will be determined as of such date);

       

      (iii)    the
        representations and warranties contained in Section 2.02 (Subsidiaries);
        Section 2.03(a), (b) and (c) (Capital Structure); and Section 3.06
        (The Shares) shall be true and correct in all respects as of the date of
        this
        Agreement and as of the Closing Date with the same effect as if made on and
        as
        of the Closing Date (except that the accuracy of representations and warranties
        that by their terms speak as of a specified date will be determined as of
        such
        date); and

       

      (iv)    the
        Purchasing Parties shall have received a certificate signed on behalf of
        the
        Selling Parties by an authorized officer of the Selling Parties to the effect
        of
        the preceding clauses (i), (ii) and (iii).

       

      (b)        Performance
        of Obligations of the Company.  The Company shall have performed
        in all material respects all obligations required to be performed by it under
        this Agreement at or prior to the Closing Date, and the Purchasing Parties
        shall
        have received a certificate signed on behalf of the Company by an authorized
        officer of the Company to such effect.

       

      (c)        Performance
        of Obligations of the Selling Parties.  The Selling Parties shall
        have performed in all material respects all obligations required to be performed
        by them under this Agreement at or prior to the Closing Date, and the Purchasing
        Parties shall have received a certificate signed on behalf of the Selling
        Parties by an authorized officer of the Selling Parties to such
        effect.

       

      (d)        No
        Material Adverse Effect.  Since the date of this Agreement, there
        shall not have been any Effect that is incapable of cure or has not been
        cured
        that, individually or in the aggregate, has had or is reasonably likely to
        result in a Material Adverse Effect.

       

      
        (e)        Employment
          Agreement.  Howard Socol shall not have died or suffered any
          injury, sickness or mental illness or other condition which has resulted
          in, or
          is reasonably likely to result in, a disability that prevents him from
          performing his duties as chief executive officer of the Company immediately
          following the Closing.

         

        SECTION
          7.03.  Conditions to Obligation of the Selling
          Parties and the Company.  The obligation of the Selling Parties
          and the Company to effect the Acquisition is further subject to the satisfaction
          or waiver on or prior to the Closing Date of the following
          conditions:

         

        (a)        Representations
          and Warranties.  The representations and warranties contained in
          Article IV of this Agreement, disregarding all qualifications and
          exceptions contained therein relating to materiality, shall be true and
          correct
          as of the date of this Agreement and as of the Closing Date with the same
          effect
          as if made on and as of the Closing Date (except that the accuracy of
          representations and warranties that by their terms speak as of a specified
          date
          will be determined as of such date), except where the failure to be true
          and
          correct is not reasonably likely to have a material adverse effect on the
          ability of either of the Purchasing Parties to perform its obligations
          under
          this Agreement or prevent or materially impede, interfere with, hinder
          or delay
          the consummation of the Acquisition or any of the other transactions
          contemplated by this Agreement.  The Selling Parties shall have
          received a certificate signed on behalf of the Purchasing Parties by an
          authorized officer of the Purchasing Parties to such effect.

         

      

       

      
        
          
          

        

        
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      (b)        Performance
        of Obligations of the Purchasing Parties.  The Purchasing Parties
        shall have performed in all material respects all obligations required to
        be
        performed by them under this Agreement at or prior to the Closing Date, and
        the
        Selling Parties shall have received a certificate signed on behalf of the
        Purchasing Parties by an authorized officer of the Purchasing Parties to
        such
        effect.

       

      SECTION
        7.04.  Frustration of Closing
        Conditions.  None of the Selling Parties, the Company or the
        Purchasing Parties may rely on the failure of any condition set forth in
        Section 7.01, 7.02 or 7.03, as the case may be, to be satisfied if such
        failure was caused by such party’s failure to use its reasonable best efforts,
        as the case may be, to consummate the Acquisition and the other transactions
        contemplated by this Agreement, as required by and subject to Section 5.06,
        or otherwise by such party’s breach of its obligations under this
        Agreement.

       

      ARTICLE
        VIII

       

      Termination,
        Amendment and Waiver

       

      SECTION
        8.01.  Termination.  This Agreement
        may be terminated, and the Acquisition contemplated hereby may be abandoned,
        at
        any time prior to the Closing Date:

       

      (a)        by
        mutual written consent of the Purchasing Parties and Seller Parent;

       

      (b)        by
        either the Purchasing Parties or Seller Parent by written notice to the other
        or
        others, as applicable, (i) if the Acquisition shall not have been
        consummated on or before November 15, 2007 (the “Outside Date”) for any
        reason; provided, however, that the right to terminate this
        Agreement under this clause 8.01(b)(i) shall not be available to any party
        hereto whose action or failure to act (or whose Affiliate’s action or failure to
        act) has been a principal cause of or resulted in the failure of the Acquisition
        to occur on or before such date and such action or failure to act constitutes
        a
        breach of this Agreement or (ii) any Restraint referred to in
        Section 7.01(b) shall be in effect and shall have become final and
        nonappealable;

      
         

        (c)        by
          the Purchasing Parties upon written notice to Seller Parent, if the Company
          or
          the Selling Parties shall have materially breached or failed to perform
          any of
          their representations, warranties, covenants or agreements set forth in
          this
          Agreement, which breach or failure to perform would give rise to the failure
          of
          a condition set forth in Section 7.02 and is incapable of cure or has not
          been cured by the earlier of (i) the date which is twenty-five days after
          the date of delivery of notice of such breach by the Purchasing Parties
          or
          (ii) the Outside Date;

         

      

       

      
        
          
          

        

        
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      (d)        by
        Seller Parent upon written notice to the Purchasing Parties, if the Purchasing
        Parties shall have materially breached or failed to perform any of their
        representations, warranties, covenants or agreements set forth in this
        Agreement, which breach or failure to perform would give rise to the failure
        of
        a condition set forth in Section 7.03 and is incapable of cure or has not
        been cured by the earlier of (i) the date which is twenty-five days after
        the date of delivery of notice of such breach by Seller Parent or (ii) the
        Outside Date;

       

      (e)        by
        Seller Parent upon written notice to the Purchasing Parties, if all the
        conditions to Closing set forth in Section 7.01 and Section 7.02 have
        been satisfied (or are capable of being satisfied), the Marketing Period
        shall
        have ended and Purchaser fails to pay the Closing Date Amount at the Closing
        because of a failure to receive the proceeds of one or more of the debt
        financings contemplated by the Financing Commitments or any Alternative
        Financing;

       

      (f)        by
        Seller Parent, upon written notice to the Purchasing Parties, in order to
        accept
        or enter into a transaction contemplated by a Parent Acquisition Proposal,
        provided that Seller Parent shall concurrently with its delivery of the written
        notice of termination have paid to Purchaser the Seller Parent Termination
        Fee
        pursuant to Section 8.05(c) (and any termination pursuant to this
        Section 8.01(f) shall not be effective unless and until such fee has been
        paid);

       

      (g)        by
        Seller Parent, upon written notice to the Purchasing Parties, in order to
        accept
        or enter into a Superior Transaction, provided each of the following conditions
        have been met:  (i) the Selling Parties have theretofore complied
        with their obligations under Section 5.13, (ii)(A) Seller Parent has
        given the Purchasing Parties at least three business days’ prior written notice
        (a “Notice of Superior Transaction”) of its intention to accept or enter
        into a Superior Transaction and of all the material terms and conditions
        of such
        Superior Transaction and (B) the Purchasing Parties do not within three
        business days of receipt by the Purchasing Parties of the Notice of Superior
        Transaction, make an offer that the Board of Directors of Seller Parent
        determines, in its good faith judgment (after consultation with its outside
        financial advisors) to be at least as favorable to Seller Parent as such
        Superior Transaction; provided, that during such three business day
        period, Seller Parent shall have negotiated in good faith with the Purchasing
        Parties (to the extent that the Purchasing Parties wish to negotiate) to
        enable
        the Purchasing Parties to make such an offer; and provided,
further, that, in the event of any amendment to the financial or
        other
        terms of such proposed Superior
        Transaction, Seller Parent shall deliver to the Purchasing Parties an additional
        written Notice of Superior Transaction, and the three business day period
        referenced above shall be extended for an additional two business days after
        the
        Purchasing Parties’ receipt of such additional Notice of Superior Transaction,
        (iii) the Board of Directors of Seller Parent, after taking into account
        any modifications to the terms hereof agreed to by the Purchasing Parties
        after
        receipt of such notice, continues to believe such  proposed
        transaction continues to constitute a Superior Transaction, and (iv) Seller
        Parent shall concurrently with its delivery of the written notice of termination
        have paid to Purchaser the Seller Parent Termination Fee pursuant to
        Section 8.05(c) (and any termination pursuant to this Section 8.01(g)
        shall not be effective unless and until such fee has been paid);
provided, however, that in no event shall the Closing occur during
        any of the three business day or two business day periods referred to in
        this
        Section 8.01(g); or

       

       

      
        
          
          

        

        
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      (h)        by
        the Purchasing Parties if an Effect that individually or in the aggregate
        has
        had or is reasonably likely to result in a Material Adverse Effect shall
        have
        occurred and is incapable of cure or has not been cured by the earlier of
        (i)
        the date which is twenty-five days after the date of delivery of notice of
        such
        Effect by the Purchasing Parties or (ii) the Outside Date.

       

      SECTION
        8.02.  Effect of Termination.  In the
        event of termination of this Agreement by either the Seller Parent or the
        Purchasing Parties as provided in Section 8.01, this Agreement shall
        forthwith become void and have no further force or effect, without any liability
        or obligation on the part of the Selling Parties, the Purchasing Parties
        or the
        Company, except that (i) the provisions of Section 2.24 (Brokers and
        Other Advisors), Section 3.05 (Brokers and Other Advisors),
        Section 4.07 (Brokers and Other Advisors), the last sentence of
        Section 5.05 (Confidentiality), Section 5.07 (Public Announcements),
        this Section 8.02 (Effect of Termination), Section 8.05 (Fees and
        Expenses) and Article X (General Provisions) shall survive such
        termination, and (ii) subject to the limitation on damages described in
        Section 8.06, any termination of this Agreement shall not relieve any party
        from
        any Liability for any willful breach by such party of its representations,
        warranties, covenants or agreements set forth in this Agreement.

       

      SECTION
        8.03.  Amendment.  This Agreement may
        not be amended except by an instrument in writing signed on behalf of each
        of
        the parties hereto.

       

      SECTION
        8.04.  Extension; Waiver.  At any
        time prior to the Closing Date, the parties may (a) extend the time for the
        performance of any of the obligations or other acts of the other parties,
        (b) waive any inaccuracies in the representations and warranties contained
        herein or in any document delivered pursuant hereto or (c) waive compliance
        with any of the agreements or conditions contained herein.  Any
        agreement on the part of a party to any such extension or waiver shall be
        valid
        only if set forth in an instrument in writing signed on behalf of such
        party.  Any such waiver shall not operate as a waiver of, or estoppel
        with respect to, any subsequent inaccuracy or noncompliance.  The
        failure or delay of any party to this Agreement to assert any of its rights
        under this Agreement or otherwise shall not constitute a waiver of such rights
        nor shall any single or partial exercise by any party to this Agreement of
        any
        of its rights under this Agreement preclude any other or further exercise
        of
        such rights or any other rights under this Agreement.

       

      
        SECTION
          8.05.  Fees and
          Expenses.  (a)  Except as set forth in
          Section 1.03(d) and 5.01(b), whether or not the Acquisition is consummated,
          all costs and expenses incurred by the Selling Parties or the Company and
          its
          Subsidiaries in connection with this Agreement, the Related Documents and
          the
          transactions contemplated hereby and thereby, including any audits, shall
          be
          paid by the Selling Parties and all costs and expenses incurred by the
          Purchasing Parties in connection with this Agreement, the Related Documents
          and
          the transactions contemplated hereby and thereby shall be paid by the Purchasing
          Parties, it being understood that the Purchasing Parties shall pay all
          of the
          filing fees for any filings pursuant to the HSR Act.

      

       

      
        
          
          

        

        
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      (b)        (i)
        In the event that this Agreement is terminated by Seller Parent pursuant
        to
        Section 8.01(d) or (e), as a result of a breach by the Purchasing Parties
        of
        their obligation to effect the Closing (including consummating the Acquisition
        and paying the Closing Date Amount) and (ii) the Purchasing Parties failed
        to effect the Closing (including consummating the Acquisition and paying
        the
        Closing Date Amount) because of a failure to receive the proceeds of one
        or more
        of the debt financings contemplated by the Financing Commitments or any
        Alternative Financing, then the Purchasing Parties shall pay to Seller Parent,
        within five business days after the first demand by Seller Parent therefor
        an
        amount equal to $20,600,000 (the “Purchaser Termination Fee”), in
        immediately available funds by wire transfer to an account designated in
        writing
        by Seller Parent.

       

      (c)        In
        the event that this Agreement is terminated by Seller Parent pursuant to
        Section 8.01(f) or (g), Seller Parent shall pay Purchaser the Seller Parent
        Termination Fee, in immediately available funds on the date of such termination,
        by wire transfer to an account designated by Purchaser.  The
“Seller Parent Termination Fee” shall be (i) $20,600,000 in the event
        that Seller Parent delivers a notice of its intent to terminate the Agreement
        pursuant to Section 8.01(f) or a Notice of Superior Transaction pursuant
        to
        Section 8.01(g) on or prior to the Initial Window Termination Date, and (ii)
        $22,700,000 in the event that Seller Parent delivers a notice of its intent
        to
        terminate the Agreement pursuant to Section 8.01(f) or a Notice of Superior
        Transaction pursuant to Section 8.01(g) following the Initial Window Termination
        Date.

       

      (d)        The
        parties acknowledge that the agreements contained in this Section 8.05 are
        an integral part of the transactions contemplated by this Agreement and that,
        without these agreements, neither party would have entered into this
        Agreement.  Accordingly, in the event Purchaser shall fail to pay the
        Purchaser Termination Fee when due or Seller Parent shall fail to pay the
        Seller
        Parent Termination Fee when due, and in order to obtain such payment, Seller
        Parent or Purchaser, as the case may be, commences a Proceeding which results
        in
        a judgment or similar award against the other party for such fee, then Purchaser
        or Seller Parent, as the case may be, shall pay to the other party such other
        party’s reasonable costs and expenses (including reasonable attorneys’ fees and
        expenses of enforcement) in connection with such suit.

