Exhibit 10.2

[Execution]

FOURTH AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT

by and among

LERNER NEW YORK, INC.,
LERNCO, INC. and
LERNER NEW YORK OUTLET, INC.,
as Borrowers,

NEW YORK & COMPANY, INC.,
NEVADA RECEIVABLE FACTORING, INC.,
LERNER NEW YORK HOLDING, INC.,
LERNER NEW YORK GC, LLC and
NEW YORK & COMPANY STORES, INC.,
as Guarantors,

WELLS FARGO BANK, NATIONAL ASSOCIATION,
as Administrative Agent for Revolving Loan Lenders and
Collateral Agent,

WELLS FARGO BANK, NATIONAL ASSOCIATION,
as Administrative Agent for Term Loan Lenders,

WELLS FARGO CAPITAL FINANCE, LLC
as Sole Lead Arranger and Sole Bookrunner,

and

WELLS FARGO BANK, NATIONAL ASSOCIATION
AND THE OTHER PERSONS NAMED HEREIN,
as Revolving Loan Lenders,

WELLS FARGO BANK, NATIONAL ASSOCIATION,
AND THE OTHER PERSONS NAMED HEREIN
as Term Loan Lenders,

Dated:  October 24, 2014

Table of Contents

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INDEX OF SCHEDULES AND EXHIBITS

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FOURTH AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT

This Fourth Amended and Restated Loan and Security Agreement (this “Agreement”), dated as of October 24, 2014, is entered into by and among Lerner New York, Inc., a Delaware corporation (“Lerner”), Lernco, Inc., a Delaware corporation (“Lernco”), and Lerner New York Outlet, Inc., a Massachusetts corporation (“Lerner Outlet” and together with Lerner and Lernco, collectively, “Borrowers” and individually each a “Borrower”), New York & Company, Inc., a Delaware corporation (“NY&Co”), Lerner New York Holding, Inc., a Delaware corporation (“Parent”), Nevada Receivable Factoring, Inc., a Nevada corporation (“Nevada Factoring”), New York & Company Stores, Inc., a New York corporation, formerly known as Associated Lerner Shops of America, Inc., a New York corporation (“NY &Co Stores”), and Lerner New York GC, LLC, an Ohio limited liability company (“Lerner GC” and together with NY&Co, Parent, Nevada Factoring and NY &Co Stores, collectively, “Guarantors” and each a “Guarantor”), the Revolving Loan Lenders (as hereinafter defined), Wells Fargo Bank, National Association, a national banking association, in its capacity as administrative agent and collateral agent for Lenders and Bank Product Providers (in such capacity, “Agent” as hereinafter further defined), Term Loan Lenders (as hereinafter defined), Wells Fargo Bank, National Association, a national banking association, in its capacity as administrative agent for Term Loan Lenders (in such capacity, “Term Loan Agent” as hereinafter further defined), and Wells Fargo Capital Finance, LLC, as sole lead arranger and sole lead bookrunner.

W I T N E S S E T H:

WHEREAS, Borrowers, Guarantors, the persons party thereto as lenders (the “Existing Lenders”), and Agent have previously entered into the Third Amended and Restated Loan and Security Agreement, dated as of August 10, 2011 (the “Existing Loan Agreement” as hereinafter further defined), pursuant to which, among other things, the Existing Lenders have provided certain loans and other financial accommodations to Borrowers;

WHEREAS, Borrowers and Guarantors have requested that Agent and Existing Lenders (a) permit a Term Loan in the principal amount of $15,000,000 (the “Term Loan” as hereinafter further defined) to be made by Term Loan Lenders to Borrowers, and (b) amend and extend the Existing Loan Agreement and the other Existing Financing Agreements by amending and restating the Existing Loan Agreement;

WHEREAS, Borrowers and Guarantors (other than Parent) are wholly-owned Subsidiaries of Parent, and together they are interrelated entities which collectively constitute an integrated clothing retailer;

WHEREAS, the directors of each Borrower view the entities as sufficiently dependent upon each other and so interrelated that any advance made hereunder to any Borrower would benefit each of the Borrowers as a result of their consolidated operations and identity of interests;

WHEREAS, each Borrower has requested that Agents (as hereinafter defined) and Lenders treat them as co-borrowers hereunder, jointly and severally responsible for the obligations of each other hereunder;

WHEREAS, each Revolving Loan Lender (as hereinafter defined) is willing (severally and not jointly) to continue to make Revolving Loans (as hereinafter defined) and other financial accommodations to Borrowers, in each case on a pro rata basis according to its commitments provided for herein on the terms and conditions set forth herein, and Agent is willing to continue to act as agent for the Lenders on the terms and conditions set forth herein;

WHEREAS, each Term Loan Lender is willing (severally and not jointly) to make a Term Loan to Borrowers, in each case on a pro rata basis according to its commitment provided for herein on the terms and conditions set forth therein, and Term Loan Agent and Agent are willing to act as agents for Term Loan Lenders on the terms and conditions set forth herein; and

WHEREAS, the parties hereto have agreed to amend and restate, in their entirety, the agreements contained in the Existing Loan Agreement on the terms and conditions set forth herein.

NOW, THEREFORE, in consideration of the mutual conditions and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto amend and restate the Existing Loan Agreement and agree as follows:

SECTION 1.                         DEFINITIONS

For purposes of this Agreement, the following terms shall have the respective meanings given to them below:

“Accounts” shall mean all present and future rights of each Borrower and Guarantor to payment of a monetary obligation, whether or not earned by performance, which is not evidenced by chattel paper or an instrument, (a) for property that has been or is to be sold, leased, licensed, assigned, or otherwise disposed of, (b) for services rendered or to be rendered, (c) for a secondary obligation incurred or to be incurred, or (d) arising out of the use of a credit or charge card or information contained on or for use with any such card. The term “Accounts” as used herein shall include, without limitation, all Credit Card Receivables.

“ACH Transactions” shall mean any cash management or related services, including the automatic clearing house transfer of funds by Agent or any of its Affiliates for the account of a Borrower or a Guarantor pursuant to agreement, or overdrafts.

“Adjusted Eurodollar Rate” shall mean, with respect to each Interest Period for any Eurodollar Rate Loan, the rate per annum (rounded upwards, if necessary, to the next one-hundredth (1/100) of one percent (1%)) determined by dividing (a) the Eurodollar Rate for such Interest Period by (b) a percentage equal to: (i) one (1) minus (ii) the Reserve Percentage. For purposes hereof, “Reserve Percentage” shall mean the reserve percentage, expressed as a decimal, prescribed by any United States or foreign banking authority for determining the reserve requirement which is or would be applicable to deposits of United States dollars in a non-United States or an international banking office of the Reference Bank used to fund a Eurodollar Rate Loan or any Eurodollar Rate Loan made with the proceeds of such deposit, whether or not the Reference Bank actually holds or has made any such deposits or loans.  The Adjusted

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Eurodollar Rate shall be adjusted on and as of the effective day of any change in the Reserve Percentage.

“Affiliate” shall mean, with respect to a specific Person, any other Person which directly or indirectly, through one or more intermediaries, controls or is controlled by or is under common control with such Person.  For the purposes of this definition, the term “control” (including with correlative meanings, the terms “controlled by” and “under common control with”), as used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of Voting Stock, by contract or otherwise.

“Agent” shall mean Wells Fargo Bank, National Association, a national banking association, in its capacity as administrative agent and collateral agent on behalf of Lenders pursuant to the terms hereof, and any replacement or successor agent hereunder.

“Agent Payment Account” shall mean account no.               of Agent Wells Fargo Bank, National Association, located in Charlotte, North Carolina, ABA no.          , or such other account of Agent as Agent may from time to time designate to Borrowers as the Agent Payment Account for purposes of this Agreement and the other Financing Agreements.

“Applicable LC Margin” shall mean

(a)                                 Subject to clause (b) below, at any time as to the Letter of Credit Rate for documentary Letter of Credit Accommodations and the Letter of Credit Rate for standby Letter of Credit Accommodations, the applicable percentages (on a per annum basis) set forth below, in each case based on the Average Compliance Excess Availability for the immediately preceding fiscal quarter, is at or within the amounts indicated for such percentage as of the last day of the fiscal quarter as follows:

(b)                                 Notwithstanding anything to the contrary set forth above in clause (a) above, (i) the Applicable LC Margin shall be calculated and established once each fiscal quarter and shall remain in effect until adjusted thereafter after the end of such fiscal quarter, (ii) each adjustment of the Applicable LC Margin shall be effective as of the first day of a fiscal quarter based on the Average Compliance Excess Availability for the immediately preceding fiscal quarter, (iii) the Applicable LC Margin from the date hereof through the end of the first full fiscal quarter after the date hereof shall be the applicable percentages set forth in Tier 1 set forth above, and (iv) in the event that at any time after the end of a fiscal quarter, the Average Compliance Excess Availability for such fiscal quarter used in the calculation of the Applicable

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LC Margin was greater than or less than the actual amount of the Average Compliance Excess Availability for such fiscal quarter, the Applicable LC Margin shall be adjusted for such prior fiscal quarter and any additional fee as a result of such recalculation shall promptly paid to Agent.

“Applicable Margin” shall mean

(a)                                 Subject to clause (b) below, at any time, as to the Interest Rate for Prime Rate Loans and the Interest Rate for Eurodollar Rate Loans, the applicable percentages (on a per annum basis) set forth below, in each case based on Borrowers’ Average Compliance Excess Availability for the immediately preceding fiscal quarter, is at or within the amounts indicated for such percentage as of the last day of such fiscal quarter as follows:

(b)                                 Notwithstanding anything to the contrary set forth above in clause (a) above, (i) the Applicable Margin shall be calculated and established once each fiscal quarter and shall remain in effect until adjusted thereafter after the end of such fiscal quarter, (ii) each adjustment of the Applicable Margin shall be effective as of the first day of a fiscal quarter based on the Average Compliance Excess Availability for the immediately preceding fiscal quarter, (iii) the Applicable Margin from the date hereof through the end of the first full fiscal quarter after the date hereof shall be the applicable percentages set forth in Tier 1 set forth above, and (iv) in the event that at any time after the end of a fiscal quarter, the Average Compliance Excess Availability for such fiscal quarter used in the calculation of the Applicable Margin was greater than or less than the actual amount of the Average Compliance Excess Availability for such fiscal quarter, the Applicable Margin shall be adjusted for such prior fiscal quarter and any additional interest as a result of such recalculation shall promptly be paid to Agent.

“Appointed Agent” shall have the meaning set forth in Section 12.1 hereof.

“Approved Fund” shall mean with respect to any Lender that is a fund or similar investment vehicle that makes or invests in commercial loans, any fund or similar investment vehicle that invests in commercial loans which is managed or advised by the same investment advisor as such Lender or by an Affiliate of such investment advisor.

“Assignment and Acceptance” shall mean an Assignment and Acceptance substantially in the form of Exhibit A attached hereto (with blanks appropriately completed) delivered to Agent in connection with an assignment of a Lender’s interest hereunder in accordance with the provisions of Section 14.7 hereof.

“Authorized Officer” shall mean Greg Scott, Sheamus Toal or such other person as the Board of Directors of each Borrower may designate by written notice to Agent.

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“Average Compliance Excess Availability” shall mean the average daily amount, as determined by Agent for the immediately preceding fiscal quarter, of Compliance Excess Availability.

“Bank Products” shall mean any one or more of the following types of services or facilities extended to a Borrower or a Guarantor by a Bank Product Provider: (a) credit cards, (b) ACH Transactions, (c) Hedging Transactions, and (d) foreign exchange contracts.

“Bank Product Providers” shall mean Wells Fargo and any of its Affiliates that may, from time to time, provide any Bank Products to any Borrower or Guarantor or any of their respective Subsidiaries.

“Bank Product Reserve” shall mean any and all reserves that Agent may establish from time to time, in its sole discretion, for the Bank Products then provided and outstanding, which reserve may be revised by Agent for such Bank Product from time to time.

“Blocked Accounts” shall have the meaning set forth in Section 6.3(a) hereof.

“Borrowers” shall mean, collectively, the following (together with their respective successors and assigns): (a) Lerner, (b) Lernco, and (c) Lerner Outlet; each sometimes being referred to herein individually as “Borrower”.

“Borrowing Base” shall mean, at any time, the amount equal to:

(a)                                 the sum of:

(i)                                     the lesser of (A) the sum of (1)  ninety percent (90%) of the Net Amount of Eligible Sell-Off Vendors Receivables of Borrowers, plus (2) ninety percent (90%) of the Net Amount of Eligible Damaged Goods Vendors Receivables of Borrowers, and (B) $3,500,000, plus

(ii)                                  ninety percent (90%) of the Net Amount of the Eligible Credit Card Receivables of Borrowers other than PayPal Receivables, plus

(iii)                               the lesser of (A) ninety percent (90%) of the Net Amount of Eligible Credit Card Receivables of Borrowers consisting of PayPal Receivables and (B) $500,000, plus

(iv)                              ninety percent (90%) of the Net Recovery Percentage multiplied by the Value of the Eligible Landed Inventory of Borrowers, plus

(v)                                 the lesser of (A) the sum of (1) ninety percent (90%) of the Net Recovery Percentage multiplied by the Landed Value of Eligible In-Transit Inventory of Borrowers, plus (2) ninety percent (90%) of the Net Recovery Percentage multiplied by the Landed Value of Eligible In-Transit LC Inventory of Borrowers, or (B) one of the following amounts as determined by Agent in its good faith discretion: (1) $25,000,000, if Eligible In-Transit Inventory satisfies the requirements of clause (c)(i)(A) of the definition of Eligible In-Transit Inventory and if such Eligible In-Transit LC Inventory satisfies the requirements of

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clause (f)(i) of the definition of Eligible In-Transit LC Inventory, (2) $12,000,000 (which amount shall automatically increase or decrease from time to time proportionally based upon a Revolving Loan Facility Increase or Revolving Loan Facility Decrease so that, after giving effect to any such Revolving Loan Facility Increase or Revolving Loan Facility Decrease, the amount of such sublimit shall be equal to the amount that is 16% of the revised amount of the Maximum Credit), if Eligible In-Transit Inventory satisfies the requirements of clause (c)(i)(B) of the definition of Eligible In-Transit Inventory and if such Eligible In-Transit LC Inventory satisfies the requirements of clause (f)(ii) of the definition of Eligible In-Transit LC Inventory, and (3) $10,000,000 (which amount shall automatically increase or decrease from time to time proportionally based upon a Revolving Loan Facility Increase or Revolving Loan Facility Decrease so that, after giving effect to any such Revolving Loan Facility Increase or Revolving Loan Facility Decrease, the amount of such sublimit shall be equal to the amount that is 13.33 % of the revised amount of the Maximum Credit), if Eligible In-Transit Inventory satisfies the requirements of clause (c)(i)(C) of the definition of Eligible In-Transit Inventory and if such Eligible In-Transit LC Inventory satisfies the requirements of clause (f)(iii) of the definition of Eligible In-Transit LC Inventory, plus

(vi)                              one hundred percent (100%) of Eligible Cash Collateral; minus,

(b)                                 the Reserves and the Bank Product Reserves; minus,

(c)                                  the Term Loan Push Down Reserve.

Agent shall have the right to revise the advance rates in, establish Reserves against or sublimits in the Borrowing Base in such amounts and with respect to such matters as Agent in its good faith discretion shall deem necessary or appropriate, at all times and after Agent has completed its updated field audits, examinations and appraisals of the Collateral; provided, that, (i) so long as no Default or Event of Default exists or has occurred and is continuing, Agent shall give to Borrowers ten (10) Business Days’ telephonic or electronic notice and (ii) if a Default or Event of Default exists or has occurred and is continuing, Agent shall give to Borrowers three (3) Business Days’ telephonic or electronic notice if (A) Agent establishes Reserves relating to new categories of Reserves, (B) Agent changes the methodology of calculating Reserves, (C) Agent establishes sublimits in the Borrowing Base or (D) Agent revises the advance rates set forth in subparagraph (a)(iii) and (a)(iv) above based on the results of appraisals of the Inventory conducted in accordance with Section 7.3 hereof that are on a “going out of business sale” basis, net of liquidation expenses. The amounts of Eligible Inventory shall be determined based on the lesser of the amount of Inventory set forth in the general ledgers of Borrowers or the perpetual inventory records maintained by Borrowers.  The foregoing notwithstanding, in the event Agent is required to establish Reserves to preserve or protect or maximize the value of the Collateral, Agent shall only provide Borrowers with notice at the time such Reserve is established.

“Borrowing Base Certificate” shall mean a certificate substantially in the form of Exhibit B hereto, as such form, subject to the terms hereof, may from time to time be modified by Agent, which is duly completed (including all schedules thereto) and executed by the chief executive officer, chief financial officer, controller or other appropriate financial officer of Borrowers acceptable to Agent in its good faith determination and delivered to Agent.

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“Business Day” shall mean any day other than a Saturday, Sunday, or other day on which commercial banks are authorized or required to close under the laws of the State of New York, or the Commonwealth of Massachusetts, and a day on which Agent is open for the transaction of business, except that if a determination of a Business Day shall relate to any Eurodollar Rate Loans, the term Business Day shall also exclude any day on which banks are closed for dealings in dollar deposits in the London interbank market or other applicable Eurodollar Rate market.

“Capital Expenditures” shall mean, with respect to any Person and its Subsidiaries, all expenditures made and liabilities incurred for the acquisition of equipment, software, fixed assets, real property or improvements, or replacements or substitutions therefor, which are not, in accordance with GAAP, treated as expense items for such Person and its Subsidiaries in the year made or incurred or as a prepaid expense applicable to a future year or years.

“Capital Leases” shall mean, as applied to any Person, any lease of (or any agreement conveying the right to use) any property (whether real, personal or mixed) by such Person as lessee which in accordance with GAAP, is required to be reflected as a liability on the balance sheet of such Person.

“Capital Stock” shall mean, with respect to any Person, any and all shares, interests, participations or other equivalents (however designated) of such Person’s capital stock or partnership, limited liability company or other equity interests at any time outstanding, and any and all rights, warrants or options exchangeable for or convertible into such capital stock or other interests (but excluding any debt security that is exchangeable for or convertible into such capital stock).

“Cash Collateral Account” shall mean a deposit account: (a) maintained by a Borrower as a collateral account with either Wells Fargo, and otherwise mutually satisfactory to Lerner, Agent and Lenders; (b) that is a money market account which does not contain stocks, bonds, other investment property or interests in such investment property; (c) used by such Borrower to deposit cash collateral for the purpose of supporting advances described in clause (a)(v) of the definition of Borrowing Base; (d) which contains readily available funds sufficient to support any and all advances that may be requested by Borrowers pursuant to clause (a)(v) of the definition of Borrowing Base, as determined by Agent; and (e) which is subject to the Cash Collateral Account Control Agreement.  For purposes of clarification, there is no dollar limit on the amount of cash, Cash Equivalents or investment property that may be deposited in or credited to a Cash Collateral Account at any time.

“Cash Collateral Account Control Agreement” shall mean a Deposit Account Control Agreement, which, among other things, (a) prohibits the Borrowers from withdrawing or transferring any amounts or investment property from such account except upon the conditions set forth in Section 9.25(f) hereof, (b)  provides that the bank at which such account is maintained will provide to Agent a daily report as to the balance of such account, and (c) is otherwise satisfactory to Agent in form and substance.

“Cash Dominion Event” shall mean a period either (a) commencing on the date that a Default or Event of Default shall exist or have occurred and be continuing and ending on the date such Default or Event of Default has been waived or cured in accordance with Section 11.3

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hereof or (b) commencing on the date that Compliance Excess Availability has been less than twelve and one-half (12.5%) percent of the Revolving Loan Limit for a period of one (1) Business Day as calculated by Agent hereunder and ending on the date that Compliance Excess Availability has been greater than twelve and one-half (12.5%) percent of the Revolving Loan Limit for any thirty (30) consecutive day period thereafter.  Notwithstanding anything to the contrary contained herein, except as Agent and Required Lenders may otherwise agree in writing, a Cash Dominion Event may no longer be terminated following the second (2nd) such termination during the term of this Agreement and in either such case, the Cash Dominion Event shall continue until the payment in full of the Obligations (other than contingent Obligations as to which Agent shall have received such cash collateral, or letter of credit, as is provided for pursuant to the terms of Section 14.1 hereof) and the termination of the Commitments.

“Cash Equivalents” shall mean, at any time, (a) any evidence of Indebtedness with a maturity date of ninety (90) days or less issued or directly and fully guaranteed or insured by the United States of America or any agency or instrumentality thereof; provided, that, the full faith and credit of the United States of America is pledged in support thereof; (b) certificates of deposit or bankers’ acceptances with a maturity of ninety (90) days or less of any financial institution that is a member of the Federal Reserve System having combined capital and surplus and undivided profits of not less than $250,000,000; (c) commercial paper (including variable rate demand notes) with a maturity of ninety (90) days or less issued by a corporation (except an Affiliate of any Borrower) organized under the laws of any State of the United States of America or the District of Columbia and rated at least A-1 by Standard & Poor’s Ratings Service, a division of The McGraw-Hill Companies, Inc. or at least P-1 by Moody’s Investors Service, Inc.; (d) repurchase obligations with a term of not more than thirty (30) days for underlying securities of the types described in clause (a) above entered into with any financial institution having combined capital and surplus and undivided profits of not less than $250,000,000; (e) repurchase agreements and reverse repurchase agreements relating to marketable direct obligations issued or unconditionally guaranteed by the United States of America or issued by any governmental agency thereof and backed by the full faith and credit of the United States of America, in each case maturing within ninety (90) days or less from the date of acquisition; provided, that, the terms of such agreements comply with the guidelines set forth in the Federal Financial Agreements of Depository Institutions with Securities Dealers and Others, as adopted by the Comptroller of the Currency on October 31, 1985; (f) investments in money market funds and mutual funds which invest substantially all of their assets in securities of the types described in clauses (a) through (e) above; and (f) other investments as agreed by Agent in writing.

“Central Collection Deposit Account” shall mean any deposit account established by Borrowers that is used by Borrowers to receive deposits from local retail store deposit accounts or from sales of Inventory or other proceeds of Collateral arising from transactions other than sales at local retail stores.

“Change of Control” shall mean, as of any date of determination, the occurrence of any of the following: (a) any Person and/or one or more of its Affiliates, other than IPC and/or one or more of its Affiliates, or group (within the meaning of the Securities Exchange Act of 1934, as amended) of Persons shall have acquired beneficial ownership (within the meaning of Rule 13d-3 of the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended) of twenty percent (20%) or more of the issued and outstanding Voting Stock of

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NY&Co, unless either (i) IPC and/or one or more of its Affiliates, collectively, own more of the Voting Stock of NY&Co than such Person and/or its Affiliates or (ii) IPC and/or one or more of its Affiliates has the right to elect, or cause to be elected, and has elected, or caused to be elected, a majority of the members of the Board of Directors of NY&Co, (b) during any period of twelve (12) consecutive calendar months, individuals who at the beginning of such period constituted the board of directors of NY&Co (together with any new directors whose election by the board of directors of NY&Co or whose nomination for election by the shareholders of NY&Co was approved by a vote of at least two-thirds of the directors then still in office who either were directors at the beginning of such period or whose elections or nomination for election was previously so approved) cease for any reason other than death or disability to constitute a majority of the directors then in office; or (c) except as permitted under the terms of Section 9.7 hereof, NY&Co shall cease to own (directly or indirectly) one hundred percent (100%) of the Capital Stock of each Borrower and each other Guarantor; or (d) any Borrower or Guarantor other than NY&Co does not own one hundred percent (100%) of the Capital Stock of any of its Subsidiaries.

“Change in Law” shall mean (a) the adoption of any law, rule, regulation or treaty (including any rules or regulations issued under or implementing any existing law) after November 27, 2002, (b) any change in any law, rule, regulation or treaty or in the interpretation or application thereof by any Governmental Authority after November 27, 2002 or (c) compliance by any Lender or Issuing Bank (or any lending office of such Lender or by such Lender’s or Issuing Bank’s holding company, if any) with any request, guideline or directive (whether or not having the force of law) of any Governmental Authority made or issued after November 27, 2002; provided that notwithstanding anything herein to the contrary, (i) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines or directives thereunder, issued in connection therewith or in implementation thereof, and (ii) all requests, rules, guidelines and directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or by United States or foreign regulatory authorities, in each case pursuant to Basel III, shall in each case be deemed to be a “Change in Law”, regardless of the date enacted, adopted, issued or implemented.

“Closing Date” shall mean October 24, 2014.

“Code” shall mean the Internal Revenue Code of 1986, as the same now exists or may from time to time hereafter be amended, modified, recodified or supplemented, together with all rules, regulations and interpretations thereunder or related thereto.

“Collateral” shall have the meaning set forth in Section 5 hereof.

“Collateral Access Agreement” shall mean an agreement in writing, in form and substance reasonably satisfactory to Agent, from any lessor of premises to any Borrower or Guarantor, or any other person to whom any Collateral is consigned or who has custody, control or possession of any such Collateral or is otherwise the owner or operator of any premises on which any of such Collateral is located, pursuant to which such lessor, consignee or other person, among other things, acknowledges the first priority security interest of Agent, for itself and the ratable benefit of the Lenders and the Bank Product Providers, in such Collateral, agrees to

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waive or subordinate any and all claims such lessor, consignee or other person may, at any time, have against such Collateral, whether for processing, storage or otherwise, and agrees to permit Agent access to, and the right to remain on, the premises of such lessor, consignee or other person so as to exercise Agent’s rights and remedies and otherwise deal with such Collateral and in the case of any consignee or other person who at any time has custody, control or possession of any Collateral, acknowledges that it holds and will hold possession of the Collateral for the benefit of Agent, the Lenders and the Bank Product Providers and agrees to follow all instructions of Agent with respect thereto.

“Commitment” shall mean, as to each Lender, the aggregate of such Lender’s Revolving Loan Commitment and Term Loan Commitment; sometimes being referred to herein collectively as “Commitments”.

“Commodity Exchange Act” shall mean the Commodity Exchange Act (7 U.S.C. § 1 et seq.), as amended from time to time, and any successor statute.

“Compliance Excess Availability” shall mean the amount, as determined by Agent, calculated at any date, equal to (a) the lesser of:  (i) the Borrowing Base and (ii) the Revolving Loan Limit, minus (b) the sum of all then outstanding and unpaid Obligations in respect of the Revolving Loans and outstanding Letter of Credit Obligations.

“Credit Card Acknowledgments” shall mean, collectively, the following as determined by Agent in its good faith discretion (as the same now exist or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced): (a) the agreements by Credit Card Issuers or Credit Card Processors who are parties to Credit Card Agreements in favor of Agent acknowledging Agent’s first priority security interest, for and on behalf of Lenders, in the monies due and to become due to any Borrower or Guarantor (including, without limitation, credits and reserves) under the Credit Card Agreements, and agreeing to transfer all such amounts to the Blocked Accounts, and (b) the written notices to Credit Card Issuers or Credit Card Processors who are parties to Credit Card Agreements notifying such Credit Card Issuers or Credit Card Processors of Agent’s first priority security interest, for and on behalf of Lenders, in the monies due and to become due to any Borrower or Guarantor (including, without limitation, credits and reserves) under the Credit Card Agreements, and instructing such Credit Card Issuer or Credit Card Processor to transfer all such amounts to the Blocked Accounts, each sometimes being referred to herein individually as a “Credit Card Acknowledgment”.

“Credit Card Agreements” shall mean all agreements now or hereafter entered into by any Borrower or Guarantor with any Credit Card Issuer or any Credit Card Processor, as the same now exist or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced, including, but not limited to, the agreements set forth on Schedule 8.16 hereto.

“Credit Card Issuer” shall mean any person (other than a Borrower or Guarantor) who issues or whose members issue credit cards, including, without limitation, MasterCard or VISA bank credit or debit cards or other bank credit or debit cards issued through MasterCard International, Inc., Visa, U.S.A., Inc. or Visa International and American Express, Discover, Diners Club, Carte Blanche, WFNNB and other non-bank credit or debit cards, including,

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without limitation, credit or debit cards issued by or through American Express Travel Related Services Company, Inc.

“Credit Card Processor” shall mean any servicing or processing agent or any factor or financial intermediary who facilitates, services, processes or manages the credit authorization, billing transfer and/or payment procedures with respect to any Borrower’s or Guarantor’s sales transactions involving credit card or debit card purchases by customers using credit cards or debit cards issued by any Credit Card Issuer.

“Credit Card Receivables” shall mean all domestic Accounts consisting of the present and future rights of any Borrower or Guarantor, including the Private Label Credit Card Receivables and PayPal Receivables, to payment by any Credit Card Processor or Credit Card Issuer and all information contained on or for use with a credit, charge or debit card issued by a Credit Card Issuer.

“Credit Facility” shall mean the Revolving Loan Facility (including the Letter of Credit Accommodations provided hereunder and under the other Financing Agreements) and the Term Loan Facility.

“Default” shall mean an act, condition or event that with notice or passage of time or both would constitute an Event of Default.

“Defaulting Lender” shall have the meaning set forth in Section 6.10(d) hereof.

“Deferred Billing Program” shall mean any program of any Borrower or Guarantor with a Credit Card Issuer or Credit Card Processor under a Credit Card Agreement or other arrangement of Borrowers or Guarantors pursuant to which any Borrower or Guarantor defers the submission of the sales receipt, invoice or credit card slips to a Credit Card Processor or Credit Card Issuer or the payment of any amounts due from any account debtor is deferred.

“Deposit Account Control Agreement” shall mean an agreement in writing, in form and substance satisfactory to Agent, by and among Agent, a Borrower or Guarantor with a deposit account at any bank, and the bank at which such deposit account is at any time maintained which provides that such bank will comply with instructions originated by Agent directing disposition of the funds in the deposit account without further consent by such Borrower or Guarantor and such other terms and conditions as Agent may require, including as to any such agreement with respect to any Blocked Account, providing that all items received or deposited in the Blocked Accounts are the property of Agent, for itself and the ratable benefit of the Lenders and the Bank Product Providers, that the bank has no lien upon, or right to setoff against, the Blocked Accounts, the items received for deposit therein, or the funds from time to time on deposit therein and that the bank will wire, or otherwise transfer, in immediately available funds, on a daily basis to the Agent Payment Account all funds received or deposited into the Blocked Accounts.

“Domestic In-Transit Inventory” shall mean Inventory owned by a Borrower that is located in the continental United States of America which is in transit to one of the locations set forth on Exhibit E (as such schedule may be updated from time to time by Borrowers to exclude locations which have been closed and/or include additional locations of Inventory which

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Borrowers are permitted to establish under the terms of this Agreement) being the premises of such Borrower in the United States of America which are either owned and controlled by such Borrower or leased by such Borrower.

“EBITDA” shall mean, for any period, without duplication, the total of the following for the Borrowers and Guarantors on a consolidated basis, each calculated for such period:  Net Income plus (a) preferred dividends, plus (b) income tax expense, plus (c) Interest Expense (including all charges owed with respect to letters of credit), plus (d) depreciation expense, plus (e) amortization expense, plus (f) management fees and expenses, as permitted hereunder, paid or accrued, plus (g) non-cash losses from any sale or disposition of assets, and minus (h) non-cash gains from any sale or disposition of assets, plus (i) one-time expenses incurred in connection with the relocation of the headquarters of Borrowers and Guarantors to 330 West 34th Street, New York, New York not to exceed $5,000,000 for the fiscal period of Borrowers and Guarantors ending April 30, 2015, plus (j) any other non-cash charges, non-cash expenses (including non-cash straight line rent), non-cash losses or non-cash restructuring charges, plus (k) one-time expenses incurred in connection with the closing of this Agreement and the transactions contemplated to occur on the date hereof, plus (l) non-cash compensation expenses, including, but not limited to, those arising from or relating to the issuance of stock, restricted stock, options to purchase stock, stock appreciation rights (i.e., phantom stock) and deferred compensation to the officers, employees and directors of the Borrowers and Obligors, plus (m) without duplication, amortization of intangibles, plus (n) employee compensation incurred prior to the date hereof in connection with the transactions contemplated hereby, minus (o) the amortization of construction or landlord tenant allowances of the Borrowers or any Subsidiary of a Borrower for such period, all of the foregoing determined in accordance with GAAP.  For purposes of calculating EBITDA for any Measurement Period, (i) acquisitions that have been made by such Person and its Subsidiaries, including through mergers or consolidated and including any related financing transactions, during the Measurement Period shall be deemed to have occurred on the first day of the Measurement Period; provided, however, that only the actual historical results of operations of the Persons so acquired, without adjustment for pro forma expense savings or revenue increases, shall be used for such calculation; and (ii) the EBITDA of such Person and its Subsidiaries attributable to discontinued operations, as determined in accordance with GAAP, and operations or businesses disposed of prior to the end of such Measurement Period, shall be excluded. For purposes of calculating EBITDA for any Measurement Period with respect to (i) whether an appraisal of the Intellectual Property may be required in accordance with Section 7.6 hereof and (ii) whether a Term Loan Push Down Trigger Event has occurred and is continuing in accordance with Section 2.9 hereof, clause (j) solely as it relates to non-cash straight line rent and clause (o) of this definition shall be excluded.

“Eligible Cash Collateral” shall mean the cash or Cash Equivalents, in each case denominated in United States Dollars, of a Borrower which are: (a) pledged by such Borrower to Agent pursuant to the Cash Collateral Control Agreement, in form and substance reasonably satisfactory to Agent and duly authorized, executed and delivered by such bank or financial intermediary and such Borrower; (b) free and clear of any lien, security interest, claim or other encumbrance or restriction, except for (i) liens in favor of Agent and (ii) liens of the financial intermediary holding such cash or Cash Equivalents that are expressly permitted by the Cash Collateral Control Agreement; (c) subject to the first priority, valid and perfected security interest and pledge in favor of Agent, except (as to priority) for liens in favor of the financial

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intermediary holding such cash or Cash Equivalents to the extent such liens are expressly permitted to have priority by the Cash Collateral Control Agreement; and (d) available to such Borrower without condition or restriction except those arising pursuant to the pledge in favor of Agent; provided, that, no cash or Cash Equivalents shall constitute Eligible Cash Collateral prior to the date (if any) on which Agent shall have consented to the request by Borrowers to include Eligible Cash Collateral in the Borrowing Base.