       

      SECTION
        8.06.  Maximum
        Recovery.  Notwithstanding anything to the contrary in this
        Agreement, if the Purchasing Parties fail to consummate the Acquisition or
        are
        otherwise in breach of this Agreement, then the Liability of the Purchasing
        Parties and any of their respective former, current and future direct or
        indirect equity holders, controlling persons, stockholders, directors, officers,
        employees, agents, Affiliates, members, managers, general or limited partners
        or
        assignees with respect to any breach or alleged breach of any representation,
        warranty, covenant or agreement set forth in this Agreement and any claim,
        loss,
        cost, expenses, damage, Liability or obligation relating to this Agreement
        and
        the transactions contemplated hereby shall be limited to an amount equal
        to the
        amount of the Purchaser Termination Fee (it being understood that no person
        shall have any rights under the Equity
        Funding Letter (except as expressly provided therein)), whether at law or
        equity, in contract, in tort or otherwise (without prejudice to Seller Parent’s
        rights under the Limited Guarantee, dated as of the date hereof, by Purchaser
        Guarantor in favor of Seller Parent), except as expressly provided herein,
        including the right to specific performance in Section 10.09.  None of
        the Purchasing Parties or any of their respective former, current and future
        direct or indirect equity holders, controlling persons, stockholders, directors,
        officers, employees, agents, Affiliates, members, managers, general or limited
        partners or assignees shall have any further Liability or obligation relating
        to
        or arising out of the Acquisition, this Agreement, any Related Document or
        the
        other transactions contemplated hereby or thereby, except as expressly provided
        herein, including the right to specific performance in Section
        10.09.  Notwithstanding the foregoing, following the Closing the
        indemnification provisions of Article IX shall govern the parties’ rights to
        monetary damages and the foregoing limitations on damages shall not
        apply.  Each party hereto hereby agrees and acknowledges that it
        specifically intends that the other parties hereto will have the right to
        specifically enforce this Agreement under the circumstances expressly provided
        in Section 10.09.

       

       

      
        
          
          

        

        
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      ARTICLE
        IX

       

      Survival
        and Indemnification

       

      SECTION
        9.01.  Survival of Representations, Warranties and
        Covenants.  The representations and warranties and the covenants
        the performance of which is specified to occur on or prior to the Closing
        (the
“Pre-Closing Covenants”) of the parties contained in this Agreement,
        including the Company Disclosure Letter, shall survive the Closing and continue
        in full force and effect until 18 months after the Closing Date;
provided, however, that the representations and warranties
        contained in Section 2.12 (Environmental Matters), Section 2.13
        (Employees and Labor) and Section 2.14 (Employee Benefits Plans) shall
        survive the Closing and continue in full force and effect until the date
        that is
        30 months after the Closing Date and the representations and warranties
        contained in Sections 2.01 (Organization, Standing and Corporate Power),
        Section 2.02 (Subsidiaries), Section 2.03 (Capital Structure;
        Indebtedness), Section 2.04(a) (Authority), Section 2.24 (Brokers and
        Other Advisors), Section 3.05 (Brokers and Other Advisors),
        Section 3.06 (The Shares), Section 4.01 (Organization, Standing and
        Corporate Power), Section 4.02(a) (Authority), Section 4.07 (Brokers
        and Other Advisors) and Section 4.09 (No Distribution), shall survive the
        Closing indefinitely.  Any covenant or other agreement herein, any
        portion of the performance of which may, or is specified to, occur after
        the
        Closing, shall survive indefinitely or for such lesser period of time as
        may be
        specified therein or elsewhere in this Agreement.  Except as otherwise
        provided in this Article IX and in Article VI, no other
        representations, warranties or covenants of the Parties contained in this
        Agreement shall survive the Closing.

       

      SECTION
        9.02.  Indemnification by Seller Parent and
        Seller.  (a)  From and after the Closing each of the
        Selling Parties shall, on a joint and several basis, indemnify, defend and
        hold
        harmless the Purchasing Parties, their respective Affiliates and their and
        their
        Affiliates’ respective Representatives (“Purchaser Indemnified Persons”)
        from and against any and all losses, Liabilities, damages, claims, judgments,
        awards, settlements, demands, offsets and expenses (including interest,
        penalties, court costs, arbitration costs and fees, reasonable witness fees
        and
        reasonable fees and expenses of attorneys, investigators, expert witnesses,
        accountants and other professionals) (“Losses”) which any of them may
        suffer, incur or sustain, arising out of, attributable to or resulting
        from:

      
         

        (i)     any
          breach or inaccuracy of any of the representations and warranties contained
          in
          Article II and Article III of this Agreement or any failure of such
          representation or warranty to be true and correct (other than any representation
          or warranty contained in Section 2.15 (Tax Matters), which is the subject
          of the tax indemnification in Article VI), on the date of this Agreement or
          on and as of the Closing Date with the same effect as though made on such
          date
          or, in the case of any representation or warranty that speaks as of a specific
          date or time, on and as of such specific date or time;

         

      

       

      
        
          
          

        

        
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      (ii)    any
        breach by the Selling Parties or the Company of any of their covenants or
        other
        agreements contained in this Agreement; or

       

      (iii)   the
        class-action litigation captioned Tina Soualian v. Barneys New York, Inc.,
        Barney’s Inc. (case CV 07-558 JFW (FFMx)) pending in the United States District
        Court for the Central District of California or any other Proceeding arising
        under the Fair Credit Reporting Act, 15 U.S.C. § 1681 et seq., and 15
        U.S.C. § 1681c(g) of the Fair and Accurate Credit Transactions Act as a result
        of any acts or omissions or alleged acts or omissions occurring at or prior
        to
        the Closing.

       

      (b)        Notwithstanding
        anything herein to the contrary, the Selling Parties’ indemnification obligation
        under Section 9.02(a) shall be subject to each of the following
        limitations:

       

      (i)     there
        shall be no obligation to indemnify under Sections 9.02(a)(i) or (ii) for
        Losses arising out of, attributable to or resulting from any breach or
        inaccuracy of any representation or warranty contained in Article II or
        Article III of this Agreement, the failure of any such representation or
        warranty to be true and correct at and as of the times specified in
        Section 9.02(a)(i) or any breach by the Selling Parties or the Company of
        any of their Pre-Closing Covenants (other
        than
        any claim for willful breach, as to which such limitations shall not apply),
        unless the aggregate amount of all Losses for which the Selling Parties,
        but for
        this clause (i), would be liable under Sections 9.02(a)(i) and (ii) exceeds
        on a cumulative basis an amount equal to $8,250,000, and then only to the
        extent
        of such excess; provided, that the limitation on indemnification set
        forth in this Section 9.02(b)(i) shall not apply to any Losses arising out
        of, attributable to or resulting from any breach or inaccuracy or failure
        to be
        true and correct of the representations and warranties contained in
        Sections 2.01 (Organization, Standing and Corporate Power),
        Section 2.02 (Subsidiaries), Section 2.03 (Capital Structure;
        Indebtedness), Section 2.04(a) (Authority), Section 2.24 (Brokers and
        Other Advisors), Section 3.05 (Brokers and Other Advisors) and
        Section 3.06 (the Shares);

       

      (ii)    the
        obligation of the Selling Parties to indemnify under Sections 9.02(a)(i) or
        (ii) for Losses arising out of, attributable to or resulting from any breach
        or
        inaccuracy of any representation or warranty contained in Article II or
        Article III of this Agreement, the failure of any such representation or
        warranty to be true and correct at and as of the times specified in
        Section 9.02(a)(i) or any breach by the Selling Parties or the Company of
        any of their Pre-Closing Covenants (other than any claim for willful breach,
        as
        to which such limitations shall not apply) shall be capped at an aggregate
        amount of $100,000,000; provided, that the limitation on indemnification
        set forth in this Section 9.02(b)(ii) shall not apply to any Losses arising
        out of or relating to breach or inaccuracies of the representations and
        warranties contained in Sections 2.01 (Organization, Standing and Corporate
        Power), Section 2.02 (Subsidiaries), Section 2.03 (Capital Structure;
        Indebtedness), Section 2.04(a) (Authority), Section 2.24 (Brokers and
        Other Advisors), Section 3.05 (Brokers and Other Advisors) and
        Section 3.06 (The Shares); and

       

       

      
        
          
          

        

        
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      (iii)   the
        amount of indemnification in respect of any Loss for which the Selling Parties,
        but for this clause (iii), would be liable under Section 9.02(a) shall be
        reduced by the amount of any insurance proceeds, and any indemnity, contribution
        or other similar payment, paid to any Purchaser Indemnified Person by any
        third
        party with respect to such Loss, in each case net of any Losses incurred
        in
        collecting such proceeds or payments (provided, that this
        Section 9.02(b)(iii) shall not limit in any respect the right of any
        Purchaser Indemnified Person from pursuing indemnification from the Selling
        Parties hereunder or from recovering for any Loss not reduced to zero pursuant
        to this Section 9.02(b)(iii) and provided, further, that for
        the avoidance of doubt, any amounts for which a Purchaser Indemnified Person
        would ultimately be responsible, as a result of deductibles, self-insurance,
        indemnification of insurers, caps or similar items or arrangements, shall
        not
        reduce recovery of indemnification hereunder).

       

      SECTION
        9.03.  Indemnification by the Purchasing
        Parties.  (a)  From and after the Closing, the
        Purchasing Parties shall indemnify, defend and hold harmless each Selling
        Party,
        their respective Affiliates and their respective Representatives (“Seller
        Indemnified Persons”) from and against all Losses which any of them may
        suffer, incur or sustain, arising out of, attributable to or resulting
        from:

       

      (i)     any
        breach or inaccuracy of any of the representations and warranties contained
        in
        Article IV of this Agreement or any failure of such representation or
        warranty to be true and correct on the date of this Agreement or on and as
        of
        the Closing Date with the same effect as though made on such date or, in
        the
        case of any representation or warranty that speaks as of a specified date
        or
        time, on and as of such specified date or time; or

       

      (ii)    any
        breach by the Purchasing Parties of any of their covenants or other agreements
        contained in this Agreement.

       

      (b)        Notwithstanding
        anything herein to the contrary, the Purchasing Parties’ indemnification
        obligation under Section 9.03(a) shall be subject to each of the following
        limitations:

       

      (i)     there
        shall be no obligation to indemnify under Sections 9.03(a)(i) or (ii) for
        Losses arising out of, attributable to or resulting from any breach or
        inaccuracy of any representation or warranty contained in Article IV of
        this Agreement, the failure of any such representation or warranty to be
        true
        and correct at and as of the times specified in Section 9.03(a)(i) or any
        breach by the Purchasing Parties of any of their Pre-Closing Covenants (other
        than any claim for willful breach, as to which such limitations shall not
        apply), unless the aggregate amount of all Losses for which the Purchasing
        Parties, but for this clause (i), would be liable under Section 9.03(a)(i)
        exceeds on a cumulative basis an amount equal to $8,250,000, and then only
        to
        the extent of such excess; provided, that the limitation on
        indemnification set forth in this Section 9.03(b)(i) shall not apply to
        Losses arising out of, attributable to or resulting from any  breach
        or inaccuracy or failure to be true and correct of the representations and
        warranties contained in Section 4.01(Organization, Standing and Corporate
        Power), 4.02(a) (Authority), 4.07 (Brokers and Other Advisors) and
        Section 4.09 (No Distribution);

       

       

      
        
          
          

        

        
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      (ii)    the
        obligation of the Purchasing Parties to indemnify under Sections 9.03(a)(i)
        or (ii) for any Losses arising out of, attributable to or resulting from
        any
        breach or inaccuracy of any representation or warranty contained in
        Article IV of this Agreement, the failure of any such representation or
        warranty to be true and correct at and as of the times specified in
        Section 9.03(a)(i) or any breach by the Purchasing Parties of any of their
        Pre-Closing Covenants (other than any claim for willful breach, as to which
        such
        limitations shall not apply) shall be capped at an aggregate amount of
        $100,000,000; provided, that the limitation on indemnification set forth
        in this Section 9.03(b)(ii) shall not apply to any Losses arising out of or
        relating to breaches or inaccuracies of the representations and warranties
        contained in Section 4.01(Organization, Standing and Corporate Power),
        4.02(a) (Authority), Section 4.07 (Brokers and Other Advisors) and
        Section 4.09 (No Distribution); and

       

      (iii)   the
        amount of indemnification in respect of any Loss for which the Purchasing
        Parties, but for this clause (iii), would be liable under Section 9.03(a)
        shall be reduced by the amount of any insurance proceeds, and any indemnity,
        contribution or other similar payment, paid to any Seller Indemnified Person
        by
        any third party with respect to such Loss, in each case net of any Losses
        incurred in collecting such proceeds or payments
        (provided, that this Section 9.03(b)(iii) shall not
        limit in any respect the right of any Seller Indemnified Person from pursuing
        indemnification from the Purchasing Parties hereunder or from recovering
        for any
        Loss not reduced to zero pursuant to this Section 9.03(b)(iii) and
provided, further, that for the avoidance of doubt, any amounts
        for which a Seller Indemnified Person would ultimately be responsible, as
        a
        result of deductibles, self-insurance, indemnification of insurers, caps
        or
        similar items or arrangements, shall not reduce recovery of indemnification
        hereunder).

       

      SECTION
        9.04.  Notice of Claim;
        Defense.  (a)  If (i) any third party institutes or
        asserts any Proceeding that may give rise to Losses for which a person (an
        “Indemnifying Party”) may be liable for indemnification under
        Article VI or this Article IX (a “Third Party Claim”) or
        (ii) any person entitled to indemnification under this Agreement (an
“Indemnified Party”) shall have a claim to be indemnified by an
        Indemnifying Party that does not involve a Third Party Claim (a “Direct
        Claim”), then, in case of clause (i) or (ii), the Indemnified Party shall
        promptly send to the Indemnifying Party a written notice specifying the nature
        of such claim and, to the extent then known, the amount of all related
        Liabilities (a “Claim Notice”).  In the event an Indemnified
        Party fails to provide a timely and adequate Claim Notice, the Indemnifying
        Party shall be relieved of its indemnification obligations under Article VI
        or this Article IX as a result of such failure, only to the extent that it
        is prejudiced by such failure.

       

      (b)        In
        the event of a Third Party Claim, the Indemnifying Party may elect to retain
        counsel of its choice, reasonably acceptable to the relevant Indemnified
        Parties, to represent such Indemnified Parties in connection with such
        Proceeding and shall pay the fees, charges and disbursements of such counsel
        and
        other defense costs.  The Indemnified Parties may participate, at
        their own expense and through legal counsel of their choice, in any such
        Proceeding; provided that (i) the Indemnifying Party shall have the
        right to defend such Third Party Claim by all appropriate proceedings and,
        so
        long as it diligently pursues such defense, shall have full control of such
        defense and such proceedings, and (ii) the Indemnified Parties and their
        counsel shall cooperate with the Indemnifying Party and its counsel in
        connection with such Proceeding.  The Indemnifying Party shall not
        settle any such Proceeding without the relevant Indemnified Parties’ prior
        written consent (which shall not be unreasonably withheld or delayed), unless
        the terms of such settlement contain a complete and unconditional release
        of the
        Indemnified Party of any Liability related to such Proceeding.