“Eligible Credit Card Receivables” shall mean, as to any Borrower, the Credit Card Receivables of such Borrower which are and continue to be acceptable to Agent based on the criteria set forth below.  Credit Card Receivables of a Borrower shall be Eligible Credit Card Receivables if:

(a)                                 such Credit Card Receivables arise from the actual and bona fide sale and delivery of goods or rendition of services by such Borrower in the ordinary course of the business of such Borrower which transactions are completed in accordance with the terms and provisions contained in any agreements binding on such Borrower or the other party or parties related thereto;

(b)                                 such Credit Card Receivables are not past due (beyond any stated applicable grace period, if any, therefor) pursuant to the terms set forth in the Credit Card Agreements with the Credit Card Issuer or Credit Card Processor of the credit card or debit card used in the purchase which give rise to such Credit Card Receivables;

(c)                                  such Credit Card Receivables are not unpaid more than ten (10) days after the date of the sale of Inventory giving rise to such Credit Card Receivables;

(d)                                 such Credit Card Receivables did not consist of Deferred Billing Receivables or Private Label Credit Card Receivables arising pursuant to a “Lerner catalog card”;

(e)                                  all procedures required by the Credit Card Issuer or the Credit Card Processor of the credit card or debit card used in the purchase which gave rise to such Credit Card Receivables shall have been followed in all material respects by such Borrower and all documents required for the authorization and approval by such Credit Card Issuer or Credit Card Processor shall have been obtained in connection with the sale giving rise to such Credit Card Receivables;

(f)                                   the required authorization and approval by such Credit Card Issuer or Credit Card Processor shall have been obtained for the sale giving rise to such Credit Card Receivables;

(g)                                  such Borrower shall have submitted all sales slips, drafts, charges and other reports and other materials required by the Credit Card Issuer or Credit Card Processor obligated in respect of such Credit Card Receivables in order for such Borrower to be entitled to payment in respect thereof;

(h)                                 such Credit Card Receivables comply with the applicable terms and conditions contained in Section 8.16 of this Agreement;

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(i)                                     the Credit Card Issuer or Credit Card Processor with respect to such Credit Card Receivables has not asserted a counterclaim, defense or dispute and does not have any right of setoff against such Credit Card Receivables (other than transactions in the ordinary course of the business of such Borrower) and such Credit Card Issuer or Credit Card Processor has not setoff against amounts otherwise payable by such Credit Card Issuer or Credit Card Processor to a Borrower for the purpose of establishing a reserve or collateral for obligations of a Borrower to such Credit Card Issuer or Credit Card Processor (notwithstanding that the Credit Card Issuer or Credit Card Processor may have setoffs for fees and chargebacks consistent with the practices of such Credit Card Issuer or Credit Card Processor with a Borrower as of the date hereof or as such practices may hereafter change as a result of changes to the policies of such Credit Card Issuer or Credit Card Processor applicable to its customers generally and unrelated to the circumstances of a Borrower);

(j)                                    there are no facts, events or occurrences which to the best knowledge of Borrowers would impair in any material respect the validity, enforceability or collectability of such Credit Card Receivables or reduce the amount payable or delay payment thereunder (other than for setoffs for fees and chargebacks consistent with the practices of such Credit Card Issuer or Credit Card Processor with such Borrower as of the date hereof or as such practices may hereafter change as a result of changes to the policies of such Credit Card Issuer or Credit Card Processor applicable to its customers generally and unrelated to the circumstances of a Borrower);

(k)                                 such Credit Card Receivables are subject to the first priority, valid and perfected security interest and lien of Agent, for and on behalf of Lenders, as to such Credit Card Receivables of a Borrower and any goods giving rise thereto are not, and were not at the time of the sale thereof, subject to any encumbrances permitted under the terms hereof;

(l)                                     Agent shall have received, in form and substance satisfactory to Agent in good faith, a Credit Card Acknowledgment for the credit card or debit card used in the sale which gave rise to such Credit Card Receivable, such Credit Card Acknowledgment shall be in full force and effect and the Credit Card Issuer or Credit Card Processor party thereto shall be in compliance with the terms thereof;

(m)                             there are no proceedings or actions which are pending or, to the best of a Borrower’s knowledge, threatened against the Credit Card Issuers or Credit Card Processors with respect to such Credit Card Receivables which would reasonably be expected to result in any material adverse change in the continued collectability of the Credit Card Receivables with respect to the Credit Card Issuers or Credit Card Processors;

(n)                                 the terms of the sale giving rise to such Credit Card Receivables and all practices of a Borrower with respect to such Credit Card Receivables comply in all material respects with applicable Federal, State, and local laws and regulations;

(o)                                 such Borrower has not received from any Credit Card Issuer or Credit Card Processor any notice of default and/or notice of its intention to cease or suspend payments to a Borrower in respect of such Credit Card Receivables or to establish reserves or collateral for obligations of a Borrower to such Credit Card Issuer or Credit Card Processor (other than for

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then current fees and chargebacks consistent with the current practices of such Credit Card Issuer or Credit Card Processor as of the date hereof or as such practices may hereafter change as a result of changes to the policies of such Credit Card Issuer or Credit Card Processor applicable to its customers generally and unrelated to the circumstances of a Borrower); and

(p)                                 the customer using the credit card or debit card giving rise to such Credit Card Receivable shall not have returned the merchandise purchased giving rise to such Credit Card Receivable.

“Eligible Damaged Goods Vendors Receivables” shall mean Accounts, other than Credit Card Receivables or Eligible Sell-Off Vendors Receivables, created by any Borrower which are and continue to be acceptable to Agent based on the criteria set forth below.  In general, Accounts shall be Eligible Damaged Goods Vendors Receivables if:

(a)                                 such Accounts arise from the actual and bona fide sale and delivery of damaged Inventory by such Borrower to a third-party off-price wholesaler satisfactory to Agent, in the ordinary course of such Borrower’s business, which transactions are completed in accordance with the terms and provisions contained in any documents related thereto;

(b)                                 such Accounts are not unpaid more than ninety (90) days after the date of the original invoice for them;

(c)                                  such Accounts comply with the terms and conditions contained in Section 7.2(b) of this Agreement;

(d)                                 such Accounts do not arise from sales on consignment, guaranteed sale, sale and return, sale on approval, or other terms under which payment by the account debtor may be conditional or contingent;

(e)                                  the chief executive office of the account debtor with respect to such Accounts is located in the United States of America or Canada;

(f)                                   such Accounts do not consist of progress billings (such that the obligation of the account debtors with respect to such Accounts is conditioned upon such Borrower’s satisfactory completion of any further performance under the agreement giving rise thereto), bill and hold invoices or retainage invoices, except as to bill and hold invoices, if Agent shall have received an agreement in writing from the account debtor, in form and substance satisfactory to Agent, confirming the unconditional obligation of the account debtor to take the goods related thereto and pay such invoice;

(g)                                  the account debtor with respect to such Accounts has not asserted a counterclaim, defense or dispute and does not have, and does not engage in transactions which may give rise to any right of setoff or recoupment against such Accounts (but the portion of the Accounts of such account debtor in excess of the amount at any time and from time to time owed by such Borrower to such account debtor or claimed to be owed by such account debtor may be deemed Eligible Damaged Goods Vendors Receivables);

(h)                                 there are no facts, events or occurrences which would impair the validity,

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enforceability or collectability of such Accounts or reduce the amount payable or delay payment thereunder;

(i)                                     such Accounts are subject to the first priority, valid and perfected security interest of Agent and any goods giving rise thereto are not, and were not at the time of the sale thereof, subject to any liens except those of Agent or those permitted in this Agreement that are subject to an intercreditor agreement in form and substance satisfactory to Agent between the holder of such security interest or lien and Agent;

(j)                                    neither the account debtor nor any officer or employee of the account debtor with respect to such Accounts is an officer, employee, agent or other Affiliate of any Borrower or Guarantor;

(k)                                 the account debtors with respect to such Accounts are not any foreign government, the United States of America, any State, political subdivision, department, agency or instrumentality thereof, unless, if the account debtor is the United States of America, any State, political subdivision, department, agency or instrumentality thereof, upon Agent’s request, the Federal Assignment of Claims Act of 1940, as amended or any similar State or local law, if applicable, has been complied with in a manner satisfactory to Agent;

(l)                                     there are no proceedings or actions which are threatened or pending against the account debtors with respect to such Accounts which are likely to result in any material adverse change in any such account debtor’s financial condition (including, without limitation, any bankruptcy, dissolution, liquidation, reorganization or similar proceeding);

(m)                             such Accounts are not evidenced by or arising under any instrument or chattel paper;

(n)                                 such Accounts are not owed by an account debtor who has Accounts unpaid more than ninety (90) days after the original invoice date for them which constitute more than thirty-five percent (35%) of the total Accounts of such account debtor;

(o)                                 the account debtor is not located in a state requiring the filing of a Notice of Business Activities Report or similar report in order for such Borrower to seek judicial enforcement in such State of payment of such Account, unless such Borrower has qualified to do business in such state or has filed a Notice of Business Activities Report or equivalent report for the then current year or such failure to file and inability to seek judicial enforcement is capable of being remedied without any material delay or material cost; and

(p)                                 such Accounts do not constitute amounts which have been invoiced by such Borrower but with respect to which goods so invoiced have not been delivered to the account debtor.

The criteria for Eligible Damaged Goods Vendors Receivables set forth above may only be changed and any new criteria for Eligible Damaged Goods Vendors Receivables may only be established by Agent in good faith based on either:  (i) an event, condition or other circumstance arising after the date hereof, or (ii) an event, condition or other circumstance existing on the date hereof to the extent Agent has no written notice thereof from Borrowers prior to the date hereof,

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in either case under clause (i) or (ii) which adversely affects or could reasonably be expected to adversely affect the Accounts in the good faith determination of Agent.  Any Accounts which are not Eligible Damaged Goods Vendors Receivables shall nevertheless be part of the Collateral.

“Eligible Inventory” shall mean Eligible Landed Inventory, Eligible In-Transit Inventory and Eligible In-Transit LC Inventory.

“Eligible Intellectual Property” shall mean Intellectual Property deemed by Agent and Term Loan Agent in their commercially reasonable discretion to be eligible for inclusion in the calculation of the Term Loan Push Down Reserve based on the criteria set forth below.  Intellectual Property shall be Eligible Intellectual Property if (except as otherwise agreed by Agent and Term Loan Agent in their commercially reasonable discretion):

(a)                                 such Intellectual Property is validly registered with the U.S. Patent and Trademark Office or the U.S. Copyright Office, as applicable;

(b)                                 a Borrower owns such Intellectual Property or exclusively licenses such Intellectual Property from a third party;

(c)                                  such Borrower is in compliance in all material respects with the representations, warranties and covenants set forth in the Agreement relating to such Intellectual Property;

(d)                                 such Intellectual Property shall be subject to a valid first priority security interest of Agent, subject only to any licenses, liens or junior encumbrances expressly permitted hereunder (including, without limitation, filings at the U.S. Patent and Trademark Office or the U.S. Copyright Office, as applicable); and

(e)                                  such Intellectual Property shall be included in an appraisal delivered in accordance with Section 7.6 hereof.

“Eligible In-Transit Inventory” shall mean Domestic In-Transit Inventory and Foreign In-Transit Inventory owned by a Borrower that otherwise satisfies the criteria for Eligible Landed Inventory; provided, that:

(a)                                 as to any such Domestic In-Transit Inventory or Foreign In-Transit Inventory:

(i)                                     title to such Inventory has passed to such Borrower;

(ii)                                  such Inventory is not then subject to a Letter of Credit Accommodation;

(iii)                               such Inventory is insured against types of loss, damage, hazards, and risks, and in amounts, satisfactory to Agent in its discretion and Agent shall have received a copy of the certificate of evidence of property insurance in the case of Domestic In-Transit Inventory and the certificate of evidence of marine cargo insurance in the case of Foreign In-Transit Inventory, in each case, in which Agent has been named as an additional insured and

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lender’s loss payee in a manner acceptable to Agent;

(iv)                              the applicable Borrower has provided a certificate to Agent that certifies that, to the best knowledge of such Borrower, such Inventory meets all of such Borrower’s representations and warranties contained herein concerning Eligible Inventory, that it knows of no reason why such Inventory would not be accepted by such Borrower when it arrives and that the shipment as evidenced by the documents conforms to the related order documents; and

(v)                                 Agent has a first priority perfected security interest in and lien upon such Inventory and all documents of title with respect thereto;

(b)                                 in addition to and not in limitation of the criteria set forth in clause (a) of this definition, as to any such Domestic In-Transit Inventory,

(i)                                     such Inventory shall not have been in transit for more than fourteen (14) days, without the prior written consent of Agent; and

(ii)                                  such Inventory, and if requested by Agent, any documents of title related thereto, is in the possession of a Person who has executed, in form and substance acceptable to Agent, a Collateral Access Agreement in favor of Agent;

(c)                                  in addition to and not in limitation of the criteria set forth in clause (a) of this definition, as to any such Foreign In-Transit Inventory,

(i)                                     such Inventory meets the criteria in subsections (A), (B) or (C) below, subject to the sublimits set forth in the Borrowing Base:

(A)                               such Inventory either (1) is the subject of a negotiable bill of lading (I) in which Agent is named as the consignee (either directly or by means of endorsements), (II) that was issued by the carrier respecting such Inventory that is subject to such bill of lading, and (III) that is in the possession of Agent or the Freight Forwarder handling the importing, shipping and delivery of such Inventory, in all cases, acting on Agent’s behalf subject to a Collateral Access Agreement, duly authorized, executed and delivered by such Freight Forwarder, or (2) is the subject of a negotiable forwarder’s cargo receipt and such cargo receipt on its face indicates the name of the freight forwarder as a carrier or multimodal transport operator and has been signed or otherwise authenticated by it in such capacity or as a named agent for or on behalf of the carrier or multilmodal transport operator, in any case respecting such Inventory and either (I) names Agent as the consignee (either directly or by means of endorsements), or (II) is in the possession of Agent or the Freight Forwarder handling the importing, shipping and delivery of such Inventory, in all cases, acting on Agent’s behalf subject to a Collateral Access Agreement, duly authorized, executed and delivered by such Freight Forwarder; such Inventory currently is in the possession or control of a bailee signatory to a Collateral Access Agreement and is in transit (whether by vessel, air, or land);

(B)                               such Inventory either (1) is the subject of a non-negotiable bill of lading (I) in which Agent is directly named as the consignee, (II) that was issued by the carrier respecting such Inventory that is subject to such bill of lading, and (III) that is in the

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possession of Agent or the Freight Forwarder handling the importing, shipping and delivery of such Inventory, in all cases, acting on Agent’s behalf subject to a Collateral Access Agreement, duly authorized, executed and delivered by such Freight Forwarder, or (2) is the subject of a non-negotiable forwarder’s cargo receipt and such cargo receipt on its face indicates the name of the freight forwarder as a carrier or multimodal transport operator and has been signed or otherwise authenticated by it in such capacity or as a named agent for or on behalf of the carrier or multilmodal transport operator, in any case respecting such Inventory and (I) directly names Agent as the consignee, and (II) is in the possession of Agent or the Freight Forwarder handling the importing, shipping and delivery of such Inventory, in all cases, acting on Agent’s behalf subject to a Collateral Access Agreement, duly authorized, executed and delivered by such Freight Forwarder; such Inventory currently is in the possession or control of a bailee signatory to a Collateral Access Agreement and is in transit (whether by vessel, air, or land);

(C)                               such Inventory either (1) is the subject of a non-negotiable bill of lading (I) in which such Borrower is named as the consignee, (II) that was issued by the carrier respecting such Inventory that is subject to such bill of lading, and (III) that is in the possession of Agent or the Freight Forwarder handling the importing, shipping and delivery of such Inventory, in all cases, acting on Agent’s behalf subject to a Collateral Access Agreement, duly authorized, executed and delivered by such Freight Forwarder, or (2) is the subject of a non-negotiable forwarder’s cargo receipt and such cargo receipt on its face indicates the name of the freight forwarder as a carrier or multimodal transport operator and has been signed or otherwise authenticated by it in such capacity or as a named agent for or on behalf of the carrier or multilmodal transport operator, in any case respecting such Inventory and (I) names such Borrower as the consignee, and (II) is in the possession of Agent or the Freight Forwarder handling the importing, shipping and delivery of such Inventory, in all cases, acting on Agent’s behalf subject to a Collateral Access Agreement, duly authorized, executed and delivered by such Freight Forwarder; such Inventory currently is in the possession or control of a bailee signatory to a Collateral Access Agreement and is in transit (whether by vessel, air, or land);

(ii)                                  the bills of lading and other documents of title with respect to such Inventory complies with the terms and conditions of Section 7.5 hereof; and

(iii)                               such Inventory shall not have been in transit for more than forty-five (45) days, without the prior written consent of Agent.

“Eligible In-Transit LC Inventory” shall mean Inventory owned by a Borrower that otherwise satisfies the criteria for Eligible Landed Inventory but is not located in the continental United States of America and which is in transit to one of the locations set forth on Exhibit E hereto (as such schedule may be updated from time to time by Borrowers to exclude locations which have been closed and/or include additional locations of Inventory which Borrowers are permitted to establish under the terms of this Agreement) being either the premises of a Freight Forwarder in the United States of America or the premises of such Borrower in the United States of America which are either owned and controlled by such Borrower or leased by such Borrower (but only if Agent has received a Collateral Access Agreement duly authorized, executed and delivered by such Freight Forwarder or the owner and lessor of such leased premises, as the case may be); provided, that:

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(a)                                 such Inventory is the subject of an outstanding documentary Letter of Credit Accommodation issued hereunder for the purchase of such Inventory;

(b)                                 the documentary Letter of Credit Accommodation issued hereunder for the purchase of such Inventory has not been outstanding more than seventy-five (75) days from its date of issuance;

(c)                                  title to such Inventory has passed to such Borrower,

(d)                                 Agent has a first priority perfected security interest in and lien upon such Inventory and all documents of title with respect thereto;

(e)                                  such Inventory is insured against types of loss, damage, hazards, and risks, and in amounts, satisfactory to Agent in its discretion and Agent shall have received a copy of the certificate of evidence of marine cargo insurance in connection therewith in which it has been named as an additional insured and lender’s loss payee in a manner acceptable to Agent;

(f)                                   such Inventory meets the criteria in subsections (i), (ii) or (iii) below, subject to the sublimits set forth in the Borrowing Base:

(i)                                     such Inventory either (A) is the subject of a negotiable bill of lading (1) in which Agent is named as the consignee (either directly or by means of endorsements), (2) that was issued by the carrier respecting such Inventory that is subject to such bill of lading, and (3) that is in the possession of Agent or the Freight Forwarder handling the importing, shipping and delivery of such Inventory, in all cases, acting on Agent’s behalf subject to a Collateral Access Agreement, duly authorized, executed and delivered by such Freight Forwarder, or (B) is the subject of a negotiable forwarder’s cargo receipt and such cargo receipt on its face indicates the name of the freight forwarder as a carrier or multimodal transport operator and has been signed or otherwise authenticated by it in such capacity or as a named agent for or on behalf of the carrier or multilmodal transport operator, in any case respecting such Inventory and either (I) names Agent as the consignee (either directly or by means of endorsements), or (2) is in the possession of Agent or the Freight Forwarder handling the importing, shipping and delivery of such Inventory, in all cases, acting on Agent’s behalf subject to a Collateral Access Agreement, duly authorized, executed and delivered by such Freight Forwarder; such Inventory currently is in the possession or control of a bailee signatory to a Collateral Access Agreement and is in transit (whether by vessel, air, or land);

(ii)                                  such Inventory either (A) is the subject of a non-negotiable bill of lading (1) in which Agent is directly named as the consignee, (2) that was issued by the carrier respecting such Inventory that is subject to such bill of lading, and (3) that is in the possession of Agent or the Freight Forwarder handling the importing, shipping and delivery of such Inventory, in all cases, acting on Agent’s behalf subject to a Collateral Access Agreement, duly authorized, executed and delivered by such Freight Forwarder, or (B) is the subject of a non-negotiable forwarder’s cargo receipt and such cargo receipt on its face indicates the name of the freight forwarder as a carrier or multimodal transport operator and has been signed or otherwise authenticated by it in such capacity or as a named agent for or on behalf of the carrier or multilmodal transport operator, in any case respecting such Inventory and (1) directly names

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Agent as the consignee, and (2) is in the possession of Agent or the Freight Forwarder handling the importing, shipping and delivery of such Inventory, in all cases, acting on Agent’s behalf subject to a Collateral Access Agreement, duly authorized, executed and delivered by such Freight Forwarder; such Inventory currently is in the possession or control of a bailee signatory to a Collateral Access Agreement and is in transit (whether by vessel, air, or land);

(iii)          such Inventory either (A) is the subject of a non-negotiable bill of lading (1) in which such Borrower is named as the consignee, (2) that was issued by the carrier respecting such Inventory that is subject to such bill of lading, and (3) that is in the possession of Agent or the Freight Forwarder handling the importing, shipping and delivery of such Inventory, in all cases, acting on Agent’s behalf subject to a Collateral Access Agreement, duly authorized, executed and delivered by such Freight Forwarder, or (B) is the subject of a non-negotiable forwarder’s cargo receipt and such cargo receipt on its face indicates the name of the freight forwarder as a carrier or multimodal transport operator and has been signed or otherwise authenticated by it in such capacity or as a named agent for or on behalf of the carrier or multilmodal transport operator, in any case respecting such Inventory and (1) names such Borrower as the consignee, and (2) is in the possession of Agent or the Freight Forwarder handling the importing, shipping and delivery of such Inventory, in all cases, acting on Agent’s behalf subject to a Collateral Access Agreement, duly authorized, executed and delivered by such Freight Forwarder; such Inventory currently is in the possession or control of a bailee signatory to a Collateral Access Agreement and is in transit (whether by vessel, air, or land); and

(g)           the applicable Borrower has provided a certificate to Agent that certifies that, to the best knowledge of such Borrower, such Inventory meets all of such Borrower’s representations and warranties contained herein concerning Eligible Inventory, that it knows of no reason why such Inventory would not be accepted by such Borrower when it arrives and that the shipment as evidenced by the documents conforms to the related order documents.

“Eligible Landed Inventory” shall mean Inventory consisting of finished goods held for resale in the ordinary course of the business of Borrowers located in one of the locations of Borrowers set forth on Exhibit E hereto (as such schedule may be updated from time to time by Borrowers to exclude locations which have been closed and/or include additional locations of Inventory which Borrowers are permitted to establish under the terms of this Agreement) which are acceptable to Agent based on the criteria set forth below.  In general, Eligible Landed Inventory shall not include:

(a)           work-in-process;

(b)           raw materials;

(c)           spare parts for equipment;

(d)           packaging and shipping materials;

(e)           supplies used or consumed in Borrowers’ business;

(f)            Inventory at premises other than those owned or leased and controlled by a Borrower unless Agent has either (i) received a Collateral Access Agreement in form and

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substance satisfactory to Agent with respect to such location or (ii) established a Reserve in an amount in accordance with the terms hereof with respect to such location;

(g)           Inventory subject to a perfected security interest or lien in favor of any person other than Agent except those permitted in this Agreement including those that are subordinate to the security interest of Agent pursuant to an intercreditor agreement in form and substance satisfactory to Agent between Agent and the holder of such other security interest or lien;

(h)           bill and hold goods;

(i)            obsolete, out-of-season or slow moving Inventory;

(j)            damaged and/or defective Inventory;

(k)           Inventory returned by customers and not held for resale;

(l)            Inventory consisting of samples or displays;

(m)          Inventory held for return to vendors; and

(n)           Inventory purchased or sold on consignment.

General criteria for Eligible Landed Inventory may only be made more restricted and any new criteria for Eligible Landed Inventory may only be established by Agent in good faith, based on either:  (i) an event, condition or other circumstance arising after the date hereof, or (ii) existing on the date hereof to the extent Agent has no written notice thereof from Borrowers prior to the date hereof, in either case under clause (i) or (ii) which adversely affects or could reasonably be expected to adversely affect the Inventory in the good faith determination of Agent.  Any Inventory which is not Eligible Landed Inventory shall nevertheless be part of the Collateral.

“Eligible Sell-Off Vendors Receivables” shall mean Accounts, other than Credit Card Receivables or Eligible Damaged Goods Vendor Receivables, created by any Borrower which are and continue to be acceptable to Agent based on the criteria set forth below.  In general, Accounts shall be Eligible Sell-Off Vendors Receivables if:

(a)           such Accounts arise from the actual and bona fide sale and delivery of out-of-season or slow moving Inventory by such Borrower to a third-party off-price wholesaler, including NEJ, Inc. and Global Traders Network (or any other Person engaged in substantially the same business as NEJ, Inc. and Global Traders Network and permitted by Agent), in the ordinary course of such Borrower’s business, which transactions are completed in accordance with the terms and provisions contained in any documents related thereto;

(b)           such Accounts are not unpaid more than ninety (90) days after the date of the original invoice for them;

(c)           such Accounts comply with the terms and conditions contained in Section

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7.2(b) of this Agreement;

(d)           such Accounts do not arise from sales on consignment, guaranteed sale, sale and return, sale on approval, or other terms under which payment by the account debtor may be conditional or contingent;

(e)           the chief executive office of the account debtor with respect to such Accounts is located in the United States of America or Canada;

(f)            such Accounts do not consist of progress billings (such that the obligation of the account debtors with respect to such Accounts is conditioned upon such Borrower’s satisfactory completion of any further performance under the agreement giving rise thereto), bill and hold invoices or retainage invoices, except as to bill and hold invoices, if Agent shall have received an agreement in writing from the account debtor, in form and substance satisfactory to Agent, confirming the unconditional obligation of the account debtor to take the goods related thereto and pay such invoice;

(g)           the account debtor with respect to such Accounts has not asserted a counterclaim, defense or dispute and does not have, and does not engage in transactions which may give rise to any right of setoff or recoupment against such Accounts (but the portion of the Accounts of such account debtor in excess of the amount at any time and from time to time owed by such Borrower to such account debtor or claimed to be owed by such account debtor may be deemed Eligible Sell-Off Vendors Receivables),

(h)           there are no facts, events or occurrences which would impair the validity, enforceability or collectability of such Accounts or reduce the amount payable or delay payment thereunder;

(i)            such Accounts are subject to the first priority, valid and perfected security interest of Agent and any goods giving rise thereto are not, and were not at the time of the sale thereof, subject to any liens except those permitted in this Agreement that are subject to an intercreditor agreement in form and substance satisfactory to Agent between the holder of such security interest or lien and Agent;

(j)            neither the account debtor nor any officer or employee of the account debtor with respect to such Accounts is an officer, employee, agent or other Affiliate of any Borrower or Guarantor;

(k)           the account debtors with respect to such Accounts are not any foreign government, the United States of America, any State, political subdivision, department, agency or instrumentality thereof, unless, if the account debtor is the United States of America, any State, political subdivision, department, agency or instrumentality thereof, upon Agent’s request, the Federal Assignment of Claims Act of 1940, as amended or any similar State or local law, if applicable, has been complied with in a manner satisfactory to Agent;

(l)            there are no proceedings or actions which are threatened or pending against the account debtors with respect to such Accounts which are likely to result in any material adverse change in any such account debtor’s financial condition (including, without

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limitation, any bankruptcy, dissolution, liquidation, reorganization or similar proceeding);

(m)          such Accounts are not evidenced by or arising under any instrument or chattel paper;

(n)           such Accounts are not owed by an account debtor who has Accounts unpaid more than ninety (90) days after the original invoice date for them which constitute more than thirty-five (35%) of the total Accounts of such account debtor;

(o)           the account debtor is not located in a state requiring the filing of a Notice of Business Activities Report or similar report in order for such Borrower to seek judicial enforcement in such State of payment of such Account, unless such Borrower has qualified to do business in such state or has filed a Notice of Business Activities Report or equivalent report for the then current year or such failure to file and inability to seek judicial enforcement is capable of being remedied without any material delay or material cost; and

(p)           such Accounts do not constitute amounts which have been invoiced by such Borrower but with respect to which goods so invoiced have not been delivered to the account debtor.

The criteria for Eligible Sell-Off Vendors Receivables set forth above may only be changed and any new criteria for Eligible Sell-Off Vendors Receivables may only be established by Agent in good faith based on either:  (i) an event, condition or other circumstance arising after the date hereof, or (ii) an event, condition or other circumstance existing on the date hereof to the extent Agent has no written notice thereof from Borrowers prior to the date hereof, in either case under clause (i) or (ii) which adversely affects or could reasonably be expected to adversely affect the Accounts in the good faith determination of Agent.  Any Accounts which are not Eligible Sell-Off Vendors Receivables shall nevertheless be part of the Collateral.

“Eligible Transferee” shall mean (a) any Lender; (b) the parent company of any Lender and/or any Affiliate of such Lender which is at least fifty percent (50%) owned by such Lender or its parent company; (c) any person (whether a corporation, partnership, trust or otherwise) that is engaged in the business of making, purchasing, holding or otherwise investing in bank loans and similar extensions of credit in the ordinary course of its business and is administered or managed by a Lender or with respect to any Lender that is a fund which invests in bank loans and similar extensions of credit, any other fund that invests in bank loans and similar extensions of credit and is managed by the same investment advisor as such Lender or by an Affiliate of such investment advisor, and in each case is approved by Agent; and (d) any other commercial bank, financial institution or “accredited investor” (as defined in Regulation D under the Securities Act of 1933) approved by Agent, provided, that, (i) no Borrower, Guarantor, Affiliate of any Borrower or Guarantor, IPC or any Affiliate of IPC shall qualify as an Eligible Transferee, (ii) no Person to whom any Indebtedness which is in any way subordinated in right of payment to any other Indebtedness of any Borrower or Guarantor shall qualify as an Eligible Transferee, except as Agent may otherwise specifically agree and (iii) no Person that is organized under the laws of a jurisdiction other than the United States or any state thereof shall qualify as an Eligible Transferee.

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“Enforcement Action” shall mean the exercise by Agent in good faith of any of its material enforcement rights and remedies as a secured creditor hereunder or under the other Financing Agreements, applicable law or otherwise at any time upon the occurrence and during the continuance of an Event of Default (including, without limitation, the solicitation of bids from third parties to conduct the liquidation of all or any material portion of the Collateral, the engagement or retention of sales brokers, marketing agents, investment bankers, accountants, appraisers, auctioneers or other third parties for the purposes of valuing, marketing, promoting and selling all or any material portion of the Collateral, the commencement of any action to foreclose on the security interests or Liens of Agent in all or any material portion of the Collateral, notification of account debtors to make payments to Agent, any action to take possession of all or any material portion of the Collateral or commencement of any legal proceedings or actions against or with respect to all or any material portion of the Collateral).

“Environmental Laws” shall mean all foreign, Federal, State and local laws (including common law), rules, codes, licenses, permits (including any conditions imposed therein), authorizations, judicial or administrative decisions, injunctions or agreements between any Borrower or Guarantor and any Governmental Authority, (a) relating to pollution and the protection, preservation or restoration of the environment (including air, water vapor, surface water, ground water, drinking water, drinking water supply, surface land, subsurface land, plant and animal life or any other natural resource), or to occupational health or safety, (b) relating to the exposure to, or the use, storage, recycling, treatment, generation, manufacture, processing, distribution, transportation, handling, labeling, production, release or disposal, or threatened release, of Hazardous Materials, or (c) relating to all laws with regard to recordkeeping, notification, disclosure and reporting requirements respecting Hazardous Materials.  The term “Environmental Laws” includes (i) the Federal Comprehensive Environmental Response, Compensation and Liability Act of 1980, the Federal Superfund Amendments and Reauthorization Act, the Federal Water Pollution Control Act of 1972, the Federal Clean Water Act, the Federal Clean Air Act, the Federal Resource Conservation and Recovery Act of 1976 (including the Hazardous and Solid Waste Amendments thereto), the Federal Solid Waste Disposal and the Federal Toxic Substances Control Act, the Federal Insecticide, Fungicide and Rodenticide Act, and the Federal Safe Drinking Water Act of 1974, (ii) applicable state counterparts to such laws and (iii) any common law or equitable doctrine that may impose liability or obligations for injuries or damages due to, or threatened as a result of, the presence of or exposure to any Hazardous Materials.

“Equipment” shall mean all of each Borrower’s and each Guarantor’s now owned and hereafter acquired equipment, wherever located, including machinery, data processing and computer equipment (whether owned or licensed and including embedded software), vehicles, tools, furniture, fixtures, all attachments, accessions and property now or hereafter affixed thereto or used in connection therewith, and substitutions and replacements thereof, wherever located.

“ERISA” shall mean the United States Employee Retirement Income Security Act of 1974, as amended, together with all rules, regulations and interpretations thereunder or related thereto.

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“ERISA Affiliate” shall mean any person required to be aggregated with any Borrower or any Guarantor under Sections 414(b), 414(c), 414(m) or 414(o) of the Code.

“ERISA Event” shall mean (a) any “reportable event”, as defined in Section 4043(c) of ERISA or the regulations issued thereunder, with respect to a Pension Plan, except for any such event with respect to which notice has been waived pursuant to applicable regulations; (b) the adoption of any amendment to a Pension Plan that would require the provision of security pursuant to Section 401(a)(29) of the Code or Section 307 of ERISA; (c) the existence with respect to any Pension Plan of an “accumulated funding deficiency” (as defined in Section 412 of the Code or Section 302 of ERISA), whether or not waived; (d) the filing pursuant to Section 412 of the Code or Section 303(d) of ERISA of an application for a waiver of the minimum funding standard with respect to any Pension Plan; (e) the occurrence of a non-exempt “prohibited transaction” with respect to which any Borrower or Guarantor, or any of their respective Subsidiaries is a “disqualified person” (within the meaning of Section 4975 of the Code); (f) a complete or partial withdrawal by any Borrower, any Guarantor or any ERISA Affiliate from a Multiemployer Plan or a cessation of operations which is treated as such a withdrawal or notification that a Multiemployer Plan is in reorganization; (g) the filing of a notice of intent to terminate, the treatment of a Pension Plan amendment as a termination under Section 4041 or 4041A of ERISA, or the commencement of proceedings by the Pension Benefit Guaranty Corporation to terminate a Pension Plan; (h) an event or condition which might reasonably be expected to constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan; and (i) the imposition of any liability under Title IV of ERISA, other than the Pension Benefit Guaranty Corporation premiums due but not delinquent under Section 4007 of ERISA, upon any Borrower, any Guarantor or any ERISA Affiliate in an amount that could reasonably be expected to have a Material Adverse Effect.

“Eurodollar Rate” shall mean with respect to the Interest Period for a Eurodollar Rate Loan, the interest rate per annum equal to the arithmetic average of the rates of interest per annum (rounded upwards, if necessary, to the next one-hundredth (1/100) of one percent (1%)) appearing on Reuters Screen LIBOR01 Page (or any successor or substitute page of such service, or any successor to or substitute for such service as determined by Agent) as the London interbank offered rate for deposits in US Dollars at approximately 11:00 a.m. (London time) two (2) Business Days’ prior to the first day of such Interest Period for a term comparable to such Interest Period; provided, that, if more than one rate is specified on Reuters Screen LIBOR01 Page for such comparable period, the applicable rate shall be the arithmetic mean of all such rates.  If such rate is not available at such time for any reason, then the “Eurodollar Rate” shall mean, with respect to any Eurodollar Rate Loan for the Interest Period applicable thereto, the rate of interest per annum at which US dollar deposits of $5,000,000 and for a term comparable to such Interest Period are offered by the principal London office of Wells Fargo as specified by Agent, in immediately available funds in the London interbank market at approximately 11:00 a.m. London time two (2) Business Days prior to the commencement of such Interest Period.

“Eurodollar Rate Loans” shall mean the Loans or portions thereof on which interest is payable based on the Adjusted Eurodollar Rate in accordance with the terms hereof.

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“Event of Default” shall mean the occurrence or existence of any event or condition described in Section 10.1 hereof.

“Excess Availability” shall mean, the amount, as determined by Agent, calculated at any date, equal to (a)  the lesser of:  (i) the Borrowing Base and (ii) the Revolving Loan Limit, minus (b) the sum of: (i) the amount of all then outstanding and unpaid Obligations in respect of the Revolving Loans and outstanding Letter of Credit Obligations, plus (ii) the aggregate amount of all outstanding and unpaid trade payables and other obligations of any Borrower which, as reported on the most recent Borrowing Base Certificate for the most recent month end, are outstanding more than forty-five (45) days past due as of such time (other than trade payables or other obligations being contested or disputed by such Borrower in good faith), plus (iii) without duplication, the amount of checks issued by any Borrower to pay trade payables and other obligations which, as reported on the most recent Borrowing Base Certificate for the most recent month end, are more than forty-five (45) days past due as of such time (other than trade payables or other obligations being contested or disputed by such Borrower in good faith), but not yet sent.

“Exchange Act” shall mean the Securities Exchange Act of 1934, together with all rules, regulations and interpretations thereunder or related thereto.

“Excluded Swap Obligation” shall mean, with respect to any Borrower or Guarantor, any Swap Obligation if, and to the extent that, all or a portion of the joint and several obligations of such Borrower hereunder or the Guarantee of such Guarantor, or the grant by such Borrower or Guarantor of a security interest to secure, such Swap Obligation (or any Guarantee thereof) is or becomes illegal under the Commodity Exchange Act or any rule, regulation or order of the Commodity Futures Trading Commission (or the application or official interpretation of any thereof) by virtue of such Borrower’s or Guarantor’s failure for any reason to constitute an “eligible contract participant” as defined in the Commodity Exchange Act and the regulations thereunder at the time the liability of such Borrower or the Guarantee of such Guarantor or the grant of such security interest becomes effective with respect to such Swap Obligation. If a Swap Obligation arises under a master agreement governing more than one swap, such exclusion shall apply only to the portion of such Swap Obligation that is attributable to swaps for which such joint and several obligation or Guarantee or security interest is or becomes illegal.

“Existing Financing Agreements” shall mean, collectively, the Existing Loan Agreement, the Existing Guarantor Security Agreements, and all other documents, certificates, instruments, notes, guarantees, mortgages and agreements executed and delivered by Borrowers and Guarantors in connection therewith, whether or not specifically mentioned herein or therein as heretofore, amended and as in effect immediately prior to the date hereof.

“Existing Guarantor Security Agreements” shall mean, collectively, the Amended and Restated Guaranty and Security Agreement, dated March 16, 2004, by NY&Co in favor of Agent, the Amended and Restated Guaranty and Security Agreement, dated March 16, 2004, by Parent in favor of Agent, the Amended and Restated Guaranty and Security Agreement, dated March 16, 2004, by Nevada Factoring in favor of Agent, the Amended and Restated Guaranty and Security Agreement, dated March 16, 2004, by Associated Lerner in favor of Agent, Associated Lerner, and the Amended and Restated Guaranty and Security Agreement, dated

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March 16, 2004, by Lerner GC in favor of Agent as heretofore amended and as in effect immediately prior to the date hereof.