       

       

      
        
          
          

        

        
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      (c)        Notwithstanding
        the foregoing, if (i) the Indemnifying Party elects not to assume control
        of such defense, (ii) both the Indemnifying Party and any Indemnified Party
        are parties to or subjects of such Proceeding and conflicts of interests
        exist
        between the Indemnifying Party and such Indemnified Party, or (iii) the
        Proceeding is reasonably likely to establish a precedential custom or practice
        that is materially detrimental to the continuing business interests of the
        Indemnified Party, then the Indemnified Parties may retain counsel reasonably
        acceptable to the Indemnifying Party in connection with such Proceeding and
        assume control of the defense in connection with such Proceeding and the
        fees,
        charges and disbursements of no more than one such counsel per jurisdiction
        selected by the Indemnified Parties shall be reimbursed by the Indemnifying
        Party.  Under no circumstances will the Indemnifying Party have any
        Liability in connection with any settlement of any Proceeding that is entered
        into without its prior written consent (which shall not be unreasonably withheld
        or delayed).

       

      (d)        From
        and after the delivery of a Claim Notice, at the reasonable request of the
        Indemnifying Party, each Indemnified Party shall grant the Indemnifying Party
        and its counsel, experts and representatives reasonable access, during normal
        business hours, to the books, records, personnel and properties of the
        Indemnified Party to the extent reasonably related to the Claim Notice at
        no
        cost to the Indemnifying Party (other than for reasonable out-of-pocket expenses
        of the Indemnified Parties).

       

      (e)        If
        there is a Proceeding at any time that concerns the business or operations
        of
        the Company and its Subsidiaries before the Closing Date and a Claim Notice
        is
        not submitted with respect to such Proceeding, then, at the reasonable request
        of any of the Purchasing Parties, on the one hand, or any of the Selling
        Parties
        or the Company, on the other hand, Seller Parent and Seller shall make those
        persons who at the relevant times were employees of the Selling Parties and
        the
        Company and its Subsidiaries, or Purchaser shall make those persons who at
        the
        relevant times were Employees, as the case may be, available to cooperate
        with
        the requesting party and its Affiliates (including by making such employees
        available to provide information, discovery and testimony), to the extent
        reasonable and without interrupting the business or operations of the party
        receiving such request and of its Affiliates, in each case solely for purposes
        of permitting the preparation for, defense of and participation in such
        litigation or Proceeding by any of the requesting party, its Affiliates or
        their
        respective agents, directors, officers and employees; provided that the
        requesting party shall reimburse all reasonable out-of-pocket expenses incurred
        by the party receiving such request, its Affiliates and their respective
        agents,
        directors, officers and employees in complying with this undertaking and,
        since
        such payments, if any, will not be made pursuant to an indemnity claim, such
        payments shall not be taken into account for purposes of the limitations
        set
        forth in Section 9.02(b) or 9.03(b).

       

      
        SECTION
          9.05.  Potential Contributors.  If an
          Indemnified Party receives any payment from an Indemnifying Party in respect
          of
          Losses and the Indemnified Party could have recovered all or a part of
          such
          Losses from a third party (including any insurer) based on the underlying
          claim
          or demand asserted against such Indemnifying Party, then such Indemnified
          Party
          shall transfer such of its rights to proceed against such third party as
          are
          necessary to permit such Indemnifying Party to recover from such third
          party the
          amount of such payment.

         

      

       

      
        
          
          

        

        
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      SECTION
        9.06.  Mitigation.  Any Indemnified
        Party and Indemnifying Party shall cooperate with respect to mitigating and
        resolving any claims or liability with respect to which an Indemnifying Party
        is
        obligated to indemnify an Indemnified Party hereunder, including by using
        reasonable best efforts to mitigate or resolve any such claim or
        liability.

       

      SECTION
        9.07.  Survival of Indemnity.  Any
        matter as to which a Claim Notice has been submitted in the manner provided
        by
        Section 9.04 within the applicable survival period specified in
        Section 9.01 that is pending or unresolved at the end of such applicable
        survival period shall continue to be covered by this Article IX,
        notwithstanding the expiration of the applicable survival period specified
        in
        Section 9.01 until such matter is finally terminated or otherwise resolved
        under this Agreement or by an arbitral tribunal or court of competent
        jurisdiction and any amounts payable hereunder are finally determined and
        paid.

       

      SECTION
        9.08.  No Duplication; Exclusive
        Remedy.  (a)  From and after the Closing, any Liability
        for indemnification hereunder shall be determined without duplication of
        recovery by reason of the state of facts giving rise to such Liability
        constituting a breach of more than one representation, warranty, covenant
        or
        agreement.

       

      (b)        Except
        as provided in Section 1.03, Article VI or Article IX, from and
        after the Closing, the exclusive remedy of the Parties in connection with
        this
        Agreement and the transactions contemplated hereby shall be as provided in
        Article VI or this Article IX; provided, that this exclusive
        remedy for damages does not preclude a party from bringing an action
        (i) for fraud, (ii) pursuant to Section 1.03 or (iii) for
        specific performance, injunctive relief or any other equitable remedy to
        require
        any other party to perform its obligations under this Agreement.

       

      ARTICLE
        X

       

      General
        Provisions

       

      SECTION
        10.01.  Notices.  Except for
        notices that are specifically required by the terms of this Agreement to
        be
        delivered orally, all notices, requests, claims, demands, waivers and other
        communications hereunder shall be in writing and shall be deemed given if
        delivered personally, facsimiled (which is confirmed) or sent by overnight
        courier (providing proof of delivery) to the parties at the following addresses
        (or at such other address for a party as shall be specified by like
        notice):

       

      if
        to the
        Selling Parties, to:

       

      Jones
        Apparel Group, Inc.

      1411
        Broadway

      New
        York,
        NY 10018

      Facsimile
        No.:  212-790-9988

      Attention:  Ira
        M. Dansky, Esq.

       

      with
        a
        copy to:

       

      Cravath,
        Swaine & Moore LLP

      Worldwide
        Plaza

      825
        Eighth Avenue

      New
        York,
        New York 10019

      Facsimile
        No.:  212-474-3700

      Attention:  Scott
        A. Barshay, Esq. and George F. Schoen, Esq.

       

      
         

        
          
            
            

          

          
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      if
        to the
        Company, to:

      

      Barneys
        New York, Inc.

      575
        Fifth
        Avenue

      New
        York,
        NY 10017

      Facsimile
        No.:  (212) 450-8480

      Attention:
        Marc Perlowitz

       

      with
        a
        copy to:

       

      Jones
        Apparel Group, Inc.

      1411
        Broadway

      New
        York,
        NY 10018

      Facsimile
        No.:  212-790-9988

      Attention:  Ira
        M. Dansky, Esq.

       

      Cravath,
        Swaine & Moore LLP

      Worldwide
        Plaza

      825
        Eighth Avenue

      New
        York,
        New York 10019

      Facsimile
        No.:  212-474-3700

      Attention:  Scott
        A. Barshay, Esq. and George F. Schoen, Esq.

       

      
        if
          to the
          Purchasing Parties, to:

         

        Istithmar
          PJSC

        Emirates
          Tower, Level 4

        Sheikh
          Zayed Road

        Dubai,
          United Arab Emirates

        Facsimile
          No.:  +971 4 390 3818

        Attention:  John
          Bruno Randazzo

         

        with
          a
          copy to:

         

        Cleary
          Gottlieb Steen & Hamilton LLP

        One
          Liberty Plaza

        New
          York,
          NY 10006

        Facsimile
          No.:  212-225-3999

        Attention:  Daniel
          S. Sternberg, Esq. and David I. Gottlieb, Esq.

         

         

         

      

      
        
          
          

        

        
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      SECTION
        10.02.  Definitions.  For purposes
        of this Agreement:

       

      (a)        an
        “Affiliate” of any person means another person that directly or
        indirectly, through one or more intermediaries, controls, is controlled by,
        or
        is under common control with, such first person.

       

      (b)        “business
        day” means a day except a Saturday, a Sunday or other day on which the SEC
        or banks in the City of New York are authorized or required by Law to be
        closed.

       

      (c)        “Knowledge
        of the Selling Parties” of any person that is not an individual means, with
        respect to any matter in question, the actual knowledge of the persons listed
        on
        Section 10.02(c) of the Disclosure Schedule, after due inquiry of the
        employee of the Company or its Subsidiaries with primary responsibility for
        the
        matter in question.

       

      (d)        “Lien”
        means any lien, encumbrance, mortgage, deed of trust, security interest,
        conditional sale or other title retention agreement, pledge, hypothecation,
        charge or set-off, whether arising by agreement, statute or
        otherwise.

       

      (e)        “Permitted
        Liens” means (i) Liens for Taxes that are not yet due and payable, that
        may thereafter be paid without interest or penalty, that have been adequately
        reserved for in accordance with GAAP, or for amounts being contested in good
        faith, (ii) Liens that secure obligations that are reflected as Liabilities
        in the balance sheet dated February 3, 2007 included in the Audited Financial
        Statements or Liens the existence of which is referred to in the notes to
        the
        Financial Statements, (iii) mechanics’, carriers’, workmen’s, repairmen’s,
        warehousemen’s or other like Liens arising or incurred in the ordinary course of
        business relating to obligations that are not delinquent or that are being
        contested in good faith by the Company or any of its Subsidiaries, (iv) any
        reciprocal easement or operating agreement identified in any Company Lease
        together with other easements, covenants, rights-of-way and other encumbrances
        or restrictions and other imperfections in title that, individually or in
        the
        aggregate, would not reasonably be expected to impair the value or continued
        use
        and operation of the assets to which they relate as currently conducted,
        (v) zoning, building and other similar codes and regulations,
        (vi) Liens that have been placed by any developer, landlord or other third
        party on the fee interest or ground leasehold interest in any real property
        in
        which the Company or any of its Subsidiaries has a leasehold or subleasehold
        interest and subordination or similar agreements relating thereto,
        (vii) Liens that do not and could not be reasonably expected to materially
        interfere with the conduct of the Company’s business as currently conducted and
        do not and could not be reasonably expected to adversely affect or impair
        in any
        material respect the use or value of the Company’s assets as currently
        operated.

       

      
        (f)        “person”
          means an individual, corporation, partnership, limited liability company,
          joint
          venture, joint stock company, Governmental Authority, association, trust,
          unincorporated organization or other entity.

         

        (g)        “Related
          Documents” means each other agreement, certificate or document executed and
          delivered in connection with this Agreement and the transactions contemplated
          hereby, including the Transition Services Agreement; provided that the
          term “Related Document” shall not include any agreement, certificate or document
          related to the Financing.

         

      

       

      
        
          
          

        

        
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      (h)        A
        “Subsidiary” of any person means another person of which an amount of the
        voting securities, other voting rights or voting partnership interests of
        which
        is sufficient to elect at least a majority of its board of directors or other
        governing body (or, if there are no such voting interests, more than 50%
        of the
        equity interests of which) is owned directly or indirectly by such first
        person.

       

      SECTION
        10.03.  Interpretation.  When a
        reference is made in this Agreement to an Article, a Section, Subsection,
        Exhibit or Schedule, such reference shall be to an Article of, a Section
        or
        Subsection of, or an Exhibit or Schedule to, this Agreement unless otherwise
        indicated.  The table of contents and headings contained in this
        Agreement are for reference purposes only and shall not affect in any way
        the
        meaning or interpretation of this Agreement.  Whenever the words
“include”, “includes” or “including” are used in this Agreement, they shall be
        deemed to be followed by the words “without limitation”.  The words
“hereof”, “hereto”, “hereby”, “herein” and “hereunder” and words of similar
        import when used in this Agreement shall refer to this Agreement as a whole
        and
        not to any particular provision of this Agreement.  The term “or” is
        not exclusive.  The word “extent” in the phrase “to the extent” shall
        mean the degree to which a subject or other thing extends, and such phrase
        shall
        not mean simply “if”.  All terms defined in this Agreement shall have
        the defined meanings when used in any certificate or other document made
        or
        delivered pursuant hereto unless otherwise defined therein.  The
        definitions contained in this Agreement are applicable to the singular as
        well
        as the plural forms of such terms and to the masculine as well as to the
        feminine and neuter genders of such term.  Any statute defined or
        referred to herein means such statute as from time to time amended, modified
        or
        supplemented, including by succession of comparable successor statutes and
        references to all attachments thereto and instruments incorporated
        therein.  References to a person are also to its permitted successors
        and assigns.

       

      SECTION
        10.04.  Counterparts.  This
        Agreement may be executed in one or more counterparts (including by electronic
        transmission), all of which shall be considered one and the same agreement
        and
        shall become effective when one or more counterparts have been signed by
        each of
        the parties and delivered to the other parties.

       

      
        SECTION
          10.05.  Entire Agreement; No Third-Party
          Beneficiaries.  This Agreement, together with the Confidentiality
          Agreement (a) constitutes the entire agreement, and supersedes all prior
          agreements, understandings and negotiations, both written and oral, among
          the
          parties with respect to the subject matter of this Agreement and the
          Confidentiality Agreement and (b) is not intended to confer upon any person
          other than the parties hereto (and their respective successors and assigns)
          or
          thereto (and their respective successors and assigns) any rights or
          remedies.  Nothing in this Agreement shall constitute or be construed
          as an amendment or modification of any Company Plan or of any employee
          benefit
          plan or arrangement of Purchaser or any of its Affiliates.

         

        SECTION
          10.06.  Governing Law.  This
          Agreement and any dispute arising out of, relating to or in connection
          with this
          Agreement shall be governed by, and construed in accordance with, the internal
          laws of the State of Delaware applicable to agreements made and to be performed
          entirely within such State, without giving effect to any choice or conflict
          of
          law provision or rule that would cause the application of the laws of any
          other
          jurisdiction.

         

         

      

       

      
        
          
          

        

        
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      SECTION
        10.07.  Assignment.  Neither this
        Agreement nor any of the rights, interests or obligations hereunder shall
        be
        assigned, in whole or in part, by operation of Law or otherwise by any of
        the
        parties without the written consent of the other parties; provided,
however, that (a) the Purchasing Parties may transfer any of their
        respective rights or obligations to any Affiliate of the Purchasing Parties
        and
        (b) the Purchasing Parties may make a collateral assignment of any proceeds
        receivable by them under this Agreement to any of their lenders, but no
        assignment pursuant to clauses (a) or (b) of this proviso shall relieve the
        Purchasing Parties of their obligations hereunder.  For the avoidance
        of doubt, no lender shall be entitled to make a claim under this Agreement
        or
        enforce any provision of this Agreement as a result of an assignment of proceeds
        pursuant to clause (b) of the foregoing sentence.  Subject to the
        preceding sentence, this Agreement will be binding upon, inure to the benefit
        of, and be enforceable by, the parties and their respective successors and
        assigns.