“Existing Letters of Credit” shall mean, collectively, the letters of credit issued for the account of Borrowers under the Existing Loan Agreement, as the same now exist or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced.

“Existing Loan Agreement” shall have the meaning set forth in the recitals hereof as heretofore amended and as in effect immediately prior to the date hereof.

“FATCA” shall mean the Foreign Account Tax Compliance Act (enacted as part of the Hiring Incentives to Restore Employment Act), Sections 1471 through 1474 of the Code, together with all rules, regulations and interpretations thereunder or related thereto.

“Federal Funds Rate” shall mean, for any period, a fluctuating interest rate per annum equal to, for each day during such period, the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for such day on such transactions received by Agent from three Federal funds brokers of recognized standing selected by it.

“Fee Letters” shall mean, collectively, the Revolving Loan Fee Letter and the Term Loan Fee Letter; sometimes being referred to herein individually as a “Fee Letter”.

“Financing Agreements” shall mean, collectively, this Agreement, any and all notes, the Fee Letter, the Guarantee, the Stock Pledge Agreements, the Collateral Access Agreements, the Credit Card Acknowledgments, the Deposit Account Control Agreements (together with all other agreements necessary for Agent to take (conditionally or otherwise) dominion of all cash receipts and payments on credit card receivables of each Borrower and Guarantor), the Investment Property Control Agreements, any other security agreements, the Intellectual Property Security Agreements, the Intercompany Subordination Agreement, and all other agreements, documents and instruments now or at any time hereafter executed and/or delivered by any Borrower or any Obligor in connection with this Agreement.

“Fiscal Month-End” shall mean the dates denoted as Fiscal Month-End dates on Exhibit F hereto.

“Fiscal Quarter-End” shall mean the dates denoted as Fiscal Quarter-End dates on Exhibit F hereto.

“Fiscal Year-End” shall mean the dates denoted as Fiscal Year-End dates on Exhibit F hereto.

“Fixed Charge Coverage Ratio” shall mean, as to any Person and their Subsidiaries, calculated on a consolidated basis, for any applicable Measurement Period, measured as of the end of such, the ratio of: (a) the amount equal to sum of (i) EBITDA plus (ii) Qualified Cash to (b) Fixed Charges.

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“Fixed Charges” shall mean, with respect to any Person and its Subsidiaries for any period, the sum of, without duplication, (a) all cash Interest Expense paid during such period (net of interest income of such Person during such Period and excluding, to the extent taken into account in the calculation of Interest Expense, upfront fees, costs and expenses in respect of this Agreement and the transactions contemplated hereby and thereby), plus (b) all regularly scheduled mandatory principal payments with respect to Indebtedness for borrowed money (excluding payments in respect of Revolving Loans but including regularly scheduled amortization payments in respect of the Term Loans) paid or payable for such period, and Indebtedness with respect to Capital Leases paid during such period in cash (excluding the interest component with respect to Indebtedness under Capital Lease), plus (c) all income taxes paid during such period in cash (net of refunds or tax credits to such Person in respect to income taxes, and excluding income tax on extraordinary or non-recurring gains or gains from asset sales outside of the ordinary course of business), plus (d) all Capital Expenditures paid in cash during such period net of applicable construction or landlord tenant allowances during such period (other than (i) Capital Expenditures of such Person made with the proceeds of Indebtedness permitted for such purpose hereunder and (ii) lease payments in respect of certain Capital Leases and Capital Expenditures of Borrowers not to exceed $15,000,000 in the aggregate in respect of the construction of the new headquarters of Borrowers and Guarantors located at 330 West 34th Street, New York, New York), all of the foregoing as determined in accordance with GAAP.

“Foreign In-Transit Inventory” shall mean Inventory owned by a Borrower that is not located in the continental United States of America and which is in transit to one of the  locations set forth on Exhibit E hereto (as such schedule may be updated from time to time by Borrowers to exclude locations which have been closed and/or include additional locations of Inventory which Borrowers are permitted to establish under the terms of this Agreement) being either the premises of a Freight Forwarder in the United States of America or the premises of such Borrower in the United States of America which are either owned and controlled by such Borrower or leased by such Borrower.

“Foreign Subsidiary” shall mean any Subsidiary of any Borrower or Guarantor that is organized or incorporated under the laws of any jurisdiction outside of the United States of America.

“Foreign Holdco Subsidiary” shall mean any Subsidiary of any Borrower or Guarantor that is organized or incorporated under the laws of any jurisdiction within the United States of America which (a) is formed and maintained for the sole purpose of holding the Capital Stock of any Foreign Subsidiary, (b) owns assets consisting solely of the Capital Stock of any Foreign Subsidiary and assets having a de minimis value, and (c) does not have any creditors.

“Freight Forwarders” shall mean the persons listed on Schedule 1.87 hereto or such other person or persons as may be selected by Borrower after the date hereof and after written notice by Borrower to Agent who are reasonably acceptable to Agent to handle the receipt of Inventory within the United States of America and/or to clear Inventory through the Bureau of Customs and Border Protection (formerly the Customs Service) or other domestic or foreign export control authorities or otherwise perform port of entry services to process Inventory imported by Borrower from outside the United States of America (such persons sometimes being referred to herein individually as a “Freight Forwarder”), provided, that, as to each such person, (a) Agent

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shall have received a Collateral Access Agreement by such person in favor of Agent (in form and substance satisfactory to Agent) duly authorized, executed and delivered by such person, (b) such agreement shall be in full force and effect and (c) such person shall be in compliance in all material respects with the terms thereof.

“GAAP” shall mean generally accepted accounting principles in the United States of America as in effect from time to time as set forth in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and the statements and pronouncements of the Financial Accounting Standards Board which are applicable to the circumstances as of the date of determination consistently applied, except that, for purposes of Section 9.17 and for purposes of calculating the Fixed Charge Coverage Ratio hereof, GAAP shall be determined on the basis of such principles in effect on the date hereof and consistent with those used in the preparation of the most recent audited financial statements delivered to Agent prior to the date hereof.

“Gift Certificate and Store Credit Reserve” shall mean, as of any date of determination, a Reserve equal to the amount of fifty-one percent (51%) of all (a) accrued and outstanding gift certificates which any Borrower is obligated to honor and (b) the aggregate amount of outstanding store credit to be honored by any Borrower.

“Governmental Authority” shall mean any nation or government, any state, province, or other political subdivision thereof, any central bank (or similar monetary or regulatory authority) thereof, and any entity exercising executive, legislative, judicial, regulatory or administrative functions of government.

“Guarantee” shall mean the Third Amended and Restated Guarantee, dated as of August 10, 2011, executed and delivered by each Guarantor in favor of Agent, for itself and the ratable benefit of the Lenders and the Bank Product Providers, in form and substance satisfactory to Agent, with respect to the Obligations, and any other guaranty from time to time executed by any Guarantor in favor of Agent, for itself and the ratable benefit of Lenders and the Bank Product Providers, with respect to the Obligations, as the same now exist or may hereafter exist when executed and delivered or may hereafter or thereafter be amended, modified, supplemented, extended, renewed, restated or replaced.

“Guarantors” shall mean collectively, the following (together with their respective successors and assigns): (a) NY&Co, (b) Parent, (c) Nevada Factoring, (d) NY&Co Stores, and (e) Lerner GC; each sometimes being referred to herein individually as ‘Guarantor’.

“Hazardous Materials” shall mean any hazardous, toxic or dangerous substances, materials and wastes, including hydrocarbons (including naturally occurring or man-made petroleum and hydrocarbons), flammable explosives, asbestos, urea formaldehyde insulation, radioactive materials, polychlorinated biphenyls, pesticides, herbicides and any other kind and/or type of pollutants or contaminants, sewage, sludge, industrial slag, solvents and/or any other similar substances, materials, or wastes and including any other substances, materials or wastes that are or become classified as hazardous or toxic under any Environmental Law.

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“Hedging Transactions” shall mean (a) any and all rate swap transactions, basis swaps, forward rate transactions, commodity swaps, commodity options, forward commodity contracts, equity or equity index swaps or options, bond or bond price or bond index swaps or options, forward bond or forward bond price or forward bond index transactions, interest rate options, forward foreign exchange transactions, cap transactions, floor transactions, collar transactions, currency swap transactions, cross-currency rate swap transaction, currency options or any other similar transactions or any combination of any of the foregoing (including any options to enter into any of the foregoing), whether or not any such transaction is governed by or subject to any master agreement, or (b) any and all transactions of any kind, and the related confirmations, that are subject to the terms or conditions of, or governed by, any form of master agreement published by the International Swaps and Derivatives Association, Inc., or any other master agreement, as amended, restated, extended, supplemented or otherwise modified in writing from time to time, including but not limited to, any such obligations or liabilities under any such agreement.

“Increased Collateral Reporting Event” shall mean a period either (a) commencing on the date that a Default or Event of Default shall exist or have occurred and be continuing and ending on the date such Default or Event of Default is waived or cured in accordance with Section 11.3 hereof or (b) commencing on the date that Compliance Excess Availability has been less than fifteen (15%) percent of the Revolving Loan Limit as calculated by Agent hereunder and ending on the date that Compliance Excess Availability has been greater than fifteen (15%) percent of the Revolving Loan Limit for any thirty (30) consecutive day period thereafter.

“In-Store Payment” shall have the meaning set forth in the Private Label Credit Card Agreement.

“Indebtedness” shall mean, with respect to any Person and without duplication, any liability, whether or not contingent, (a) in respect of borrowed money (whether or not the recourse of the lender is to the whole of the assets of such Person or only to a portion thereof) or evidenced by bonds, notes, debentures or similar instruments; (b) representing the balance deferred and unpaid of the purchase price of any property or services (except any such balance that constitutes an account payable to a trade creditor (whether or not an Affiliate) created, incurred, assumed or guaranteed by such Person in the ordinary course of business of such Person in connection with obtaining goods, materials or services that is not overdue by more than ninety (90) days, unless the trade payable is being contested in good faith); (c) all obligations as lessee under leases which have been, or should be, in accordance with GAAP recorded as Capital Leases; (d) any contractual obligation, contingent or otherwise, of such Person to pay or be liable for the payment of any indebtedness described in this definition of another Person, including, without limitation, any such indebtedness, directly or indirectly guaranteed, or any agreement to purchase, repurchase, or otherwise acquire such indebtedness, obligation or liability or any security therefor, or to provide funds for the payment or discharge thereof, or to maintain solvency, assets, level of income, or other financial condition of another Person; (e) all obligations with respect to redeemable stock and redemption or repurchase obligations under any Capital Stock or other equity securities issued by such Person; (f) all reimbursement obligations and other liabilities of such Person with respect to surety bonds (whether bid, performance or otherwise), letters of credit, banker’s acceptances, drafts or similar documents or instruments issued for such Person’s account; (g) all indebtedness of such Person in respect of indebtedness

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of another Person for borrowed money or indebtedness of another Person otherwise described in this definition which is secured by any consensual lien, security interest, collateral assignment, conditional sale, mortgage, deed of trust, or other encumbrance on any asset of such Person, whether or not such obligations, liabilities or indebtedness are assumed by or are a personal liability of such Person, all as of such time; (h) all obligations, liabilities and indebtedness of such Person (marked to market) arising under swap agreements, cap agreements and collar agreements and other agreements or arrangements designed to protect such person against fluctuations in interest rates or currency or commodity values; and (i) all obligations owed by such Person under License Agreements with respect to non-refundable, advance or minimum guarantee royalty payments.

“Indemnitee” shall have the meaning set forth in Section 11.5 hereof.

“Information Certificates” shall mean the Information Certificates, dated the date hereof, of Borrowers and Guarantors collectively constituting Exhibit D hereto, containing material information with respect to such Person and such Person’s businesses and assets provided by or on behalf of such Person to Agent in connection with the preparation of this Agreement and the other Financing Agreements and the financing arrangements provided for herein.

“Insolvency Event” shall mean, the commencement of any of the following with respect to any Borrower or Guarantor: (a) any case or proceeding with respect to such person under the Bankruptcy Code, or any other Federal, State or other bankruptcy, insolvency, reorganization or other law affecting creditors’ rights or any other or similar proceedings seeking any stay, reorganization, arrangement, composition or readjustment of all or substantially all of the obligations and indebtedness of such person or (b) any proceeding seeking the appointment of any receiver, trustee, administrator, liquidator, custodian or other insolvency official with similar powers with respect to such person or all or substantially all of its assets or (c) any proceeding for liquidation, dissolution or other winding up of the business of such person or (d) any general assignment for the benefit of creditors or any general marshaling of all or substantially all of the assets of such person.

“Intellectual Property” shall mean any Borrower’s or any Guarantor’s now owned and hereafter arising or acquired:  patents, patent rights, patent applications, copyrights, works which are the subject matter of copyrights, copyright registrations, trademarks, trade names, trade styles, and trademark and service mark applications; all extensions, renewals, reissues, divisions, continuations, and continuations-in-part of any of the foregoing; all rights to sue for past, present and future infringement of any of the foregoing; inventions, trade secrets, formulae, processes, compounds, drawings, designs, blueprints, surveys, reports, manuals, and operating standards; goodwill (including any goodwill associated with any trademark or the license of any trademark); customer and other lists in whatever form maintained; trade secret rights, copyright rights, rights in works of authorship, domain names and domain name registrations; software and contract rights relating to computer software programs, in each case, in whatever form created or maintained, and whether owned or licensed.

“Intellectual Property Reserves” shall mean such reserves as Agent and Term Loan Agent may from time to time determine in Agent’s and Term Loan Agent’s commercially reasonable discretion as being appropriate to reflect the impediments to Agent’s ability to realize upon any

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Eligible Intellectual Property or to reflect claims and liabilities that Agent determines will need to be satisfied in connection with the realization upon any Eligible Intellectual Property; provided, that, (a) as of the Closing Date, no Intellectual Property Reserve is in effect and (b) after the Closing Date, Agent and Term Loan Agent will provide ten Business Days’, or if a Default or Event of Default exists or has occurred and is continuing, three (3) Business Days’, telephonic or electronic notice to Borrowers before implementing any such Intellectual Property Reserve.

“Intellectual Property Security Agreements” shall mean, collectively, the Lerner Trademark Agreement, the Lernco Trademark Agreement and any other security agreement concerning any Intellectual Property of any Borrower or Guarantor at any time delivered to Agent in connection with this Agreement, as the same now exist or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced.

“Intercompany Subordination Agreement” shall mean the Second Amended and Restated Intercompany Subordination Agreement, in form and substance satisfactory to Agent, dated as of August 22, 2007, by and among Borrowers, certain of their Affiliates and Agent, as the same now exists or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced.

“Interest Expense” shall mean, for any period, total interest expense in accordance with GAAP of Borrowers and Guarantors on a consolidated basis with respect to all outstanding Indebtedness.

“Interest Period” shall mean for any Eurodollar Rate Loan, a period of approximately one (1), two (2), three (3) or six (6) months duration as Borrowers may elect, the exact duration to be determined in accordance with the customary practice in the applicable Eurodollar Rate market; provided, that, Borrowers may not elect an Interest Period which will end after the last day of the then-current term of this Agreement.

“Interest Rate” shall mean:

(a)           Subject to clause (b) of this definition below:

(i)            as to Revolving Loans that are Prime Rate Loans, a rate equal to the Prime Rate plus the Applicable Margin for Prime Rate Loans,

(ii)           as to Revolving Loans that are Eurodollar Rate Loans, a rate equal to the Adjusted Eurodollar Rate plus the Applicable Margin for Eurodollar Rate Loans (in each case, based on the Eurodollar Rate applicable for the Interest Period selected by Borrowers as in effect two (2) Business Days after the date of receipt by Agent of the request of or on behalf of Borrowers for such Eurodollar Rate Loans in accordance with the terms hereof, whether such rate is higher or lower than any rate previously quoted to Borrowers),

(iii)          in the event that Eurodollar Rate Loans are not available under the terms of this Agreement, as to Term Loans that are Prime Rate Loans, a rate equal to the Prime Rate plus four (4.0%) percent for Prime Rate Loans, and

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(iv)          as to Term Loans that are Eurodollar Rate Loans, a rate equal to the Adjusted Eurodollar Rate for an Interest Period of one (1) month plus four and one-half (4.5%) percent; provided, that, in no event shall the Adjusted Eurodollar Rate for such Eurodollar Rate Loans be less than one-half of one percent (0.50%).

(b)           Notwithstanding anything to the contrary contained in clause (a) of this definition, (i) the Applicable Margin otherwise used to calculate the Interest Rate for Prime Rate Loans in the immediately preceding clause (a)(i) and for Eurodollar Rate Loans in the immediately preceding clause (a)(ii) shall be the percentage set forth in the definition of the term Applicable Margin for each category of Loans that is then applicable plus two (2%) percent per annum, at Agent’s option and (ii) the Interest Rate for Prime Rate Loans in the immediately preceding clause (a)(iii) and for Eurodollar Rate Loans in the immediately preceding clause (a)(iv) shall be the percentage set forth in each such clause for such Term Loans plus two (2%) percent per annum, at Term Loan Agent’s option, either (1) for the period (x) on and after the date of termination or non-renewal of this Agreement in accordance with the terms hereof until such time as all Obligations are finally paid and satisfied in full in immediately available funds, or (y) from and after the date of the occurrence of any Event of Default, and for so long as such Event of Default is continuing or (2) on Loans at any time in the aggregate in excess of the Borrowing Base at any time or any other limitation with respect thereto provided for herein (in each case whether or not such excess(es) arise or are made with or without any Agent’s or any Lender’s knowledge or consent and whether made before or after an Event of Default), it being understood that Agent may elect to increase the Interest Rate on Revolving Loans and Term Loan Agent on Term Loans under this clause (b) by no more than two (2%) percent even if the events described in each of subclauses (1) and (2) above have occurred.

“Inventory” shall mean all of each Borrower’s and each Guarantor’s now owned and hereafter existing or acquired goods, wherever located, which (a) are leased by such Borrower or Guarantor as lessor; (b) are held by such Borrower or Guarantor for sale or lease or to be furnished under a contract of service; (c) are furnished by such Borrower or Guarantor under a contract of service; (d) consist of raw materials, work in process, finished goods or materials used or consumed in its business; or (e) are goods in transit to such Borrower or Guarantor.

“Investment Property Control Agreement” shall mean an agreement in writing, in form and substance satisfactory to Agent, by and among Agent, any Borrower or Guarantor (as the case may be) and any securities intermediary, commodity intermediary or other person who has custody, control or possession of any investment property of such Borrower or Guarantor acknowledging that such securities intermediary, commodity intermediary or other person has custody, control or possession of such investment property on behalf of Agent, that it will comply with entitlement orders originated by Agent with respect to such investment property, or other instructions of Agent, or (as the case may be) apply any value distributed on account of any commodity contract as directed by Agent, in each case, without the further consent of such Borrower or Guarantor and including such other terms and conditions as Agent may require.

“IPC” shall mean IPC/NYCG, LLC, a Delaware limited liability company.

“Issuing Bank” shall mean Wells Fargo Bank, National Association, a national banking association, and it successors and assigns.

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“Landed Value” shall mean, with respect to Eligible In-Transit Inventory or Eligible In-Transit LC Inventory, the sum of (a) the face amount of all documentary Letter of Credit Accommodations issued under this Agreement for purposes of purchasing such Inventory from a Person who is not an Affiliate of any Borrower plus (b) the amount of freight, customs, taxes and duty and other amounts which Agent estimates must be paid upon the arrival and in connection with the delivery of such Inventory to a Borrower’s location for Eligible Landed Inventory within the United States of America.

“Lenders” shall mean the Revolving Loan Lenders and Term Loan Lenders; each sometimes being referred to herein individually as a “Lender”.

“Lernco” shall mean Lernco, Inc., a Delaware corporation, and its successors and assigns.

“Lernco Trademark Agreement” shall mean the Second Amended and Restated Collateral Assignment of Trademarks (Security Agreement), dated as of August 22, 2007, by Lernco and Lerner Outlet in favor of Agent, for itself and the ratable benefit of the Lenders and the Bank Product Providers, as the now exists or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced.

“Lerner” shall mean Lerner New York, Inc., a Delaware corporation, and its successors and assigns.

“Lerner GC” shall mean Lerner New York GC, LLC, an Ohio limited liability company, and its successors and assigns.

“Lerner Outlet” shall mean Lerner New York Outlet, Inc., a Massachusetts corporation, formerly known as Jasmine Company, Inc., and its successors and assigns.

“Lerner Stock Pledge Agreement” shall mean the Second Amended and Restated Stock Pledge Agreement, dated as of August 22, 2007, by Lerner in favor of Agent, for itself and the ratable benefit of the Lenders and the Bank Product Providers, with respect to the pledge of 100% of the Capital Stock of Associated Lerner, Lernco, Lerner GC and Lerner Outlet, owned by Lerner, as the now exists or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced.

“Lerner Trademark Agreement” shall mean the Amended and Restated Collateral Assignment of Trademarks (Security Agreement), dated as of August 22, 2007, by Lerner in favor of Agent, for itself and the ratable benefit of the Lenders and the Bank Product Providers, as the same now exists or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced.

“Letter of Credit Accommodations” shall mean, collectively, the letters of credit, merchandise purchase or other guaranties, or acceptances of drafts relating to letters of credit, which are from time to time either (a) issued or opened by Issuing Bank for the account of any Borrower or any Obligor or for which Issuing Bank is the confirming bank or in respect of which it has otherwise agreed to make any payment, including all Existing Letters of Credit, or (b) with respect to which Agent or Lenders have agreed to indemnify the issuer or guarantee to the issuer

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the performance by any Borrower or any Obligor of its obligations to such issuer; sometimes being referred to herein individually as a “Letter of Credit Accommodation”.

“Letter of Credit Documents” shall mean, with respect to any Letter of Credit Accommodation, such Letter of Credit Accommodation, any amendments thereto, any documents delivered in connection therewith, any application therefor, and any agreements, instruments, guarantees or other documents (whether general in application or applicable only to such Letter of Credit Accommodation) governing or providing for (a) the rights and obligations of the parties concerned or at risk or (b) any collateral security for such obligations.

“Letter of Credit Rate” shall have the meaning set forth in Section 2.2(b) hereof.

“Letter of Credit Limit” shall mean $45,000,000, which amount shall automatically increase or decrease from time to time proportionally based upon a Revolving Loan Facility Increase or Revolving Loan Facility Decrease so that, after giving effect to any such Revolving Loan Facility Increase or Revolving Loan Facility Decrease, the amount of the Letter of Credit Limit shall be equal to the amount that is 60% of the revised amount of the Revolving Loan Limit.

“Letter of Credit Obligations” shall mean, at any time, the sum of (a) the aggregate undrawn amount of all Letter of Credit Accommodations outstanding at such time, plus (b) the aggregate amount of all drawings under Letter of Credit Accommodations for which Issuing Bank has not at such time been reimbursed, plus (c) without duplication, the aggregate amount of all payments made by each Lender to Issuing Bank with respect to such Lender’s participation in Letter of Credit Accommodations as provided in Section 2.2 for which Borrowers have not at such time reimbursed Lenders, whether by way of a Revolving Loan or otherwise.

“License Agreements” shall have the meaning set forth in Section 8.11 hereof.

“Loan Accounts” shall have the meaning set forth in Section 6.1 hereof.

“Loan Parties” shall mean Borrowers and Guarantors.

“Loans” shall mean the Revolving Loans and the Term Loans.

“Material Adverse Effect” shall mean a material adverse effect on (a) the financial condition, business, performance or operations of the Borrowers taken as a whole or the Loan Parties taken as a whole; (b) the legality, validity or enforceability of this Agreement or any of the other Financing Agreements; (c) the legality, validity, enforceability, perfection or priority of the security interests and liens of Agent upon the Collateral; (d) the Collateral or its value; (e) the ability of the Borrowers, taken as a whole, to repay the Obligations or of the Borrowers, taken as a whole, or the Loan Parties, taken as a whole, to perform their obligations under this Agreement or any of the other Financing Agreements as and when to be performed; or (f) the ability of Agent or any Lender to enforce the Obligations or realize upon the Collateral or otherwise with respect to the rights and remedies of Agent and Lenders under this Agreement or any of the other Financing Agreements.

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“Material Contract” shall mean (a) any contract or other agreement (other than the Financing Agreements), written or oral, of any Borrower or Obligor involving liability for $5,000,000 or more of Indebtedness owed to any Person (other than another Loan Party) or (b) any other contract or other agreement (other than the Financing Agreements), whether written or oral, to which any Borrower is a party as to which the breach, nonperformance, cancellation or failure to renew by any party thereto would have a Material Adverse Effect.

“Maturity Date” shall mean October 24, 2019.

“Maximum Credit” shall mean the amount equal to the (a) the Revolving Loan Limit then in effect plus (b) the outstanding principal amount of the Term Loans less any payments or prepayments thereon.

“Measurement Period” shall mean the twelve-month period ending on the last day of any month in which EBITDA is to be measured, taken as a single accounting period.

“Multiemployer Plan” shall mean a “multi-employer plan” as defined in Section 4001(a)(3) of ERISA which is or was at any time during the current year or the immediately preceding six (6) years contributed to by any Borrower or any ERISA Affiliate.

“Net Amount of Eligible Credit Card Receivables” shall mean, the gross amount of the Eligible Credit Card Receivables less returns, discounts, claims, credits and allowances of any nature at any time issued, owing, granted, outstanding, available or claimed with respect thereto.

“Net Amount of Eligible Damaged Goods Vendors Receivables” shall mean the gross amount of the Eligible Damaged Goods Vendors Receivables less returns, discounts, claims, credits and allowances of any nature at any time issued, owing, granted, outstanding, available or claimed with respect thereto.

“Net Amount of Eligible Sell-Off Vendors Receivables” shall mean, the gross amount of the Eligible Sell-Off Vendors Receivables less returns, discounts, claims, credits and allowances of any nature at any time issued, owing, granted, outstanding, available or claimed with respect thereto.

“Net Cash Proceeds” shall mean the aggregate cash proceeds received by any Borrower or Guarantor (a) in respect of any sale, lease, transfer or other disposition of any assets or properties, or interest in assets and properties, in each case outside the ordinary course of business of such Borrower or Guarantor, or (b) as proceeds of any loans or other financial accommodations provided to any Borrower or Guarantor (either of clause (i) or (ii) of this definition, a “Specified Disposition”), in each case net of (i) the reasonable costs relating to such Specified Disposition (including, without limitation, legal, accounting and investment banking fees, and sales commissions), (ii) the portion of such proceeds deposited in an escrow account or otherwise required to be reserved pursuant to the purchase agreements related to such Specified Disposition for purchase price adjustments or indemnification payments payable by such Borrower or Guarantor to the purchaser thereof (but only until such time as such portion of such proceeds is received by such Borrower or Guarantor), (iii) taxes paid or estimated to be payable as a result thereof (after taking into account any available tax credits or deductions and any tax sharing arrangements), and (iv) amounts applied to the repayment of Indebtedness secured by a

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valid and enforceable lien on the asset or assets that are the subject of such Specified Disposition required to be repaid in connection with such transaction.  For purposes of this definition, a Specified Disposition described in clause (i) above shall exclude (x) sales, leases, transfers and other dispositions of Inventory permitted under Section 9.7(b)(vii) hereof, and (y) sales and other dispositions of defective, obsolete, out-of-season or slow moving Inventory to a third-party off-price wholesaler, including Ben Elias and Value City, or any other Person engaged in substantially the same business as Ben Elias or Value City and permitted by Agent.  Net Cash Proceeds shall exclude any non-cash proceeds received by any Borrower or Guarantor from any Specified Disposition, but shall include such proceeds when and as converted by any Borrower or Guarantor to cash or other immediately available funds.

“Net Income” shall mean, for any period, the net income (or loss) of the Borrowers and Obligors on a consolidated basis for such period taken as a single accounting period as determined in accordance with GAAP; provided, however, there shall be excluded therefrom (a) unrealized gains and losses due solely to fluctuations in currency values and the related tax effects according to GAAP and (b) items classified as a cumulative effect of an accounting change or as extraordinary items, in accordance with GAAP; provided, further, for clarification purposes, stores openings and closings in ordinary course shall not be considered extraordinary for the purposes hereof.

“Net Orderly Liquidation Value” shall mean, as of any date of determination, the value of the Intellectual Property of Borrowers that is estimated to be recoverable in an orderly liquidation of such Intellectual Property net of all costs and expenses of such liquidation, such amount to be determined as to each category of Intellectual Property and to be as specified in the most recent appraisal received by Term Loan Agent and Agent in accordance with Section 7.6 hereof.

“Net Recovery Percentage” shall mean the fraction, expressed as a percentage, (a) the numerator of which is the amount equal to the amount of the recovery in respect of the Inventory at such time a “net orderly liquidation value” basis as set forth in the most recent acceptable appraisal of Inventory received by Agent in accordance with Section 7.3 hereof, net of operating expenses, liquidation expenses and commissions, and (b) the denominator of which is the applicable Value of the aggregate amount of the Inventory subject to such appraisal.

“Nevada Factoring” shall mean Nevada Receivable Factoring, Inc., a Nevada corporation, and its successors and assigns.

“Non-Borrower Receivables” shall mean those receivables owned by WFNNB, Nevada Factoring or any Person other than a Borrower, with respect to which the proceeds thereof are, at any time, in the possession of a Borrower or in a deposit account of a Borrower and such Borrower maintains possession or control of such proceeds for the benefit of WFNNB, Nevada Factoring or any other such Person pursuant to the Private Label Credit Card Agreement or any other agreement.

“Non-Consenting Lender” shall have the meaning set forth in Section 11.3(d) hereof.

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“Non-Recourse Agreement” shall mean that certain agreement dated as of November 27, 2002 and entered into by and among Lerner, Nevada Factoring and WFNNB.

“Notice of Default or Failure of Condition” shall have the meaning set forth in Section 12.3(a) hereof.

“NY&Co” shall mean New York & Company, Inc., a Delaware corporation, and its successors and assigns.

“NY&Co Stores” shall mean New York & Company Stores, Inc., a New York corporation, formerly known as Associated Lerner Shops of America, Inc., a New York corporation, and its successors and assigns.

“NY&Co Stock Pledge Agreement” shall mean that certain Second Amended and Restated Stock Pledge Agreement, dated as of August 22, 2007, by NY&Co in favor of Agent, for itself and the ratable benefit of the Lenders and the Bank Product Providers, with respect to the pledge of 100% of the Capital Stock of Parent owned by NY&Co, as the same may be amended, modified, supplemented, extended, renewed, restated or replaced.

“Obligations” shall mean (a) any and all Loans, Letter of Credit Accommodations and all other obligations, liabilities and indebtedness of every kind, nature and description owing by any Borrower or any Guarantor to Agent, any Lender or any Issuing Bank and/or any of their Affiliates, whether consisting of principal, interest, charges, fees, costs and expenses, fees relating to Letter of Credit Accommodations, however evidenced, whether as principal, surety, endorser, guarantor or otherwise, arising under this Agreement or any of the other Financing Agreements, whether now existing or hereafter arising, in each case under this Agreement or the other Financing Agreements, whether arising before, during or after the initial or any renewal term of this Agreement or after the commencement of any case with respect to any Borrower or any Guarantor or Obligor under the United States Bankruptcy Code or any similar statute (including the payment of interest and other amounts which would accrue and become due but for the commencement of such case, whether or not such amounts are allowed or allowable in whole or in part in such case), whether direct or indirect, absolute or contingent, joint or several, due or not due, primary or secondary, liquidated or unliquidated, or secured or unsecured and (b) for purposes only of Section 5.1 hereof and subject to the priority in right of payment set forth in Section 6.4 hereof, all obligations, liabilities and indebtedness of every kind, nature and description owing by any or all of Borrowers or Guarantors to Agent or any Bank Product Provider arising under or pursuant to any Bank Products, whether now existing or hereafter arising, provided, that, (i) as to any such obligations, liabilities and indebtedness arising under or pursuant to a Hedging Transaction, the same shall only be included within the Obligations if, upon Agent’s request, Agent shall have entered into an agreement, in form and substance satisfactory to Agent, with the Bank Product Provider that is a counterparty to such Hedging Transaction, as acknowledged and agreed to by Borrowers and Guarantors, providing for the delivery to Agent by such counterparty of information with respect to the amount of such obligations and providing for the other rights of Agent and such Bank Product Provider in connection with such arrangements, and notwithstanding anything contained in the foregoing or in any of the other Financing Agreements to the contrary, the Obligations of any Borrower or Guarantor shall exclude its Excluded Swap Obligations, (ii) as to any such obligations, liabilities

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and indebtedness arising under or pursuant to a Bank Product (other than a Hedging Transaction if Agent has requested the agreement referred to in clause (i) above), the same shall only be included within the Obligations if the Bank Product Provider with respect thereto shall have delivered written notice to Agent that (A) such Bank Product Provider has entered into a transaction to provide Bank Products to a Borrower and Guarantor and (B) the obligations arising pursuant to such Bank Products provided to Borrowers and Guarantors constitute Obligations entitled to the benefits of the security interest of Agent granted hereunder, and Agent shall have accepted such notice in writing (provided, that, not such notice or acceptance shall be required as to such obligations, liabilities and indebtedness arising under or pursuant to a Bank Product provided by or owing to Wells Fargo or any of its Affiliates), and (iii) in no event shall any Bank Product Provider acting in such capacity to whom such obligations, liabilities or indebtedness are owing be deemed a Lender for purposes hereof to the extent of and as to such obligations, liabilities or indebtedness except that each reference to the term “Lender” in Sections 12.1, 12.2, 12.3(b), 12.5, 12.6,12.7, 12.9, 12.12 and 14.6 hereof shall be deemed to include such Bank Product Provider and in no event shall the approval of any such person in its capacity as Bank Product Provider be required in connection with the release or termination of any security interest or lien of Agent.

“Obligor” shall mean any guarantor, endorser, acceptor, surety or other person liable on or with respect to the Obligations or who is the owner of any property which is security for the Obligations (including, without limitation, Guarantors, other than Borrowers).

“OFAC” shall mean the U.S. Department of the Treasury’s Office of Foreign Assets Control.

“Other Taxes” shall mean any present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies of the United States or any political subdivision thereof or any applicable foreign jurisdiction, and all liabilities with respect thereto, in each case arising from any payment made hereunder or under any of the other Financing Agreements or from the execution, delivery or registration of, or otherwise with respect to, this Agreement or any of the other Financing Agreements

“Parent” shall mean Lerner New York Holding, Inc., a Delaware corporation, and its successors and assigns.

“Parent Stock Pledge Agreement” shall mean that certain Second Amended and Restated Stock Pledge Agreement, dated as of August 22, 2007, by Parent in favor of Agent, for itself and the ratable benefit of the Lenders and the Bank Product Providers, with respect to the pledge of 100% of the Capital Stock of Lerner, Lernco and Nevada Factoring owned by Parent, as the same may be amended, modified or supplemented from time to time.

“Participant” shall mean any Person that acquires and holds a participation in the interest of any Lender in any of the Revolving Loans or Letter of Credit Accommodations in conformity with the provisions of Section 14.7 of this Agreement governing participations.

“Patriot Act” shall mean the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA Patriot Act of 2001), as

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the same now exists or may from time to time hereafter be amended, modified, recodified or supplemented, together with all rules, regulations and interpretations thereunder or related thereto.

“PayPal” shall mean PayPal, Inc., a Delaware corporation; and its successors and assigns.

“PayPal Agreements” shall mean, collectively, the Merchant Agreement, dated as of February 21, 2013, between NY&Co and PayPal, together with the attachments, schedules, exhibits, guidelines, rules and other documents incorporated therein, as the same may be amended from time to time in accordance with the terms hereof.

“PayPal Receivables” shall mean those Accounts of Borrowers arising in connection with payments received through the PayPal system of sending and receiving payments pursuant to the PayPal Agreements.

“Pension Plan” shall mean a Plan that is subject to Title IV of ERISA.