       

      SECTION
        10.08.  Jurisdiction; Waiver of Jury
        Trial.  (a) The Purchasing Parties irrevocably submit, and the
        Selling Parties and the Company irrevocably submit, to the exclusive
        jurisdiction of the Chancery Court of the State of Delaware, for the purposes
        of
        any suit, action or other Proceeding arising out of this Agreement or any
        transaction contemplated hereby (and each agrees that no such action, suit
        or
        Proceeding relating to this Agreement shall be brought by it or any of its
        Affiliates except in such court).  The Purchasing Parties further
        agree, and the Selling Parties and the Company further agree, that service
        of
        any process, summons, notice or document by U.S. registered mail to such
        person’s respective address set forth above (as modified as set forth above)
        shall be effective service of process for any action, suit or Proceeding
        in
        Delaware with respect to any matters to which it has submitted to jurisdiction
        as set forth above in the immediately preceding sentence.  The
        Purchasing Parties irrevocably and unconditionally waive (and agree not to
        plead
        or claim), and the Selling Parties and the Company irrevocably and
        unconditionally waive (and agree not to plead or claim), any objection to
        the
        laying of venue of any action, suit or Proceeding arising out of this Agreement
        or the transactions contemplated hereby in the Chancery Court of the State
        of
        Delaware or that any such action, suit or Proceeding brought in any such
        court
        has been brought in an inconvenient forum.  This Section 10.08(a)
        shall not apply to any dispute under Section 1.03 that is required to be
        decided by the Accounting Firm.

      
         

        (b)        EACH
          OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT
          PERMITTED
          BY APPLICABLE LAW, ANY AND ALL RIGHTS IT MAY HAVE TO TRIAL BY JURY IN ANY
          CLAIM,
          SUIT, ACTION OR OTHER PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF,
          UNDER OR
          RELATED TO THIS AGREEMENT.  EACH PARTY HERETO HEREBY
          (I) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY
          HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH PARTY WOULD NOT, IN
          THE EVENT
          OF ANY CLAIM, ACTION, SUIT OR PROCEEDING, SEEK TO ENFORCE THE FOREGOING
          WAIVER
          AND (II) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN
          INDUCED TO ENTER INTO THIS AGREEMENT, BY, AMONG OTHER THINGS, THE MUTUAL
          WAIVER
          AND CERTIFICATIONS IN THIS SECTION 10.08.

         

        SECTION
          10.09.  Specific Performance.  The
          parties agree that irreparable damage would occur in the event that any
          of the
          provisions of this Agreement were not performed in accordance with their
          specific terms or were otherwise breached and therefore that, prior to
          the
          termination of this Agreement pursuant to Article VIII, (a) the
          Purchasing Parties shall be entitled to an injunction or injunctions to
          prevent
          breaches of and to enforce specifically the performance of the terms hereof,
          in
          addition to any other remedy they may have at law or in equity and 

         

         

      

       

      
        
          
          

        

        
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      (b) the
        Selling Parties shall be entitled to an injunction or injunctions to prevent
        breaches of and to enforce specifically the Purchasing Parties’ performance of
        their obligations (x) under Sections 5.04, 5.06 and 5.13 hereof and
        (y) hereunder to consummate the Acquisition if, in the case of this
        clause (y), the conditions set forth in Sections 7.01 and 7.02 hereof
        shall be satisfied or waived by the Purchasing Parties (other than those
        conditions that by their nature are to be satisfied at the Closing Date,
        which
        shall be capable of being satisfied on the Closing Date) and the Financing
        Commitments or any Alternative Financing are available to be drawn down by
        the
        Purchasing Parties pursuant to the terms of the applicable agreements but
        are
        not so drawn down solely as a result of the Purchasing Parties refusing to
        do so
        in breach of this Agreement, in each case in addition to any other remedy
        they
        may have at law or in equity.  Notwithstanding the first sentence of
        this Section 10.09, the parties acknowledge that the Selling Parties shall
        not have the right to specifically enforce the provisions of this Agreement
        except to the extent set forth in clause (b) of the preceding
        sentence.  For the avoidance of doubt, whether or not a party is
        entitled to seek injunctions or specific performance pursuant to the provisions
        of the preceding sentence or otherwise, in no event will the Purchasing Parties
        be entitled to monetary damages in excess of an amount equal to the Purchaser
        Termination Fee, nor will the Selling Parties be entitled to monetary damages
        in
        excess of an amount equal to the Purchaser Termination Fee for losses or
        damages
        arising from or in connection with breaches of this Agreement by the Selling
        Parties, the Company, the Purchasing Parties or their respective Representatives
        and Affiliates, or arising from any other claim or cause of action under
        this
        Agreement and in no event shall the Purchasing Parties seek to recover any
        money
        damages in excess of such applicable amount from the Selling Parties, the
        Company or their Representatives and Affiliates in connection herewith or
        therewith, nor shall the Selling Parties or the Company seek to recover any
        money damages in excess of such applicable amount from the Purchasing Parties
        or
        their respective Representatives and Affiliates in connection herewith or
        therewith.  Notwithstanding the foregoing, following the Closing the
        indemnification provisions of Article IX shall govern the parties’ rights
        to monetary damages and Section 8.06 and the foregoing limitations on damages
        shall not apply.

      
         

        SECTION
          10.10.  Obligations of Seller
          Parent.  (a)  Seller Parent shall take any and all
          actions necessary to cause its Subsidiaries (including the Seller and,
          prior to
          the Closing, the Company and its Subsidiaries) to perform any action or
          refrain
          from taking any action required of such Subsidiaries under this Agreement
          or any
          Related Document.

         

        (b)        The
          parties hereto agree that for all purposes under this Agreement and any
          Related
          Document, any action required to be taken hereunder or thereunder by Seller
          may
          be taken by the Seller Parent and any action (including any waiver or consent
          to
          amendments) or omissions to act hereunder or thereunder by Seller Parent
          shall
          be binding upon and enforceable against the Seller.  In furtherance of
          this Section 10.10(b), the Purchasing Parties shall be entitled to rely
          exclusively upon any communications or writings given or executed by Seller
          Parent and shall not be liable in any manner whatsoever for any action
          taken or
          not taken in reliance upon the actions taken or not taken or communications
          given or executed by Seller Parent.  Any information, document,
          notice, funds or other item required to be delivered to any Subsidiary
          of Seller
          Parent (including Seller, the Company or its Subsidiaries) hereunder or
          under
          any Related Document, may be delivered to Seller Parent and such delivery
          to
          Seller Parent shall constitute delivery to such Affiliate for all purposes
          hereunder and thereunder.

         

      

       

      
        
          
          

        

        
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      SECTION
        10.11.  Severability.  If any term
        or other provision of this Agreement is invalid, illegal or incapable of
        being
        enforced by any rule of law or public policy, all other conditions and
        provisions of this Agreement shall nevertheless remain in full force and
        effect
        so long as the economic or legal substance of the transactions contemplated
        hereby is not affected in any manner materially adverse to any party
        hereto.  Upon such determination that any term or other provision is
        invalid, illegal or incapable of being enforced, the parties hereto shall
        negotiate in good faith to modify this Agreement so as to effect the original
        intent of the parties as closely as possible to the fullest extent permitted
        by
        applicable Law in an acceptable manner to the end that the transactions
        contemplated hereby are fulfilled to the extent possible.

       

       

      
        
          
          

        

        
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      IN
        WITNESS WHEREOF, the Selling Parties, the Company and the Purchasing Parties
        have caused this Agreement to be signed by their respective officers thereunto
        duly authorized, all as of the date first written above.

       

       

      
        	 	JONES
                APPAREL GROUP,
                INC.,	 
	 	 	 	 
	
                 

              	
                By:
                  

              	/s/ Peter
                Boneparth	 
	 	 	Peter
                Boneparth	 
	 	 	President
                and Chief Executive
                Officer	 
	 	 	 	 

      

    

     

    
       

      
        	 	JONES
                APPAREL GROUP HOLDINGS,
                INC.,	 
	 	 	 	 
	
                 

              	
                By:
                  

              	/s/ Ira
                M.
                Dansky	 
	 	 	
                Ira
                  M. Dansky

              	 
	 	 	President	 
	 	 	 	 

      

    

     

    
      
         

        
          	 	BARNEYS
                  NEW YORK, INC.,	 
	 	 	 	 
	
                   

                	
                  By:
                    

                	/s/ Howard
                  Socol	 
	 	 	
                  Howard
                    Socol

                	 
	 	 	President
                  and Chief Executive
                  Officer	 
	 	 	 	 

        

      

       

      
        
           

          
            	 	ISTITHMAR
                    BENTLEY HOLDING
                    CO.,	 
	 	 	 	 
	
                     

                  	
                    By:
                      

                  	/s/ David
                    Jackson	 
	 	 	
                    David
                      Jackson

                  	 
	 	 	Director	 
	 	 	 	 

          

        

         

        
          
             

            
              	 	ISTITHMAR
                      BENTLEY ACQUISITION
                      CO.,	 
	 	 	 	 
	
                       

                    	
                      By:
                        

                    	/s/ David
                      Jackson	 
	 	 	
                      David
                        Jackson

                    	 
	 	 	Director	 
	 	 	 	 

            

          

           

        

         

         
           

        

        68TARPON INDUSTRIES, INC.
                                2420 Wills Street
                              Marysville, MI 48040
                                Tel: 810 364-7421
                                Fax: 810 364 5610
                         Email: jbradshaw@tarponind.com

                               FINANCING AGREEMENT
                                  June 14, 2007

Issuer:             Tarpon Industries, Inc. ("Tarpon" or the "Company")

Investors:          "Accredited"  investors,  as defined in  Regulation D of the
                    Securities Act of 1933,  including High Capital Funding, LLC
                    ("HCF" or "Lead Investor").  HCF and the other investors are
                    referred to herein as the "Investors." The names, addresses,
                    and the  amount of Bridge  Notes (as  defined  below)  being
                    purchased by the  Investors  are set forth on the  signature
                    pages hereto. The Investors have read and agree to the terms
                    contained   in  Exhibit  A  to  this   Financing   Agreement
                    ("Financing Agreement").

Securities Offered: Up to $1,700,000, in up to 170 units of $10,000, in exchange
                    for  promissory   notes  ("Bridge   Notes")  and  securities
                    ("Bridge  Shares")  of  the  Company.  Each  Investor  shall
                    receive  one and one half  Bridge  Shares for each dollar of
                    principal amount of Bridge Notes purchased. Fractional units
                    below  the  $10,000   minimum  may  be  issued  upon  mutual
                    agreement of the Company and the Placement Agent (as defined
                    below).  Fractional units above the $10,000 minimum may also
                    be issued.

Maturity:           (a) The entire  principal amount of the Bridge Notes and all
                    accrued  and unpaid  interest  thereon is due and payable on
                    the  earlier  of (i)  December  17,  2007 or (ii) the  third
                    business day following the closing of an underwritten public
                    offering or a private  placement of equity securities by the
                    Company resulting in gross proceeds of $6 million or more (a
                    "Qualified  Offering")  (the  "Maturity  Date").  The Bridge
                    Notes  will be  prepayable  at any time  without  premium or
                    penalty.

                    (b)  Upon  the  written  request  of the  Company,  the Lead
                    Investor  shall have the right to extend the  Maturity  Date
                    for up to six one-month  periods  ("Extension  Periods(s)"),
                    upon  such  additional  terms  and  conditions  as it  shall
                    determine  in  its  sole  discretion.   The  final  extended
                    Maturity  Date is referred to herein as the "Final  Maturity
                    Date." The Lead  Investor  shall provide  written  notice to
                    each  Investor  within five business days of the granting of
                    an extension of the  Maturity  Date,  which notice shall set
                    forth the terms of such extension.

                                  Page 1 of 11

                           Tarpon Financing Agreement
                                 070615-Rev 11A

<PAGE>

                    (c) In the event the  maturity  date of the Bridge  Notes is
                    extended,  the Holders shall be entitled to receive 1/4th of
                    a share of Tarpon  restricted  common  stock  per  dollar of
                    Bridge  Notes  principal  for each month or part  thereof of
                    such Extension Period(s) ("Note Extension Shares").

                    (d) In the event the  principal  and  interest on the Bridge
                    Notes is not paid to the Holders  (as defined  herein) on or
                    before the third  business  day  following  the closing of a
                    Qualified  Offering,  the Company shall issue to the Holders
                    one quarter of a share of its common stock for each month or
                    part  thereof for each dollar of  principal  ("Late  Payment
                    Shares")  until the  earlier  of (i)  payment in full of all
                    such principal and interest; or (ii) the date upon which the
                    Conversion Shares (as defined herein) may be sold under Rule
                    144 without volume  restriction and are no longer subject to
                    an  underwriter's  lockup.  The Late Payment Shares shall be
                    issued  and  delivered  by the  fifth  business  day of each
                    month,  commencing  with the month  following the closing of
                    the Qualified Offering.

Interest:           (a) 12% per annum  during  the  initial  term of the  Bridge
                    Notes payable at the Maturity Date (as defined below);

                    (b) 13% per  annum  payable  monthly  during  any  Extension
                    Periods and at the Final Maturity Date;

                    (c) 18% per  annum  default  interest  rate  after the Final
                    Maturity Date, payable monthly; and

                    (d) 24% per annum in the event the Bridge Notes are not paid
                    in full by the  initial  Maturity  Date and Tarpon  fails to
                    obtain  shareholder  approval,  if  then  required  under  a
                    listing  agreement  with  a  securities  exchange,  for  the
                    issuance  of the Note  Extension  Shares,  the Late  Payment
                    Shares,  the Conversion Shares (as defined herein),  and the
                    Late Registration  Shares by the initial Maturity Date, such
                    24% rate of interest to be paid monthly until the earlier of
                    (i) payment in full of the Bridge Notes, or (ii) shareholder
                    approval for the issuance of the Note Extension Shares,  the
                    Late Payment Shares, and the Conversion Shares.

                    (e) 24% per annum in the event the Bridge Notes are not paid
                    in full by the third business day following the closing of a
                    Qualified  Offering , such 24% rate of  interest  to be paid
                    monthly until the payment in full of the Bridge Notes.

Purchase Price:     The  aggregate  purchase  price of each  Bridge Note and the
                    Bridge  Shares  related to such Note  shall be the  original
                    principal  amount of the Bridge Note. For federal income tax
                    purposes,  the Company  will  allocate  86% of the  purchase
                    price to the Bridge  Note and 14% of the  purchase  price to
                    the  Bridge  Shares.  The  portion  allocated  to the Bridge
                    Shares will be treated as "original issue discount" and will
                    be reportable as interest income over the term of the Bridge
                    Notes.

                                  Page 2 of 11

                           Tarpon Financing Agreement
                                 070615-Rev 11A

<PAGE>

Security:           Repayment  of the Bridge Notes shall be secured by a lien on
                    all tangible and intangible  assets of the Company,  and any
                    subsidiary  or  subsidiaries  formed prior to the payment in
                    full of the  Bridge  Notes,  to be  evidenced  by a Security
                    Agreement  from  the  Company.  In  the  event  the  Company
                    acquires  or forms a  subsidiary  or  subsidiaries  prior to
                    payment in full of the Bridge  Notes,  each such  subsidiary
                    shall execute a Security Agreement  satisfactory in form and
                    substance to the Lead Investor.  It is understood and agreed
                    that the liens  formed by the  Security  Agreement  shall be
                    junior to the  first  liens of  LaSalle  Bank  Midwest  N.A.
                    (f/k/a  Standard  Federal  Bank N.A).  and LaSalle  Business
                    Credit,   a  division   of  ABN  AMRO  Bank,   N.V.   Canada
                    Branch,(collectively  "LaSalle Bank") and the second lien of
                    Laurus  Master  Fund,  Ltd.  ("Laurus").   By  signing  this
                    Financing  Agreement each Investor agrees to be bound by the
                    terms of the subordination  agreements with LaSalle Bank and
                    Laurus in the form of Exhibits D-1 and D-2  attached  hereto
                    ("Subordination  Agreements").  The Company  represents  and
                    warrants  that it will  cause  each such  after-acquired  or
                    formed   subsidiary  to  become  a  party  to  the  Security
                    Agreement concurrently with such acquisition or formation.

Use of Proceeds     The proceeds of this financing  shall be used  substantially
                    as follows:

                    (a) up to $60,000 to the  American  Stock  Exchange  for the
                    payment of past due listing fees;

                    (b)  approximately  $160,000  for the  payment of health and
                    directors & officers liability insurance;

                    (c)  the  balance  for  the  purchase  of  steel  and  other
                    materials;

                    (d) no  proceeds  of  this  financing  shall  be used to pay
                    accrued and unpaid  compensation  to officers of the Company
                    or any of its subsidiaries;

                    The CEO and CFO shall provide a written  certification as to
                    the use of the proceeds of this  financing to the  Placement
                    Agent and the Lead Investor on a bi-weekly basis  commencing
                    on the second Friday following the First Closing (as defined
                    herein).

Document
Preparation
Securities:         In lieu of  reimbursing  HCF for the cost of  preparing  the
                    legal  documents  for this  transaction,  the Company  shall
                    issue to HCF 63,285  shares of its  restricted  common stock
                    ("Document  Preparation  Shares").  The Document Preparation
                    Shares  shall be in all  respects  identical  to the  Bridge
                    Shares with identical attendant rights.

                                  Page 3 of 11

                           Tarpon Financing Agreement
                                 070615-Rev 11A

<PAGE>

Placement Agent:    (a) Joseph Gunnar & Co, LLC (the "Placement Agent") has been
                    retained as  placement  agent on a best efforts  basis.  The
                    Placement  Agent  fee  shall  be 10% of the  gross  proceeds
                    payable at the First  Closing  and each  Additional  Closing
                    (both terms as defined  herein) and warrants equal to 10% of
                    the gross proceeds to the Company exercisable at the closing
                    bid price on the date of the First Closing per warrant for a
                    period  of 5  years  from  the  First  Closing  (as  defined
                    herein). The Company will also reimburse the Placement Agent
                    for up to $25,000 of its out-of-pocket  expenses incurred in
                    connection with this offering,  including  attorneys'  fees,
                    and  will  indemnify  the  Placement  Agent,  its  officers,
                    directors,   agents,   employees  and  controlling  persons,
                    against certain liabilities.

                    (b) The  Company  has  executed a letter of intent  with the
                    Placement  Agent  to act as the  lead  underwriter  for a $6
                    million public offering of common stock ("Public Offering").

Expenses:           Except as set forth in  "Document  Preparation  Shares"  and
                    "Placement  Agent" above,  the parties shall be  responsible
                    for their own expenses in connection with this transaction.

Conversion Right:   In the event there is no Public  Offering  of the  Company's
                    common stock by December 17,  2007,  the Holders  shall have
                    the right to convert the principal and/or unpaid interest of
                    the Bridge  Notes into shares of common  stock  ("Conversion
                    Shares")  until payment in full of all amounts due under the
                    Bridge Notes as follows:

                    (a) If the shares are trading on a U.S.  securities exchange
                    (including  the NASD OTC  Bulletin  Board),  the  conversion
                    price  shall be 80% of the  average of the closing bid price
                    of the Company's common stock as reported by such securities
                    exchange  or in the  over-the-counter  market  for the  five
                    trading  days  ending on the last  trading  day  immediately
                    preceding the giving of written  notice of conversion by any
                    Investor.

                    (b) If the shares are being quoted on the pink sheets or are
                    not trading on a U.S.  securities  exchange  (including  the
                    NASD OTC Bulletin  Board),  each Holder shall have the right
                    to  convert  such  Holder's  Note at a price of the lower of
                    $0.35 or the  average  closing  bid price on the pink sheets
                    for the five  trading  days  ending on the last  trading day
                    immediately  preceding  the  giving  of  written  notice  of
                    conversion by any Investor.

Shareholder
Approval:           To the extent that the rules of the American  Stock Exchange
                    may  require  the  approval  of the Tarpon  shareholders  to
                    enable the  issuance of any of the Bridge  Shares,  the Note
                    Extension Shares,  the Conversion  Shares,  the Late Payment
                    Shares,  or the Late Registration  Shares,  Tarpon agrees to
                    use its reasonable  best efforts to obtain such approval not
                    later than December 1, 2007.

                                  Page 4 of 11

                           Tarpon Financing Agreement
                                 070615-Rev 11A

<PAGE>

Transfer and
Assignment:         Investors  shall  have  the  right,  subject  to  applicable
                    securities laws, to transfer and/or assign the Bridge Notes,
                    the Bridge Shares,  the Conversion  Shares, the Late Payment
                    Shares,  the  Late  Registration  Shares,  and the  Document
                    Preparation Share. Any Investor and any permitted transferee
                    or assignee of any of the foregoing securities is a "Holder"
                    or collectively "Holders."

Escrow:             All subscriptions  shall be payable to the Company and shall
                    be held in a  non-interest-bearing  escrow  account  at U.S.
                    Bank, NA (the "Escrow  Agent") which shall be under the sole
                    control of the Placement Agent.

Closing Date(s):    (a) The First  Closing  shall be on the second  business day
                    following  the  receipt  by the  Escrow  Agent  of at  least
                    $500,000 from  Investors  subscribing  for the Bridge Notes,
                    together with written  instructions  signed by the Placement
                    Agent  and  the  Company  directed  to  the  escrow  account
                    administrator  stating that all Closing Conditions set forth
                    in this Financing Agreement have been satisfied or waived.

                    (b) Additional closings (the "Additional Closings") shall be
                    held on the second business day following the receipt by the
                    escrow account  administrator of written instructions signed
                    by the  Placement  Agent and the  Company  stating  that all
                    Closing  Conditions  set forth in this  Financing  Agreement
                    have been satisfied or waived.

                    (c) At the First Closing (and each  Additional  Closing,  as
                    provided  for below) the Escrow  Agent  shall  transfer  the
                    Closing  Proceeds,  to the Company,  and the Placement Agent
                    (and/or its counsel)  shall  deliver the Bridge Notes to the
                    Investors.  Additional  Closings may be held as agreed among
                    the  Company  and  the  Placement  Agent,  provided  that no
                    Additional  Closings  shall  be held  after  July  15,  2007
                    without  the written  consent of the  Placement  Agent.  The
                    First Closing and any Additional Closings may be referred to
                    as the "Closing" or "Closings."

                    (d) The Escrow Agent shall promptly  return to the Investors
                    all escrowed funds,  without interest thereon,  remaining on
                    deposit  after July 15,  2007 (which date may be extended in
                    writing by the Placement Agent for up to one-month).

Closing Conditions: The First Closing and each Additional  Closing is subject to
                    the receipt by the  Placement  Agent (and/or its counsel) of
                    the following:

                    (a) Executed Bridge Notes for the Closing Proceeds.

                    (b) A  written  undertaking  by the  CEO  and the CFO of the
                    Company,  together with a certified copy of a  corresponding
                    resolution of the Board of Directors, that if the listing of
                    the Bridge Shares and/or the Document Preparation Shares has
                    not been approved in writing by the American  Stock Exchange
                    ("AMEX")  on or  before  the 30th day  following  the  final
                    Closing,  within 5 business days of the receipt of a written
                    request from the Lead Investor, the Company will voluntarily
                    delist  from the AMEX and arrange  simultaneously  therewith
                    for the  quotation  of its  shares on the NASD OTC  Bulletin
                    Board.

                                  Page 5 of 11

                           Tarpon Financing Agreement
                                 070615-Rev 11A

<PAGE>

                    (c) An executed Security Agreement from the Company and each
                    of its subsidiaries;

                    (d) Executed Subordination Agreements;

                    (e)  Evidence of filing of a UCC-1 to perfect  the  security
                    interest created under the Security Agreement;

                    (f) Legal opinion in form and substance  satisfactory to the
                    Lead Investor,  in its sole  discretion,  as provided for in
                    "Jurisdiction/Choice of Law" below.

                    (g) In addition,  at the First  Closing,  the Company  shall
                    deliver a letter signed by each of its officers,  directors,
                    and 5% or greater shareholders,  committing to vote in favor
                    at any  shareholder's  meeting of issuing the maximum number
                    of  Bridge  Shares,  Note  Extension  Shares,  Late  Payment
                    Shares,  Conversion  Shares,  and Late Registration  Shares,
                    which  shareholders  meeting shall take place not later than
                    December 1, 2007.

Delivery of Shares: The Company shall issue and deliver the certificates for the
                    Bridge Shares and the Document Preparation Shares within two
                    business  days  following  the listing of such shares on the
                    AMEX or the delisting of the Company's shares from the AMEX.
                    The issuance and delivery of the certificates for the Bridge
                    Shares in excess of the initial  1,700,000 Bridge Shares may
                    require  shareholder  approval  before  such  shares  can be
                    listed  on  the  AMEX.  As  stated  above  in   "Shareholder
                    Approval," the Company has agreed to use its reasonable best
                    efforts to obtain such  shareholder  approval not later than
                    December 1, 2007.

Registration
Rights:             (a) Promptly upon  consummation of a Public Offering (but in
                    no event later than 30 days after the closing of such public
                    offering),   the  Company  shall  (i)  file  a  registration
                    statement  (the  "Registration  Statement")  relating to the
                    resale  of  the  Bridge  Shares,  the  Document  Preparation
                    Shares, the Note Extension Shares (if any), the Late Payment
                    Shares  (if any),  and the  Conversion  Shares (if any) (the
                    "Registrable  Securities"),  (ii)  use its  commercial  best
                    efforts  to  cause  the  Registration  Statement  to  become
                    effective  within 30 days after filing,  if the Registration
                    Statement is not reviewed by the staff of the Securities and
                    Exchange  Commission  ("Staff")  or  within  120 days  after
                    filing,  if the  Registration  Statement  is reviewed by the
                    Staff and (iii) use its commercial best efforts to cause the
                    Registration   Statement   (or   an   equivalent   successor
                    registration   statement   covering   the   resale  of  such
                    securities) to remain  effective  with a current  prospectus
                    available until all Registrable Securities may be sold under
                    Rule  144(k).  If any sale under  Rule 144  requires a legal
                    opinion, the cost thereof will be borne by the Company.

                                  Page 6 of 11

                           Tarpon Financing Agreement
                                 070615-Rev 11A

<PAGE>

                    (b) If the Company fails to satisfy the  requirements of (a)
                    above,  it shall pay, as liquidated  damages  related to any
                    such failure,  a 2% late  registration  fee (i.e., 2% of the
                    principal amount of the related Bridge Note(s)) per month or
                    part thereof that such failure continues ("Late Registration
                    Fee"). The Late Registration Fee shall be payable in cash or
                    common stock,  which shall be  registered  for resale in the
                    Registration   Statement   ("Late   Registration   Shares");
                    provided  however,  that no Late  Registration  Fee shall be
                    payable for any period  during which all of the  Registrable
                    Securities  may be  sold  under  Rule  144  (without  volume
                    limitation).  If less than all of the Registrable Securities
                    can be sold  under  Rule  144 as a  result  of the  Rule 144
                    volume limitation,  the 2% Late Registration Fee shall apply
                    only to the shares whose resale is so limited and not to the
                    shares that may be sold. The Late Registration  Shares shall
                    be valued at 80% of the average of the closing  price of the
                    common stock for the five trading  days  preceding  the date
                    the Late Registration Shares accrue to the Holders.

Lock-up:            In  the  event  the   Company   proposes   to   complete  an
                    underwritten   public  offering   subsequent  to  the  First
                    Closing,  each Investor will execute a lock-up agreement for
                    a  period  of not  more  than six  months  from  the  public
                    offering closing and containing such other terms, conditions
                    and   provisions   as  may  be  required  by  the   managing
                    underwriter of such offering; provided, however, in no event
                    shall the Investors be subject to a lock-up  agreement  that
                    is more  restrictive  than that  agreed to by the  Company's
                    officers,  directors,  and  holders  of 5% or  more  of  the
                    Company's common stock.

SEC Reporting:      The Company will use its commercial best efforts to maintain
                    the  registration of its common stock under Section 12(b) or
                    12(g)  of the  Securities  Exchange  Act of 1934  ("Exchange
                    Act"),  and will file all reports  required by the  Exchange
                    Act in a timely  manner  until the later of (i)  payment  in
                    full of the Bridge Notes, or (ii) the date upon which all of
                    the Bridge Shares,  Document  Preparation  Shares,  the Note
                    Extension  Shares,  the Late Payment Shares,  the Conversion
                    Shares,  and the Late Registration  Shares may be sold under
                    Rule 144(k).

Events of Default:  To  include  breach  of  any  of  the   representations  and
                    warranties  and  covenants  contained  in any of the Further
                    Documents (as defined below).

Jurisdiction/
Choice of Law:      All transaction documents shall be governed by and construed
                    under the laws of the states of  Delaware  or  Michigan  (as
                    indicated  below) as applied to agreements  entered into and
                    to be performed entirely within such states,  without giving
                    effect  to  principles  of  conflicts  of law.  The  parties
                    irrevocably  consent  to the  jurisdiction  and venue of the

                                  Page 7 of 11

                           Tarpon Financing Agreement
                                 070615-Rev 11A

<PAGE>
                    state and federal courts located in Wilmington,  Delaware in
                    connection with any action relating to this transaction.  At
                    or prior to the First Closing and any Additional Closing the
                    Investors shall receive a legal opinion from Company counsel
                    in form and substance  satisfactory  to the Lead Investor as
                    to (a) the due formation and existence of the Company (under
                    Michigan law), (b) the validity and  enforceability  of this
                    Financing  Agreement  (under  Delaware  law),  the  Security
                    Agreement  (under Delaware law) (c) the valid  authorization
                    to issue the Bridge Shares, the Document Preparation Shares,
                    the  Note  Extension   Shares,   the  Late  Payment  Shares,
                    Conversion Shares, and the Late Registration Shares (subject
                    to  shareholder  approval  - under  Michigan  law),  (d) the
                    issuance and validity of the Bridge Notes,  (under  Michigan
                    law),  and (e) the  computation of the holding period of the
                    Bridge  Shares,  the Note  Extension  Shares,  the  Document
                    Preparation  Shares, the Late Payment Shares, the Conversion
                    Shares,  and the Late  Registration  Shares  under  Rule 144
                    ("Legal  Opinion").  The Legal  Opinion shall be updated and
                    reissued at each Additional Closing.