“Permitted Acquisitions” shall mean the purchase by a Borrower or Guarantor after the date hereof of all or substantially all of the assets of any Person or a business or division of such Person (whether pursuant to a merger or other transaction) or of all or a majority of the Capital Stock of a Person (such assets or Person being referred to herein as the “Acquired Business”) in one or a series of transactions that satisfies each of the following conditions as determined by Agent:

(a)           as of the date of such acquisition and the date of any payment in respect thereof, and after giving effect thereto, no Event of Default shall exist or have occurred and be continuing;

(b)           as of the date of such acquisition and the date of any payment in respect thereof, and after giving effect thereto, Borrowers shall have Excess Availability in an amount equal to not less than twenty (20%) percent of the Revolving Loan Limit,

(c)           Agent shall have received, in form and substance satisfactory to Agent, monthly projections showing that, for the twelve (12) months immediately after such payment is made, Excess Availability shall be greater than twenty (20%) percent of the Revolving Loan Limit,

(d)           the Acquired Business shall be one or more Persons or a division or line of business that engages in a line of business that is substantially similar, reasonably related or incidental to the business that Borrowers and Guarantors are engaged in on date hereof;

(e)           in the case of the acquisition of the Capital Stock of another Person, the board of directors (or other comparable governing body) of such other Person to be acquired shall have duly approved such acquisition and such Person shall not have announced that it will oppose such acquisition and shall not have commenced any action which alleges that such acquisition will violate applicable law;

(f)            Agent shall have received not less than ten (10) Business Days’ prior

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written notice of the proposed acquisition and such information with respect thereto as Agent may reasonably request, to the extent available, including (i) the parties to such acquisition, (ii) the proposed date and amount of the acquisition, (iii) a description of the assets or shares intended to be acquired, and (iv) the proposed total purchase price and other consideration for the assets to be purchased (and the terms of payment of such purchase price);

(g)           Agent shall have received true, correct and complete copies of all material agreements, documents and instruments relating to such acquisition, which shall be in form and substance reasonably satisfactory to Agent;

(h)           the Acquired Business shall not include a Foreign Subsidiary unless otherwise agreed to by Agent in writing;

(i)            Agent shall have received a certificate of the chief executive officer or a Financial Officer of Administrative Borrower certifying on behalf of Borrowers to Agent and Lenders that such transaction complies with this definition.

Notwithstanding anything to the contrary contained herein, (i) Borrowers and Guarantors shall comply with the terms and conditions of Section 9.22 hereof to the extent applicable to such Acquired Business and (ii) if Borrowers request that any assets acquired pursuant to any acquisition be included in the Borrowing Base, Agent shall have (A) completed a field examination with respect to the business and assets of the Acquired Business and (B) completed its customary business and legal due diligence, in each case, in accordance with Agent’s customary procedures and practices and as otherwise required by the nature and circumstances of the business of the Acquired Business, the scope and results of which shall be reasonably satisfactory to Agent before such assets may be included.  Any Accounts, Intellectual Property or Inventory of the Acquired Business shall only be Eligible Accounts, Eligible Intellectual Property or Eligible Inventory to the extent that Agent has so completed such field examination with respect thereto and the criteria for Eligible Accounts, Eligible Intellectual Property or Eligible Inventory set forth herein are satisfied with respect thereto (or such other or additional criteria as Agent may, at its option, establish with respect thereto, and subject to such Reserves as Agent may establish in connection with the Acquired Business), and, if requested by Agent, in the case of Eligible Intellectual Property or Eligible Inventory acquired pursuant to a Permitted Acquisition to the extent that it has been subject to an appraisal that satisfies the requirements of Section 7.3 or Section 7.6 hereof, as the case may be.

“Person” or “person” shall mean any individual, sole proprietorship, partnership, corporation (including any corporation which elects subchapter S status under the Code), limited liability company, limited liability partnership, business trust, unincorporated association, joint stock corporation, trust, joint venture or other entity or any government or any agency or instrumentality or political subdivision thereof.

“Plan” shall mean an employee benefit plan (as defined in Section 3(3) of ERISA) which any Borrower or Guarantor or, solely with respect to an employee benefit plan subject to Title IV of ERISA, an ERISA Affiliate sponsors or to which it contributes, or a Multiemployer Plan.

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“Prime Rate” shall mean the highest of (a) the rate from time to time publicly announced by Reference Bank, or its successors, as its “prime rate”, subject to each increase or decrease in such prime rate, effective as of the day any such change occurs, whether or not such announced rate is the best rate available at such bank, (b) the Federal Funds Rate from time to time plus one-half (.50%) percent, or (c) the Adjusted Eurodollar Rate (using the one month rate if applicable), which rate shall be determined on a daily basis, plus one (1%) percent.

“Prime Rate Loans” shall mean the Loans or any portion thereof on which interest is payable based on the Prime Rate in accordance with the terms thereof.

“Priority Event” shall mean the occurrence of any one or more of the following: (a) the occurrence and continuance of an Event of Default under Section 10.1(a)(i) hereof with respect to any Borrower’s failure to pay any of the Obligations related to the Loans (including principal, interest, fees and expenses attributable thereto); (b) the occurrence and continuance of an Event of Default under Sections 10.1(e), 10.1(f), 10.1(g) or 10.1(h) hereof; or (c) the occurrence of any other Event of Default and the acceleration by Agent of the payment of all or a material portion of the Obligations related to any Loans; or (d) the receipt by Agent of a Term Loan Action Notice.

“Private Label Credit Card Agreement” shall mean the Amended and Restated Private Label Credit Card Program Agreement, dated as of November 1, 2004, between NY&Co and WFNNB, as amended, and as may be further amended from time to time in accordance with the terms hereof, including the amendment thereto to add Lerner as a party thereto and to be the party submitting credit card slips and charges to WFNNB in consideration of the remittance of the amounts payable on such Accounts from WFNNB to Lerner.

“Private Label Credit Card Receivables” shall mean those Accounts of Lerner arising under Lerner’s private label credit card program and sold or otherwise assigned or transferred by Lerner to WFNNB pursuant to the Private Label Credit Card Agreement.

“Pro Rata Share” shall mean, in each case as the context requires, (a) with respect to any Revolving Lender at any time, the percentage of the aggregate Revolving Loan Commitments represented by such Revolving Lender’s Revolving Loan Commitment at such time, provided, that, if the Revolving Loan Commitments have been terminated, the numerator shall be the unpaid amount of such Revolving Lender’s Revolving Loans and its interest in Special Agent Advances and Letter of Credit Accommodations and the denominator shall be the aggregate amount of all unpaid Revolving Loans, Special Agent Advances and outstanding Letter of Credit Accommodations, (b) with respect to any Term Lender at any time, the portion of the Term Loan represented by the outstanding principal balance of such Term Lender’s Term Loan at such time, or (c) with respect to all Lenders at any time, the percentage of the sum of the Aggregate Revolving Commitments and the outstanding Term Loans represented by the sum of such Lender’s Revolving Commitment and the outstanding principal balance of such Lender’s Term Loan at such time, in each case as the context provides.

“Provision for Taxes” shall mean an amount equal to all taxes imposed on or measured by net income, whether Federal, State, Provincial, county or local, and whether foreign or

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domestic, that are paid or payable by any Person in respect of any period in accordance with GAAP.

“Qualified Cash” shall mean, as of any date of determination, the amount of cash carried by any Borrower on its balance sheet, other than cash in the Cash Collateral Account, cash constituting Eligible Cash Collateral or cash in any Blocked Account, which is in an account subject to a Deposit Account Control Agreement and with respect to which Agent has received statements of the available balances thereof from the bank or other financial institution at which such account is maintained which confirm such amounts.

“Qualified ECP Guarantor” shall mean, in respect of any Swap Obligation, each Borrower and Guarantor that has total assets exceeding $10,000,000 at the time the relevant guarantee, keepwell, or grant of the relevant security interest becomes effective with respect to such Swap Obligation or such other person as constitutes an “eligible contract participant” under the Commodity Exchange Act or any regulations promulgated thereunder and can cause another person to qualify as an “eligible contract participant” at such time by entering into a keepwell under Section 1a(18)(A)(v)(II) of the Commodity Exchange Act.

“Real Property” shall mean all now owned and hereafter acquired real property of any Borrower and Guarantor, including leasehold interests, together with all buildings, structures, and other improvements located thereon and all licenses, easements and appurtenances relating thereto, wherever located.

“Receivables” shall mean all of the following now owned or hereafter arising or acquired property of each Borrower and Guarantor: (a) all Accounts; (b) all interest, fees, late charges, penalties, collection fees and other amounts due or to become due or otherwise payable in connection with any Account; (c) all payment intangibles; (d) letters of credit, indemnities, guarantees, security or other deposits and proceeds thereof issued payable to such Borrower or Guarantor or otherwise in favor of or delivered to such Borrower or Guarantor in connection with any Account; or (e) all other accounts, contract rights, chattel paper, instruments, notes, general intangibles and other forms of obligations owing to such Borrower or Guarantor, whether from the sale and lease of goods or other property, licensing of any property (including Intellectual Property or other general intangibles), rendition of services or from loans or advances by such Borrower or Guarantor or to or for the benefit of any third person (including loans or advances to any Affiliates or Subsidiaries of any Borrower or Guarantor) or otherwise associated with any Accounts, Inventory or general intangibles of such Borrower or Guarantor (including, without limitation, choses in action, causes of action, tax refunds, tax refund claims, any funds which may become payable to such Borrower or Guarantor in connection with the termination of any Plan or other employee benefit plan and any other amounts payable to such Borrower or Guarantor from any Plan or other employee benefit plan, rights and claims against carriers and shippers, rights to indemnification, business interruption insurance and proceeds thereof, casualty or any similar types of insurance and any proceeds thereof and proceeds of insurance covering the lives of employees on which such Borrower or Guarantor is a beneficiary).

“Records” shall mean all of each Borrower’s or Guarantor’s present and future books of account of every kind or nature, purchase and sale agreements, invoices, ledger cards, bills of

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lading and other shipping evidence, statements, correspondence, memoranda, credit files and other data relating to the Collateral or any account debtor, together with the tapes, disks, diskettes and other data and software storage media and devices, file cabinets or containers in or on which the foregoing are stored (including any rights of such Borrower or Guarantor with respect to the foregoing maintained with or by any other person).

“Reference Bank” shall mean Wells Fargo Bank, National Association, or such other bank as Agent may from time to time designate.

“Registered Term Note” shall have the meaning set forth in Section 2.8(d) hereof.

“Report” or “Reports” shall have the meaning set forth in Section 12.10(a) hereof.

“Required Lenders” shall mean the Required Revolving Loan Lenders plus the Required Term Loan Lenders.

“Required Revolving Loan Lenders” shall mean, at any time, those Revolving Loan Lenders whose Pro Rata Shares aggregate sixty-six and two-thirds percent (662/3%) or more of the aggregate Revolving Loan Commitments of all Revolving Loan Lenders, or if the Revolving Loan Commitments have been terminated, Revolving Loan Lenders to whom sixty-six and two-thirds percent (662/3%) or more of the then outstanding Obligations arising from or in connection with the Revolving Loans are owing.

“Required Term Loan Lenders” shall mean, as of any date of determination, Lenders to whom sixty-six and two-thirds percent (662/3%) or more of the then outstanding Obligations arising from or in connection with the Term Loans are owing.

“Reserves” shall mean as of any date of determination, such amounts as Agent may from time to time establish and revise in good faith reducing the amount of Revolving Loans and Letter of Credit Accommodations which would otherwise be available to Borrowers under the lending formula(s) provided for herein:  (a) to reflect events, conditions, contingencies or risks which, as determined by Agent in good faith, adversely affect, or would have a reasonable likelihood of adversely affecting, either (i) the Collateral or any other property which is security for the Obligations or its value or (ii) the assets or business of any Borrower or any Obligor or (iii) the security interests and other rights of Agent or any Lender in the Collateral (including the enforceability, perfection and priority thereof) or (b) to reflect Agent’s good faith belief that any collateral report or financial information furnished by or on behalf of any Borrower or any Obligor to Agent is or may have been incomplete, inaccurate or misleading in any material respect.  To the extent Agent may decrease the lending formulas used to determine the Borrowing Base or establish new criteria or revise existing criteria for Eligible Sell-Off Vendors Receivables, Eligible Damaged Goods Vendors Receivables, Eligible Credit Card Receivables or Eligible Inventory so as to address any circumstances, condition, event or contingency in a manner satisfactory to Agent, Agent shall not establish a Reserve for the same purpose.  The amount of any Reserve established by Agent shall have a reasonable relationship to the event, condition or other matter which is the basis for such reserve as determined by Agent in good faith.  Without limiting the generality of the foregoing, Reserves may be established to reflect any of the following: (i) the Gift Certificate and Store Credit Reserve, (ii) such amounts, as

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determined by Agent, for amounts at any time due or to become past due in the good faith judgment of Agent to the owner, lessor or operator of any facility at which Eligible Inventory may be located with respect to which Agent has not received a Collateral Access Agreement, in form and substance satisfactory to Agent; provided, that, with respect to facilities leased by a Borrower or Guarantor which are located in a jurisdiction which affords the lessor thereof a lien, or other such rights, on any of the Collateral for unpaid rent or other amounts, which lien may have priority over Agent’s liens on or rights to the Collateral, such amount shall equal three (3) months’ rent for such facility plus any amounts past due, (iii) such amounts, as determined by Agent, for sales, excise or similar taxes that are (A) past due and (B) not being contested in good faith and not subject to liens filed against any Borrower or Guarantor with respect thereto, (iv) such amounts, as determined by Agent, for payments owed by any Borrower or Guarantor to bailees, customs brokers or freight forwarders for the services provided by such bailees, customs brokers or freight forwarders in an amount not to exceed $1,000,000, plus such freight, customs, taxes and duty and other amounts which Agent estimates must be paid upon the arrival and in connection with the delivery to a Borrower’s location for Eligible Inventory within the United States of America of any Inventory ordered or purchased by any Borrower under a documentary Letter of Credit Accommodation or which constitutes any portion of the Borrowing Base, (v) upon an Event of Default or if Compliance Excess Availability is less than $10,000,000, such amounts, as determined by Agent, for Service Costs owed to Limited Brands, Inc. or any of its Affiliates and payable by any Borrower or any of their Affiliates arising from logistic or information technology services to be provided by Limited Brands, Inc. for the benefit of any Borrower or its Affiliates pursuant to the Transition Services Agreement in an amount not to exceed $1,000,000 and (vi) Intellectual Property Reserves.

“Revolving Credit Facility” shall mean the Revolving Loans (including all Special Agent Advances and additional Revolving Loans pursuant to Section 12.8 hereof) and all Letter of Credit Accommodations provided to or for the benefit of Borrowers and Guarantors as set forth in this Agreement.

“Revolving Loan Commitment” shall mean, at any time, as to any Lender, the principal amount set forth opposite such Lender’s name on Schedule 1 hereto designated as such Lender’s Revolving Loan Commitment or on Schedule 1 to the Assignment and Acceptance Agreement pursuant to which such Lender became a Lender hereunder in accordance with the provisions of 14.7 hereof, as the same may be adjusted from time to time in accordance with the terms hereof; sometimes being collectively (as to all Revolving Loan Lenders) referred to herein as the “Revolving Loan Commitments”.

“Revolving Loan Facility Decrease” shall have the meaning set forth in Section 2.6 hereof.

“Revolving Loan Facility Increase” shall have the meaning set forth in Section 2.5 hereof.

“Revolving Loan Fee Letter” shall mean the Confidential Revolving Loan Fee Letter, dated of even the date herewith, among Borrowers, Guarantors and Agent.

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“Revolving Loan Lender Register” shall have the meaning given in Section 14.7(b) hereof.

“Revolving Loan Lenders” shall mean the financial institutions who are signatories hereto as Lenders that hold Revolving Loan Commitments and other persons made a party to this Agreement as a Revolving Loan Lender in accordance with Section 14.7 hereof, and their respective successors and assigns; each sometimes being referred to herein individually as a “Revolving Loan Lender”.

“Revolving Loan Limit” shall mean the amount equal to $75,000,000, as may from time to time be in effect and as may from time to time be increased in accordance with the terms of a Revolving Loan Facility Increase or be decreased in accordance with the terms of a Revolving Loan Facility Decrease.

“Revolving Loan Priority Collateral” shall mean the Accounts, Inventory and all the Collateral other than the Term Loan Priority Collateral.

“Revolving Loan Register” shall have the meaning set forth in Section 14.7(b) hereof.

“Revolving Loans” shall mean the loans now or hereafter made by or on behalf of any Lender or by Agent for the account of any Lender on a revolving basis (involving advances, repayments and readvances) as set forth in Section 2.1 hereof.

“Sanctioned Entity” shall mean (a) an agency of the government of, (b) an organization directly or indirectly controlled by, or (c) a person resident in, a country that is subject to a sanctions program identified on the list maintained and published by OFAC and available at http://www.treas.gov/offices/enforcement/ofac/programs, or as otherwise published from time to time as such program may be applicable to such agency, organization or person.

“Sanctioned Person” shall mean a person named on the list of Specially Designated Nationals or Blocked Persons maintained by OFAC available at http://www.treas.gov/offices/enforcement/ofac/sdn/index.html, or as otherwise published from time to time.

“Secured Parties” shall mean, collectively, (a) Agent, (b) Term Loan Agent, (e) Issuing Bank, (f) Lenders and (g) Bank Product Providers; provided, that, as to any Bank Product Provider, only to the extent of the Obligations owing to such Bank Product Provider.

“Service Costs” shall have the meaning set forth in the Transition Services Agreement.

“Settlement Period” shall have the meaning set forth in Section 6.10(b) hereof.

“Solvent” shall mean, at any time with respect to any Person, that at such time such Person (a) is able to pay its debts as they mature and has (and has a reasonable basis to believe it will continue to have) sufficient capital (and not unreasonably small capital) to carry on its business consistent with its practices as of the date hereof, and (b) the assets and properties of such Person at a fair valuation (and including as assets for this purpose at a fair valuation all rights of subrogation, contribution or indemnification arising pursuant to any guarantees given

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by such Person) are greater than the Indebtedness of such Person, and including subordinated and contingent liabilities computed at the amount which, such person has a reasonable basis to believe, represents an amount which can reasonably be expected to become an actual or matured liability (and including as to contingent liabilities arising pursuant to any guarantee the face amount of such liability as reduced to reflect the probability of it becoming a matured liability).

“Special Agent Advances” shall have the meaning set forth in Section 12.11(a) hereof.

“Specified Amounts” shall have the meaning set forth in Section 6.4(c)(i) hereof.

“Stock Pledge Agreements” shall mean, collectively, the NY&Co Stock Pledge Agreement, the Parent Stock Pledge Agreement, the Lerner Stock Pledge Agreement and any other stock pledge agreement at any time made in favor of Agent, for itself and the ratable benefit of the Lenders and the Bank Product Providers, in connection with this Agreement.

“Subsidiary” or “subsidiary” shall mean, with respect to any Person, any corporation, limited liability company, limited liability partnership or other limited or general partnership, trust, association or other business entity of which an aggregate of at least a majority of the outstanding Capital Stock or other interests entitled to vote in the election of the board of directors of such corporation (irrespective of whether, at the time, Capital Stock of any other class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency), managers, trustees or other controlling persons, or an equivalent controlling interest therein, of such Person is, at the time, directly or indirectly, owned by such Person and/or one or more subsidiaries of such Person.

“Swap Obligation” shall mean, with respect to any Borrower or Guarantor, any obligation to pay or perform under any agreement, contract or transaction that constitutes a “swap” within the meaning of section 1a(47) of the Commodity Exchange Act.

“Taxes” shall mean any and all present or future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto, excluding, in the case of Agent, Issuing Bank or any Lender, (a) such taxes (including income taxes, franchise taxes, branch profits or capital taxes) as are imposed on or measured by Agent’s, such Issuing Bank’s, or such Lender’s net income or capital (or other taxes imposed in lieu thereof) by any jurisdiction or political subdivision thereof, (b) all interest and penalties imposed on Agent, such Issuing Bank or such Lender with respect to the taxes described in clause (a) above, and (c) any United Stated federal withholding taxes imposed under FATCA.

“Term Loan Action Default” shall mean any one or more of the following: (a) an Event of Default described in Section 10.1(a)(i) or (ii) with respect to the Term Loans, and (b) an Event of Default described in 10.1(e), 10.1(f), 10.1(g), or 10.1(h) hereof or an Event of Default under Section 10.1(a)(ii) arising from a breach of Section 9.17 hereof in each case after giving effect to any applicable cure period.

“Term Loan Action Notice” shall have the meaning set forth in Section 10.3(a) hereof.

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“Term Loan Agent” shall mean Wells Fargo Bank, National Association, a national banking association, in its capacity as administrative agent on behalf of Term Loan Lenders pursuant to the terms hereof, and any replacement or successor term loan agent hereunder.

“Term Loan Commitment” shall mean, at any time, as to any Lender, the principal amount set forth opposite such Lender’s name on Schedule 1 hereto designated as such Lender’s Term Loan Commitment or on Schedule 1 to the Assignment and Acceptance Agreement pursuant to which such Lender became a Lender hereunder in accordance with the provisions of 14.7 hereof, as the same may be adjusted from time to time in accordance with the terms hereof; sometimes being collectively (as to all Term Loan Lenders) referred to herein as the “Term Loan Commitments”.

“Term Loan Facility” shall mean the Term Loans provided to or for the benefit of Borrowers and Guarantors as set forth in this Agreement.

“Term Loan Fee Letter” shall mean the Confidential Term Loan Fee Letter, dated of even the date herewith, among Borrowers, Guarantors and Term Loan Agent.

“Term Loan Lender Register” shall have the meaning set forth in Section 14.7(c) hereof.

“Term Loan Lenders” shall mean the financial institutions who are signatories hereto as Lenders that hold Term Loan Commitments and other persons made a party to this Agreement as a Term Loan Lender in accordance with Section 14.7 hereof, and their respective successors and assigns; each sometimes being referred to herein individually as a “Term Loan Lender”.

“Term Loan Priority Collateral” shall mean all now owned or hereafter acquired Collateral that constitutes:

(a)           fixtures and Equipment;

(b)           Intellectual Property;

(c)           Real Property;

(d)           general intangibles, chattel paper, instruments and documents (other than general intangibles, chattel paper, instruments and documents that are Revolving Loan Priority Collateral);

(e)           payment intangibles that relate to fixtures, Equipment, Intellectual Property or Real Property;

(f)            permits and licenses related to any of the foregoing (including any permits or licenses related to ownership or operation of fixtures, Equipment, Intellectual Property or Real Property of any Loan Party);

(g)           all books and records related to the foregoing and not constituting Revolving Loan Priority Collateral; and

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(h)           all products and proceeds of any and all of the foregoing in whatever form received, including proceeds of insurance and claims against third parties.

“Term Loan Push Down Reserve” shall mean, at any time of calculation, a positive amount equal to (a) the outstanding principal amount of the Term Loan minus (b) the amount equal to fifty (50%) percent of the Net Orderly Liquidation Value of Eligible Intellectual Property.

“Term Loan Push Down Trigger Event” shall have the meaning set forth in Section 2.9 hereof.

“Term Loan Register” shall have the meaning set forth in Section 14.7(c) hereof.

“Term Loan Standstill Period” shall have the meaning given in Section 10.3(a) hereof.

“Term Loans” shall mean the term loans provided by Lenders with Term Loan Commitments pursuant to Section 2.8 hereof

“Third Party Purchaser” shall have the meaning set forth in Section 10.3 hereof.

“Transition Services Agreement” shall mean collectively, those certain transition services agreements, dated as of November 27, 2002, and entered into by and among Seller, NY&Co and Lerner, as amended by Amendment to Transition Services Agreement, dated April 19, 2006, Amendment to Transition Services Agreement, dated October 10, 2007, Amendment to Transition Services Agreement, dated July 8, 2008, Fourth Amendment to Transition Services Agreement, dated April 6, 2009, Fifth Amendment to Transition Services Agreement, dated March 16, 2010, and Sixth Amendment to Transition Services Agreement, dated September 14, 2010.

“UCC” shall mean the Uniform Commercial Code as in effect in the State of New York and any successor statute, as in effect from time to time (except that terms used herein which are defined in the Uniform Commercial Code as in effect in the State of New York on the date hereof shall continue to have the same meaning notwithstanding any replacement or amendment of such statute except as Agent may otherwise determine); provided, that, if, with respect to any financing statement or by reason of any provisions of law, the perfection or the effect of perfection or non-perfection of the security interests granted to Agent pursuant to the applicable Financing Agreement is governed by the Uniform Commercial Code as in effect in a jurisdiction of the United States other than the State of New York, then “UCC” means the Uniform Commercial Code as in effect from time to time in such other jurisdiction for purposes of the provisions of each Financing Agreement and any financing statement relating to such perfection or effect of perfection or non-perfection.

“Unused Line Fee” shall have the meaning set forth in Section 3.2(a) hereof.

“US Dollars”, “US$” and “$” shall each mean lawful currency of the United States of America.

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“Value” shall mean, as determined by Agent in good faith, with respect to Inventory, the lower of (a) cost computed on a specific identification basis in accordance with GAAP or (b) market value; provided, that, for purposes of the calculation of the Borrowing Base, (i) the Value of the Inventory shall not include:  (A) the portion of the value of Inventory equal to the profit earned by a Borrower or any Affiliate of any Borrower on the sale thereof to any Borrower or (B) write-ups or write-downs in value with respect to currency exchange rates and (ii) notwithstanding anything to the contrary contained herein, the cost of the Inventory shall be computed in the same manner and consistent with the most recent appraisal of the Inventory received and accepted by Agent prior to the date hereof, if any.

“Voting Stock” shall mean with respect to any Person, (a) one (1) or more classes of Capital Stock of such Person having general voting powers to elect at least a majority of the board of directors, managers or trustees of such Person, irrespective of whether at the time Capital Stock of any other class or classes have or might have voting power by reason of the happening of any contingency, and (b) any Capital Stock of such Person convertible or exchangeable without restriction at the option of the holder thereof into Capital Stock of such Person described in clause (a) of this definition.

“Wells” shall mean Wells Fargo Capital Finance, LLC, a Delaware limited liability company, in its individual capacity, and its successors and assigns.

“Wells Fargo” shall mean Wells Fargo Bank, National Association, a national banking association, successor by merger to Wachovia Bank, National Association, in its individual capacity, and its successors and assigns.

“WFNNB” shall mean World Financial Network National Bank.

SECTION 2.        CREDIT FACILITIES

2.1          Revolving Loans.

(a)           Subject to and upon the terms and conditions contained herein, each Revolving Loan Lender severally (and not jointly) agrees to fund its Pro Rata Share of Revolving Loans to Borrowers from time to time in amounts requested by any Borrower up to the amount outstanding for all Revolving Loan Lenders at any time equal to the lesser of: (i) the Borrowing Base and (ii) the Revolving Loan Limit.

(b)           Agent may, in its discretion, from time to time, (i) if no Default or Event of Default exists or has occurred and is continuing, upon ten (10) Business Days’ telephonic or electronic notice to Borrowers and (ii) if a Default or Event of Default exists or has occurred and is continuing, upon three (3) Business Days’ telephonic or electronic notice to Borrowers, (A) reduce the lending formula(s) with respect to Eligible Inventory to the extent that Agent determines in good faith that:  (1) the number of days of the turnover of the Inventory for any period has adversely changed or (2) the liquidation value of the Eligible Inventory, or any category thereof, has decreased, including any decrease attributable to a material change in the nature, quality or mix of the Inventory or (B) reduce the lending formula(s) with respect to Eligible Sell-Off Vendors Receivables, Eligible Damaged Goods Vendors Receivables, Eligible Credit Card Receivables to the extent that Agent determines in good faith that an event of

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condition or other circumstance exists which could adversely affect the ability to collect such Receivables.  The amount of any decrease in the lending formulas shall have a reasonable relationship to the event, condition or circumstance which is the basis for such decrease as determined by Agent in good faith.  In determining whether to reduce the lending formula(s), Agent may consider events, conditions, contingencies or risks which are also considered in determining Eligible Sell-Off Vendors Receivables, Eligible Damaged Goods Vendors Receivables, Eligible Credit Card Receivables, Eligible Inventory or in establishing Reserves.

(c)           Except with the consent of all Revolving Loan Lenders and Required Term Loan Lenders, or as otherwise provided in Sections 12.8 and 12.11 hereof, (i) the aggregate amount of the Revolving Loans and Letter of Credit Obligations outstanding at any time shall not exceed the Revolving Loan Limit, and (ii) the aggregate principal amount of the Revolving Loans and Letter of Credit Obligations outstanding at any time to Borrowers shall not exceed the Borrowing Base or the sublimits established within the Borrowing Base.

(d)           In the event that (i) the aggregate amount of Revolving Loans and Letter of Credit Obligations outstanding at any time exceeds the Revolving Loan Limit, or (ii)  the aggregate amount of Revolving Loans and Letter of Credit Obligations outstanding at any time exceeds the Borrowing Base or the sublimits established within the Borrowing Base, such event shall not limit, waive or otherwise affect any rights of Agent or Lenders in such circumstances or on any future occasions and Borrowers shall immediately repay to Agent the entire amount of any such excess(es), in cash without any prepayment premium or penalty, other than any breakage or similar costs or other amounts payable in accordance with the terms of this Agreement.

2.2          Letter of Credit Accommodations.

(a)           Subject to and upon the terms and conditions contained herein and in the Letter of Credit Documents, at the request of any Borrower, Agent agrees, for the ratable risk of each Revolving Loan Lender according to its Pro Rata Share, to cause Issuing Bank, and Issuing Bank agrees to issue, one of more Letter of Credit Accommodations for the account of Borrowers containing terms and conditions acceptable to Agent and Issuing Bank.  Any payments made by or on behalf of Agent or any Revolving Loan Lender to Issuing Bank in connection with the Letter of Credit Accommodations provided to or for the benefit of any Borrower shall constitute additional Revolving Loans to Borrowers pursuant to this Section 2 (or Special Agent Advances as the case may be).

(b)           In the case of the issuance of any Letter of Credit Accommodations, Borrowers shall pay to Agent, for the benefit of Revolving Loan Lenders on a Pro Rata Basis, monthly a fee at the applicable rate determined as provided in accordance with the Applicable LC Margin on a per annum basis on the average daily maximum amount available to be drawn under such Letter of Credit Accommodations for the immediately preceding month (or part thereof), payable in arrears as of the first day of each succeeding month, computed for each day from the date of issuance to the date of expiration (the “Letter of Credit Rate”).  The Letter of Credit Rate for standby Letter of Credit Accommodations shall be a rate equal to the Applicable LC Margin for standby Letter of Credit Accommodations. The Letter of Credit Rate for documentary Letter of Credit Accommodations shall be a rate equal to the Applicable LC

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Margin for documentary Letter of Credit Accommodations. At Agent’s option, Borrowers shall pay such Letter of Credit Accommodation fee at a Letter of Credit Rate equal to two (2.00%) percent per annum greater than the otherwise applicable Letter of Credit Rate on such average daily maximum amount for: (i) the period from and after the date of termination or non-renewal of this Agreement in accordance with its terms until Agent and Revolving Loan Lenders have received full and final payment of all Obligations (notwithstanding entry of a judgment against any Borrower or Guarantor) and (ii) the period from and after the date of the occurrence of an Event of Default for so long as such Event of Default is continuing as determined by Agent.  Such Letter of Credit Accommodation fees shall be calculated on the basis of a three hundred sixty (360) day year and actual days elapsed and the obligation of Borrowers to pay such fee shall survive the termination or non-renewal of this Agreement.  In addition to the Letter of Credit Accommodation fees provided above, Borrower shall pay to Issuing Bank for its own account (without sharing with Revolving Loan Lenders) a letter of credit fronting fee equal to one eighths (0.125%) percent per annum and the customary charges and arranging fees of Issuing Bank with respect to the issuance, amendment, transfer, administration, cancellation and conversion of, and drawings under, such Letter of Credit Accommodations.

(c)           A Borrower shall give Agent one (1) Business Day’s prior written notice of such Borrower’s request for the issuance of a commercial Letter of Credit Accommodation and two (2) Business Days’ prior written notice of such Borrower’s request for the issuance of a stand-by Letter of Credit Accommodation.  Such notice shall be irrevocable and shall specify the original face amount of the Letter of Credit Accommodation requested, the effective date (which date shall be a Business Day) of issuance of such requested Letter of Credit Accommodation, whether such Letter of Credit Accommodations may be drawn in a single or in partial draws, the date on which such requested Letter of Credit Accommodation is to expire (which date shall be a Business Day), the purpose for which such Letter of Credit Accommodation is to be issued, and the beneficiary of the requested Letter of Credit Accommodation.  Such Borrower shall attach to such notice the proposed terms of the Letter of Credit Accommodation.

(d)           In addition to being subject to the satisfaction of the applicable conditions precedent contained in Section 4 hereof and the other terms and conditions contained herein, no Letter of Credit Accommodations shall be available unless each of the following conditions precedent have been satisfied in a manner satisfactory to Agent:  (i) the applicable Borrower shall have delivered to Issuing Bank at such times and in such manner as Issuing Bank may require, an application, in form and substance satisfactory to Issuing Bank and Agent, for the issuance of the Letter of Credit Accommodation and the Letter of Credit Documents, and the form and terms of the proposed Letter of Credit Accommodation shall be satisfactory to Agent and Issuing Bank, (ii) as of the date of issuance, no order of any court, arbitrator or other Governmental Authority shall purport by its terms to enjoin or restrain money center banks generally from issuing letters of credit of the type and in the amount of the proposed Letter of Credit Accommodation, and no law, rule or regulation applicable to money center banks generally and no request or directive (whether or not having the force of law) from any Governmental Authority with jurisdiction over money center banks generally shall prohibit, or request that Issuing Bank refrain from, the issuance of letters of credit generally or the issuance of such Letter of Credit Accommodations; and (iii) after giving effect to the issuance of such Letter of Credit Accommodation, the aggregate amount of the Obligations then outstanding would not exceed the Borrowing Base.

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(e)           Except with the consent of all Revolving Loan Lenders, the aggregate amount of all Letter of Credit Obligations shall not at any time exceed the Letter of Credit Limit.

(f)            Each Borrower and Guarantor shall indemnify and hold Agent and Revolving Loan Lenders and Issuing Bank harmless from and against any and all losses, claims, damages, liabilities, costs and expenses which Agent, any Revolving Loan Lender or Issuing Bank may suffer or incur in connection with any Letter of Credit Accommodations and any documents, drafts or acceptances relating thereto, including any losses, claims, damages, liabilities, costs and expenses due to any action taken by Issuing Bank or a correspondent bank of such Issuing Bank with respect to any Letter of Credit Accommodation, except for such losses, claims, damages, liabilities, costs or expenses that are a direct result of the gross negligence or willful misconduct of Agent or any Revolving Loan Lender as determined pursuant to a final non-appealable order of a court of competent jurisdiction.  Each Borrower assumes all risks with respect to the acts or omissions of the drawer under or beneficiary of any Letter of Credit Accommodation and for such purposes the drawer or beneficiary shall be deemed such Borrower’s agent.  Each Borrower assumes all risks for, and agrees to pay, all foreign, Federal, State and local taxes, duties and levies relating to any goods subject to any Letter of Credit Accommodations or any documents, drafts or acceptances thereunder.  Each Borrower and Guarantor hereby releases and holds Agent and Revolving Loan Lenders harmless from and against any acts, waivers, errors, delays or omissions, whether caused by such Borrower or Guarantor, by Issuing Bank or correspondent bank or otherwise with respect to or relating to any Letter of Credit Accommodation, except for the gross negligence or willful misconduct of Agent or any Revolving Loan Lender as determined pursuant to a final, non-appealable order of a court of competent jurisdiction.  The provisions of this Section 2.2(f) shall survive the payment of Obligations and the termination of this Agreement.

(g)           At any time a Cash Dominion Event exists or has occurred and is continuing, in connection with Inventory purchased pursuant to Letter of Credit Accommodations during the existence and continuance of such Cash Dominion Event, each Borrower and Guarantor shall, at Agent’s request, instruct all suppliers, carriers, forwarders, customs brokers, warehouses or others receiving or holding cash, checks, Inventory, documents or instruments in which Agent holds a security interest to deliver them to Agent and/or subject to Agent’s order, and if they shall come into such Borrower’s or Guarantor’s possession, to deliver them, upon Agent’s request, to Agent in their original form.  Each Borrower and Guarantor shall also, at Agent’s request, designate Agent as the consignee on all bills of lading and other negotiable and non-negotiable documents.

(h)           Each Borrower hereby irrevocably authorizes and directs Issuing Bank to name such Borrower as the account party therein and to deliver to Agent all instruments, documents and other writings and property received by Issuing Bank pursuant to the Letter of Credit Accommodations and to accept and rely upon Agent’s instructions and agreements with respect to all matters arising in connection with the Letter of Credit Accommodations or the applications therefor.  Nothing contained herein shall be deemed or construed to grant any Borrower any right or authority to pledge the credit of Agent or any Lender in any manner.  Borrowers shall be bound by any reasonable interpretation made in good faith by Agent, or Issuing Bank or correspondent bank thereof under or in connection with any Letter of Credit Accommodation or any drafts or acceptances of other Letter of Credit Documents thereunder,

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notwithstanding that such interpretation may be inconsistent with any instructions from any Borrower.