Binding Agreement:  All parties  executing  this Financing  Agreement  including
                    Exhibit  A, shall be  legally  bound by the above  terms and
                    shall execute such further documents ("Further  Documents"),
                    including  without   limitation  the  form  of  Bridge  Note
                    (Exhibit B), the form of Security  Agreement (Exhibit C) and
                    the forms of the Subordination  Agreements  (Exhibit D), all
                    substantially in the forms attached hereto. If there are any
                    inconsistencies  between this Financing Agreement (exclusive
                    of  Exhibits  B through  D) and any such  Further  Documents
                    executed in connection with this  transaction,  the terms of
                    this  Financing   Agreement  shall  govern.  This  Financing
                    Agreement may be signed in two or more counterparts,  all of
                    which taken together shall constitute an original. Facsimile
                    signatures shall be deemed to be original signatures.

                                  Page 8 of 11

                           Tarpon Financing Agreement
                                 070615-Rev 11A

<PAGE>

Company
   TARPON INDUSTRIES, INC.

   By:/s/James W. Bradshaw                               Date:    June 18, 2007
      _____________________________________
              (signature)

   James W. Bradshaw, CEO

   Placement Agent
   JOSEPH GUNNAR & CO., LLC

   By: /s/Stephan A. Stein                               Date:    June 18, 2007
      _____________________________________
              (signature)

      Stephen A. Stein, Member
      _____________________________________
              (name and title)

    30 Broad Street

    New York, NY

    Tel:  212 [number]

    Fax: 212 [number]

    Email: sstein@jgunnar.com

    Attn: Stephan Stein

                                  Page 9 of 11

                           Tarpon Financing Agreement
                                 070615-Rev 11A

<PAGE>

                           Signature Page(s) Continued

Investor Name                     Date                      Amount of Investment

Lead Investor
High Capital Funding, LLC        June 18, 2007               $500,000

By:/s. Fred A. Brasch
---------------------------
          (signature)

Fred A. Brasch, CFO
__________________________________
          (name and title)

333 Sandy Springs Circle, Suite 230
Atlanta, GA 30328
Attn: Fred A. Brasch, CFO

Tel:  404 257-9150
Fax: 404 257-9125
Email: fredbrasch@mindspring.com
Tax ID#/SS#:    13-3921591

with copy to:

David A. Rapaport, EVP & GC
333 Sandy Springs Circle, Suite 230
Atlanta, GA 30328

Tel:  404 257-9150
Fax: 404 257-9125
Email: drapaport@highcapus.com

                                  Page 10 of 11

                           Tarpon Financing Agreement
                                 070615-Rev 11A

<PAGE>

                           Signature Page(s) Continued

Investor Name                        Date                   Amount of Investment

[Name]                               __________             $___________

_____________________________

[Street Address]
[City, State, ZIP]

Tel:
Fax:
Email:

                                  Page 11 of 11

                           Tarpon Financing Agreement
                                 070615-Rev 11A

<PAGE>

                                    EXHIBIT A

                           REPRESENTATIONS OF INVESTOR

     The Investor represents and warrants to the Company as follows:

     (1) Accredited  Investor Status.  The Investor is an "accredited  investor"
within the meaning of Securities and Exchange  Commission Rule 501 of Regulation
D.

     (2) Purchase Entirely for Own Account.  The Bridge Notes and Bridge Shares,
each as defined in the Financing Agreement  (collectively,  the "Bridge Units"),
to be  received  by the  Investor  will  be  acquired  for  investment  for  the
Investor's  own account,  not as a nominee or agent,  and not with a view to the
resale or distribution of any part thereof, and that the Investor has no present
intention of selling,  granting any participation in, or otherwise  distributing
the same. The Investor  further  represents  that it does not have any contract,
undertaking, agreement or arrangement with any person to sell, transfer or grant
participations to such person or to any third person, with respect to the Bridge
Units.

     (3) Disclosure of Information. The Investor represents that it has received
the disclosure it believes relevant and necessary to its investment decision and
has had an  opportunity  to ask questions  and receive  answers from the Company
regarding  the  terms  and  conditions  of this  transaction  and the  business,
properties,  prospects  and  financial  condition  of the  Company and to obtain
additional  information (to the extent the Company possessed such information or
could acquire it without  unreasonable effort or expense) and/or conduct its own
independent  investigation  necessary to verify the accuracy of any  information
furnished to the Investor or to which the Investor had access.  I have  received
no  representation  or  warranty  from  the  Company  or any  of  its  officers,
directors,  employees or agents in respect of my investment in the Company and I
have received no  information  (written or otherwise)  from them relating to the
Company or its business other than as set forth in the Offering Documents.  I am
not  participating  in the  offer  as a  result  of or  subsequent  to:  (i) any
advertisement,   article,   notice  or  other  communication  published  in  any
newspaper,  magazine or similar media or broadcast  over  television or radio or
(ii) any seminar or meeting  whose  attendees  have been  invited by any general
solicitation or general advertising.

     (4)  Investment  Experience.  The Investor (i) is experienced in evaluating
and  investing in private  placement  transactions  in  securities  of companies
similar to the Company and has such  knowledge  and  experience  in financial or
business  matters that it is capable of  evaluating  the merits and risks of the
investment in the Units and (ii) acknowledges that it can bear the economic risk
of its  investment,  including  the loss of the entire  investment.  I have been
urged to seek independent  advice from my professional  advisors relating to the
suitability  of an  investment  in the  Company in view of my overall  financial
needs and with respect to the legal and tax implications of such investment.

     (5) Restricted  Securities.  The Investor understands that the Bridge Units
are being sold pursuant to exemptions  from  registration  under Section 4(2) of
the  Securities Act of 1933, as amended (the  "Securities  Act") and Rule 506 of
Regulation D  promulgated  thereunder.  The Investor also  understands  that the
Bridge Units and, with certain limited  exceptions,  any securities  issuable on
exercise  or  conversion  thereof  may not be  resold  by the  Investor  without
registration under the Securities Act or an exemption therefrom, and that in the
absence of an effective  registration  statement covering the Bridge Units or an
available exemption from registration under the Securities Act, the Bridge Units
may be restricted from resale in a transaction to which United States securities
laws apply for an indefinite period of time.

                                      A-1
<PAGE>

     (6) Illiquid  Investment.  The Investor  understands that no market for the
Bridge Units exists and no such market may ever exist.

     (7) Residence.  The Investor resides,  or its office primarily  responsible
for the  purchase of the Bridge Units is located,  at the address  listed on the
signature page.

     (8)  Brokers  or  Finders.  All  negotiations  on the part of the  Investor
relative to the  transactions  contemplated  hereby have been  carried on by the
Investor  without the  intervention of any person or as the result of any act of
the  Investor  in such manner as to give rise to any valid claim for a brokerage
commission,  finder's fee, or other like payment. The foregoing notwithstanding,
the Investor acknowledges that Joseph Gunnar & Co., LLC has been retained by the
Company to serve as placement agent in this offering, as in such capacity,  will
be paid a  commission  equal to 10% of the gross  proceeds  payable at the First
Closing and each Additional  Closing (as such terms are defined in the Financing
Agreement)  and  warrants  equal to 10% of the gross  proceeds  to the  Company,
exercisable  at the  closing  bid  price on the date of the  First  Closing  per
warrant,  for a period of 5 years from the First Closing.  The Company will also
reimburse the Placement  Agent for up to $25,000 of its  out-of-pocket  expenses
(including attorneys' fees) incurred in connection with the offering.

     (9) Reliance. The Investor understands that this agreement is made with the
Investor in reliance upon the Investor's  representations to the Company, as set
forth above.

                                      A-2
<PAGE>

                                    EXHIBIT B

                         FORM OF SECURED PROMISSORY NOTE

THIS NOTE HAS NOT BEEN  REGISTERED  UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES  ACT"), NOR UNDER ANY STATE SECURITIES LAW AND MAY NOT BE SOLD,
PLEDGED,  OFFERED FOR SALE,  ASSIGNED OR  TRANSFERRED  UNLESS (A) A REGISTRATION
STATEMENT WITH RESPECT  THERETO IS EFFECTIVE  UNDER THE SECURITIES  ACT, AND ANY
APPLICABLE  STATE  SECURITIES LAW  REQUIREMENTS  HAVE BEEN MET OR (B) EXEMPTIONS
FROM THE REGISTRATION REQUIREMENTS UNDER THE SECURITIES ACT AND THE REGISTRATION
OR QUALIFICATION REQUIREMENTS OF APPLICABLE STATE SECURITIES LAWS ARE AVAILABLE.

THE INDEBTEDNESS  EVIDENCED BY THE NOTE AND THE RIGHTS OF THE HOLDER OF THE NOTE
IS SUBORDINATED TO INTERESTS AND RIGHTS OF LASALLE BANK MIDWEST N.A. ("LASALLE")
AND LASALLE  BUSINESS  CREDIT,  A DIVISION OF ABN AMRO BANK N.V.,  CANADA BRANCH
("ABN AMRO") PURSUANT TO THE TERMS OF A  SUBORDINATION  AGREEMENT DATED JUNE 14,
2007 AMONG LASALLE,  ABN AMRO, HIGH CAPITAL FUNDING, LLC AND THE OTHER INVESTORS
PARTY THERETO.

                             TARPON INDUSTRIES, INC.
                             SECURED PROMISSORY NOTE
                                                                  June____, 2007

FOR  VALUE  RECEIVED,   TARPON   INDUSTRIES,   INC.,  a  Michigan   corporation,
("Borrower")       promises      to      pay      to      the      order      of
_________________________________________  ("Lender")  the  principal  amount of
___________________________ Dollars ($______________), together with interest on
the unpaid principal amount as set forth herein.

This  secured  promissory  note (the "Bridge  Note") is issued  pursuant to that
certain Financing  Agreement,  dated as of June 14, 2007,  executed by Borrower,
Joseph Gunnar & Co. LLC., a Delaware  limited  liability  company,  as Placement
Agent, and High Capital Funding,  LLC, a Delaware limited liability company,  as
Lead Investor  (the  "Financing  Agreement"),  with  Lender's  signature  either
affixed thereon or incorporated by reference as evidenced by Lender's  signature
on the accompanying  Subscription Agreement.  This Bridge Note is subject to the
terms and conditions of the Financing  Agreement.  To the extent that any of the
terms specifically set forth in the Financing Agreement is inconsistent with the
provisions  of this  Bridge Note  specifically  relating  to such  matters,  the
Financing  Agreement shall govern with respect to such  inconsistencies.  To the
extent  relevant to this Bridge Note,  the terms of the Financing  Agreement are
incorporated  herein by reference as though fully set forth herein.  This Bridge
Note is one of a series of Bridge  Notes,  aggregating  up to One Million  Seven
Hundred  Thousand  Dollars  ($1,700,000.00)  in principal amount of Bridge Notes
being offered and sold pursuant to the Financing  Agreement.  Capitalized  terms
used herein and not otherwise  defined have the meanings ascribed to them in the
Financing Agreement.

                                      B-1
<PAGE>

1.   Maturity.

     (a) The entire  principal  amount of this Bridge  Notes and all accrued and
     unpaid  interest  thereon is due and payable on the earlier of (i) December
     17,  2007 or (ii) the  third  business  day  following  the  closing  of an
     underwritten public offering or a private placement of equity securities by
     the Company resulting in gross proceeds of $6 million or more (a "Qualified
     Offering") (the "Maturity Date").

     (b) The Placement  Agent,  upon the written  request of the Company,  shall
     have the right to extend the Maturity Date for up to six one-month  periods
     ("Extension  Periods(s)"),  upon such additional terms and conditions as it
     shall determine in its sole discretion. The final extended Maturity Date is
     referred to herein as the "Final  Maturity Date." The Placement Agent shall
     provide  written notice to Lender within five business days of the granting
     of an  extension  of the  Maturity  Date,  which notice shall set forth the
     terms of such extension.

     (c) In the event the maturity  date of the Bridge  Notes is  extended,  the
     Lender shall be entitled to receive  1/6th of a share of Tarpon  restricted
     common stock per dollar of principal for each month or part thereof of such
     extension period ("Extension Shares").

     (d) In the event the principal and interest on the Bridge Notes is not paid
     to the Holders on or before the third business day following the closing of
     a Qualified Offering, the Company shall issue to the Holders one quarter of
     a share of its common  stock for each month or part thereof for each dollar
     of principal  ("Late  Payment  Shares") until the earlier of (i) payment in
     full of all such  principal and  interest;  or (ii) the date upon which the
     Conversion Shares may be sold under Rule 144 without volume restriction and
     are no longer subject to an underwriter's  lockup.  The Late Payment Shares
     shall be issued and  delivered  by the fifth  business  day of each  month,
     commencing with the month following the closing of the Qualified Offering.

2. Interest.

     (a) 12% per annum (based on a 360 day year) during the initial term of this
     Bridge Note payable at the Maturity Date.

     (b) 13% per annum  (based on a 360 day year)  payable  monthly  during  any
     Extended Term, and at the Final Maturity Date;

     (c) 18% per annum (based on a 360 day year) default interest rate after the
     Final Maturity Date, payable monthly; and

     (d) 24% per annum  (based on a 360 day year) in the event this  Bridge Note
     is not  paid in full by the  Maturity  Date  and  Tarpon  fails  to  obtain
     shareholder  approval for the issuance of the Note Extension Shares and the
     Conversion  Shares) by the Maturity  Date,  such 24% rate of interest to be
     paid monthly  until the earlier of (i) payment in full of this Bridge Note,
     or (ii) shareholder  approval for the issuance of the Note Extension Shares
     and the Conversion Shares.

                                       B-2
<PAGE>

     (e) 24% per annum in the event the Bridge Notes are not paid in full by the
     third business day following the closing of a Qualified Offering,  such 24%
     rate of interest to be paid monthly until the payment in full of the Bridge
     Notes.

3. Prepayment. Borrower may prepay any or all amounts due under this Bridge Note
at any time without  penalty.  Any partial  prepayment shall be applied first to
interest and the remaining balance of such payment, if any, to principal.

4. Method of Payment.  Any payment of principal or interest  hereunder  shall be
made by certified or bank  cashier's  check unless Holder has provided  Borrower
with appropriate wire instructions, in which event, the payment shall be made by
wire transfer of "same day" funds. For the purpose of any interest  calculation,
payment  shall be deemed  made when the check is sent by  overnight  delivery or
when the wire is sent. Any partial payment shall be applied first to accrued and
unpaid interest and thereafter to a reduction of principal. If this Bridge Note,
or any payment  hereunder,  falls due on a  Saturday,  Sunday or a day that is a
public  holiday in the State of California,  any payment due hereunder  shall be
made on the next  succeeding  business  day and such  additional  time  shall be
included in the computation of any interest payable hereunder.

5.  Security.  Repayment  of this  Bridge Note shall be secured by a lien on all
tangible and intangible assets of the Borrower and its consolidated subsidiaries
as described  in that  certain  Security  Agreement  executed  contemporaneously
herewith.

6. Conditional Right to Convert. In the event there is no Public Offering of the
Company's common stock by December 17, 2007, the Holder shall have the right to
convert the principal and/or unpaid interest of this Bridge Note into shares of
common stock ("Conversion Shares") until payment in full of all amounts due
under this Bridge Note as follows:

     (a) If the shares are trading on a U.S.  securities exchange (including the
     NASD OTC Bulleting Board), the conversion price shall be 80% of the average
     of the closing bid price of the Company's  common stock as reported by such
     securities exchange or in the over-the-counter  market for the five trading
     days ending on the last  trading day  immediately  preceding  the giving of
     written notice of conversion by any Holder.

     (b) If the shares are being quoted on the pink sheets or are not trading on
     a U.S.  securities  exchange  (including the NASD OTC Bulletin Board), each
     Holder shall have the right to convert such Holder's Note at a price of the
     lower of $0.35 or the average  closing bid price on the pink sheets for the
     five trading days ending on the last trading day immediately  preceding the
     giving of written notice of conversion by any Holder.

provided,  however,  that no  fractional  shares  will be issued and  fractional
shares will be rounded down to the nearest full share.  Upon receipt by Borrower
of Holder's  notice of each such election,  the Bridge Note shall  represent the
right to receive the Common Stock into which that portion of the Bridge Note has
been converted, and Borrower's right and obligation to repay that portion of the
Bridge Note shall be extinguished.

                                       B-3
<PAGE>

7.  Anti  Dilution  Adjustments.  The  number  and kind of  securities  or other
property into which this Bridge Note may become  convertible shall be subject to
adjustment as follows:

     (a) If a split or a reverse  split shall have  occurred with respect to the
     Common Stock, the conversion rate shall be appropriately  adjusted to cause
     the Holder to receive, upon conversion,  a number of shares of Common Stock
     representing  the same percentage of the equity of the Company to which the
     Holder  would have been  entitled on such  conversion  if the split had not
     occurred.

     (b) If a  dividend  or  other  distribution  shall  be made in favor of the
     Common Stock, appropriate adjustment shall be made so that, upon conversion
     of the Bridge  Note,  the Holder shall  receive,  in addition to the Common
     Stock  otherwise  obtainable on such  conversion,  the cash,  securities or
     other  property  that it would have  received  had the Bridge  Note been so
     converted immediately prior to the split, dividend or distribution.

     (c) If the Common Stock shall,  as the result of a merger or otherwise,  be
     converted  into  the  right  to  receive  other   securities  or  property,
     appropriate adjustment shall be made so that, upon conversion of the Bridge
     Note,  the Holder shall  receive,  in lieu of Common Stock,  the securities
     and/or  property  that it would have  received as a result of the merger or
     other such  transaction  had the Bridge Note been so converted  immediately
     prior to the record date therefor.

8.  Default.  In the event of an  occurrence  of any event of default  specified
below, the principal of, and all accrued and unpaid interest on, the Bridge Note
shall become  immediately due and payable  without  notice,  except as specified
below:

     (a) Borrower  fails to make any payment  hereunder  when due, which failure
     has not been cured within Ten (10) days following such due date.

     (b) Any defined  event of default  occurs under any contract or  instrument
     pursuant to which Borrower has incurred any liability for borrowed money in
     excess  of One  Hundred  Thousand  Dollars  ($100,000.00),  which  event of
     default has not been waived  within Five (5) business days  following  such
     occurrence,  and which event of default is reasonably  likely to materially
     affect the Company's business, and which results in the acceleration.

     (c)  Borrower  files a petition to take  advantage of any  insolvency  act;
     makes  an  assignment  for  the  benefit  of  its  creditors;  commences  a
     proceeding  for the  appointment  of a  receiver,  trustee,  liquidator  or
     conservator of itself of a whole or any  substantial  part of its property;
     files a petition or answer seeking reorganization or arrangement or similar
     relief under the federal  bankruptcy  laws or any other  applicable  law or
     statute of the United States of America or any state.

     (d) A court of competent  jurisdiction enters an order,  judgment or decree
     appointing a custodian,  receiver,  trustee,  liquidator or  conservator of
     Borrower  or of the whole or any  substantial  part of its  properties,  or
     approves  a petition  filed  against  Borrower  seeking  reorganization  or
     arrangement  or similar  relief  under the federal  bankruptcy  laws or any
     other  applicable  law or statute  of the  Untied  States of America or any
     state;  or if, under the  provisions of any other law for the relief or aid
     of debtors, a court of competent jurisdiction assumes custody or control of
     Borrower  or of the whole or any  substantial  part of its  properties;  or
     there is commenced against Borrower any proceeding for any of the foregoing
     relief and such proceeding or petition remains  undismissed for a period of
     Thirty (30) days;  or if Borrower  by any act  indicates  its consent to or
     approval of any such proceeding or petition.

                                       B-4
<PAGE>

     (e) If (i) any judgment  remaining  unpaid,  unstayed or undismissed  for a
     period of Sixty (60) days is rendered  against  Borrower which by itself or
     together with all other such judgments  rendered against Borrower remaining
     unpaid,  unstayed  or  undismissed  for a period of Sixty (60) days,  is in
     excess of One Hundred Thousand Dollars ($100,000.00),  or (ii) there is any
     attachment or execution against Borrower's properties remaining unstayed or
     undismissed  for a period of Sixty  (60) days  which by itself or  together
     with all other  attachments and executions  against  Borrower's  properties
     remaining unstayed or undismissed for a period of Sixty (60) days is for an
     amount in excess of One Hundred Thousand Dollars ($100,000.00).

9.  Cumulative  Remedies.  The  remedies  of Lender as provided  herein,  in the
Security Agreement and in the Security and Pledge Agreement,  or any one or more
of them, or in law or in equity, shall be cumulative and concurrent,  and may be
pursued  singularly,  successively or together at Lender's sole discretion,  and
may be exercised as often as occasion therefore shall occur.

10.  Successors and Assigns.  The Bridge Note is transferable  and assignable by
Lender or any subsequent  permitted assignee subject to the requirement that any
such  assignment  or  transfer  be, in the  opinion of  Borrower's  counsel,  in
compliance with applicable federal and state securities laws. The assignee shall
be referred to herein as a "Holder." All covenants,  agreements and undertakings
in the Bridge Note by or on behalf of any of the parties shall bind and inure to
the benefit of the respective  successors and assigns of the parties  whether so
expressed or not.

11. Notices.  Any and all notices,  requests,  consents and demands  required or
permitted  to be given  hereunder  shall be in writing and shall be deemed given
and  received  (i) upon  personal  delivery,  (ii) upon the first  business  day
following the receipt of confirmation  of facsimile  transmission to the telefax
number or email,  the  receipt  of which is  confirmed  by return  email  and/or
telephonically,  as indicated below,  (iii) upon delivery by overnight  courier,
prepaid and  delivered  on a business  day; or (iv) upon the third  business day
after  deposit in the United  States  mail,  by certified  or  registered  mail,
postage prepaid and addressed as follows:

    To Lender: [to the address and facsimile provided in Subscription  Agreement
               between the Lender and the Borrower  executed in connection  with
               the purchase and sale of this Bridge Note]

    To Borrower:  Tarpon Industries, Inc.
                  2420 Wills Street
                  Marysville, MI 48040
                  Attn:  James W. Bradshaw
                  Fax:    810 364-5610
                  E-mail: jbradshaw@tarponind.com

                                       B-5
<PAGE>

Either party may change by notice the address to which notices to that party are
to be addressed.

12.  Waivers/Forebearance/Amendment.  Borrower  hereby  waives  presentment  for
payment, demand, protest and notice of protest for nonpayment of the Bridge Note
and  consents to any  extension  or  postponement  of the time of payment or any
other indulgence.  Lender shall not be deemed,  by any act or omission,  to have
waived any of its rights or remedies  hereunder unless such waiver is in writing
and signed by Lender and then only to the extent  specifically set forth in such
writing.  A waiver  with  reference  to one  event  shall  not be  construed  as
continuing  or as a bar to or waiver  of any right or remedy as to a  subsequent
event.  No delay or omission of Lender to exercise any right,  whether before or
after a default hereunder,  shall impair any such right or shall be construed to
be a waiver of any right or default, and the acceptance at any time by Lender of
any  past-due  amount shall not be deemed to be a waiver of the right to require
prompt payment when due of any other amounts then or thereafter due and payable.
Notwithstanding  the foregoing,  any provision of this Bridge Note may be waived
or amended  upon the  written  consent of the  Borrower  and the  consent of the
Holder of this Bridge  Note.  The Bridge Note may only be amended or modified by
written agreement signed by Borrower and Holder.

13.  Expenses.  In  any  action  for  breach  of  this  Bridge  Note,  including
nonpayment,  the  prevailing  party in any such  dispute  shall be  entitled  to
recover all reasonable  costs and attorney fees incurred in connection with such
action.  In  addition,  Borrower  shall be entitled  to recover  from Lender all
reasonable costs of collection,  including  without  limitation,  legal fees and
expenses incurred in any bankruptcy and/or state insolvency proceeding.

14. Choice of Law. The Bridge Note shall be construed and enforced in accordance
with,  and the rights of the parties shall be governed by, the laws of the State
of Delaware.  The parties agree that venue for any suit,  action,  proceeding or
litigation  arising  out of or in  relation  to this  Bridge Note will be in any
federal  or  state  court  in   Wilmington,   Delaware   having  subject  matter
jurisdiction, and the parties hereby submit to the jurisdiction of that Court.

     WITH RESPECT TO ANY CLAIM OR ACTION  ARISING  UNDER THIS BRIDGE NOTE,  EACH
PARTY HEREBY (A)  IRREVOCABLY  SUBMITS TO THE  JURISDICTION OF THE COURTS OF THE
STATE OF DELAWARE AND THE UNITED  STATES  DISTRICT  COURT LOCATED IN THE CITY OF
WILMINGTON, STATE OF DELAWARE, AND (B) IRREVOCABLY WAIVES ANY OBJECTION WHICH IT
MAY HAVE AT ANY TIME TO THE  LAYING OF VENUE OF ANY SUIT,  ACTION OR  PROCEEDING
ARISING  OUT OF OR  RELATING  TO THIS  BRIDGE  NOTE  BROUGHT IN ANY SUCH  COURT,
IRREVOCABLY WAIVES ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN
ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM AND FURTHER IRREVOCABLY
WAIVES  THE  RIGHT TO  OBJECT,  WITH  RESPECT  TO SUCH  CLAIM,  SUIT,  ACTION OR
PROCEEDING BROUGHT IN ANY SUCH COURT, THAT SUCH COURT DOES NOT HAVE JURISDICTION
OVER SUCH PARTY.  NOTHING IN THIS  BRIDGE  NOTE WILL BE DEEMED TO  PRECLUDE  THE
LENDER FROM  BRINGING  AN ACTION OR  PROCEEDING  IN RESPECT  HEREOF IN ANY OTHER
JURISDICTION.

                                       B-6
<PAGE>

     IN WITNESS WHEREOF, this Bridge Note has been executed and delivered on the
date specified on the first page hereof by the duly authorized representative of
Borrower.

                             TARPON INDUSTRIES, INC.

                             By:
                                  -------------------------------

                                  -------------------------------

                             Its:
                                  -------------------------------

                                      B-7
<PAGE>

                                    EXHIBIT C

                               SECURITY AGREEMENT

     THIS SECURITY AGREEMENT, ("Agreement") is made as of this 18th day of June,
2007, by and among TARPON INDUSTRIES,  INC., a Michigan corporation (hereinafter
"Borrower")  and Lender(s) as listed on Schedule "1" of this  Agreement,  acting
through HIGH CAPITAL FUNDING, LLC (the "Lead Investor").

     WHEREAS,  this Agreement is given to secure  performance of the obligations
("Obligations") under the Secured Promissory Note(s) ("Secured Notes"), executed
by  Borrower,  in favor of  Lenders  as  lenders  and in the  amounts  listed on
Schedule "1" attached hereto and incorporated herein by reference, together with
interest  thereon as  provided  for in the  Secured  Notes.  Schedule I shall be
amended and supplemented  from time to time to reflect the issuance and delivery
of additional Secured Notes.

     NOW,  THEREFORE,  in  consideration  of the loans  made by the  Lenders  to
Borrower,  and further  consideration of the covenants and promises contained in
this Agreement, and for other good and valuable consideration, the parties agree
as follows:

1.   Defined Terms.  As used in this  Agreement,  the following terms shall have
     the following meanings:

     (a) "Collateral" has the meaning set forth in paragraph 3 hereof.

     (b) "PTO" means the United States Patent and Trademark Office.

     (c) "UCC"  means the Uniform  Commercial  Code as in effect in the State of
Nevada.

     (d) Terms Defined in UCC. Where applicable in the context of this Agreement
and except as otherwise defined herein,  terms used in this Agreement shall have
the meanings assigned to them in the UCC.

     (e) Terms Defined in the Financing Agreement. Terms used herein, defined in
the  Financing  Agreement  (defined  below)  and not  otherwise  defined in this
Security  Agreement,  have  the  meanings  ascribed  to  them  in the  Financing
Agreement.

     (f)  Construction.  In this Agreement,  the following rules of construction
and interpretation  shall be applicable:  (i) no reference to "proceeds" in this
Agreement authorizes any sale, transfer,  or other disposition of any Collateral
by Borrower; (ii) "includes" and "including" are not limiting; (iii) "or" is not
exclusive; and (iv) "all" includes "any" and "any" includes "all."

2.   Supremacy of Financing Agreement. This Security Agreement is being executed
     pursuant to that  certain  Financing  Agreement,  dated as of June 11, 2007
     (the  "Financing  Agreement").  This  Security  Agreement is subject to the
     terms and conditions of the Financing Agreement.  To the extent that any of

                                      C-1
<PAGE>

     the terms specifically set forth in the Financing Agreement is inconsistent
     with the  provisions of this Security  Agreement  specifically  relating to
     such  matters,  the Financing  Agreement  shall govern with respect to such
     inconsistencies.

3.   Security Interest.

     (a) Grant of Security Interest. As security for the payment and performance
of the Obligations,  Borrower hereby assigns,  transfers and conveys to Lenders,
and grants to Lenders a security  interest  in and to all of  Borrower's  right,
title and interest in, to and under the following property, in each case whether
now or hereafter  existing or arising or in which  Borrower now has or hereafter
owns, acquires or develops an interest and wherever located  (collectively,  the
"Collateral") provided, however, that such security interest shall be junior and
subordinate to the security interests of LaSalle Bank and Laurus:

          (i) Accounts;

          (ii) Chattel Paper and Electronic Chattel Paper;

          (iii) Fixtures;

          (iv) Goods;

          (v) Inventory;

          (vi) Software;

          (vii)  all  patents,  trademark,  patent  applications  and  trademark
     applications,  domestic or  foreign,  all  licenses  relating to any of the
     foregoing  and all  income  and  royalties  with  respect  to any  licenses
     (including  such  patents,  trademark,  patent  applications  and trademark
     applications  as  described in Schedule  "2"),  all rights to sue for past,
     present or future  infringement  thereof,  all rights arising therefrom and
     pertaining thereto and all reissues,  divisions,  continuations,  renewals,
     extensions  and  continuations-in-part  thereof.  Borrower  represents  and
     warrants  to Lenders  that a true and correct  list of all of the  existing
     Collateral consisting of U.S. patents,  trademark,  patent applications and
     trademark  applications or registrations owned by Borrower,  in whole or in
     part, is set forth in Schedule "2";

          (viii) all General  Intangibles  and all  intangible  intellectual  or
     other similar  property of Borrower of any kind or nature,  associated with
     or arising out of any of the  aforementioned  properties and assets and not
     otherwise described above; and

          (ix)  all  Proceeds  of  any  and  all  of  the  foregoing  Collateral
     (including license royalties,  rights to payment,  accounts and proceeds of
     infringement suits) and, to the extent not otherwise included, all payments
     under  insurance  (whether or not Lenders is the loss payee thereof) or any
     indemnity,  warranty or guaranty  payable by reason of loss or damage to or
     otherwise with respect to the foregoing Collateral.