(i)            At any time an Event of Default exists or has occurred and is continuing, Agent shall have the right and authority to, and no Borrower or Guarantor shall, without the prior written consent of Agent, (i) approve or resolve any questions of non-compliance of documents, (ii) give any instructions as to acceptance or rejection of any documents or goods, (iii) execute any and all applications for steamship or airway guaranties, indemnities or delivery orders, (iv) grant any extensions of the maturity of, time of payments for, or time of presentation of, any drafts, acceptances, or other Letter of Credit Documents, and (v) agree to any amendments, renewals, extensions, modifications, changes or cancellations of any of the terms or conditions of any of the applications, Letter of Credit Accommodations, or documents, drafts or acceptances thereunder or any letters of credit included in the Collateral.  Agent may take such actions either in its own name or in any Borrower’s or Guarantor’s name.

(j)            At any time, so long as no Event of Default exists or has occurred and is continuing, any Borrower may, with Agent’s consent, (i) grant any extensions of the maturity of, time of payment for, or time of presentation of, any drafts, acceptances or other Letter of Credit Documents, and (ii) agree to any amendments, renewals, extensions, modifications, changes or cancellations of any of the terms or conditions of any of the applications, Letter of Credit Accommodations, or Letter of Credit Documents or any letters of credit included in the Collateral; provided, that, such Borrower may approve or resolve any questions of non-compliance of documents following notice to Agent thereof and without Agent’s consent except as otherwise provided in Section 2.2(i) hereof.

(k)           Any rights, remedies, duties or obligations granted or undertaken by any Borrower to Issuing Bank in any application for any Letter of Credit Accommodation, or any other agreement in favor of Issuing Bank relating to any Letter of Credit Accommodation, shall be deemed to have been granted or undertaken by such Borrower to Agent for the ratable benefit of Revolving Loan Lenders.  Any duties or obligations undertaken by Agent to Issuing Bank in any application for any Letter of Credit Accommodation, or any other agreement by Agent in favor of Issuing Bank to the extent relating to any Letter of Credit Accommodation, shall be deemed to have been undertaken by such Borrower to Agent for the ratable benefit of Revolving Loan Lenders and to apply in all respects to such Borrower.

(l)            Immediately upon the issuance or amendment of any Letter of Credit Accommodation, each Revolving Loan Lender shall be deemed to have irrevocably and unconditionally purchased and received, without recourse or warranty, an undivided interest and participation to the extent of such Revolving Loan Lender’s Pro Rata Share of the liability with respect to such Letter of Credit Accommodation (including, without limitation, all Obligations with respect thereto).

(m)          Borrowers and Guarantors are irrevocably and unconditionally, jointly and severally, obligated, without presentment, demand or protest, to pay to Agent any amounts paid by Issuing Bank with respect to such Letter of Credit Accommodation (whether through the borrowing of Revolving Loans in accordance with Section 2.2(a) hereof or otherwise).  In the event that Borrowers and Guarantors fail to pay Agent on the date of any payment under a Letter

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of Credit Accommodation in an amount equal to the amount of such payment, Agent (to the extent it has actual notice thereof) shall promptly notify each Revolving Loan Lender of the unreimbursed amount of such payment and each Revolving Loan Lender agrees, upon one (1) Business Days’ notice, to fund to Agent the purchase of its participation in such Letter of Credit Accommodation in an amount equal to its Pro Rata Share of the unpaid amount.  The obligation of each Revolving Loan Lender to deliver to Agent an amount equal to its respective participation pursuant to the foregoing sentence is absolute and unconditional and such remittance shall be made notwithstanding the occurrence or continuance of any Event of Default, the failure to satisfy any other condition set forth in Section 4 hereof or any other event or circumstance.  If such amount is not made available by a Revolving Loan Lender when due, Agent shall be entitled to recover such amount on demand from such Revolving Loan Lender with interest thereon, for each day from the date such amount was due until the date such amount is paid to Agent at the Federal Funds Rate for each day during such period (as published by the Federal Reserve Bank of New York or at Agent’s option based on the arithmetic mean determined by Agent of the rates for the last transaction in overnight Federal funds arranged prior to 9:00 a.m. (New York City time) on that day by each of the three leading brokers of Federal funds transactions in New York City selected by Agent) and if such amounts are not paid within three (3) days of Agent’s demand, at the highest Interest Rate provided for in Section 3.1 hereof applicable to Prime Rate Loans.

2.3          Revolving Loan Commitments.  The aggregate amount of each Revolving Lender’s Pro Rata Share of the Revolving Loans and Letter of Credit Accommodations shall not exceed the amount of such Revolving Lender’s Revolving Loan Commitment, as the same may from time to time be amended in accordance with the provisions hereof.

2.4          Bank Products.  Any Borrower or Guarantor may (but no such Person is required to) request that Agent provide or arrange for such Person to obtain Bank Products from Agent or its Affiliates, and Agent may, in its sole discretion, provide or arrange for such Person to obtain the requested Bank Products.  Any Borrower or Guarantor that obtains Bank Products shall indemnify and hold Agent, each Lender and their respective Affiliates harmless from any and all obligations now or hereafter owing to any other Person by Agent or its Affiliates in connection with any Bank Products.  Each Borrower and Guarantor acknowledges and agrees that the obtaining of Bank Products from Agent and its Affiliates (a) is in the sole discretion of Agent or such Affiliate, as the case may be, and (b) is subject to all rules and regulations of the Person that provides the Bank Product.

2.5          Revolving Loan Facility Increases.

(a)           Borrowers may, at their option, request an increase in the Revolving Loan Limit (each a “Revolving Loan Facility Increase”) in an aggregate amount not to exceed $25,000,000 by delivering a written request to Agent that specifies the amount of such increase in the Revolving Loan Limit; provided, that, (i)  the aggregate amount of any such increase shall not cause the Revolving Loan Limit to exceed $100,000,000, (ii) the amount of any such initial Revolving Loan Facility Increase shall be for an increase in the amount equal to not less than $10,000,000 or an integral multiple of $500,000 in excess thereof, (iii) the amount of any additional Revolving Loan Facility Increase shall be for an increase in the amount equal to not less than $5,000,000 or an integral multiple of $500,000 in excess thereof, (iv) any such request

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shall be irrevocable (unless such Revolving Loan Facility Increase is being requested in connection with a Permitted Acquisition and Agent receives written notice prior to the effective date of such Revolving Loan Facility Increase that such Permitted Acquisition will not be consummated), (v) after the initial Revolving Loan Facility Increase, there shall be no more than two (2) additional Revolving Loan Facility Increases, (vi) Agent shall have received a Revolving Loan Facility Increase fee in accordance with the terms and conditions of the Revolving Loan Fee Letter, (vii) Agent shall have received such written request at least two (2) Business Days’ before the proposed effective date of such increase, and (viii) at the time Agent receives notice of such request for a Revolving Loan Facility Increase and on the date of and after giving effect to such Revolving Loan Facility Increase, no Default or Event of Default shall exist or have occurred and be continuing. If the conditions set forth in this Section 2.5(a) are satisfied as determined by Agent, then the requested amount of the Revolving Loan Facility Increase shall become effective on the proposed effective date of such increase. Wells Fargo agrees to increase its Commitment up to the full amount of any such Revolving Loan Facility Increase to the extent that any other Revolving Loan Lender declines to increase its Revolving Loan Commitment as provided in this Section 2.5(a) hereof.

(b)           Upon the receipt by Agent of any such written request, Agent shall promptly notify each Revolving Loan Lender of such request and each Revolving Loan Lender shall have the option (but not the obligation, other than Wells Fargo) to increase the amount of its Commitment by an amount up to its Pro Rata Share of the amount of the increase in the Revolving Loan Limit requested by Borrowers as set forth in the notice from Agent to such Revolving Loan Lender.  Each Revolving Loan Lender shall notify Agent within ten (10) days after the receipt of such notice from Agent whether such Revolving Loan Lender will so increase its Revolving Loan Commitment, and if so, the amount of such increase.  The minimum increase in the Commitments of each such Revolving Loan Lender providing the additional Revolving Loan Commitments shall equal such Revolving Loan Lender’s Pro Rata Share unless otherwise agreed to by Agent.  If the aggregate amount of the increases in the Revolving Loan Commitments received from Revolving Loan Lenders does not equal or exceed the amount of the increase in the Revolving Loan Limit requested by Borrowers, Agent may seek additional increases from Lenders or Revolving Loan Commitments from such Eligible Transferees as it may determine, after consultation with Borrowers.  In the event Revolving Loan Lenders (or Revolving Loan Lenders and any such Eligible Transferees, as the case may be) have committed in writing to provide increases in their Revolving Loan Commitments or new Revolving Loan Commitments in an aggregate amount in excess of the increase in the Revolving Loan Limit requested by Borrowers or permitted hereunder, Agent shall then have the right to allocate such commitments, first to Revolving Loan Lenders and then to Eligible Transferees, in such amounts and manner as Agent may determine, after consultation with Borrowers.  Any new Revolving Loan Lender that is an Eligible Transferee shall execute and deliver an Assignment and Acceptance as modified to provide for the sale by Agent of such Revolving Loan Commitment to such Eligible Transferee.

2.6          Revolving Loan Facility Decreases.

(a)           Borrowers may, at their option, request a decrease in the Revolving Loan Limit (each a “Revolving Loan Facility Decrease”) by delivering a written request to Agent that specifies the amount of the decrease in the Revolving Loan Limit and a corresponding decrease

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in the Revolving Loan Commitments; provided, that, (i) the aggregate amount of any such decrease shall not cause the Revolving Loan Limit to be less than $60,000,000, (ii) the amount of any such Revolving Loan Facility Decrease shall be in a minimum amount of not less than $5,000,000 or an integral multiple of $500,000 in excess thereof, (iii) any such request shall be irrevocable (unless such Revolving Loan Facility Decrease is being requested in connection with a permitted asset disposition and Agent receives written notice prior to the effective date of such Revolving Loan Facility Decrease that such permitted asset disposition will not be consummated), (iv) Agent shall have received such written request at least two (2) Business Days’ before the proposed effective date of such Revolving Loan Facility Decrease, and (v) at the time Agent receives notice of such request for a Revolving Loan Facility Decrease and on the date of and after giving effect to such Revolving Loan Facility Decrease, no Default or Event of Default shall exist or have occurred and be continuing.

(b)           Upon the receipt by Agent of any such Revolving Loan Facility Decrease, Agent shall notify each Revolving Loan Lender of such request and each Revolving Loan Lender shall decrease the amount of its Revolving Loan Commitment by an amount up to its Pro Rata Share of the amount of the Revolving Loan Facility Decrease requested by Borrowers as set forth in the notice from Agent to such Revolving Loan Lender.  Such Revolving Loan Facility Decrease shall be effective on the date that is two (2) Business Days after each of the conditions set forth in Section 2.6(a) hereof have been satisfied or such earlier date after such conditions have been satisfied as Agent may agree.

2.7          Prepayments.

(a)           Borrowers may, at their option, upon notice to Agent pursuant to Section 14.3 hereof, at any time or from time to time, make a prepayment of all or any portion of the outstanding balance of Revolving Loans (without a related reduction in Revolving Loan Commitments), in whole or in part, without premium or penalty, other than any breakage or similar costs or other amounts payable in accordance with this Agreement.  On and after the occurrence and during the continuance or existence of a Cash Dominion Event, the outstanding Loans and other Obligations shall be repaid in accordance with Section 6.4 hereof.

(b)           Borrowers may, at their option, at any time or from time to time, make a prepayment of all or any portion of the outstanding principal balance of Term Loan; provided, that:

(i)            on the date of and after giving effect to such payment, no Default or Event of Default shall exist or have occurred and be continuing;

(ii)           the amount of such principal prepayment shall be in an amount not less than $100,000 or an integral multiple of $100,000 in excess thereof;

(iii)          unless the Revolving Credit Facility is being or has been terminated in full in accordance with the terms of this Agreement, on the date of and after giving effect to such payment, Borrowers have Compliance Excess Availability in an amount equal to not less than twenty (20%) percent of the Revolving Loan Limit;

(iv)          unless the Revolving Credit Facility is being or has been

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terminated in full in accordance with the terms of this Agreement, Agent shall have received, in form and substance reasonably satisfactory to Agent, monthly projections showing that, for the twelve (12) months immediately after such payment is made, Compliance Excess Availability shall be greater than 20% of the Revolving Loan Limit;

(v)           Parent and its Subsidiaries shall have a Fixed Charge Coverage Ratio of not less than 1.0:1.0 calculated based on the immediately preceding twelve (12) months for which Agent has received financial statements delivered in accordance with Section 9.6(a) hereof as set forth in an officer’s certificate, in form and substance reasonably satisfactory to Agent;

(vi)          Agent and Term Loan Agent shall have been given not less than two (2) Business Days’ prior written notice of the intention of Borrowers to make such prepayment, which notice shall include the amount of the payment and such other information as Agent and Term Loan Agent may request in good faith; and

(vii)         Borrowers pay the fees required pursuant to Section 3.2(d) hereof and the fees due for any breakage or similar costs or other amounts payable in accordance with this Agreement (if any).

(c)           Upon the sale, lease, transfer or other disposition of any Term Loan Priority Collateral other than as permitted pursuant by Section 9.7(b) hereof, the Net Cash Proceeds therefrom shall be applied to prepay the Term Loan.  All such amounts shall be applied first to the amount of the Term Loan due on the Maturity Date and then in inverse order of the payments due pursuant to Section 2.8(c) hereof, each prepayment in accordance with the Pro Rata Share each Term Loan Lender.

2.8          Term Loans.

(a)           Subject to and upon the terms and conditions contained herein, each Term Loan Lender severally (and not jointly) agrees to make its Term Loan to Borrowers in an amount equal to its Term Loan Commitment.  All of the Term Loans have been fully funded on the date hereof by Term Loan Lenders and after the Closing Date, no further Term Loan Commitment exists on the part of any Term Loan Lender to make any further Term Loans.

(b)           The Term Loans shall be (i) evidenced by this Agreement and, at the request of Term Loan Agent, a Term Promissory Note issued to each Term Loan Lender in the original principal amount of the Term Loan Commitment of such Term Loan Lender, duly executed and delivered by Borrowers to such Term Loan Lender; (ii) to be repaid, together with interest and other amounts, in accordance with this Agreement, the Term Promissory Notes (if and when executed and delivered), and the other Financing Agreements, and (iii) secured by all of the Collateral.

(c)           The aggregate principal amount of the Term Loans shall be repaid in consecutive quarterly installments (or earlier as provided herein) payable on the first day of each calendar quarter commencing on January 1, 2015, each such installment shall be in the amount of $250,000 and the entire remaining unpaid balance of the Term Loans shall be due and payable on the Maturity Date. Any amounts paid in respect of Term Loans may not be reborrowed.

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(d)           Agent, on behalf of Borrowers, agrees upon the request of all Term Loan Lenders to record the Term Loans on the Register referred to in Section 14.7(c) hereof.  Upon the registration of the Term Loans, any promissory note evidencing the same shall be null and void and shall be returned to Borrower.  Borrowers agree, at the request of Agent, to execute and deliver to any Term Loan Lender a promissory note in registered form to evidence such Registered Term Loan (i.e., containing registered note language) and registered as provided in Section 14.7(c) hereof (a “Registered Term Note”), payable to the order of each Term Loan Lender and otherwise duly completed.  Once recorded on the Register, the Obligations evidenced by such Registered Term Note may not be removed from the Register so long as it remains outstanding, and a Registered Term Note may not be exchanged for a promissory note that is not a Registered Term Note.

(e)           Except for the Term Loans made by Term Loan Lenders as set forth in this Section 2.8, Borrowers shall have no right to request, and Term Loan Lenders shall have no obligation to make, any additional loans or advances to Borrowers under this this Agreement, and any repayments of the Term Loans shall not be subject to any readvance to or reborrowing by Borrowers.

2.9          Term Loan Push Down Reserve.  As of the Closing Date, the Term Loan Push Down Reserve is $0. No Term Loan Push Down Reserve shall be established, unless after the Closing Date (a) EBITDA of Borrowers and their Subsidiaries on a consolidated basis calculated each month on a trailing twelve (12) month basis is at any time less than $20,000,000 or (b) an Event of Default exists or has occurred and is continuing (a “Term Loan Push Down Reserve Trigger Event”). Term Loan Agent shall calculate the Term Loan Push Down Reserve based upon the most recent appraisal of the Intellectual Property received by Agent and Term Loan Agent in accordance with Section 7.6 hereof, and Agent shall include the amount of the Term Loan Push Down Reserve in the Borrowing Base; provided, that, at any time after a Term Loan Push Down Reserve Trigger Event has occurred, if (i) EBITDA of Borrowers and their Subsidiaries on a consolidated basis calculated each month on a trailing twelve (12) month basis is $20,000,000 or greater for a period of not less than one (1) fiscal quarter and (ii) no Event of Default shall exist or have occurred and be continuing, then the Term Loan Push Down Reserve previously established as a result of such Term Loan Push Down Reserve Trigger Event shall be released as of the end of the fiscal quarter that both of the conditions set forth in the immediately preceding clauses (i) and (ii) have been satisfied, unless thereafter another Term Loan Push Down Reserve Trigger Event occurs or reoccurs.

SECTION 3.        INTEREST AND FEES

3.1          Interest.

(a)           Borrowers shall pay to Agent, for the ratable benefit of the Lenders, interest on the outstanding principal amount of the Loans at the applicable Interest Rate.  All interest accruing hereunder on and after the date of any Event of Default or termination hereof shall be payable on demand.

(b)           Any Borrower may from time to time request that Revolving Loans be made as Eurodollar Rate Loans or may request that Revolving Loans which are Prime Rate

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Loans be converted to Eurodollar Rate Loans or that any existing Revolving Loans which are Eurodollar Rate Loans continue for an additional Interest Period.  Such request from a Borrower shall specify the amount of such Eurodollar Rate Loans or the amount of such Prime Rate Loans to be converted to Eurodollar Rate Loans or the amount of such Eurodollar Rate Loans to be continued (subject to the limits set forth below) and the Interest Period to be applicable to such Eurodollar Rate Loans.  Subject to the terms and conditions contained herein, two (2) Business Days after receipt by Agent of such a request from such Borrower, such Eurodollar Rate Loans shall be made or such Prime Rate Loans shall be converted to Eurodollar Rate Loans or such Eurodollar Rate Loans shall continue, as the case may be, provided, that, (i) no Default or Event of Default shall exist or have occurred and be continuing, (ii) no party hereto shall have sent any notice of termination of this Agreement, (iii) such Borrower shall have complied with such customary procedures as are established by Agent and specified by Agent to Borrowers for Eurodollar Rate Loans, (iv) no more than six (6) Interest Periods may be in effect at any one time, (v) the aggregate amount of the Eurodollar Rate Loans must be in an amount not less than $3,000,000 or an integral multiple of $500,000 in excess thereof, and (vi) Agent and each Lender shall have determined that the Interest Period or Adjusted Eurodollar Rate is available to Agent and such Lender and can be readily determined as of the date of the request for such Eurodollar Rate Loan by such Borrower.  Any request by or on behalf of any Borrower for Revolving Loans that are to be Eurodollar Rate Loans or to convert Revolving Loans that are Prime Rate Loans to Eurodollar Rate Loans or to continue any existing Revolving Loans that are Eurodollar Rate Loans shall be irrevocable.  Notwithstanding anything to the contrary contained herein, Agent and Lenders shall not be required to purchase United States Dollar deposits in the London interbank market or other applicable Eurodollar Rate market to fund any Eurodollar Rate Loans, but the provisions hereof shall be deemed to apply as if Agent and Lenders had purchased such deposits to fund the Eurodollar Rate Loans.

(c)           Any Revolving Loans that are Eurodollar Rate Loans shall automatically convert to Prime Rate Loans upon the last day of the applicable Interest Period, unless Agent has received and approved a request to continue such Eurodollar Rate Loan at least two (2) Business Days prior to such last day in accordance with the terms hereof.  Any Revolving Loans that are Eurodollar Rate Loans shall, at Agent’s option, upon notice by Agent to Borrowers, be subsequently converted to Prime Rate Loans in the event that this Agreement or the Revolving Credit Facility shall terminate or not be renewed.  Borrowers shall pay to Agent, for the benefit of Lenders, upon demand by Agent (or Agent may, at its option, charge any loan account of Borrowers) any amounts required to compensate any Lender or Participant for any loss (including loss of anticipated profits), cost or expense incurred by such person, as a result of the conversion of Eurodollar Rate Loans to Prime Rate Loans pursuant to any of the foregoing.

(d)           Interest shall be payable by Borrowers to Agent, for the account of Lenders, monthly in arrears not later than the first day of each calendar month (provided that Interest with respect to any Eurodollar Rate Loans shall be payable on the last day of each relevant Interest Period) and shall be calculated on the basis of a three hundred sixty (360) day year and actual days elapsed.  The interest rate on non-contingent Obligations (other than Eurodollar Rate Loans) shall increase or decrease by an amount equal to each increase or decrease in the Prime Rate effective on the first day of the month after any change in such Prime Rate is announced based on the Prime Rate in effect on the last day of the month in which any such change occurs.  In no event shall charges constituting interest payable by Borrowers to

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Agent and Lenders exceed the maximum amount or the rate permitted under any applicable law or regulation, and if any such part or provision of this Agreement is in contravention of any such law or regulation, such part or provision shall be deemed amended to conform thereto.

(e)           Subject to the terms and conditions of Section 3.3 hereof, all Term Loans shall be Eurodollar Rate Loans.

3.2          Fees.

(a)           Unused Line Fee. Borrowers shall pay to Agent, for the Pro Rata Share of each Revolving Loan Lender, monthly an unused line fee at a rate equal to one quarter percent (0.25%) per annum in the aggregate of the difference between (i) the average daily principal balance of the outstanding Revolving Loans and Letter of Credit Accommodations during the immediately preceding month (or part thereof) while this Agreement is in effect and for so long thereafter as any of the Obligations are outstanding and (ii) the Revolving Loan Limit then in effect (the “Unused Line Fee”), which fee shall be payable on the first day of each month in arrears.

(b)           Revolving Loan Fee Letter. Borrowers and Guarantors shall pay or cause to be paid to Agent, for its own account and the account of Revolving Loan Lenders, the other fees set forth in the Revolving Loan Fee Letter in the amounts and at the times specified therein.  To the extent payment in full of the applicable fees are received by Agent from or on behalf of Borrowers on or about the date hereof, Agent shall pay to each Revolving Loan Lender its share of such fees in accordance with the terms of the agreements between Agent and such Revolving Loan Lender.

(c)           Term Loan Fee Letter.  Borrowers and Guarantors shall pay or cause to be paid to Term Loan Agent, for its own account and the account of Term Loan Lenders, the other fees set forth in the Term Loan Fee Letter in the amounts and at the times specified therein.  To the extent payment in full of the applicable fees are received by Term Loan Agent from or on behalf of Borrowers on or about the date hereof, Term Loan Agent shall pay to each Term Loan Lender its share of such fees in accordance with the terms of the agreements between Term Loan Agent and such Term Loan Lender.

(d)           Term Loan Early Termination Fee.

(i)            If the Term Loan Facility is (a) terminated prior to the Maturity Date (whether voluntarily by Borrowers or by Lenders following an Event of Default), or (b) in the event that the Borrowers prepay, or are required to prepay, the Term Loan in whole or in part, in view of the impracticality and extreme difficulty of ascertaining actual damages and by mutual agreement of the parties as to a reasonable calculation of lost profits of Term Loan Lenders as a result thereof, Borrowers agree to pay to Term Loan Lenders, upon the effective date of such termination (or prepayment), an early termination fee as follows:  (A) in the amount equal to two percent (2%) of the outstanding principal amount of the Term Loans immediately prior to the date of such termination (or in the case of a prepayment, the amount so prepaid), if this Agreement is terminated (or prepayment made) at any time after the Closing Date to and including the second anniversary of this Agreement; and (B), in the amount equal to one percent

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(1%) of the outstanding principal amount of the Term Loans immediately prior to the date of such termination (or in the case of a prepayment, the amount so prepaid), if this Agreement is terminated (or prepayment made) at any time after the Closing Date to and including the third anniversary of this Agreement.

(ii)           Such early termination fee shall be presumed to be the amount of damages sustained by Term Loan Lenders as a result of such early termination and Borrowers agree that it is reasonable under the circumstances currently existing (including, but not limited to, the interest, fees and other charges that are reasonably expected to be received by Term Loan Lenders pursuant to the Term Loans).  Without limiting the foregoing, Term Loan Lenders shall be entitled to such early termination fee upon the occurrence of any Event of Default described in 10.1(e), 10.1(f), 10.1(g) and 10.1(h) hereof, even if Term Loan Agent and Term Loan Lenders do not exercise the right to terminate this Agreement, but elect, at their option, to provide financing to any Borrower or permit the use of cash collateral under the United States Bankruptcy Code.  The early termination fee provided for in this Section 3.2(d) shall be deemed included in the Obligations.

3.3          Inability to Determine Applicable Interest Rate.  If Agent shall determine in good faith (which determination shall, absent manifest error, be final and conclusive and binding on all parties hereto) that on any date by reason of circumstances affecting the London interbank market adequate and fair means do not exist for ascertaining the interest rate applicable to Eurodollar Rate Loans, Agent shall on such date give notice to Borrowers and each Lender of such determination.  Upon such date no Loans may be maintained, made as, or converted to, Eurodollar Rate Loans until such time as Agent notifies Borrowers and Lenders that the circumstances giving rise to such notice no longer exist and any existing Eurodollar Rate Loans shall be converted to Prime Rate Loans and any request for Eurodollar Rate Loans received by Agent shall be deemed to be a request, or a continuation or conversion, for or into Prime Rate Loans.

3.4          Illegality.  Notwithstanding anything to the contrary contained herein, if (a) any Change in Law makes it unlawful for a Lender to make or maintain a Eurodollar Rate Loan or to maintain any Commitment with respect to a Eurodollar Rate Loan or (b) a Lender determines in good faith (which determination shall, absent manifest error, be final and conclusive and binding upon all parties hereto) has become impracticable as a result of a circumstance that adversely affects the London interbank market or the position of such Lender in such market, then such Lender shall promptly give notice thereof to Agent and Borrowers and may (i) declare that Eurodollar Rate Loans will not thereafter be made by such Lender, such that any request for a Eurodollar Rate Loans from such Lender shall be deemed to be a request for a Prime Rate Loan unless such Lender’s declaration has been withdrawn (and it shall be withdrawn promptly upon the cessation of the circumstances described in clause (a) or (b) above )and (ii) demand that (A) all outstanding Eurodollar Rate Loans made by such Lender be prepaid immediately or (B) converted to Prime Rate Loans immediately, in which event all outstanding Eurodollar Rate Loans of such Lender shall be so converted; provided, that, Borrowers shall have the option to choose whether to prepay such Eurodollar Rate Loans or have such Eurodollar Rate Loans converted to Prime Rate Loans.  Borrowers shall jointly and severally indemnify Agent, Term Loan Agent and Lenders and hold Agent, Term Loan Agent and Lenders harmless from any loss or expense which Agent or any Lender may sustain or incur as a consequence of a default by any

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Borrower in making a borrowing of or conversion into Eurodollar Rate Loans after any Borrower has given a notice requesting the same in accordance with the provisions of this Agreement.  This covenant shall survive the termination or non-renewal of this Agreement and the payment of the Obligations.

3.5          Increased Costs.  If any Change in Law shall: (a) impose, modify or deem applicable any reserve, special deposit, compulsory loan, insurance charge or similar requirement against assets of, deposits with or for the account of, or credit extended or participated in by, any Lender or the Issuing Bank; (b) subject any Lender or Issuing Bank to any tax of any kind whatsoever with respect to this Agreement, any Letter of Credit Accommodation, any participation in a Letter of Credit Accommodation or any Eurodollar Rate Loan made by it, or change the basis of taxation of payments to such Lender or the Issuing Bank in respect thereof (except for Taxes or Other Taxes covered by Section 6.5 and the imposition of, or any change in the rate of, any taxes payable by such Lender or the Issuing Bank described in Sections 6.5(a), (b) and (c)); or (c) impose on any Lender or Issuing Bank or the London interbank market any other condition, cost or expense affecting this Agreement or Eurodollar Rate Loans made by such Lender or any Letter of Credit Accommodation or participation therein, and the result of any of the foregoing shall be to increase the cost to such Lender of making or maintaining any Eurodollar Rate Loan (or of maintaining its obligation to make any such Loan), or to increase the cost to such Lender or Issuing Bank of participating in, issuing or maintaining any Letter of Credit Accommodation (or of maintaining its obligation to participate in or to issue any Letter of Credit Accommodation), or to reduce the amount of any sum received or receivable by such Lender or Issuing Bank hereunder (whether of principal, interest or any other amount) then, upon request of such Lender or Issuing Bank, Borrowers will pay to such Lender or Issuing Bank, as the case may be, such additional amount or amounts as will compensate such Lender or Issuing Bank, as the case may be, for such additional costs incurred or reduction suffered.

3.6          Capital Requirements.  If any Lender or Issuing Bank determines that any Change in Law affecting such Lender or the Issuing Bank or any lending office of such Lender or such Lender’s or Issuing Bank’s holding company, if any, regarding capital requirements has or would have the effect of reducing the rate of return on such Lender’s or Issuing Bank’s capital or on the capital of such Lender’s or Issuing Bank’s holding company, if any, as a consequence of this Agreement, the Commitments of such Lender or the Loans made by, or participations in Letter of Credit Accommodations held by, such Lender, or the Letter of Credit Accommodations issued by the applicable Issuing Bank, to a level below that which such Lender or Issuing Bank or such Lender’s or Issuing Bank’s holding company could have achieved but for such Change in Law (taking into consideration such Lender’s or Issuing Bank’s policies and the policies of such Lender’s or Issuing Bank’s holding company with respect to capital adequacy), then from time to time Borrowers will pay to such Lender or Issuing Bank, as the case may be, such additional amount or amounts as will compensate such Lender or Issuing Bank or such Lender’s or Issuing Bank’s holding company for any such reduction suffered.

3.7          Certificates for Reimbursement.  A certificate of a Lender or Issuing Bank, together with reasonable supporting documentation or calculations in accordance with such Lender’s or Issuing Bank’s then existing procedures, setting forth the amount or amounts necessary to compensate such Lender or Issuing Bank or its holding company, as the case may be, as specified in Section 3.5 or 3.6 hereof and delivered to Borrowers shall be conclusive

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absent manifest error.  Borrowers shall pay such Lender or Issuing Bank, as the case may be, the amount shown as due on any such certificate within fifteen (15) days after receipt thereof.

3.8          Delay in Requests.  Failure or delay on the part of any Lender or Issuing Bank to demand compensation pursuant to Section 3.5 or 3.6 hereof shall not constitute a waiver of such Lender’s or Issuing Bank’s right to demand such compensation; provided, that, Borrowers shall not be required to compensate a Lender or Issuing Bank pursuant to this Section for any increased costs incurred or reductions occurring more than one hundred eighty (180) days prior to the date that such Lender or Issuing Bank, as the case may be, becomes aware of the Change in Law giving rise to such Lender’s or Issuing Bank’s claim for compensation therefor (except that, if the Change in Law giving rise to such increased costs or reductions is retroactive, then the one hundred eighty (180) day period referred to above shall be extended to include the period of retroactive effect thereof).

3.9          Mitigation; Replacement of Lenders.

(a)           If any Lender requests compensation under Section 3.4, 3.5 or Section 3.6 hereof, or Borrowers are required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 6.5, then such Lender shall, if requested by Borrowers, use reasonable efforts (subject to overall policy considerations of such Lender) to designate a different lending office for funding or booking its Loans hereunder, to assign its rights and obligations hereunder to another of its offices, branches or affiliates or to take such other actions as such Lender or Agent determines, if, in the judgment of such Lender, such designation, assignment or other action (i) would eliminate or reduce amounts payable pursuant to such Sections in the future and (ii) would not subject Agent or such Lender to any unreimbursed cost or expense and Agent or such Lender would not suffer any economic, legal or regulatory disadvantage.  Nothing in this Section 3.9 shall affect or postpone any of the obligations of Borrowers or the rights of Agent or such Lender pursuant to this Section 3.9.  Borrowers hereby agree to pay on demand all reasonable out of pocket costs and expenses incurred by Agent or any Lender in connection with any such designation or assignment.

(b)           If (i) any Lender requests compensation under Section 3.4, 3.5 or Section 3.6 hereof, (ii) Borrowers are required to pay any additional amount to any Lender or Governmental Authority pursuant to Section 6.5 hereof, (iii) a Non-Consenting Lender does not consent to a proposed change, waiver, discharge or termination with respect to this Agreement or any Financing Agreement that has been approved by the Required Lenders as provided in Section 11.3 hereof but requires unanimous consent of all Lenders or all Lenders directly affected thereby (as applicable) or (iv) any Lender is a Defaulting Lender, then Borrowers may, at their sole expense and effort, upon notice to such Lender and Agent, replace such Lender by requiring such Lender to assign and delegate (and such Lender shall be obligated to assign and delegate), without recourse (in accordance with and subject to the restrictions contained in Section 14.7 hereof), all of its interests, rights and obligations under this Agreement and the related Financing Agreements to an Eligible Transferee that shall assume such obligations; provided, that, (A) Borrowers have received the prior written consent of Agent, (B) such Lender shall have received payment of an amount equal to the outstanding principal amount of its Loans and participations in Letter of Credit Obligations that it has funded, if any, accrued interest thereon, accrued fees and other amounts payable to it hereunder, from the assignee (to the extent

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of such outstanding principal) and Borrowers (in the case of accrued interest, fees and other amounts, including amounts under Section 3.10 hereof), (C) such assignment will result in a reduction in such compensation and payments, and (D) such assignment does not conflict with applicable laws or regulations.  A Lender shall not be required to make any such assignment and delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Borrowers to require such assignment and delegation cease to apply.  Nothing in this Section 3.9 shall impair any rights that any Borrower or Agent may have against any Lender that is a Defaulting Lender.

3.10        Funding Losses.  Borrowers shall pay to Agent its customary administrative charge and to each Lender all losses, expenses and liabilities (including any interest paid by such Lender to Lenders of funds borrowed by it to make or carry its Eurodollar Rate Loans and any loss, expense or liability sustained by such Lender in connection with the liquidation or redeployment of such) that it sustains (a) if for any reason (other than a default by such Lender) a borrowing of any Eurodollar Rate Loan does not occur on a date specified therefor or in the amount in a request for borrowing, or a conversion to, any Eurodollar Rate Loan does not occur on a date specific therefor or in the amount in a request for conversion or continuation, (b) if any prepayment or other principal payment of any of its Eurodollar Rate Loans occurs on a date prior to the last day of an Interest Period applicable to such Loan, or (c) if any prepayment of any of its Eurodollar Rate Loans is not made on any date specified in a notice of prepayment given by a Borrower. This covenant shall survive the termination or non-renewal of this Agreement and the payment of the Obligations.

3.11        Maximum Interest.  Notwithstanding anything to the contrary contained in this Agreement or any of the other Financing Agreements, in no event whatsoever shall the aggregate of all amounts that are contracted for, charged or received by Agent or any Lender pursuant to the terms of this Agreement or any of the other Financing Agreements and that are deemed interest under applicable law exceed the Maximum Interest Rate (including, to the extent applicable, the provisions of Section 5197 of the Revised Statutes of the United States of America as amended, 12 U.S.C. Section 85, as amended).  In no event shall any Borrower or Guarantor be obligated to pay interest or such amounts as may be deemed interest under applicable law in amounts which exceed the Maximum Interest Rate.  In the event any Interest is charged or received in excess of the Maximum Interest Rate (the “Excess”), each Borrower and Guarantor acknowledges and stipulates that any such charge or receipt shall be the result of an accident and bona fide error, and that any Excess received by Agent or any Lender shall be applied, first, to the payment of the then outstanding and unpaid principal hereunder; second to the payment of the other Obligations then outstanding and unpaid; and third, returned to such Borrower or Guarantor.  All monies paid to Agent or any Lender hereunder or under any of the other Financing Agreements, whether at maturity or by prepayment, shall be subject to any rebate of unearned interest as and to the extent required by applicable law. For the purpose of determining whether or not any Excess has been contracted for, charged or received by Agent or any Lender, all interest at any time contracted for, charged or received from any Borrower or Guarantor in connection with this Agreement or any of the other Financing Agreements shall, to the extent permitted by applicable law, be amortized, prorated, allocated and spread during the entire term of this Agreement in accordance with the amounts outstanding from time to time hereunder and the Maximum Interest Rate from time to time in effect in order to lawfully charge the maximum amount of interest permitted under applicable laws.  The provisions of this Section

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3.11 shall be deemed to be incorporated into each of the other Financing Agreements (whether or not any provision of this Section is referred to therein).

3.12        No Requirement of Match Funding.  Notwithstanding anything to the contrary contained herein, Agent and Lenders shall not be required to acquire US Dollar deposits in the London interbank market or any other offshore US Dollar market to fund any Eurodollar Rate Loan or to otherwise match fund any Obligations as to which interest accrues based on the Adjusted Eurodollar Rate.  All of the provisions of this Section 3 shall be deemed to apply as if Agent, each Lender or any Participant had acquired such deposits to fund any Eurodollar Rate Loan or any other Obligation as to which interest is accruing at the Adjusted Eurodollar Rate by acquiring such US Dollar deposits for each Interest Period in the amount of the Eurodollar Rate Loans or other applicable Obligations, whether or not such Eurodollar Rate Loans or other applicable Obligations were in fact so funded.

SECTION 4.        CONDITIONS PRECEDENT

4.1          Conditions Precedent to Effectiveness of Agreement.  Each of the following is a condition precedent to the effectiveness of this Agreement:

(a)           all requisite corporate action and proceedings in connection with this Agreement and the other matters related hereto shall be satisfactory in form and substance to Agent, and Agent shall have received all information and copies of all documents, including records of requisite corporate action and proceedings which Agent may have requested in connection therewith, such documents where requested by Agent or its counsel to be certified by appropriate corporate officers or Governmental Authority;

(b)           Agent shall have received, in form and substance satisfactory to Agent, (i) projected monthly consolidated balance sheets, income statements, statements of cash flows and availability of Borrowers and Guarantors for the period through the end of the fiscal year of Borrowers and Guarantors ending January 31, 2015, (ii) projected annual consolidated balance sheets, income statements, statements of cash flows and availability of Borrowers and Guarantors for the period through the end of the fiscal year of Borrowers and Guarantors ending January 28, 2017, in each case as to the projections described in the foregoing clauses (i) and (ii) with the assumptions set forth in all of such projections in form and substance reasonably satisfactory to Agent, and an opening pro forma balance sheet for Borrowers and Guarantors, (iii) any updates to the projections described in clauses (i) and (ii), in each case in form and substance reasonably satisfactory to Agent and (iv) copies of interim unaudited consolidated financial statements for each quarter and month since the last audited consolidated financial statements of Borrowers and Guarantors;

(c)           no material adverse change shall have occurred in the assets or business of Borrowers since February 1, 2014 and no change or event shall have occurred which would impair the ability of any Borrower or Obligor to perform its obligations hereunder or under any of the other Financing Agreements to which it is a party or of Agent or any Lender to enforce the Obligations or realize upon the Collateral;

(d)           on the date hereof after giving effect to the transactions contemplated by

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this Agreement, Compliance Excess Availability as determined by Agent, shall be not less than $35,000,000,

(e)           lien and tax lien search results for the location of each Borrower and Guarantor (determined in accordance with the Uniform Commercial Code of the applicable jurisdiction and any other applicable law) which search results shall be in form and substance satisfactory to Agent;

(f)            Agent shall have received the Information Certificates, the review of which shall be satisfactory to Agent in its good faith determination;

(g)           Agent shall have received, in form and substance satisfactory to Agent in good faith, such opinion letters of counsel to Borrowers and Guarantors with respect to this Agreement and such other matters related hereto as Agent may request in good faith;

(h)           Agent shall have received the Revolving Loan Fee Letter, in form and substance satisfactory to Agent, duly executed by each Borrower and Guarantor;

(i)            Agent shall have received the Term Loan Fee Letter, in form and substance satisfactory to Agent, duly executed by each Borrower and Guarantor;

(j)            Agent shall have received an Amendment No. 1 to Second Amended and Restated Collateral Assignment of Trademarks (Security Agreement), in form and substance satisfactory to Agent, duly executed by Lernco and Lerner Outlet;

(k)           Agent shall have received an Amendment No. 1 to Amended and Restated Collateral Assignment of Trademarks (Security Agreement), in form and substance satisfactory to Agent, duly executed by Lerner;

(l)            Agent shall have received the Patent Collateral Assignment and Security Agreement, in form and substance satisfactory to Agent, duly executed by Lerner;

(m)          Agent shall have received the Copyright Collateral Assignment and Security Agreement, in form and substance satisfactory to Agent, duly executed by Lernco;

(n)           all fees, costs and expenses payable by Borrowers under the terms of this Agreement and the other Financing Agreements shall have been paid in full; and

(o)           all other documents and legal matters in connection with the transactions contemplated by this Agreement shall have been delivered, executed by all parties hereto or thereto, as applicable, or recorded and shall be in form and substance satisfactory to Agent in good faith.

4.2          Conditions Precedent to All Loans and Letter of Credit Accommodations.  Each of the following is an additional condition precedent to the Lenders continuing to provide Loans and/or providing Letter of Credit Accommodations to Borrowers:

(a)           all representations and warranties contained herein and in the other

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Financing Agreements shall be true and correct in all material respects with the same effect as though such representations and warranties had been made on and as of the date of the making of each such Loan or providing each such Letter of Credit Accommodation and after giving effect thereto, except to the extent that such representations and warranties expressly relate solely to an earlier date (in which case such representations and warranties shall have been true and accurate in all material respects on and as of such earlier date);

(b)           no law, regulation, order, judgment or decree of any Governmental Authority shall exist, and no action, suit, investigation, litigation or proceeding shall be pending or threatened in any court or before any arbitrator or Governmental Authority, which (i) purports to enjoin, prohibit, restrain or otherwise affect (A) the making of the Loans or providing the Letter of Credit Accommodations, or (B) the consummation of the transactions contemplated pursuant to the terms hereof or the other Financing Agreements or (ii) has a reasonable likelihood of having a Material Adverse Effect; and

(c)           no Default or Event of Default shall exist or have occurred and be continuing on and as of the date of the making of such Loan or providing each such Letter of Credit Accommodation and after giving effect thereto.

SECTION 5.        GRANT AND PERFECTION OF SECURITY INTEREST

5.1          Grant of Security Interest.  To secure payment and performance of all Obligations, each Borrower and Guarantor hereby grants to Agent, for itself and the ratable benefit of Secured Parties a continuing security interest in, a lien upon, and a right of set off against, for itself and the ratable benefit of Secured Parties, as security, and hereby confirms, reaffirms and restates the prior grant thereof to Agent, for itself and the ratable benefit of the Secured Parties pursuant to the Existing Loan Agreement, all personal property and fixtures, and interests in personal property and fixtures, of such Borrower or Guarantor, whether now owned or hereafter acquired or existing, and wherever located (together with all other collateral security for the Obligations at any time granted to or held or acquired by Agent or any Secured Party, collectively, the “Collateral”) including, without limitation, the following:

(a)           all Accounts;

(b)           all general intangibles, including, without limitation, all Intellectual Property;

(c)           all goods, including, without limitation, Inventory and Equipment, whether ordered, in progress, finished or received;

(d)           all fixtures;

(e)           all chattel paper, including, without limitation, all tangible and electronic chattel paper;

(f)            all instruments, including, without limitation, all promissory notes;

(g)           all documents;

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(h)           all deposit accounts;

(i)            all letters of credit, banker’s acceptances and similar instruments and including all letter-of-credit rights;

(j)            all supporting obligations and all present and future liens, security interests, rights, remedies, title and interest in, to and in respect of Receivables and other Collateral, including (i) rights and remedies under or relating to guaranties, contracts of suretyship, letters of credit and other insurance related to the Collateral, (ii) rights of stoppage in transit, replevin, repossession, reclamation and other rights and remedies of an unpaid vendor, lienor or secured party, (iii) goods described in invoices, documents, contracts or instruments with respect to, or otherwise representing or evidencing, Receivables or other Collateral, including returned, repossessed and reclaimed goods, and (iv) deposits by and property of account debtors or other persons securing the obligations of account debtors;

(k)           all (i) investment property (including securities, whether certificated or uncertificated, securities accounts, security entitlements, commodity contracts or commodity accounts) and (ii) monies, credit balances, deposits and other property of such Borrower or Guarantor now or hereafter held or received by or in transit to Agent, any Secured Party or its Affiliates or at any other depository or other institution from or for the account of such Borrower or Guarantor, whether for safekeeping, pledge, custody, transmission, collection or otherwise;

(l)            all commercial tort claims, including, without limitation, those identified on Schedule 5.2(h) hereto;

(m)          to the extent not otherwise described above, all Receivables;

(n)           all Records; and

(o)           all products and proceeds of the foregoing, in any form, including insurance proceeds and all claims against third parties for loss or damage to or destruction of or other involuntary conversion of any kind or nature of any or all of the other Collateral.

Notwithstanding anything herein to the contrary, in no event shall the Collateral include, and no Borrower or Guarantor shall be deemed to have granted a security interest in, (i) any personal and real property, fixtures and interests of such Borrower or Guarantor which are not assignable or are incapable of being encumbered as a matter of law, except for the products and proceeds thereof, (ii) such Borrower’s or Guarantor’s rights or interests in any license, contract or agreement to which such Borrower or Guarantor is a party or any of its rights or interests thereunder to the extent, but only to the extent, that such a grant would, under the terms of such license, contract or agreement, applicable laws or otherwise, result in a breach of the terms of, or constitute a default under any license, contract or agreement to which such Borrower or Guarantor is a party (except for the products and proceeds thereof); provided, that, upon the ineffectiveness, lapse or termination of any such provision, the Collateral shall include, and such Borrower or Guarantor shall be deemed to have granted a security interest in, all such rights and interests as if such provision had never been in effect, (iii) the Capital Stock of any Foreign Subsidiary that is a “controlled foreign corporation” (as such term is defined in Section 957(a) of the Code), to the extent such Foreign Subsidiary is not treated as a “disregarded entity” by the

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Code, or the Capital Stock of any Foreign Holdco Subsidiary in excess of sixty five (65%) percent of all of the issued and outstanding shares of Capital Stock of such Subsidiary entitled to vote (within the meaning of Treasury Regulation Section 1.956-2); provided, that, if the pledge of one hundred (100%) percent of the Capital Stock of such Foreign Subsidiary or Foreign Holdco Subsidiary would not have an adverse tax impact on such Borrower or Guarantor for purposes of Section 956 of the Code as determined by Agent in its good faith discretion in consultation with such Borrower or Guarantor, Borrower or such Guarantor shall pledge to Agent one hundred (100%) percent of the Capital Stock of such Foreign Subsidiary or such Foreign Holdco Subsidiary; and (iv) any rights to any Intellectual Property, License Agreements or software that would be rendered, void, invalid or unenforceable under the terms thereof or under applicable laws by the grant of a security interest in such Intellectual Property, License Agreements or software created pursuant to the terms of this Agreement, for as long as such prohibition or reason for invalidity exists, except in each case under the foregoing clauses (i) through (iv) for the products and proceeds thereof.

5.2                               Perfection of Security Interests.

(a)                                 Each Borrower and Guarantor irrevocably and unconditionally authorizes Agent (or its agent) to file at any time and from time to time such financing statements with respect to the Collateral naming Agent or its designee as the secured party and such Borrower or Guarantor as debtor, as Agent may require, and including any other information with respect to such Borrower or Guarantor or otherwise required by part 5 of Article 9 of the Uniform Commercial Code of such jurisdiction as Agent may determine, together with any amendment and continuations with respect thereto, which authorization shall apply to all financing statements filed on, prior to or after the date hereof.  Each Borrower and Guarantor hereby ratifies and approves all financing statements naming Agent or its designee as secured party and such Borrower or Guarantor, as the case may be, as debtor with respect to the Collateral (and any amendments with respect to such financing statements) filed by or on behalf of Agent prior to the date hereof and ratifies and confirms the authorization of Agent to file such financing statements (and amendments, if any).  Each Borrower and Guarantor hereby authorizes Agent to adopt on behalf of such Borrower or Guarantor any symbol required for authenticating any electronic filing.  In the event that the description of the collateral in any financing statement naming Agent or its designee as the secured party and any Borrower or Guarantor as debtor includes assets and properties of such Borrower or Guarantor that do not at any time constitute Collateral, whether hereunder, under any of the other Financing Agreements or otherwise, the filing of such financing statement shall nonetheless be deemed authorized by such Borrower or Guarantor to the extent of the Collateral included in such description and it shall not render the financing statement ineffective as to any of the Collateral or otherwise affect the financing statement as it applies to any of the Collateral.  In no event shall any Borrower or Guarantor at any time file, or permit or cause to be filed, any correction statement or termination statement with respect to any financing statement (or amendment or continuation with respect thereto) naming Agent or its designee as secured party and such Borrower or Guarantor as debtor, without the prior written consent of Agent.

(b)                                 No Borrower or Guarantor has any chattel paper (whether tangible or electronic) or instruments as of the date hereof, except as set forth on Schedule 5.2(b) hereto.  In the event that any Borrower or Guarantor shall be entitled to or shall receive any chattel paper or

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instrument after the date hereof, which together with all other chattel paper and instruments that Borrowers and Guarantors have become entitled to or have received after the date hereof has a fair market value in excess of $100,000 individually or in the aggregate, such Borrower or Guarantor shall promptly notify Agent thereof in writing.  Promptly upon the receipt thereof by or on behalf of such Borrower or Guarantor (including by any agent or representative), such Borrower or Guarantor shall deliver, or cause to be delivered to Agent, all tangible chattel paper and instruments that such Borrower or Guarantor has or may at any time acquire, accompanied by such instruments of transfer or assignment duly executed in blank as Agent may from time to time specify, in each case except as Agent may otherwise agree.  At Agent’s option, such Borrower or Guarantor shall, or Agent may at any time on behalf of such Borrower or Guarantor, cause the originals of  any such instruments and chattel paper that have a fair market value in excess of $100,000 individually or in the aggregate, to be conspicuously marked in a form and manner acceptable to Agent with the following legend referring to chattel paper or instruments as applicable: “This [chattel paper][instrument] is subject to the security interest of Wells Fargo Bank, National Association, and any sale, transfer, assignment or encumbrance of this [chattel paper][instrument] violates the rights of such secured party.”

(c)                                  In the event that any Borrower or Guarantor shall at any time hold or acquire an interest in any electronic chattel paper or any “transferable record” (as such term is defined in Section 201 of the Federal Electronic Signatures in Global and National Commerce Act or in Section 16 of the Uniform Electronic Transactions Act as in effect in any relevant jurisdiction), which together with all other electronic chattel paper or “transferable record” that Borrowers and Guarantors have become entitled to has a fair market value in excess of $100,000 individually or in the aggregate, such Borrower or Guarantor shall promptly notify Agent thereof in writing.  Promptly upon Agent’s request, such Borrower or Guarantor shall take, or cause to be taken, such actions as Agent may request to give Agent control of such electronic chattel paper under Section 9-105 of the UCC and control of such transferable record under Section 201 of the Federal Electronic Signatures in Global and National Commerce Act or, as the case may be, Section 16 of the Uniform Electronic Transactions Act, as in effect in such jurisdiction.

(d)                                 No Borrower or Guarantor has any deposit accounts as of the date hereof, except as set forth in such Borrower’s or Guarantor’s Information Certificate.  No Borrower or Guarantor shall, directly or indirectly, after the date hereof open, establish or maintain any Central Collection Deposit Account unless each of the following conditions is satisfied:  (i) Agent shall have received not less than five (5) Business Days prior written notice of the intention of such Borrower or Guarantor to open or establish such account which notice shall specify in reasonable detail and specificity acceptable to Agent the name of the Central Collection Deposit Account, the owner of the Central Collection Deposit Account, the name and address of the bank at which such Central Collection Deposit Account is to be opened or established, the individual at such bank with whom such Borrower or Guarantor is dealing and the purpose of the Central Collection Deposit Account, (ii) the bank where such Central Collection Deposit Account is opened or maintained shall be reasonably acceptable to Agent, and (iii) on or before the opening of such Central Collection Deposit Account, such Borrower or Guarantor shall as Agent may specify either (A) deliver to Agent a Deposit Account Control Agreement with respect to such Central Collection Deposit Account duly authorized, executed and delivered by such Borrower or Guarantor and the bank at which such deposit account is opened and maintained or (B) arrange for Agent to become the customer of the bank with respect

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to the deposit account on terms and conditions reasonable acceptable to Agent.  The terms of this subsection (d) shall not apply to (i) deposit accounts specifically and exclusively used for payroll, payroll taxes and other employee wage and benefit payments to or for the benefit of such Borrower’s or Guarantor’s salaried employees or (ii) an account maintained by Borrowers and a management company engaged by Borrowers for the purpose of paying the real property taxes of Borrowers and Guarantors so long as (A) Borrowers prefund the amount of taxes to be paid in such account not earlier than ten (10) Business Days prior to the date such taxes are required to be paid and (B) at all times other than the time when such account may be prefunded during such ten (10) day period with the amount of taxes to be so paid, not more than $5,000 is maintained in such account.  Agent shall not exercise its right to require amounts in such accounts to be sent to the Agent Payment Account except as provided by Section 6.3 hereof.

(e)                                  No Borrower or Guarantor owns or holds, directly or indirectly, beneficially or as record owner or both, any investment property, as of the date hereof, or has any investment account, securities account, commodity account or other similar account with any bank or other financial institution or other securities intermediary or commodity intermediary as of the date hereof, in each case except as set forth on Schedule 5.2(e) hereto.

(i)                                     In the event that any Borrower or Guarantor shall be entitled to or shall at any time after the date hereof hold or acquire any certificated securities, which together with all other certificated securities in which Borrowers and Guarantors hold or acquire an interest after the date hereof have a fair market value in excess of $100,000 individually or in the aggregate, such Borrower or Guarantor shall promptly endorse, assign and deliver the same to Agent, accompanied by such instruments of transfer or assignment duly executed in blank as Agent may from time to time specify.  If any securities, now or hereafter acquired by any Borrower or Guarantor are uncertificated and are issued to such Borrower or Guarantor or its nominee directly by the issuer thereof, and such securities together with all other such securities acquired by Borrowers and Guarantors have a fair market value in excess of $100,000 individually or in the aggregate, such Borrower or Guarantor shall immediately notify Agent thereof and shall as Agent may specify, either (A) cause the issuer to agree to comply with instructions from Agent as to such securities, without further consent of such Borrower or Guarantor or such nominee, or (B) arrange for Agent to become the registered owner of the securities.

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

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securities intermediary or commodity intermediary, such Borrower or Guarantor shall as Agent may specify either (1) execute and deliver, and cause to be executed and delivered to Agent, an Investment Property Control Agreement with respect thereto duly authorized, executed and delivered by such Borrower or Guarantor and such securities intermediary or commodity intermediary or (2) arrange for Agent to become the entitlement holder with respect to such investment property on terms and conditions acceptable to Agent.  Agent shall not exercise its right to require amounts in such accounts to be sent to the Agent Payment Account except during the existence of a Cash Dominion Event.

(g)                                  No Borrower or Guarantor is the beneficiary or otherwise entitled to any right to payment under any letter of credit, banker’s acceptance or similar instrument as of the date hereof, except as set forth on Schedule 5.2(g) hereto.  In the event that any Borrower or Guarantor shall be entitled to or shall receive any right to payment under any letter of credit, banker’s acceptance or any similar instrument, whether as beneficiary thereof or otherwise after the date hereof, which together with all other letters of credit, banker’s acceptances and similar instruments that Borrowers and Guarantors have become entitled to or have received after the date hereof have a fair market value in excess of $100,000 individually or in the aggregate, such Borrower or Guarantor shall promptly notify Agent thereof in writing.  Such Borrower or Guarantor shall immediately, as Agent may specify, either (i) deliver, or cause to be delivered to Agent, with respect to any such letter of credit, banker’s acceptance or similar instrument, the written agreement of the issuer and any other nominated person obligated to make any payment in respect thereof (including any confirming or negotiating bank), in form and substance satisfactory to Agent, consenting to the assignment of the proceeds of the letter of credit to Agent by such Borrower or Guarantor and agreeing to make all payments thereon directly to Agent or as Agent may otherwise direct or (ii) cause Agent to become, at Borrowers’ expense, the transferee beneficiary of the letter of credit, banker’s acceptance or similar instrument (as the case may be).

(h)                                 No Borrower or Guarantor has any commercial tort claims with respect to which the amount claimed exceeds $1,000,000 and either a written demand therefor has been made or legal action has commenced, except as set forth on Schedule 5.2(h) hereto.  In the event that any Borrower or Guarantor shall at any time after the date hereof have any such commercial tort claims, or if an Event of Default exists, if any Borrower or Guarantor has any commercial tort claims, such Borrower or Guarantor shall promptly notify Agent thereof in writing, which notice shall (i) set forth in reasonable detail the basis for and nature of such commercial tort claim and (ii) include the express grant by such Borrower or Guarantor to Agent of a security interest in such commercial tort claim (and the proceeds thereof).  In the event that such notice does not include such grant of a security interest, the sending thereof by such Borrower or Guarantor to Agent shall be deemed to constitute such grant to Agent.  Upon the sending of such notice, any commercial tort claim described therein shall constitute part of the Collateral and shall be deemed included therein.  Without limiting the authorization of Agent provided in Section 5.2(a) hereof or otherwise arising by the execution by such Borrower or Guarantor of this Agreement or any of the other Financing Agreements, Agent is hereby irrevocably authorized from time to time and at any time to file such financing statements naming Agent or its designee as secured party and such Borrower or Guarantor as debtor, or any amendments to any financing statements, covering any such commercial tort claim as Collateral.  In addition, such Borrower or Guarantor shall promptly upon Agent’s request, execute and deliver, or cause

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to be executed and delivered, to Agent such other agreements, documents and instruments as Agent may require in connection with such commercial tort claim.

(i)                                     No Borrower or Guarantor has any goods, documents of title or other Collateral in the custody, control or possession of a third party as of the date hereof, except as set forth in such Borrower’s or Guarantor’s Information Certificate and except for goods located in the United States in transit to a location of a Borrower or Guarantor permitted herein in the ordinary course of business of such Borrower or Guarantor in the possession of any carrier transporting such goods.  In the event that any goods, documents of title or other Collateral with a fair market value in excess of $100,000 are at any time after the date hereof in the custody, control or possession of any other person not referred to in a Borrower’s or Guarantor’s Information Certificate or such carriers, such Borrower or Guarantor shall promptly notify Agent thereof in writing.  Promptly upon Agent’s request, such Borrower or Guarantor shall deliver to Agent a Collateral Access Agreement duly authorized, executed and delivered by such person and such Borrower or Guarantor.

(j)                                    Each Borrower and Guarantor shall take any other actions reasonably requested by Agent from time to time to cause the attachment, perfection and first priority of, and the ability of Agent to enforce, the security interest of Agent in any and all of the Collateral, including, without limitation, (i) executing, delivering and, where appropriate, filing financing statements and amendments relating thereto under the UCC or other applicable law, to the extent, if any, that such Borrower’s or Guarantor’s signature thereon is required therefor, (ii) upon Agent’s request after the occurrence and during the continuance of an Event of Default, causing Agent’s name to be noted as secured party on any certificate of title for a titled good if such notation is a condition to attachment, perfection or priority of, or ability of Agent to enforce, the security interest of Agent in such Collateral, (iii) complying with any provision of any statute, regulation or treaty of the United States as to any Collateral if compliance with such provision is a condition to attachment, perfection or priority of, or ability of Agent to enforce, the security interest of Agent in such Collateral, (iv) obtaining the consents and approvals required by any Governmental Authority or third party, including, without limitation, any consent of any licensor, lessor or other Person obligated on Collateral, and taking all actions required by other law, as applicable in any relevant jurisdiction.  Notwithstanding the foregoing, nothing in this Agreement shall require any Borrower or Guarantor to make any filings or take any other actions to record or perfect Agent’s security interest in or lien on any Intellectual Property outside the United States, unless Agent determines in its good faith discretion that such recordation or perfection would be required for Agent and Secured Parties have the Obligations paid in full in accordance with the terms and conditions of this Agreement.

SECTION 6.        COLLECTION AND ADMINISTRATION

6.1                               Borrowers’ Loan Accounts.  Agent shall maintain one or more loan account(s) on its books in the name of Borrowers (collectively, the “Loan Accounts”) on which shall be recorded (i)  all Revolving Loans, Letter of Credit Accommodations, Term Loans and other Obligations attributable or allocable to the Credit Facility, including all Special Agent Advances, (ii) all payments made by or on behalf of a Borrower in respect of the Obligations arising under or related to the Revolving Loans, including all Special Agent Advances,  the Term Loans, and all payments in respect of any Revolving Loan  Priority Collateral and any Term Loan Priority

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Collateral, and (iii) all other appropriate debits and credits as provided in this Agreement, including, without limitation, fees, charges, costs, expenses and interest payable hereunder attributable or allocable to the Credit Facility. All entries in the Loan Account shall be made in accordance with Agent’s customary practices as in effect from time to time.  All Collateral or other collateral security held by or granted to Agent or Secured Parties by a Borrower or any third persons shall be security for the payment and performance of any and all Obligations attributable to the Credit Facility to Agent and Secured Parties (including, but not limited to, the Revolving Loans, Letter of Credit Accommodations and Term Loans), notwithstanding the maintenance of separate accounts for Borrowers or third persons or the existence of any notes.

6.2                               Statements.  Agent shall render to Borrowers a monthly statement setting forth the balance in the Borrowers’ loan accounts maintained by Agent for Borrowers pursuant to the provisions of this Agreement, including principal, interest, fees, costs and expenses as of the end of such month.  Agent shall use its best efforts to provide such monthly statement to Borrowers by the 15th day of the next succeeding month.  Each such statement shall be subject to subsequent adjustment by Agent but shall, absent manifest errors or omissions, be considered correct and deemed accepted by Borrowers and conclusively binding upon Borrowers as an account stated except to the extent that Agent receives a written notice from Borrowers of any specific exceptions of Borrowers thereto within sixty (60) days after the date such statement has been received by Borrowers.  Until such time as Agent shall have rendered to Borrowers a written statement as provided above, the balance in Borrowers’ loan accounts shall be presumptive evidence of the amounts due and owing to Agent, Term Loan Agent, Revolving Loan Lenders and Term Loan Lenders by Borrowers.

6.3                               Collection of Accounts.

(a)                                 Borrowers and Guarantors shall establish and maintain, at their expense, blocked accounts or lockboxes and related blocked accounts (in either case, “Blocked Accounts”), as Agent may specify, with the banks set forth on Schedule 31 to the Information Certificates and such other banks as are reasonably acceptable to Agent; provided, that, not later than sixty (60) days following the date hereof (or such later date as Agent may agree in its discretion), each Borrower and Guarantor shall establish and maintain, at its expense, deposit accounts and cash management services at Wells or one of its Affiliates (except for certain local deposit accounts agreed to by Agent and Borrowers which shall be maintained with such other institutions as are acceptable to Agent) of a type and on terms reasonably satisfactory to Agent.  The banks set forth on Schedule 31 of the Information Certificate constitute all of the banks with which all Borrowers and all Guarantors have deposit account and cash management arrangements as of the date hereof and identifies each of the deposit accounts at such banks that are used for receiving receipts from particular locations of a Borrower or otherwise describes the nature of the use of such deposit account by such Borrower or Guarantor.  Such Blocked Accounts may be Central Collection Deposit Accounts, and the term Blocked Accounts shall include the Central Collection Deposit Accounts.  Borrowers and Guarantors shall retain the use of their cash, including payments and proceeds of Collateral; provided, that, at any time that a Cash Dominion Event exists or has occurred and is continuing, Agent may, at its option, instruct the banks at which the Blocked Accounts are maintained to remit the funds (other than funds in respect of Non-Borrower Receivables) therein to Agent for application to the Obligations and to otherwise comply only with the instructions of Agent.  If such Cash Dominion Event ceases to

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exist, Agent agrees to notify such banks that such banks are no longer required to remit such funds to the Agent Payment Account or Agent, and that such banks shall transfer such funds to the operations or disbursement accounts of the applicable Borrower upon the instructions of such Borrower.  Within sixty (60) days after the date hereof, each Borrower and Guarantor shall have delivered, or caused to be delivered to Agent, a Deposit Account Control Agreement duly authorized, executed and delivered by each bank where a Blocked Account is maintained for which Agent has not yet received a Deposit Account Control Agreement; provided, that, Borrowers and Guarantors shall not be required to deliver such Deposit Account Control Agreements with respect to (i) any deposit account that is specifically and exclusively used for payroll, payroll taxes and other employee wage and benefit payments to or for the benefit of any Borrower’s or Guarantor’s salaried employees, or their fiduciary trust accounts and (ii)  an account maintained by Borrowers and a management company engaged by Borrowers for the purpose of paying the real property taxes of Borrowers and Guarantors so long as (A) Borrowers prefund the amount of taxes to be paid in such account not earlier than ten (10) Business Days prior to the date such taxes are required to be paid and (B) at all times other than the time when such account may be prefunded during such five (5) day period with the amount of taxes to be so paid, not more than $5,000 is maintained in such account. The Deposit Account Control Agreements shall provide that upon notice from Agent (which shall be given upon the existence or occurrence of a Cash Dominion Event and shall be revoked promptly after the expiration of such Cash Dominion Event), such bank will send funds on a daily basis to the Agent Payment Account and otherwise take instruction with respect to such Blocked Account only from Agent.  Promptly upon Agent’s request, each Borrower and Guarantor shall execute and deliver such agreements or documents as Agent may in good faith require in connection therewith.  Each Borrower and Guarantor agrees that after notice by Agent to the bank under the Deposit Account Control Agreement, all payments made to such Blocked Accounts or other funds received and collected by Agent, whether in respect of the Receivables, as proceeds of Inventory or other Collateral or otherwise shall be treated as payments to Agent, for itself and the ratable benefit of the Lenders and the Bank Product Providers, in respect of the Obligations and therefore shall constitute the property of Agent, for itself and the ratable benefit of the Lenders and the Bank Product Providers, to the extent of the then outstanding Obligations; provided, that in the event any Non-Borrower Receivable is deposited into the Blocked Accounts, in error or otherwise, such deposit shall be treated as a non-refundable payment to Agent, for itself and the ratable benefit of the Lenders and the Bank Product Providers, in respect of the Obligations and therefore shall constitute the property of Agent, for itself and the ratable benefit of the Lenders and the Bank Product Providers, to the extent of the then outstanding Obligations.

(b)                                 For purposes of calculating the amount of the Revolving Loans available to Borrowers, such payments will be applied (conditional upon final collection) to the Revolving Loans and other Obligations in respect thereof on the Business Day of receipt by Agent of immediately available funds in the Agent Payment Account provided such payments and notice thereof are received in accordance with Agent’s usual and customary practices as in effect from time to time and prior to 12:00 p.m. New York time, and if not, then on the next Business Day.  For the purposes of calculating interest on the Revolving Loans and other Obligations in respect thereof, for the sole and equal benefit of Wells Fargo, such payments or other funds received will be applied (conditional upon final collection) to the Obligations on the same day of the receipt of immediately available funds by Agent in the Agent Payment Account provided such payments or other funds and notice thereof are prior to 12:00 p.m. New York time, and if not, then on the next

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Business Day.

(c)                                  Each Borrower and Obligor and its shareholders, directors, employees, agents, Subsidiaries or other Affiliates shall, acting as trustee for Agent, receive, as the property of Agent, any monies, checks, notes, drafts or any other payment relating to and/or proceeds of Accounts or other Collateral which come into their possession or under their control and promptly, upon receipt thereof, shall deposit or cause the same to be deposited in the Blocked Accounts, or if a Cash Dominion Event exists or has occurred and is continuing, at Agent’s option, remit the same or cause the same to be remitted, in kind, to the Agent Payment Account.  In no event shall the same be commingled with any Borrower’s or Obligor’s funds.  Borrowers and Guarantors agree to reimburse Agent on demand for any amounts owed or paid to any bank at which a Blocked Account or any other deposit account is established or any other bank or Person involved in the transfer of funds to or from the Blocked Accounts arising out of Agent’s payments to or indemnification of such bank or Person.  The obligation of Borrowers and Guarantors to reimburse Agent for such amounts pursuant to this Section 6.3(c) shall survive the termination or non-renewal of this Agreement.

6.4                               Payments.

(a)                                 Borrowers shall pay all Obligations when due.  Payments on Obligations shall be made by Borrowers remitting funds to the Agent Payment Account or, at any time during a Cash Dominion Event, by payments and proceeds of Collateral being directly remitted to the Agent Payment Account as provided in Section 6.3 hereof or such other place as Agent may designate from time to time.  So long as no Priority Event shall have occurred and be continuing or will result from any of the following payment applications, Agent shall apply payments received or collected from Borrowers or Obligors or for the account of Borrowers or Obligors (including the monetary proceeds of collections or of realization upon any Collateral) to the specific Obligation designated by Borrowers in connection with such payment in the following order of priority:

(i)                                     first, to pay in full all indemnities or expense reimbursements then due to Agent from Borrowers and Obligors (other than fees);

(ii)                                  second, ratably to pay in full indemnities or expense reimbursements then due to Lenders from Borrowers and Guarantors (other than fees);

(iii)                               third, ratably to pay in full all fees payable by Borrowers under the Financing Agreements then due;

(iv)                              fourth, ratably to pay in full interest due in respect of the Loans (including Special Agent Advances);

(v)                                 fifth, to pay or prepay principal in respect of Special Agent Advances;

(vi)                              sixth, ratably to pay principal in respect of the Term Loans in accordance with the regularly scheduled payments set forth in Section 2.8(c) hereof, to the extent the same are then due and payable;

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(vii)                           seventh, ratably to pay principal in respect of the Revolving Loans then outstanding (whether or not then due) until paid in full;

(viii)                        eighth, to cash collateralize any outstanding Letter of Credit Accommodations if required under the terms of this Agreement;

(ix)                              ninth, to pay any Obligations due in respect of the Bank Products, if any; and

(x)                                 tenth

to pay any other Obligations then due, in such order and manner as Agent determines.

(b)                                 Notwithstanding anything to the contrary contained in Section 6.4(a), from and after the commencement of a Priority Event, unless waived in writing by Agents and Lenders, Agents shall apply payments received or collected from Borrowers or Obligors or for the account of Borrowers or Obligors (including the monetary proceeds of collections or of realization upon any Collateral) as follows:

(i)                                     With respect to any and all proceeds of Collateral, other than the proceeds from Term Loan Priority Collateral:

(A)                               first, to pay in full the costs and expenses of Agent for the collection and enforcement of the Obligations and for the protection, preservation or sale, disposition or other realization upon the Collateral, including all expenses, liabilities and advances (including Special Agent Advances) incurred or made by or on behalf of Agent, in connection therewith (including attorneys’ fees and legal expenses and other expenses of Agent);

(B)                               second, ratably to pay that portion of the Obligations constituting indemnities and other amounts (other than principal, interest and fees) then due to Revolving Loan Lenders and Issuing Bank;

(C)                               third, to the extent not previously reimbursed by the Revolving Loan Lenders, to pay Agent that portion of the Obligations constituting principal and accrued and unpaid interest on any Special Agent Advances;

(D)                               fourth, ratably to pay that portion of the Obligations constituting accrued and unpaid interest on the Revolving Loans and other Obligations (other than Obligations owing to the Term Loan Lenders), and fees;

(E)                                fifth, to pay that portion of the Obligations constituting unpaid principal of the Revolving Loans;

(F)                                 sixth, to cash collateralize any outstanding Letter of Credit Accommodations;

(G)                               seventh, to pay any Obligations due with respect to the Bank Products up to the sum of (1) the amount of the Bank Product Reserve then in effect for

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such Obligations plus (2) up to $5,000,000 for such Obligations for which no Bank Product Reserve has been established;

(H)                              eighth, ratably to pay that portion of the Obligations constituting accrued and unpaid interest on the Term Loans and other Obligations and fees owing to the Term Loan Lenders,

(I)                                   ninth, ratably to pay that portion of the Obligations constituting unpaid principal of the Term Loans;

(J)                                   tenth, to pay any remaining Obligations due in respect of the Bank Products; and

(K)                              eleventh, the balance, if any, after all of the Obligations have been indefeasibly paid in full, to the Borrowers or as otherwise required by law.