                                      C-2
<PAGE>

     (b) Continuing Security Interest. Borrower agrees that this Agreement shall
create a continuing  security  interest in the Collateral  which shall remain in
effect until terminated in accordance herewith.

4.   Other Security  Interests.  Borrower  warrants that except for the security
     interests of LaSalle Bank Midwest N.A. (f/k/a  Standard  Federal Bank N.A).
     and  LaSalle  Business  Credit,  a division of ABN AMRO Bank,  N.V.  Canada
     Branch,(collectively  "LaSalle  Bank") and the second lien of Laurus Master
     Fund,  Ltd.  ("Laurus"),  to which the security  interests  created by this
     Agreement  are  subordinate,  no  financing  statement  covering any of the
     Collateral  or its proceeds is on file in any public office at this date or
     will be on file with respect to the  Collateral at the time the  Collateral
     becomes  subject to this  Agreement  (except any  purchase  money  security
     interests). No other material security affects the Collateral at this date,
     and no arrangement  exists whereby the Collateral will in the future become
     subject  to a  security  interest  senior  to the  lien  of  this  Security
     Agreement.

     Borrower  authorizes  Lenders at their option and their sole  discretion to
discharge any taxes, charges, assessments,  liens or other security interests or
other  encumbrances to which the Collateral may become subject.  Lenders may pay
amounts to preserve  and maintain the  Collateral,  if Borrower  fails to do so.
Borrower agrees to reimburse Lenders within 10 days after demand for any payment
made or any expense incurred by Lenders pursuant to the foregoing authorization,
together with interest on the amount  expended at the rate of 18% per annum from
the date of the  payment.  Any such  amounts  shall be secured by and under this
Agreement.

5.   Fees and Taxes.  Borrower will use reasonably  commercial efforts to timely
     pay any and all  license  fees,  taxes,  assessments  and  public  charges,
     general and  special,  that may at any time be levied or  assessed  upon or
     against Collateral.

6.   Maintenance of Collateral.  Borrower will, at Borrower's expense,  maintain
     and keep the tangible  Collateral at its present  location (or will provide
     Lenders with reasonable advance written notice if any such Collateral is to
     be moved) in good order and repair,  ordinary wear and tear  excepted,  and
     shall not,  without  the prior  written  consent of the Lead  Investor or a
     majority in  interest of the  Lenders,  sell,  dispose of or  substantially
     alter the  Collateral,  except  dispositions or alterations in the ordinary
     course of Borrower's business.

     Borrower will not use the Collateral in material violation of any
ordinance or state or federal statute or any administrative rules or regulation
of law.

     Borrower will use  reasonably  commercial  efforts to avoid the  Collateral
from being  attached or seized by any legal  process.  Borrower  will defend and
indemnify  Lenders from all expense and liability of every kind to any person or
to the property of any person by reason of or in  connection  with the delivery,
possession or use of the Collateral.

7.   Further  Acts.  On  a  continuing  basis,  Borrower  shall  make,  execute,
     acknowledge  and  deliver,  and file and  record in the  proper  filing and
     recording  places,  all such  instruments and documents,  and take all such
     action as may be  necessary  or advisable or may be requested by Lenders to
     carry out the intent  and  purposes  of this  Agreement,  or for  assuring,
     confirming or protecting  the grant or perfection of the security  interest
     granted or purported to be granted hereby, to ensure Borrower's  compliance

                                      C-3
<PAGE>

     with this Agreement or to enable Lenders to exercise and enforce its rights
     and  remedies  hereunder  with  respect to the  Collateral,  including  any
     documents for filing with the PTO or any applicable  state office.  Lenders
     may record this  Agreement,  an  abstract  thereof,  or any other  document
     describing Lenders' interest in the Collateral with the PTO, at the expense
     of Borrower.  In addition,  Borrower  authorizes  Lenders to file financing
     statements  describing  the  Collateral  in any UCC  filing  office  deemed
     appropriate by Lenders. If the Borrower shall at any time hold or acquire a
     commercial tort claim arising with respect to the Collateral,  the Borrower
     shall immediately notify Lenders in a writing signed by the Borrower of the
     brief  details  thereof and grant to the Lenders in such writing a security
     interest  therein and in the proceeds  thereof,  all upon the terms of this
     Agreement,  with such writing to be in form and substance  satisfactory  to
     the Lenders.

8.   Authorization  to  Supplement.  If Borrower  shall obtain rights to any new
     patentable  inventions  or become  entitled  to the  benefit  of any patent
     application or patent for any reissue,  division,  or continuation,  of any
     patent or trademark,  the provisions of this Agreement shall  automatically
     apply thereto. Borrower shall give prompt notice in writing to Lenders with
     respect  to any such new  patent  or  trademark  rights.  Without  limiting
     Borrower's obligations  hereunder,  Borrower authorize Lenders unilaterally
     to modify this  Agreement by amending  Schedule "2" to include any such new
     patent or trademark rights. Notwithstanding the foregoing, no failure to so
     modify  this  Agreement  or amend  Schedule  "2"  shall in any way  affect,
     invalidate or detract from  Lenders'  continuing  security  interest in all
     Collateral, whether or not listed on Schedule "2."

9.   Additional  Parties and Collateral.  In the event that the Company forms or
     acquires an interest in any entity that becomes a subsidiary of the Company
     prior to payment in full of the Secured Notes, Borrower agrees that it will
     cause any such  subsidiary  to become a  signatory  to this  Agreement  and
     further agrees that as a result of such action, the tangible and intangible
     assets of any such  subsidiary  shall  become  Collateral  pursuant to this
     Agreement to the same extent as if any such  subsidiary  had executed  this
     Agreement as an original  signatory and its tangible and intangible  assets
     had been  included in Section  3(a)  above,  provided,  however,  that with
     respect to any acquired  entity,  the existence and continuance of security
     agreements  of any such  entity in  effect at the time of such  acquisition
     shall  not  constitute  a  breach  of this  agreement.  Borrower  expressly
     acknowledges that a failure to comply with the provisions of this Section 9
     shall constitute a default under this Agreement.

10.  Default.  The breach or failure of any term,  agreement or covenant of this
     Agreement or the  occurrence of an event of default upon any term contained
     in the Secured Note(s) shall constitute a default hereunder.

11.  Remedies.  Upon the  occurrence of any default as defined  above,  Lenders,
     acting  through the Lead  Investor,  will have the right at their option to
     enforce and to exercise any or all of their rights under this  Agreement or
     otherwise. In addition to all other rights and remedies, Lenders shall have
     the  remedies  of a  secured  party  under  the UCC.  In  exercising  these
     remedies, Lenders and Borrower agree as follows:

     (a)  Lenders,  acting  through the Lead  Investor,  may,  at their  option,
          require  Borrower to assemble the  Collateral and make it available to
          Lenders at a place to be  designated  by Lenders  which is  reasonably
          convenient to both parties.  In the event Borrower fails or refuses to
          assemble the  Collateral,  Lenders shall have the right,  and Borrower
          hereby authorize and empower Lenders, to enter the premises upon which
          the Collateral is located in order to remove the same.

                                      C-4
<PAGE>

     (b)  Lenders,   acting  through  the  Lead  Investor,  will  give  Borrower
          reasonable  notice  of the time and  place of any  public  sale of the
          Collateral,  or of the time  after  which  any  private  sale or other
          intended  disposition  of the  Collateral  is to be made,  unless  the
          Collateral is perishable,  threatens to decline  speedily in value, or
          is of a type customarily sold on a recognized  market. The requirement
          of  reasonable  notice  shall be met if a  written  notice  is mail to
          Borrower  postage  prepaid,  to the address of Borrower  last known to
          Lenders,  at  least  10  days  prior  to  the  date  of  the  sale  or
          disposition.

     (c)  Borrower  agrees to surrender  possession of the Collateral to Lenders
          in the event  Lenders  elects to  foreclose  this  security  interest.
          Borrower  waives any  notice of the  exercise  of any and all  options
          reserved to Lenders by this Agreement.

     (d)  Borrower will, upon Lenders' request,  deliver to Lenders all original
          invoices, bills, charge or credit card receipts, books and records and
          other documents evidencing or describing any of the account receivable
          constituting a part of the Collateral.  Borrower will also execute and
          deliver  to  Lenders an  assignment  of the right to receive  payments
          under all such Accounts.  The parties recognize,  however, that in the
          event of default such  Accounts  shall be deemed  assigned to Lenders,
          whether or not the assignments described above are actually delivered.

     (e)  Lenders,  acting through the Lead  Investor,  shall have the right and
          are hereby  authorized  to collect all amounts due under the Accounts;
          sue or take other  actions to collect the same in their own name or as
          assignee of or in the name of Borrower  compromise or give acquittance
          for  amounts  due;  and use such other  measures  as  Lenders,  acting
          through the Lead Investor, may in its sole discretion deem appropriate
          for collection of the Accounts. All such actions shall be taken at the
          sole  expense of  Borrower  who agrees to  reimburse  Lenders  for all
          reasonable amounts expended  (including a reasonable  attorney's fee),
          together with  interest  thereon from the date of  expenditure  at the
          rate then applicable under the Secured Notes.

     (f)  This  Agreement  constitutes a direction to and full  authority to any
          Account debtor to pay directly to Lenders any such accounts upon being
          advised in writing by  Lenders  that there has and  continues  to be a
          default  hereunder.  No proof of default  shall be required.  Any such
          debtor is herby  irrevocably  and  unconditionally  authorized to rely
          upon and comply with any notice from Lenders.  The debtor shall not be
          liable to Borrower or any person  claiming  under  Borrower for making
          any payment or rendering any performance to Lenders.  The debtor shall
          have no  obligation  or right  to  inquire  whether  any  default  has
          occurred or is then  existing.  By its  execution  of this  Agreement,
          Borrower  irrevocably  and  unconditionally  joins in,  authorizes and
          consents to the above instructions.

     (g)  The  proceeds  of any sale of the  Collateral  shall be applied to the
          following items in the following order: (a) the reasonable expenses of
          repossessing  the  Collateral  and preparing for the holding the sale,
          including without  limitation all reasonable  attorney's fees incurred
          by Lenders;  (b) interest and principal then due (by  acceleration  or
          otherwise)  under the Secured  Notes and any other debts  specifically
          secured by the  Agreement;  (c)  interest and  principal  then due (by
          acceleration  or  otherwise)  under any  other  debts of  Borrower  to
          Lenders  (to be applied in  whatever  order  Lenders may in their sole
          discretion  determine);  (d) indebtedness of Borrower to other secured
          parties,  provided  written notice of demand  therefore is received by

                                      C-5
<PAGE>
          Lenders  before the sale (to be applied in the order Lenders  receives
          the requires); and (e) the balance, if any, to Borrower.

12.  Set-off.  Upon default by Borrower  under this  Agreement,  Lenders (or the
     holder or owner of any debt secured by this  Agreement)  shall  immediately
     have the right  without  further  notice to Borrower to set off against the
     Secured  Notes and any other debts  secured by this  Agreement all debts of
     Lenders (or such holder or owner) to Borrower, whether or not then due.

13.  Notice.  Any and all notices,  requests,  consents and demands  required or
     permitted  to be given  hereunder  shall be in writing  and shall be deemed
     given and received (i) upon personal delivery, (ii) upon the first business
     day following the receipt of confirmation of facsimile  transmission to the
     telefax number or email,  the receipt of which is confirmed by return email
     and/or telephonically, as indicated below, (iii) upon delivery by overnight
     courier,  prepaid and  delivered on a business  day; or (iv) upon the third
     business  day after  deposit in the United  States  mail,  by  certified or
     registered mail, postage prepaid and addressed as follows:

         To the Company:   Tarpon Industries, Inc.
                           2420 Wills Street
                           Marysville MI  48040
                           Fax:    810 364 4347
                           E-mail:   jbradshaw@tarponind.com

         To the Lender:    at the facsimile number,  email or address of the
                           Lender appearing on the books
                           and records of the Company

14.  Miscellaneous.  The  following  provisions  are  additional  terms  of this
     Agreement:

     (a)  Lenders have no duty to maintain, repair or protect the Collateral.

     (b)  No waiver by Lenders of any default  shall  operate as a waiver of any
          other default or of the same default on a future occasion.

     (c)  All rights and remedies of Lenders are cumulative and may be exercised
          successively  or  concurrently,  and  shall  inure to the  benefit  of
          Lenders' assigns.

     (d)  All  obligations  of  Borrower  shall bind his  trustees,  custodians,
          general partners, successors and assigns.

     (e)  The  captions  of the  sections of this  Agreement  are  inserted  for
          convenience  only  and  shall  not be  used in the  interpretation  or
          construction of any provisions hereof.

     (f)  If any provisions of this Agreement is held invalid or  unenforceable,
          the holding  shall affect only the provision in question and all other
          provisions on this Agreement shall remain in full force and effect.

     (g)  This Agreement  supersedes  all prior oral and/or  written  agreements
          concerning the subject matter hereof.

                                      C-6
<PAGE>

     IN WITNESS  WHEREOF,  Borrower has executed this Agreement the day and year
first above written.

                                    TARPON INDUSTRIES, INC.
                                    a Michigan corporation

                                    By:/s/James W. Bradshaw
                                       ----------------------------
                                        James W. Bradshaw
                                    Its:Chief Executive Officer

                                     LENDERS
                                     See Schedule "1"

                                      C-7
<PAGE>

                                  SCHEDULE "1"

                                     LENDERS

Lead Investor:

High Capital Funding, LLC                                     $500,000
333 Sandy Springs Circle, Suite 240
Atlanta, GA
Attention:  Fred A. Brasch, CFO
Tel: 404.257 9150
Fax: 404.257.9125
Email: fredbrasch@mindspring.com

By: /s/ Fred A. Brasch
    ----------------------------------------
       Fred A. Brasch, CFO

Date:    June 18, 2007

Other Lenders:

[Name/Address]                                $ _____________________

------------------------
------------------------
------------------------

By: _____________________
Name: ___________________
Title: __________________

Date: ______________, 2007

<PAGE>

                                  SCHEDULE "2"

                      PATENTS, TRADEMARKS AND APPLICATIONS

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