(ii)                                  With respect to any and all proceeds from Term Loan Priority Collateral:

(A)                               first, to payment of Agent for its costs and expenses incurred in connection with the collection and enforcement of the Obligations and for the protection, preservation or sale, disposition or other realization upon the Term Loan Priority Collateral, including all expenses and liabilities incurred or made by or on behalf of Agent, in connection therewith (including attorneys’ fees and legal expenses and other expenses of Agent);

(B)                               second, ratably to pay that portion of the Obligations constituting indemnities and other amounts (other than principal, interest and fees) then due to Term Loan Agent and Term Loan Lenders;

(C)                               third, ratably to pay any fees then due to the Term Loans Lenders until paid in full;

(D)                               fourth, ratably to pay interest accrued in respect of the Term Loans until paid in full;

(E)                                fifth, ratably to pay principal due in respect of Term Loans until paid in full;

(F)                                 sixth, to cash collateralize unliquidated indemnification obligations for which a claim has been asserted against Term Loan Agent or any Term Loan Lender;

(G)                               seventh, to pay the remaining Obligations, in accordance with the priorities established pursuant to Section 6.04(b)(i) above; and

(H)                              eighth, the balance, if any, after all of the Obligations have been indefeasibly paid in full, to Borrowers or as otherwise required by law.

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(c)                                  Notwithstanding anything to the contrary contained in this Agreement:

(i)                                     if the payment of any expenses, costs, scheduled servicing fees (such servicing fees to consist of scheduled servicing fees existing on the date hereof along with any increases to such servicing fees which have been consented to by Wells Fargo) and/or interest (other than default interest charged during the existence of an Event of Default) to Agent for the account of itself and Lenders would accrue and become due but for the occurrence of an Insolvency Event and any such amounts are not allowed or allowable in whole or in part (any such amounts are hereinafter referred to as the “Specified Amounts”), then Agent and Lenders shall receive payment in full of the Specified Amounts (but not the items excluded from Specified Amounts above); provided, that nothing herein shall prevent Agent or the Lenders from recovering any default interest charged during the existence of an Event of Default from any Borrower or Guarantor not subject to an Insolvency Event;

(ii)                                  should any payment or distribution on security or instrument or proceeds thereof be received by a Lender other than in accordance with this Section 6.4, such Lender shall receive and hold the same in trust, for the benefit of Agent, the other Lenders and the Bank Product Providers, and shall forthwith deliver the same to Agent (together with any endorsement or assignment of such Lender where necessary), for application by Agent to the Obligations in accordance with the terms of this Section 6.4;

(iii)                               unless so directed by Borrowers, Agent shall not apply any payments which it receives to any Loans that are Eurodollar Rate Loans except on the expiration date of the Interest Period applicable to any such Loans that are Eurodollar Rate Loans and if payments are received or collected from Borrowers that otherwise would be applied to Eurodollar Rate Loans, provided no Cash Dominion Event exists or has occurred and is continuing, Borrowers may instruct Agent to remit such funds to Borrowers, otherwise, such payments shall be held by Agent and shall bear interest at the Federal Funds Rate per annum commencing on the second Business Day following the date such payments are received or collected from Borrowers and continuing through the date such payments are applied to the Obligations, which shall be upon the expiration of the first Interest Period after receipt or collection of such payments, to the extent of the principal amount of the applicable Eurodollar Rate Loan or otherwise, in Agent’s sole discretion, remitted to Borrowers; and

(iv)                              to the extent any Borrower uses any proceeds of the Loans or Letter of Credit Accommodations to acquire rights in or the use of any Collateral or to repay any Indebtedness used to acquire rights in or the use of any Collateral, payments in respect of the obligations shall be deemed applied first to the Obligations arising from Loans and Letter of Credit Accommodations that were not used for such purposes and second to the Obligations arising from Loans and Letter of Credit Accommodations the proceeds of which were used to acquire rights in or the use of any Collateral in the chronological order in which such Borrower acquired such rights or use.

(d)                                 At Agent’s option, all principal, interest, fees, costs, expenses and other charges provided for in this Agreement or the other Financing Agreements may be charged directly to the loan accounts of Borrowers maintained by Agent.  Borrowers shall make all payments to Agent and Lenders on the Obligations free and clear of, and without deduction or

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withholding for or on account of, any setoff, counterclaim, defense, restrictions or conditions of any kind.  If after receipt of any payment of, or proceeds of Collateral applied to the payment of, any of the Obligations, Agent or any Lender is required to surrender or return such payment or proceeds to any Person for any reason, then the Obligations intended to be satisfied by such payment or proceeds shall be reinstated and continue and this Agreement shall continue in full force and effect as if such payment or proceeds had not been received by Agent or such Lender.  Borrowers shall be liable to pay to Agent and Lenders, and do hereby indemnify and hold Agent and Lenders harmless for the amount of any payments or proceeds surrendered or returned.  This Section 6.4(d) shall remain effective notwithstanding any contrary action which may be taken by any Agent or any Lender in reliance upon such payment or proceeds.  This Section 6.4(d) shall survive the payment of the Obligations and the termination of this Agreement.

(e)                                  Borrowers hereby direct Agent to charge the Loan Account(s) of Borrowers for all principal, interest, fees, costs, expenses and other amounts and charges provided for in this Agreement or the other Financing Agreements with respect to the Term Loans which are due and payable to Term Agent or Term Loan Lenders hereunder.

6.5                               Taxes.

(a)                                 Any and all payments by Borrowers and Guarantors to Agent, any Issuing Bank or any Lender under this Agreement and any of the other Financing Agreements shall be made free and clear of, and without deduction or withholding for, any Taxes, except to the extent required by applicable law.  In addition, Borrowers shall pay all Other Taxes (or Agent may, at its option, pay such Other Taxes and charge the loan account of Borrowers for such amounts so paid).

(b)                                 Borrowers and Guarantors shall indemnify and hold harmless Agent, Issuing Bank and Lenders for the full amount of Taxes or Other Taxes paid by Agent, any Issuing Bank or any Lender (including any Taxes or Other Taxes imposed by any jurisdiction on amounts payable under this Section, but not including Other Taxes that arise as a result of Agent’s, any Issuing Bank’s or any Lender’s activities with the applicable taxing jurisdiction, if any, and not as a result of this Agreement) and any liability (including penalties, interest and expenses (including reasonable attorney’s fees and expenses) other than those resulting solely from a failure by Agent, any Issuing Bank or any Lender to pay any Taxes or Other Taxes which it is required to pay and for which it received an indemnity payment) arising therefrom or with respect thereto, whether or not such Taxes or Other Taxes were correctly or legally asserted by the relevant Governmental Authority; provided, that, Borrowers and Guarantors shall not be required to indemnify Agent, any Issuing Bank or any Lender with respect to any Taxes or Other Taxes which are attributable to such Agent’s, Issuing Bank’s or Lender’s failure to comply with the provisions of Section 6.5(f), (g), (i) or (j) hereof.  Payment under this indemnification shall be made within ten (10) days after the date Agent, any Issuing Bank or any Lender makes written demand therefor on Borrowers.  If Borrowers reasonably believe that such Taxes or Other Taxes were not correctly or legally asserted, Agent, such Issuing Bank or such Lender shall, upon Borrowers’ request and at Borrowers’ expense, provide such documents to Borrowers in form and substance reasonably satisfactory to Agent, as Borrowers may reasonably request, to enable Borrowers to contest such Taxes or Other Taxes pursuant to appropriate proceedings then available to Borrowers (so long as providing such documents shall not, in the good faith

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determination of Agent, have a reasonable likelihood of resulting in any liability of Agent, any Issuing Bank or any Lender).

(c)                                  If any Borrower or Guarantor shall be required by law to deduct or withhold any Taxes or Other Taxes from or in respect of any sum payable hereunder or under the other Financing Agreements to Agent, any Issuing Bank or any Lender, then:

(i)                                     the sum payable shall be increased as necessary so that after making all required deductions and withholdings (including deductions and withholdings applicable to additional sums payable under this Section) Agent, such Issuing Bank or such Lender receives an amount equal to the sum it would have received had no such deductions or withholdings been made; provided, that, Borrowers and Guarantors shall not be required to increase any such sum payable to Agent, any Issuing Bank or any Lender which is attributable to such Agent’s, Issuing Bank’s or Lender’s failure to comply with the provisions of Section 6.5(f), (g), (i) or (j) hereof;

(ii)                                  such Borrower or Guarantor shall make such deductions and withholdings;

(iii)                               such Borrower or Guarantor shall pay the full amount deducted or withheld to the relevant taxing authority or other authority in accordance with applicable law; and

(iv)                              to the extent not paid to Agent, Issuing Bank or Lenders pursuant to Section 6.5(c)(i), such Borrower or Guarantor shall also pay to Agent, any Issuing Bank or any Lender, at the time interest is paid, all additional amounts which are necessary to preserve the after-tax yield Agent, such Issuing Bank or such Lender would have received pursuant to the Financing Agreements if such Taxes or Other Taxes had not been imposed.

(d)                                 Within thirty (30) days after the date of any payment by any Borrower or Guarantor of Taxes or Other Taxes, such Borrower or Guarantor shall furnish to Agent the original or a certified copy of a receipt evidencing payment thereof, or other evidence of payment reasonably satisfactory to Agent.

(e)                                  If any Borrower or Guarantor otherwise would be required to pay additional amounts to Agent, Issuing Bank or a Lender pursuant to subsection (c) of this Section, then upon Borrowers’ written request such Lender shall use reasonable efforts at Borrowers’ expense (consistent with legal and regulatory restrictions) to take such action, including changing the jurisdiction of its lending office, so as to eliminate or reduce any such additional payment by such Borrower or Guarantor which may thereafter accrue.

(f)                                   In the event a Lender shall assign the Obligations and its rights hereunder to an assignee which is organized under the laws of a jurisdiction outside the United States of America on or prior to the effective date of any such assignment, such assignee of a Lender shall provide Borrowers with an IRS Form W-8BEN or Form W-8ECI or other applicable form, certificate or document prescribed by the Internal Revenue Service certifying as to such assignee’s being entitled to full exemption from United States of America withholding tax with respect to all payments to be made to such assignee hereunder and under any of the other

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Financing Agreements (unless such assignee of a Lender is unable to do so by reason of a change in law, including, without limitation, any statute, treaty, ruling, determination or regulation occurring subsequent to the effective date of such assignment).

(g)                                  Notwithstanding anything to the contrary contained in this Section 6.5, unless Borrowers have received forms or other documents indicating that payments to a Lender or Issuing Bank hereunder or under any of the other Financing Agreements are not subject to United States of America withholding or backup withholding tax, Borrowers shall, (i) withhold taxes from such payments at the applicable statutory rate, or at a rate reduced by an applicable tax treaty and (ii) pay such assignee such payment net of any taxes so withheld.  Lenders and Issuing Bank will be required to use reasonable efforts (including reasonable efforts to change its lending office) to avoid or to minimize any amounts which might otherwise be payable by any Borrower or Guarantor pursuant to this Section 6.5; provided, that, such efforts shall not cause the imposition on such assignee of any additional costs or legal or regulatory burdens deemed by such assignee in good faith to be material.

(h)                                 If Agent, Issuing Bank or any Lender receives a refund or other permanent tax benefit in respect of any Taxes or Other Taxes for which Agent, such Issuing Bank or such Lender has received an indemnification payment or additional amounts from any Borrower or Guarantor hereunder, so long as no Event of Default shall exist or have occurred and be continuing, Agent, such Issuing Bank or such Lender (as the case may be) shall credit to the loan account of Borrowers the amount of such refund or other tax benefit.

(i)                                     Each Person that is a Lender or Issuing Bank as of the date of this Agreement and each Person that becomes a Lender or Issuing Bank after the date of this Agreement (i) either (A) represents and warrants to the Borrowers that such Person is incorporated or organized under the laws of the United States of America or a state thereof or (B) agrees to furnish (if it is organized under the laws of any jurisdiction other than the United States of America or any State thereof) to Agent and Borrowers prior to the time that Agent or such Borrower is required to make any payment of principal, interest or fees hereunder, duplicate executed originals of either U.S. Internal Revenue Service Form W-8BEN (wherein such Lender claims entitlement to the benefits of a tax treaty that provides for a complete exemption from U.S. federal income withholding tax on all payments hereunder) or W-8ECI, as applicable and agrees to provide new such forms upon the expiration of any previously delivered form or comparable statements in accordance with applicable U.S. law and regulations and amendments thereto, duly executed and completed by such Lender, and (ii) agrees to comply with all applicable U.S. laws and regulations with regard to such withholding tax exemption.  If a payment made to a Lender or Issuing Bank that is organized under the laws of any jurisdiction other than the United States of America or any State thereof would be subject to United States federal withholding tax imposed by FATCA and such Lender fails to comply with the applicable reporting requirements of FATCA (including those contained in Sections 1471(b) or 1472(b) of the Code, as applicable), such Lender or Issuing Bank shall deliver to Agent and Borrowers documentation, at the time or times required by FATCA (including such additional documentation reasonably requested by the Borrowers as may be necessary to demonstrate that such Lender or Issuing Bank has complied with applicable reporting requirements of FATCA) so that payments made to such Lender or Issuing Bank hereunder would not be subject to United States federal withholding taxes under FATCA, or, if necessary, to determine the amount to

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deduct and withhold from such payment.

(j)                                    Each Lender or Issuing Bank (other than any Lender or Issuing Bank that is entitled to a presumption under applicable Treasury Regulations that it is a domestic corporation for U.S. federal income tax purposes) shall deliver to Agent (or, in the case of an assignee of a Lender which (i) is an Affiliate of such Lender or an Approved Fund of such Lender and (ii) does not deliver an Assignment and Acceptance Agreement to Agent pursuant to Section 14.7(a) hereof for recordation pursuant to Section 14.7(b) hereof, to the assigning Lender only) and Borrowers two properly completed and duly executed copies of U.S. Internal Revenue Service Form W-9 certifying that such Lender is exempt from U.S. backup withholding tax.  Such forms shall be delivered by each such Lender on or before the date it becomes a party to this Agreement and thereafter within twenty (20) days after receipt of a written request therefor from Agent.  Notwithstanding any other provision of this Section 6.5(j), a Lender or Issuing Bank described in this Section 6.5(j) shall not be required to deliver any form pursuant to this Section 6.5(j) that such Lender or Issuing Bank is not legally able to deliver.

6.6                               Authorization to Make Loans.  Agent and Lenders are authorized to make the Revolving Loans and provide the Letter of Credit Accommodations based upon telephonic or other instructions received from anyone purporting to be an officer of a Borrower or other authorized person or, at the discretion of Agent, if such Revolving Loans are necessary to satisfy any Obligations; provided, however, that Agent and Lenders shall direct the Revolving Loans only into those accounts of a Borrower authorized in writing by more than one Authorized Officer.  The foregoing sentence notwithstanding, if Agent or a Lender makes a Revolving Loan into an account of a Borrower designated by a Person who no longer is an Authorized Officer and Agent did not receive notice that such Person is no longer an Authorized Officer, such Revolving Loan will still be considered an Obligation hereunder.  All requests for Revolving Loans or Letter of Credit Accommodations hereunder shall specify the date on which the requested advance is to be made or Letter of Credit Accommodations established (which day shall be a Business Day for any Revolving Loan or Letter of Credit Accommodation) and the amount of the requested Revolving Loan.  Requests received after 12:00 p.m. New York time on any day shall be deemed to have been made as of the opening of business on the immediately following Business Day.  All Revolving Loans under this Agreement shall be conclusively presumed to have been made to, and at the request of and for the benefit of, Borrowers or when deposited to the credit of any Borrower or otherwise disbursed or established in accordance with the instructions of Borrowers or in accordance with the terms and conditions of this Agreement.

6.7                               Use of Proceeds.  Borrowers shall use the proceeds of the Loans provided by or on behalf of Lenders to Borrowers hereunder only for (a) costs, expenses and fees in connection with the preparation, negotiation, execution and delivery of this Agreement and the other Financing Agreements and consummation of any other permitted transactions contemplated hereby which will take place on the date hereof, (b) the repurchase of shares of Capital Stock to the extent permitted by the terms and condition of this Agreement, and (c) for general operating, working capital and other proper corporate purposes of Borrowers not otherwise prohibited by the terms hereof.  None of the proceeds of any Loans or Letter of Credit Accommodations will be used, directly or indirectly, for the purpose of purchasing or carrying any margin security or for the purposes of reducing or retiring any Indebtedness which was originally incurred to purchase or carry any margin security or for any other purpose which might cause any of the

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Loans or Letter of Credit Accommodations to be considered a “purpose credit” within the meaning of Regulation U of the Board of Governors of the Federal Reserve System, as amended.

6.8                               Pro Rata Treatment.  Except to the extent otherwise provided in this Agreement:  (a) the making and conversion of Loans shall be made among the Lenders based on their respective Pro Rata Shares as to the Loans and (b) each payment on account of any Obligations to or for the account of one or more of Lenders in respect of any Obligations due on a particular day shall be allocated among the Lenders entitled to such payments based on their respective Pro Rata Shares and shall be distributed accordingly.

6.9                               Sharing of Payments, Etc.

(a)                                 Each Borrower agrees that, in addition to (and without limitation of) any right of setoff, banker’s lien or counterclaim Agent or any Lender may otherwise have, each Lender shall be entitled, at its option (but subject, as among Agent and Lenders, to the provisions of Section 12.3(b) hereof), to offset balances held by it for the account of any Borrower at any of its offices, in dollars or in any other currency, against any principal of or interest on any Loans owed to such Lender or any other amount payable to such Lender hereunder, that is not paid when due (regardless of whether such balances are then due to any Borrower), in which case it shall promptly notify Borrowers and Agent thereof; provided, that, such Lender’s failure to give such notice shall not affect the validity thereof.

(b)                                 If any Lender (including Agent) shall obtain from any Borrower payment of any principal of or interest on any Loan owing to it or payment of any other amount under this Agreement or any of the other Financing Agreements through the exercise of any right of setoff, banker’s lien or counterclaim or similar right or otherwise (other than from Agent as provided herein), and, as a result of such payment, such Lender shall have received more than its Pro Rata Share of the principal of the Loans or more than its share of such other amounts then due hereunder or thereunder by Borrowers to such Lender than the percentage thereof received by any other Lender, it shall promptly pay to Agent, for the benefit of Lenders, the amount of such excess and simultaneously purchase from such other Lenders a participation in the Loans or such other amounts, respectively, owing to such other Lenders (or such interest due thereon, as the case may be) in such amounts, and make such other adjustments from time to time as shall be equitable, to the end that all Lenders shall share the benefit of such excess payment (net of any expenses that may be incurred by such Lender in obtaining or preserving such excess payment) in accordance with their respective Pro Rata Shares or as otherwise agreed by Lenders.  To such end all Lenders shall make appropriate adjustments among themselves (by the resale of participation sold or otherwise) if such payment is rescinded or must otherwise be restored.

(c)                                  Each Borrower agrees that any Lender purchasing a participation (or direct interest) as provided in this Section may exercise, in a manner consistent with this Section, all rights of setoff, banker’s lien, counterclaim or similar rights with respect to such participation as fully as if such Lender were a direct holder of Loans or other amounts (as the case may be) owing to such Lender in the amount of such participation.

(d)                                 Nothing contained herein shall require any Lender to exercise any right of setoff, banker’s lien, counterclaims or similar rights or shall affect the right of any Lender to

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exercise, and retain the benefits of exercising, any such right with respect to any other Indebtedness or obligation of any Borrower.  If, under any applicable bankruptcy, insolvency or other similar law, any Lender receives a secured claim in lieu of a setoff to which this Section applies, such Lender shall, to the extent practicable, assign such rights to Agent, for itself and the ratable benefit of the Lenders and the Bank Product Providers, and, in any event, exercise its rights in respect of such secured claim in a manner consistent with the rights of Lenders entitled under this Section to share in the benefits of any recovery on such secured claim.

6.10                        Settlement Procedures.

(a)                                 In order to administer the Revolving Credit Facility in an efficient manner and to minimize the transfer of funds between Agent and Lenders, Agent may, at its option, subject to the terms of this Section, make available, on behalf of Lenders, the full amount of the Loans requested or charged to Borrowers’ loan accounts or otherwise to be advanced by Lenders pursuant to the terms hereof, without requirement of prior notice to Lenders of the proposed Loans.

(b)                                 With respect to all Loans made by Agent on behalf of Lenders as provided in this Section, the amount of each Lender’s Pro Rata Share of the outstanding Loans shall be computed weekly, and shall be adjusted upward or downward on the basis of the amount of the outstanding Loans as of 5:00 p.m. New York time on the Business Day immediately preceding the date of each settlement computation; provided, that, Agent retains the absolute right at any time or from time to time to make the above described adjustments at intervals more frequent than weekly, but in no event more than twice in any week.  Agent shall deliver to each of the Lenders after the end of each week, or at such lesser period or periods as Agent shall determine, a summary statement of the amount of outstanding Loans for such period (such week or lesser period or periods being hereinafter referred to as a “Settlement Period”).  If the summary statement is sent by Agent and received by a Lender prior to 12:00 p.m. New York time, then such Lender shall make the settlement transfer described in this Section by no later than 2:00 p.m. New York time on the same Business Day and if received by a Lender after 12:00 p.m. New York time, then such Lender shall make the settlement transfer by no later than 2:00 p.m. New York time on the next Business Day following the date of receipt.  If, as of the end of any Settlement Period, the amount of a Lender’s Pro Rata Share of the outstanding Loans is more than such Lender’s Pro Rata Share of the outstanding Loans as of the end of the previous Settlement Period, then such Lender shall forthwith (but in no event later than the time set forth in the preceding sentence) transfer to Agent by wire transfer in immediately available funds the amount of the increase.  Alternatively, if the amount of a Lender’s Pro Rata Share of the outstanding Loans in any Settlement Period is less than the amount of such Lender’s Pro Rata Share of the outstanding Loans for the previous Settlement Period, then, if the summary statement is prepared and delivered to Lenders by Agent prior to 12:00 p.m. New York time, then Agent shall make the transfer described in this Section by no later than 3:00 p.m. New York time on the same Business Day and if prepared and delivered to Lenders by Agent after 12:00 p.m. New York time, then Agent shall make the transfer by no later than 3:00 p.m. New York time on the next Business Day following the date of receipt, by wire transfer in immediately available funds the amount of the decrease.  The obligation of each of the Lenders and Agent to transfer such funds and effect such settlement shall be irrevocable.  Agent and each Lender agrees to mark its books and records at the end of each Settlement Period to show at all times the

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dollar amount of its Pro Rata Share of the outstanding Loans and Letter of Credit Accommodations.  Each Lender shall only be entitled to receive interest on its Pro Rata Share of the Loans to the extent such Loans have been funded by such Lender.  Because Agent on behalf of Lenders may be advancing and/or may be repaid Loans prior to the time when Lenders will actually advance and/or be repaid such Loans, interest with respect to Loans shall be allocated by Agent in accordance with the amount of Loans actually advanced by and repaid to each Lender and Agent and shall accrue from and including the date such Loans are so advanced to but excluding the date such Loans are either repaid by Borrowers or actually settled with the applicable Lender as described in this Section.

(c)                                  To the extent that Agent has made any such amounts available and the settlement described above shall not yet have occurred, upon repayment of any Loans by Borrower, Agent may apply such amounts repaid directly to any amounts made available by Agent pursuant to this Section.  In lieu of weekly or more frequent settlements, Agent may, at its option, at any time require each Lender to provide Agent with immediately available funds representing its Pro Rata Share of each Loan, prior to Agent’s disbursement of such Loan to Borrowers.  In such event, all Loans under this Agreement shall be made by the Lenders simultaneously and proportionately to their Pro Rata Shares.  No Lender shall be responsible for any default by any other Lender in the other Lender’s obligation to make a Loan requested hereunder nor shall the Commitment, as the case may be, of any Lender be increased or decreased as a result of the default by any other Lender in the other Lender’s obligation to make a Loan hereunder.

(d)                                 If Agent is not funding a particular Loan to Borrowers pursuant to Section 6.10(a) hereof on any day, Agent may assume that each Lender will make available to Agent such Lender’s Pro Rata Share of the Loan requested or otherwise made on such day and Agent may, in its discretion, but shall not be obligated to, cause a corresponding amount to be made available to or for the benefit of Borrowers on such day.  If Agent makes such corresponding amount available to Borrowers and such corresponding amount is not in fact made available to Agent by such Lender, Agent shall be entitled to recover such corresponding amount on demand from such Lender together with interest thereon for each day from the date such payment was due until the date such amount is paid to Agent at the Federal Funds Rate for each day during such period (as published by the Federal Reserve Bank of New York or at Agent’s option based on the arithmetic mean determined by Agent of the rates for the last transaction in overnight Federal funds arranged prior to 9:00 a.m. (New York City time) on that day by each of the three leading brokers of Federal funds transactions in New York City selected by Agent) and if such amounts are not paid within three (3) days of Agent’s demand, at the highest interest rate provided for in Section 3.1 hereof applicable to such Loans.  During the period in which such Lender has not paid such corresponding amount to Agent, notwithstanding anything to the contrary contained in this Agreement or any of the other Financing Agreements, the amount so advanced by Agent to or for the benefit of Borrowers shall, for all purposes hereof, be a Loan made by Agent for its own account.  Upon any such failure by a Lender to pay Agent, Agent shall promptly thereafter notify Borrowers of such failure and Borrowers shall pay such corresponding amount to Agent for its own account within five (5) Business Days of Borrowers’ receipt of such notice.  The term “Defaulting Lender” shall mean (i) any Lender that has failed to fund any portion of the Loans or participations in Letter of Credit Obligations required to be funded by it hereunder within one (1) Business Day of the date required to be funded by it

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hereunder, or has otherwise failed to pay over to Agent or any other Lender any other amount required to be paid by it hereunder within one (1) Business Day of the date when due, and such failure has not been cured by the making of such funding or payment over to Agent or such Lender by such Lender with such one (1) Business Day period, (ii) any Lender that has notified Agent, any Lender, Issuing Bank, or any Borrower or Guarantor in writing that it will not or does not intend to comply with any of its funding obligations under this Agreement (and such Lender has not retracted such notification in writing) or has made a public statement in writing to the effect that it will not or does not intend to comply with its funding obligations under this Agreement (and such Lender has not retracted such public statement in writing), or (iii) any Lender that becomes or is insolvent or has a parent company that has become or is insolvent or becomes the subject of a bankruptcy or insolvency proceeding, or has a receiver, conservator, trustee or custodian appointed for it, or has taken any action in furtherance of, or indicating its consent to, approval of or acquiescence in any such proceeding or appointment and has not obtained all required orders, approvals or consents of any court or other Governmental Authority to continue to fulfill its obligations hereunder, in form and substance satisfactory to Agent.  Agent shall not be obligated to transfer to a Defaulting Lender any payments received by Agent for the Defaulting Lender’s benefit, nor shall a Defaulting Lender be entitled to the sharing of any payments hereunder (including any principal, interest or fees).  Amounts payable to a Defaulting Lender shall instead be paid to or retained by Agent.  Agent may hold and, in its discretion, relend to Borrowers the amount of all such payments received or retained by it for the account of such Defaulting Lender.  For purposes of voting or consenting to matters with respect to this Agreement and the other Financing Agreements and determining Pro Rata Shares, such Defaulting Lender shall be deemed not to be a “Lender” and such Lender’s Commitment shall be deemed to be zero (0).  This Section shall remain effective with respect to a Defaulting Lender until such default is cured.  The operation of this Section shall not be construed to increase or otherwise affect the Commitment of any Lender, or relieve or excuse the performance by any Borrower or any Obligor of their duties and obligations hereunder.

(e)                                  For purposes of voting or consenting to matters with respect to this Agreement and the other Financing Agreements and determining Pro Rata Shares, such Defaulting Lender shall be deemed not to be a “Lender” and such Lender’s Commitment shall be deemed to be zero (0).  So long as there is a Defaulting Lender, the maximum amount of the Loans and Letter of Credit Accommodations shall not exceed the aggregate amount of the Commitments of the Lenders that are not Defaulting Lenders plus the Pro Rata Share of the Defaulting Lender (determined immediately prior to its being a Defaulting Lender) of the Loans and Letter of Credit Accommodations outstanding as of the date that the Defaulting Lender has become a Defaulting Lender.  At any time that there is a Defaulting Lender, payments received for application to the Obligations payable to Lenders in accordance with the terms of this Agreement shall be distributed to Lenders based on their Pro Rata Shares calculated after giving effect to the reduction of the Defaulting Lender’s Loan Commitment to zero (0) as provided herein or at Agent’s option, Agent may instead receive and retain such amounts that would be otherwise attributable to the Pro Rata Share of a Defaulting Lender (which for such purpose shall be such Pro Rata Share as in effect immediately prior to its being a Defaulting Lender).  To the extent that Agent elects to receive and retain such amounts, Agent may hold such amounts (which shall not accrue interest) and, in its reasonable discretion, relend such amounts to a Borrower.  To the extent that Agent exercises its option to relend such amounts, such amounts shall be treated as Revolving Loans for the account of Agent in addition to the Revolving Loans

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that are made by the Lenders other than a Defaulting Lender based on their respective Pro Rata Shares as calculated after giving effect to the reduction of such Defaulting Lender’s Commitment to zero (0) as provided herein but shall be repaid in the same order of priority as the principal amount of the Loans on a pro rata basis for purposes of Section 6.7 hereof.  Agent shall determine whether any Revolving Loans requested shall be made from relending such amounts or from Revolving Loans from the Lenders (other than a Defaulting Lender) and any allocation of requested Revolving Loans between them. The rights of a Defaulting Lender shall be limited as provided herein until such time as the Defaulting Lender has made all payments to Agent of the amounts that it had failed to pay causing it to become a Defaulting Lender and such Lender is otherwise in compliance with the terms of this Agreement (including making any payments as it would have been required to make as a Lender during the period that it was a Defaulting Lender other than in respect of the principal amount of Revolving Loans, which payments as to the principal amount of Revolving Loans shall be made based on the outstanding balance thereof on the date of the cure by Defaulting Lender or at such other time thereafter as Agent may specify) or has otherwise provided evidence in form and substance satisfactory to Agent that such Defaulting Lender will be able to fund its Pro Rata Share (as in effect immediately prior to its being a Defaulting Lender) in accordance with the terms hereof.  Upon the cure by Defaulting Lender of the event that is the basis for it to be a Defaulting Lender by making such payment or payments and such Lender otherwise being in compliance with the terms hereof, such Lender shall cease to be a Defaulting Lender and shall only be entitled to payment of interest accrued during the period that such Lender was a Defaulting Lender to the extent previously received and retained by Agent from or for the account of Borrowers on the funds constituting Loans funded by such Lender prior to the date of it being a Defaulting Lender (and not previously paid to such Lender) and shall otherwise, on and after such cure, make Loans and settle in respect of the Loans and other Obligations in accordance with the terms hereof. The existence of a Defaulting Lender and the operation of this Section shall not be construed to increase or otherwise affect the Commitment of any Lender, or relieve or excuse the performance by any Borrower or Guarantor of its duties and obligations hereunder (including, but not limited to, the obligation of such Borrower or Guarantor to make any payments hereunder, whether in respect of Loans by a Defaulting Lender or otherwise).

(f)                                   Notwithstanding anything to the contrary contained in this Agreement, in the event that there is a Defaulting Lender, if there are any Letter of Credit Accommodations outstanding, within one (1) Business Day after the written request of an Issuing Bank, Borrowers shall pay to Agent an amount equal to the Pro Rata Share of the Defaulting Lender (calculated as in effect immediately prior to such Lender becoming a Defaulting Lender) of the Letter of Credit Obligations then outstanding to be held by Agent on terms and conditions satisfactory to Agent and such Issuing Bank as cash collateral for the Obligations and for so long as there is a Defaulting Lender, such Issuing Bank shall not be required to issue any Letter of Credit Accommodations, or increase or extend or otherwise amend any Letter of Credit Accommodations, unless upon the request of such Issuing Bank, Agent has cash collateral from Borrowers in an amount equal to the Pro Rata Share of the Defaulting Lender (calculated as in effect immediately prior to such Lender becoming a Defaulting Lender) of the Letter of Credit Obligations outstanding after giving effect to any such requested Letter of Credit (or increase, extension or other amendment) to be held by Agent on its behalf on terms and conditions satisfactory to Agent and such Issuing Bank or there are other arrangements reasonably satisfactory to such Issuing Bank with respect to the participation in Letter of Credit

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Accommodations by such Defaulting Lender.  Such cash collateral shall be applied first to the Letter of Credit Obligations before application to any other Obligations, notwithstanding anything to the contrary contained in Section 6.7 hereof

(g)                                  Nothing in this Section or elsewhere in this Agreement or the other Financing Agreements shall be deemed to require Agent to advance funds on behalf of any Lender or to relieve any Lender from its obligation to fulfill its Commitment hereunder or to prejudice any rights that Borrowers may have against any Lender as a result of any default by any Lender hereunder in fulfilling its Commitment.

6.11                        Obligations Several; Independent Nature of Lenders’ Rights.  The obligation of each Lender hereunder is several, and no Lender shall be responsible for the obligation or commitment of any other Lender hereunder.  Nothing contained in this Agreement or any of the other Financing Agreements and no action taken by the Lenders pursuant hereto or thereto shall be deemed to constitute the Lenders to be a partnership, an association, a joint venture or any other kind of entity.  The amounts payable at any time hereunder to each Lender shall be a separate and independent debt, and subject to Section 12.3 hereof, each Lender shall be entitled to protect and enforce its rights arising out of this Agreement and it shall not be necessary for any other Lender to be joined as an additional party in any proceeding for such purpose.

SECTION 7.        COLLATERAL REPORTING AND COVENANTS

7.1                               Collateral Reporting.

(a)                                 Borrowers shall provide Agent with the following documents in a form satisfactory to Agent:

(i)                                     as soon as possible after the end of each month (but in any event within fifteen (15) Business Days after the end thereof), on a monthly basis, and at any time an Increased Collateral Reporting Event exists or has occurred and is continuing, more frequently as Agent may request: (A) Inventory reports by category, (B) a Collateral mix report, in form and substance satisfactory to Agent; (C) a statement confirming the payment of rent and other amounts due to owners and lessors of real property used by any Borrower or Guarantor during the immediately preceding month, subject to year-end or periodic adjustments; provided, that, if such Increased Collateral Reporting Event ceases to exist as determined by Agent, Borrowers shall thereafter deliver such collateral reports described in this Section 7.1(a)(i) on a monthly basis as provided herein;

(ii)                                  as soon as possible after the end of each month (but in any event within fifteen (15) Business Days after the end thereof), on a monthly basis, (A) a Borrowing Base Certificate, certified by the principal accounting officer or principal financial officer of each Borrower as true and correct, which shall include the calculation of the Compliance Excess Availability and the calculation of Net Amount of Eligible Credit Card Receivables, Net Amount of Eligible Damaged Goods Vendors Receivables and Net Amount of Eligible Sell-Off Vendors Receivables after giving effect to the assertion of any claims, offsets, defenses or counterclaims by any account debtor, or any disputes with account debtors, or any settlement, adjustment or compromise thereof; provided, that, at any time an Increased Collateral Reporting Event exists or

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has occurred and is continuing, as soon as possible after the end of each week (but in any event within three (3) Business Days after the end thereof), a Borrowing Base Certificate duly executed and together with all schedules required pursuant to the terms of each such Borrowing Base Certificate duly completed, and if such Increased Collateral Reporting Event ceases to exist as determined by Agent, Borrowers shall thereafter deliver a Borrowing Base Certificate on a monthly basis as provided herein;

(iii)                               as soon as possible after the end of each fiscal month (but in any event within fifteen (15) Business Days after the end thereof), on a monthly basis, and at any time an Increased Collateral Reporting Event exists or has occurred and is continuing, more frequently as Agent may request, (A) perpetual Inventory reports by location and category (and including the amounts of Inventory and the value thereof at any leased locations and at premises of warehouses, bailees or other third parties in possession of the Collateral); (B) the addresses of all new retail store locations of any Borrower or Guarantor opened, and existing retail store locations closed or sold, in each case during the immediately preceding fiscal month, and (C) a report of all deposit accounts (including without limitation local retail store deposit accounts) opened by any Borrower or Guarantor with any bank during the immediately preceding fiscal month, which report shall include the Borrower or Guarantor in whose name the account is maintained, the account number of such account, the name and address of the bank at which such account is maintained, the purpose of such account and the amount held in such account if any, on or about the date of such report; provided, that, if such Increased Collateral Reporting Event ceases to exist as determined by Agent, Borrowers shall thereafter deliver such collateral reports described in this Section 7.1(a)(iii) on a monthly basis as provided herein;

(iv)                              as soon as possible after the end of each fiscal quarter (but in any event within fifteen (15) Business Days after the end thereof), on a quarterly basis, and at any time an Increased Collateral Reporting Event exists or has occurred and is continuing, more frequently as Agent may request, a report detailing Inventory turnover; provided, that, if such Increased Collateral Reporting Event ceases to exist as determined by Agent, Borrowers shall thereafter deliver such collateral reports described in this Section 7.1(a)(iv) on a quarterly basis as provided herein;

(v)                                 upon the occurrence and during the continuance of an Event of Default or during such time as Agent performs an audit or examination of the Borrowers and Guarantors, upon Agent’s reasonable request, (A) amounts owing to owners and lessors of retail store locations, (B) copies of all bank statements, (C) copies of shipping and delivery documents, and (D) copies of purchase orders, invoices and delivery documents for Inventory and Equipment acquired by any Borrower or Guarantor;

(vi)                              upon Agent’s reasonable request, (A) reports of sales for each category of Inventory, (B) reports of aggregate Inventory purchases (including all costs related thereto, such as freight, duty and taxes) and identifying items of Inventory in transit to each Borrower related to the applicable documentary Letter of Credit Accommodation and/or bill of lading number, (C) copies of remittance advices and reports, (D) copies of bank statements relating to the Blocked Accounts, (E) reports by retail store location of sales and operating profits for each such retail store location, and (F) agings of accounts payable (and including information indicating the amounts owing to owners and lessors of leased premises (except for

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the retail store locations), warehouses, fulfillment centers, bailees and other third parties from time to time in possession of any Collateral);

(vii)                           upon the occurrence and during the continuance of an Event of Default, as frequently as Agent may request, (A) the monthly statements received by any Borrower or Guarantor or any of its Affiliates from any Credit Card Issuers or Credit Card Processors, together with such additional information with respect thereto as shall be sufficient to enable Agent to monitor the transactions pursuant to the Credit Card Agreements, (B) a report of credit card sales during the preceding month, including the amount of the chargebacks, fees, factored receivables, and credits with respect thereto and providing an aging of such sales identifying those outstanding more than five (5) days since the sale date giving rise thereto, (C) reports on sales and use tax collections, deposits and payments, including monthly sales and use tax accruals, and (D) a report reconciling the amount of Non-Borrower Receivables received by or into the account of any Borrower and remitted by such Borrower or another Person at the direction of such Borrower to or for the account of WFNNB (and Nevada Factoring as applicable) or any other Person; and

(viii)                        such other reports as to the Collateral as Agent shall reasonably request from time to time.

(b)                                 If any Borrower’s or Guarantor’s records or reports of the Collateral are prepared or maintained by an accounting service, contractor, shipper or other agent, such Borrower or Guarantor hereby irrevocably authorizes such service, contractor, shipper or agent to deliver such records, reports, and related documents to Agent and to follow Agent’s instructions with respect to further services at any time that an Event of Default exists or has occurred and is continuing.

7.2                               Accounts Covenants.

(a)                                 Each Borrower and Guarantor shall notify Agent promptly of the assertion of any material claims, offsets, defenses or counterclaims by any account debtor, Credit Card Issuer or Credit Card Processor or any material disputes with any of such persons or any settlement, adjustment or compromise thereof and all material adverse information relating to the financial condition of any account debtor, Credit Card Issuer or Credit Card Processor.  No credit, discount, allowance or extension or agreement for any of the foregoing shall be granted to any account debtor, Credit Card Issuer or Credit Card Processor except in the ordinary course of such Borrower’s or Guarantor’s business in accordance with the current practices of such Borrower or Guarantor as in effect on the date hereof.  So long as an Event of Default exists or has occurred and is continuing, no Borrower or Guarantor shall, without the prior consent of Agent, settle, adjust or compromise any material claim, offset, counterclaim or dispute with any account debtor, Credit Card Issuer, Credit Card Processor.  At any time that an Event of Default exists or has occurred and is continuing, Agent shall, at its option, have the exclusive right to settle, adjust or compromise any claim, offset, counterclaim or dispute with account debtors, Credit Card Issuers or Credit Card Processors or grant any credits, discounts or allowances.

(b)                                 With respect to each Account: no payments shall be made thereon except payments delivered to Agent pursuant to the terms of this Agreement, there shall be no material

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setoffs, deductions, contras, defenses, counterclaims or disputes existing or asserted with respect thereto except as reported to Agent in accordance with the terms of this Agreement and none of the transactions giving rise thereto will violate any applicable State or Federal Laws or regulations, all documentation relating thereto will be legally sufficient under such laws and regulations and all such documentation will be legally enforceable in accordance with its terms.

(c)                                  Each Borrower and Guarantor shall notify Agent promptly of: any notice of a material default by such Borrower or Guarantor under any of the Credit Card Agreements or of any default which has a reasonable likelihood of resulting in the Credit Card Issuer or Credit Card Processor ceasing to make payments or suspending payments to such Borrower or Guarantor, any notice from any Credit Card Issuer or Credit Card Processor that such person is ceasing or suspending, or will cease or suspend, any present or future payments due or to become due to such Borrower or Guarantor from such person, or that such person is terminating or will terminate any of the Credit Card Agreements, and the failure of such Borrower or Guarantor to comply with any material terms of the Credit Card Agreements or any terms thereof which has a reasonable likelihood of resulting in the Credit Card Issuer or Credit Card Processor ceasing or suspending payments to such Borrower or Guarantor.

(d)                                 Upon an Event of Default, Agent shall have the right at any time or times, in Agent’s name or in the name of a nominee of Agent, to verify the validity, amount or any other matter relating to any Receivables or other Collateral, by mail, telephone, facsimile transmission or otherwise.

7.3                               Inventory Covenants.  With respect to the Inventory:  (a) each Borrower and Guarantor shall at all times maintain inventory records reasonably satisfactory to Agent, keeping correct and accurate records itemizing and describing the kind, type, quality and quantity of such Borrower’s or Guarantor’s Inventory, such Borrower’s or Guarantor’s cost therefor and daily withdrawals therefrom and additions thereto; (b) each Borrower and Guarantor shall conduct a physical count of its Inventory either through periodic cycle counts or wall to wall counts, so that all Inventory is subject to such counts at least once each year, but at any time or times as Agent may request on or after an Event of Default, and promptly following such physical inventory (whether through periodic cycle counts or wall to wall counts) shall supply Agent with a report in the form and with such specificity as may be reasonably satisfactory to Agent concerning such physical count; (c) no Borrower or Guarantor shall remove any Inventory from the locations set forth or permitted herein, without the prior written consent of Agent, except for sales of Inventory in the ordinary course of such Borrower’s or Guarantor’s business and except to move Inventory directly from one location set forth or permitted herein to another such location and except for Inventory shipped from the manufacturer thereof to such Borrower or Guarantor which is in transit to the locations set forth or permitted herein; (d) upon Agent’s request, Borrowers and Guarantors shall, at their expense, deliver or cause to be delivered to Agent written appraisals as to the Inventory in form, scope and methodology acceptable to Agent and by an appraiser acceptable to Agent, addressed to Agent and upon which Agent and Lenders are expressly permitted to rely as follows: (i) so long as Compliance Excess Availability is greater twenty (20%) percent of the Revolving Loan Limit, no more than one (1) such written appraisal in any twelve (12) month period, (ii) if Compliance Excess Availability is at any time less than or equal to twenty (20%) percent of the Revolving Loan Limit, no more than two (2) such written appraisals in any twelve (12) month period, and (iii) if a Default or an Event of Default

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exists or has occurred and is continuing, such number of written appraisals as Agent may request; provided, that, at any time or times as Agent may request, at Agent’s expense,  Agent may arrange to have appraisals conducted as to the Inventory; (e) upon Agent’s request, Borrowers and Guarantors shall, at their expense, deliver or cause to be delivered to Agent field examinations as to the Inventory in form, scope and methodology acceptable to Agent and by a field examiner acceptable to Agent, addressed to Agent and upon which Agent and Lenders are expressly permitted to rely as follows: (i) so long as Compliance Excess Availability is greater twenty (20%) percent of the Revolving Loan Limit, no more than one (1) such field examination in any twelve (12) month period, (ii) if Compliance Excess Availability is at any time less than or equal to twenty (20%) percent of the Revolving Loan Limit, no more than two (2) such field examinations in any twelve (12) month period, and (iii) if a Default or an Event of Default exists or has occurred and is continuing, such number of field examinations as Agent may request; provided, that, at any time or times as Agent may request, at Agent’s expense,  Agent may arrange to have field examinations conducted as to the Inventory; (f) upon Agent’s request, Borrowers and Guarantors shall, at their expense, conduct through Washington Inventory Service or another inventory counting service acceptable to Agent, a physical count of the Inventory in form, scope and methodology acceptable to Agent, the results of which shall be reported directly by such inventory counting service to Agent and Borrowers and Guarantors shall promptly deliver confirmation in a form reasonably satisfactory to Agent that appropriate adjustments have been made to the inventory records of Borrowers and Guarantors to reconcile the inventory count to Borrowers’ and Guarantors’ inventory records, as follows: (i) so long as Compliance Excess Availability is greater twenty (20%) percent of the Revolving Loan Limit, no more than one (1) such physical count in any twelve (12) month period, and at a time to coincide with Borrowers’ and or Guarantors’ physical count of the Inventory, (ii) if Compliance Excess Availability is at any time less than or equal to twenty (20%) percent of the Revolving Loan Limit, no more than two (2) such physical counts in any twelve (12) month period, and at a time to coincide with Borrowers’ and or Guarantors’ physical count of the Inventory, and (iii) if a Default or an Event of Default exists or has occurred and is continuing, such number of physical counts as Agent may request; provided, that, at any time or times as Agent may request, at Agent’s expense,  Agent may arrange to have written reports or appraisals conducted as to the Inventory;  (g) each Borrower and Guarantor shall produce, use, store and maintain the Inventory, with all reasonable care and caution and in accordance with applicable standards of any insurance and in conformity with applicable laws (including the requirements of the Federal Fair Labor Standards Act of 1938, as amended and all rules, regulations and orders related thereto); (h) none of the Inventory or other Collateral constitutes farm products or the proceeds thereof; (i) each Borrower and Guarantor assumes all responsibility and liability arising from or relating to the production, use, sale or other disposition of the Inventory; (j) no Borrower or Guarantor shall sell Inventory to any customer on approval, or any other basis which entitles the customer to return or may obligate such Borrower or Guarantor to repurchase such Inventory except for the right of return given to retail customers of any Borrower or Guarantor in the ordinary course of the business of such Borrower or Guarantor in accordance with the then current return policy of such Borrower; (k) each Borrower and Guarantor shall keep the Inventory in good and marketable condition; and (l) no Borrower or Guarantor shall, without prior written notice to Agent or the specific identification of such Inventory in a report with respect thereto provided by such Borrower or Guarantor to Agent pursuant to Section 7.1(a) hereof, acquire or accept any Inventory on consignment or approval.

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7.4                               Equipment Covenants.  With respect to the Equipment:  (a) upon Agent’s request, Borrowers and Guarantors shall, at their expense, at any time or times as Agent may request after the occurrence and during the continuance of an Event of Default, deliver or cause to be delivered to Agent written appraisals as to the Equipment in form, scope and methodology acceptable to Agent and by an appraiser acceptable to Agent, addressed to Agent and upon which Agent is expressly permitted to rely; (b) Borrowers and Guarantors shall use commercially reasonable efforts to keep the Equipment in good order, repair and running (ordinary wear and tear excepted); (c) Borrowers and Guarantors shall use the Equipment with all reasonable care and caution and in accordance with applicable standards of any insurance and in conformity with all applicable laws; (d) the Equipment is and shall be used in the business of Borrowers and Guarantors and not for personal, family, household or farming use; (e) Borrowers and Guarantors shall not remove any Equipment from the locations set forth or permitted herein, except to the extent necessary to have any Equipment repaired or maintained in the ordinary course of its business or to move Equipment directly from one location set forth or permitted herein to another such location and except for the movement of motor vehicles used by or for the benefit of Borrowers and Guarantors in the ordinary course of business; (f) the Equipment is now and shall remain personal property and Borrowers and Guarantors shall not permit any of the Equipment to be or become a part of or affixed to real property; and (g) Borrowers and Guarantors assume all responsibility and liability arising from the use of the Equipment.

7.5                               Bills of Lading and Other Documents of Title.

(a)                                 On and after the date hereof, with respect to goods purchased by a Borrower which are outside the United States of America and in transit to the premises of such Borrower or the premises of a Freight Forwarder in the United States of America (i) if Borrowers have elected to comply with the eligibility criteria in clause (c)(i)(A) of the definition of Eligible In-Transit Inventory and the eligibility criteria of clause (f)(i) of the definition of Eligible In-Transit LC Inventory, each Borrower shall cause all bills of lading or other documents of title relating to such goods to be issued in a form so as to constitute negotiable documents as such term is defined in the Uniform Commercial Code, (ii) if Borrowers have elected to comply with the eligibility criteria in clause (c)(i)(B) or (C) of the definition of Eligible In-Transit Inventory and the eligibility criteria of clause (f)(ii) or (iii) of the definition of Eligible In-Transit LC Inventory, each Borrower shall cause all bills of lading or other documents of title relating to such goods to be issued in a form so as to constitute non-negotiable documents as such term is defined in the Uniform Commercial Code  and (iii) other than those relating to goods being purchased pursuant to a Letter of Credit Accommodation, to be issued either to the order of Agent or such other person as Agent may from time to time designate for such purpose as consignee or such Borrower as consignee, as Agent may specify.

(b)                                 There shall be no more than three (3) originals of any bills of lading and other documents of title relating to goods being purchased by a Borrower which are outside the United States of America and in transit to the premises of such Borrower or the premises of a Freight Forwarder in the United States of America.  As to any such bills of lading or other documents of title, unless and until Agent shall direct otherwise, three (3) originals of each of such bill of lading or other document of title shall be delivered to such Freight Forwarder as such Borrower may specify and that is party to a Collateral Access Agreement. Upon the request of Agent, one (1) original of each such bill of lading or other document of title shall be delivered to

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Agent.  To the extent that the terms of this Section have not been satisfied as to any Inventory, such Inventory shall not constitute Eligible Inventory, except as Agent may otherwise agree.

7.6                               Intellectual Property Appraisals.  Upon Term Loan Agent’s request, Borrowers and Guarantors shall, at their expense to the extent provided by Section 9.20(f) hereof, deliver or cause to be delivered to Term Loan Agent and Agent written appraisals as to the Intellectual Property, in form, scope and methodology reasonably acceptable to Term Loan Agent and by an appraiser reasonably acceptable to Term Loan Agent, addressed to Term Loan Agent and upon which Term Loan Agent, Agent and Lenders are expressly permitted to rely as follows: (a) so long as EBITDA of Borrowers and their Subsidiaries on a consolidated basis calculated each month on a trailing twelve (12) month basis is equal to or less than $22,500,000, no more than one (1) such written appraisal in any twelve (12) month period, and (b) if a Default or an Event of Default exists or has occurred and is continuing, such number of written appraisals as Term Loan Agent may request; provided, that, at any time or times as Term Loan Agent may request, at Term Loan Agent’s expense, Term Loan Agent may arrange to have appraisals conducted as to the Intellectual Property.

7.7                               Power of Attorney.  Each Borrower and Guarantor hereby irrevocably designates and appoints Agent (and all persons designated by Agent) as such Borrower’s or Guarantor’s true and lawful attorney-in-fact, and authorizes Agent, in such Borrower’s or Guarantor’s, or Agent’s name, to, at any time an Event of Default exists or has occurred and is continuing (i) demand payment on Receivables or other Collateral, (ii) enforce payment of Receivables by legal proceedings or otherwise, (iii) exercise all of such Borrower’s or Guarantor’s rights and remedies to collect any Receivable or other Collateral, (iv) sell or assign any Receivable upon such terms, for such amount and at such time or times as Agent deems advisable, (v) settle, adjust, compromise, extend or renew an Account, (vi) discharge and release any Receivable, (vii) prepare, file and sign such Borrower’s or Guarantor’s name on any proof of claim in bankruptcy or other similar document against an account debtor or other obligor in respect of any Receivables or other Collateral, (viii) notify the post office authorities to change the address for delivery of remittances from account debtors or other obligors in respect of Receivables or other proceeds of Collateral to an address designated by Agent, and open and dispose of all mail addressed to such Borrower or Guarantor and handle and store all mail relating to the Collateral, (ix) do all acts and things which are necessary, in Agent’s determination, to fulfill such Borrower’s or Guarantor’s obligations under this Agreement and the other Financing Agreements, (x) take control in any manner of any item of payment in respect of Receivables or constituting Collateral or otherwise received in or for deposit in the Blocked Accounts or otherwise received by Agent or any Lender, (xi) have access to any lockbox or postal box into which remittances from account debtors or other obligors in respect of Receivables or other proceeds of Collateral are sent or received, (xii) endorse such Borrower’s or Guarantor’s name upon any items of payment in respect of Receivables or constituting Collateral or otherwise received by Agent and any Lender and deposit the same in Agent’s account for application to the Obligations, (xiii) endorse such Borrower’s or Guarantor’s name upon any chattel paper, document, instrument, invoice, or similar document or agreement relating to any Receivable or any goods pertaining thereto or any other Collateral, including any warehouse or other receipts, or bills of lading and other negotiable or non-negotiable documents, (xiv) clear Inventory the purchase of which was financed with Letter of Credit Accommodations through U.S. Customs or foreign export control authorities in such Borrower’s or Guarantor’s name, Agent’s name or the

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name of Agent’s designee, and to sign and deliver to customs officials powers of attorney in such Borrower’s or Guarantor’s own name for such purpose, and to complete in such Borrower’s or Guarantor’s or Agent’s name, any order, sale or transaction, obtain the necessary documents in connection therewith and collect the proceeds thereof, and (xv) sign such Borrower’s or Guarantor’s name on any verification of Receivables and notices thereof to account debtors or any secondary obligors or other obligors in respect thereof.  Each Borrower and Guarantor hereby releases Agent and Lenders and their respective officers, employees and designees from any liabilities arising from any act or acts under this power of attorney and in furtherance thereof, whether of omission or commission, except as a result of Agent’s or any Lender’s own gross negligence or willful misconduct as determined pursuant to a final non-appealable order of a court of competent jurisdiction.

7.8                               Right to Cure.  Agent may, at its option, upon notice to Borrowers, (a) cure any default by any Borrower or Obligor under any material agreement with a third party that affects the Collateral, its value or the ability of Agent to collect, sell or otherwise dispose of the Collateral or the rights and remedies of Agent or any Lender therein or the ability of any Borrower or any Obligor to perform its obligations hereunder or under any of the other Financing Agreements, (b) pay or bond on appeal any judgment entered against any Borrower or Obligor, (c) discharge taxes, liens, security interests or other encumbrances at any time levied on or existing with respect to the Collateral and (d) pay any amount, incur any expense or perform any act which, in Agent’s judgment, is necessary or appropriate to preserve, protect, insure or maintain the Collateral and the rights of Agent and Lenders with respect thereto.  Agent may add any amounts so expended to the Obligations and charge Borrowers’ loan accounts therefor, such amounts to be repayable by Borrowers on demand.  Agent and Lenders shall be under no obligation to effect such cure, payment or bonding and shall not, by doing so, be deemed to have assumed any obligation or liability of any Borrower or any Obligor.  Any payment made or other action taken by Agent or any Lender under this Section shall be (a) made by Agent or such Lender after Agent or such Lender makes reasonable efforts to consult with Borrowers with respect thereto, and (b) without prejudice to any right to assert an Event of Default hereunder and to proceed accordingly.

7.9                               Access to Premises.  From time to time as requested by Agent, at the cost and expense of Borrowers, (a) Agent and its designees shall contemporaneously have complete access to all of each Borrower’s and Guarantor’s personnel and premises during normal business hours and after notice to, or at any time and without notice to Borrowers or Guarantors if an Event of Default exists or has occurred and is continuing, for the purposes of inspecting, verifying and auditing the Collateral and all of each Borrower’s and Guarantor’s books and records, including the Records, (b) Borrowers and Guarantors shall promptly furnish to Agent such copies of such books and records or extracts therefrom as Agent may request, and (c) Agent or any Lender or Agent’s designee may use during normal business hours such of any Borrower’s or Guarantor’s equipment, supplies and premises as may be reasonably necessary for the foregoing and if an Event of Default exists or has occurred and is continuing for the collection of Receivables and realization of other Collateral.

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SECTION 8.        REPRESENTATIONS AND WARRANTIES

Each Borrower and Guarantor hereby represents and warrants to Agent and Lenders the following (which shall survive the execution and delivery of this Agreement), the truth and accuracy of which are a continuing condition of the making of Loans and providing Letter of Credit Accommodations to Borrowers:

8.1                               Corporate Existence, Power and Authority.  Each Borrower and Guarantor is a corporation or limited liability company duly organized and in good standing under the laws of its state of incorporation or formation identified in its Information Certificate and is duly qualified as a foreign corporation or limited liability company and in good standing in all states or other jurisdictions where the nature and extent of the business transacted by it or the ownership of assets makes such qualification necessary, except for those jurisdictions in which the failure to so qualify would not have a material adverse effect on such Borrower’s or Guarantor’s financial condition, results of operation or business or the rights of Agent in or to any of the Collateral.  The execution, delivery and performance of this Agreement, the other Financing Agreements and the transactions contemplated hereunder and thereunder by each Borrower and Guarantor (a) are all within such Borrower’s or Guarantor’s corporate or limited liability company powers, (b) have been duly authorized, (c) are not in contravention of law or the terms of such Borrower’s or Guarantor’s certificate of incorporation, certificate of formation, by-laws, operating agreement or other organizational documentation, or any indenture, agreement or undertaking to which such Borrower or Guarantor is a party or by which such Borrower or Guarantor or its property are bound, except for those lease agreements of Lerner for which Lerner did not obtain consents from the parties thereto with respect to this Agreement, and (d) will not result in the creation or imposition of, or require or give rise to any obligation to grant, any lien, security interest, charge or other encumbrance upon any property of such Borrower or Guarantor other than liens in favor of Agent or any Lender as contemplated hereby.  This Agreement and the other Financing Agreements to which each Borrower and Guarantor is a party constitute legal, valid and binding obligations of such Borrower or Guarantor enforceable in accordance with their respective terms.

8.2                               Name; State of Organization; Chief Executive Office; Collateral Locations.

(a)                                 The exact legal name of each Borrower and Guarantor is as set forth on the signature pages of this Agreement and in each Borrower’s and Guarantor’s Information Certificate, subject to the rights of Borrowers and Guarantors to change names in accordance with Section 9.1(b) hereof.  No Borrower or Guarantor has, during the five years immediately prior to the date hereof, been known by or used any other corporate or fictitious name or been a party to any merger or consolidation, or acquired all or substantially all of the assets of any Person, or acquired any of its property or assets out of the ordinary course of business, except as set forth in such Borrower’s or Guarantor’s Information Certificate.

(b)                                 Each Borrower and Guarantor is an organization of the type and organized in the jurisdiction set forth in such Borrower’s and Guarantor’s Information Certificate.  Each Borrower’s and Guarantor’s Information Certificate accurately sets forth the organizational identification number of such Borrower or Guarantor or accurately states that such Borrower or Guarantor has none and accurately sets forth the federal employer identification number of such

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Borrower and Guarantor, subject to the right of each Guarantor or Borrower to change names in accordance with Section 9.1(c) hereof.

(c)                                  The chief executive office and mailing address of each Borrower and Guarantor and each Borrower’s and Guarantor’s Records concerning Accounts are located only at the address(es) identified as such in such Borrower’s and Guarantor’s Information Certificate, subject to the rights of each Borrower and Guarantor to change its chief executive office or its mailing address in accordance with Section 9.1(c) hereof, and its only other places of business and the only other locations of Collateral, if any, are the addresses set forth in such Borrower’s or Guarantor’s Information Certificate, subject to the rights of Borrowers and Guarantors to establish new locations in accordance with Section 9.2 hereof.  Each Borrower’s and Guarantor’s Information Certificate correctly identifies any of such locations which are not owned by such Borrower or Guarantor and sets forth the owners and/or operators thereof.

8.3                               Financial Statements; No Material Adverse Change.  All financial statements relating to Borrowers and Guarantors (or any of them) which have been or may hereafter be delivered by Borrowers and Guarantors (or any of them) to Agent and Lenders have been prepared in accordance with GAAP (except as to any interim financial statements, to the extent such statements are subject to normal year-end adjustments and do not include any notes) and fairly present in all material respects the financial condition and the results of operation of Borrowers and Guarantors as at the dates and for the periods set forth therein.  Except as disclosed in any interim financial statements furnished by Borrowers or Guarantors to Agent prior to the date of this Agreement or otherwise fully and accurately disclosed to Agent in writing, there has been no act, condition, circumstance or event which has had or is reasonably likely to have a Material Adverse Effect since the date of the most recent audited financial statements of Borrowers and Guarantors furnished by Borrowers and Guarantors to Agent prior to the date of this Agreement.

8.4                               Priority of Liens; Title to Properties.  The security interests and liens granted to Agent under this Agreement and the other Financing Agreements upon filing the appropriate documents (including UCC financing statements and filings with the U.S. Patent and Trademark Office and the U.S. Copyright Office), but only if and to the extent that a security interest may be so perfected under applicable laws, constitute or deemed necessary by Agent to maintain valid and perfected first priority liens and security interests in and upon the Collateral subject only to the liens indicated on the Information Certificates and the other liens permitted under Section 9.8; provided, that, additional recordations or filings may be required with the United States Copyright Office or the United States Patent and Trademark Office to perfect, and/or to preserve and protect, the lien and security interest in and upon certain of the Intellectual Property acquired by any Borrower or Guarantor after the date hereof or otherwise in accordance with the terms of this Agreement.

8.5                               Tax Returns.  Each Borrower and Guarantor has filed, or caused to be filed, in a timely manner (including any extensions) all federal income tax returns and all other material tax returns, reports and declarations that are required to be filed by it.  All information in such tax returns, reports and declarations is complete and accurate in all material respects.  Each Borrower and Guarantor has paid or caused to be paid all taxes due and payable or claimed due and payable in any assessment received by it, except taxes (i) the validity of which are being

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contested in good faith by appropriate proceedings diligently pursued and available to such Borrower or Guarantor and with respect to which adequate reserves have been set aside on its books or (ii) the nonpayment of which could not reasonably be expected to have a Material Adverse Effect.  Adequate provision has been made for the payment of all accrued and unpaid material Federal, State, county, local, foreign and other taxes whether or not yet due and payable and whether or not disputed.

8.6                               Litigation.  Except as set forth in the Information Certificates, (a) there are no investigations by any Governmental Authority pending, or to the best of each Borrower’s Guarantor’s knowledge threatened, against or affecting any Borrower or Guarantor, its assets or business and (b) there is no action, suit, proceeding or claim by any Person pending, or to the best of each Borrower’s and Guarantor’s knowledge threatened, against any Borrower or Guarantor or its assets or goodwill, or against or affecting any transactions contemplated by this Agreement, in each case, which if adversely determined against such Borrower or Guarantor has or could reasonably be expected to have a Material Adverse Effect.

8.7                               Compliance with Other Agreements and Applicable Laws.  Except for those lease agreements of Lerner for which Lerner did not obtain consents from the parties thereto with respect to this Agreement, no Borrower or Guarantor is in default in any respect under, or in violation in any material respect of any of the terms of, any agreement, contract, instrument, lease or other commitment to which it is a party or by which it or any of its assets are bound which could reasonably be expected to have a Material Adverse Effect.  Except as could not reasonably be expected to have a Material Adverse Effect, each Borrower and Guarantor is in compliance in all respects with the requirements of all applicable laws, rules, regulations and orders of any Governmental Authority relating to its business, including, without limitation, those set forth in or promulgated pursuant to the Occupational Safety and Health Act of 1970, as amended, the Fair Labor Standards Act of 1938, as amended, ERISA, the Code, as amended, and the rules and regulations thereunder, all Federal, State and local statutes, regulations, rules and orders relating to consumer credit (including, without limitation, as each has been amended, the Truth-in-Lending Act, the Fair Credit Billing Act, the Equal Credit Opportunity Act and the Fair Credit Reporting Act, and regulations, rules and orders promulgated thereunder), all Federal, State and local states, regulations, rules and orders pertaining to sales of consumer goods (including, without limitation, the Consumer Products Safety Act of 1972, as amended, and the Federal Trade Commission Act of 1914, as amended, and all regulations, rules and orders promulgated thereunder).

8.8                               Environmental Compliance.

(a)                                 Except as set forth on Schedule 8.8 hereto or as would not reasonably be expected to have a Material Adverse Effect, no Borrower or Guarantor has generated, used, stored, treated, transported, manufactured, handled, produced or disposed of any Hazardous Materials, on or off its premises (whether or not owned by it) in any manner which at any time violates in any material respect any applicable Environmental Law or any permit issued to any Borrower or Guarantor under Environmental Law, and the operations of Borrowers and Guarantors and their respective Subsidiaries comply in all material respects with all Environmental Laws and all permits issued to any Borrower or Guarantor under Environmental Law.

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(b)                                 Except as set forth on Schedule 8.8 hereto or as would not reasonably be expected to have a Material Adverse Effect, there has been no investigation by any Governmental Authority or any proceeding, complaint, order, directive, claim, citation or notice by any Governmental Authority or any other person nor is any pending or to the best of each Borrower’s and Guarantor’s knowledge threatened, with respect to any non-compliance with or violation of the requirements of any Environmental Law by such Borrower or Guarantor or the release, spill or discharge, threatened or actual, of any Hazardous Material or the generation, use, storage, treatment, transportation, manufacture, handling, production or disposal of any Hazardous Materials by such Borrower or Guarantor or any other environmental, health or safety matter involving such Borrower or Guarantor, which adversely affects or would reasonably be expected to adversely affect in any material respect such Borrower or Guarantor or its business, operations or assets or any properties at which such Borrower or Guarantor has transported, stored or disposed of any Hazardous Materials.

(c)                                  Except as set forth on Schedule 8.8 hereto or as would not reasonably be expected to have a Material Adverse Effect, no Borrower or Guarantor has any material liability (contingent or otherwise) in connection with a release, spill or discharge, threatened or actual, of any Hazardous Materials or the generation, use, storage, treatment, transportation, manufacture, handling, production or disposal of any Hazardous Materials.

(d)                                 Except as set forth on Schedule 8.8 hereto or as would not reasonably be expected to have a Material Adverse Effect, each Borrower and Guarantor has all permits required to be obtained or filed in connection with the operations of such Borrower and Guarantor under any Environmental Law and all of such licenses, certificates, approvals or similar authorizations and other permits are valid and in full force and effect.

8.9                               Employee Benefits.

(a)                                 Except as could not reasonably be expected to have a Material Adverse Effect, each Plan is in compliance in all material respects with the applicable provisions of ERISA, the Code and other Federal or State law and each Plan which is intended to qualify under Section 401(a) of the Code has received a favorable determination letter from the Internal Revenue Service or is still within the remedial amendment period (as defined in Section 401(b) of the Code) to obtain a favorable determination letter.  Each Borrower and Guarantor and its ERISA Affiliates have made all required contributions to any Pension Plan subject to Section 412 of the Code, and no application for a funding waiver or an extension of any amortization period pursuant to Section 412 of the Code has been made with respect to any such Pension Plan.

(b)                                 Except as could not reasonably be expected to have a Material Adverse Effect, there are no pending, or to the best of each Borrower’s and Guarantor’s knowledge, threatened claims, actions or lawsuits, or action by any Governmental Authority, with respect to any Plan, and there has been no non-exempt prohibited transaction or violation of the fiduciary responsibility rules with respect to any Plan.

(c)                                  (i)                                     Except as could not reasonably be expected to have a Material Adverse Effect, no ERISA Event has occurred or is reasonably expected to occur; (ii) the current value of the assets of each Pension Plan (determined in accordance with the assumptions used for

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funding such Pension Plan pursuant to Section 412 of the Code) are not exceeded by such Pension Plan’s liabilities under Section 4001(a)(16) of ERISA in an amount that could reasonably be expected to have a Material Adverse Effect; (iii) no Borrower or Guarantor or any of its ERISA Affiliates have incurred nor do any of them reasonably expect to incur any liability under Title IV of ERISA with respect to any Pension Plan (other than premiums due and not delinquent under Section 4007 of ERISA) in an amount which could reasonably be expected to have a Material Adverse Effect; (iv) except as could not reasonably be expected to have a Material Adverse Effect, no Borrower or Guarantor or any of its ERISA Affiliates have incurred nor do any of them reasonably expect to incur any liability (and no event has occurred which, with the giving of notice under Section 4219 of ERISA, would result in such liability) under Section 4201 or 4243 of ERISA with respect to a Multiemployer Plan; and (v) except as set forth on Schedule 8.9(c) hereto, no Borrower or Guarantor or any of its ERISA Affiliates has engaged in a transaction that would be subject to Section 4069 or 4212(c) of ERISA.

8.10                        Bank Accounts, etc.  All of the deposit accounts, investment accounts or other accounts in the name of or used by any Borrower or Guarantor maintained at any bank or other financial institution are set forth on such Borrower’s or Guarantor’s Information Certificate, subject to the right of Borrowers and Guarantors to establish new accounts in accordance with Section 5.2(d) hereof.

8.11                        Intellectual Property.

(a)                                 Each Borrower and Guarantor owns or licenses or otherwise has the right to use all Intellectual Property necessary for the operation of its business as presently conducted or proposed to be conducted.  As of the date hereof, no Borrower or Guarantor owns any Intellectual Property registered, or subject to pending applications, in the United States Patent and Trademark Office or any similar office or agency in the United States, any State thereof, any political subdivision thereof or in any other country, other than those described in such Borrower’s or Guarantor’s Information Certificate and has not granted any licenses with respect thereto other than as set forth in such Borrower’s or Guarantor’s Information Certificate.  To the best of each Borrower’s and Guarantor’s knowledge, no event has occurred which permits or would permit after notice or passage of time or both, the revocation, suspension or termination of any Borrower’s or Guarantor’s Intellectual Property rights the loss of which could reasonably be expected to have a Material Adverse Effect.  To the best of each Borrower’s and Guarantor’s knowledge, except as could not reasonably be expected to have a Material Adverse Effect: (i) no slogan or other advertising device, product, process, method, substance or other Intellectual Property or goods bearing or using any Intellectual Property presently contemplated to be sold by or employed by any Borrower or Guarantor infringes any patent, trademark, servicemark, tradename, copyright, license or other Intellectual Property owned by any other Person presently, and (ii) and no claim or litigation is pending or threatened against or affecting any Borrower or Guarantor contesting its right to sell or use any such Intellectual Property.  Each Borrower’s and Guarantor’s Information Certificate sets forth all of the agreements of such Borrower or Guarantor pursuant to which such Borrower or Guarantor has a license or other right to use any material trademarks, logos, designs or other material Intellectual Property owned by another person as in effect on the date hereof and the dates of the expiration of such agreements (collectively, together with such agreements or other arrangements as may be entered into by any Borrower or Guarantor after the date hereof, collectively, the “License Agreements” and

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individually, a “License Agreement”).

(b)                                 No trademark, servicemark, copyright or other Intellectual Property at any time used by any Borrower or Guarantor which is owned by another person, or owned by such Borrower or Guarantor subject to any security interest, lien, collateral assignment, pledge or other encumbrance in favor of any person other than Agent, is affixed to any Eligible Inventory, except (i)  as set forth on such Borrower’s or Guarantor’s Information Certificate, (ii) to the extent permitted under the term of the License Agreements listed on such Borrower’s or Guarantor’s  Information Certificate, and (iii)  to the extent the sale of Inventory to which such Intellectual Property is affixed is permitted to be sold by such Borrower or Guarantor under applicable law (including the United States Copyright Act of 1976).  The Intellectual Property consisting of the patents and the copyright set forth on Schedule 8.11 hereof (i) are not material and are no longer used or useful in the business of any Borrower or Guarantor, (ii) are not otherwise used in the production, distribution or sale of any Inventory or the collection of Accounts and (iii) do not have any material value.

8.12                        Subsidiaries; Affiliates; Capitalization; Solvency.

(a)                                 No Borrower or Guarantor has any direct or indirect Subsidiaries or Affiliates and is not engaged in any joint venture or partnership except as set forth in such Borrower’s or Guarantor’s Information Certificate.

(b)                                 Each Borrower and Guarantor is the record and beneficial owner of all of the issued and outstanding shares of Capital Stock of each of the Subsidiaries listed on such Borrower’s or Guarantor’s Information Certificate as being owned by such Borrower or Guarantor and there are no proxies, irrevocable or otherwise, with respect to such shares and no equity securities of any of Subsidiary of a Borrower or Guarantor are or may become required to be issued by reason of any options, warrants, rights to subscribe to, calls or commitments of any kind or nature and there are no contracts, commitments, understandings or arrangements by which any Subsidiary of a Borrower or Guarantor is or may become bound to issue additional shares of its Capital Stock or securities convertible into or exchangeable for such shares.

(c)                                  The issued and outstanding shares of Capital Stock of each Borrower and Guarantor are directly and beneficially owned and held by the persons indicated in such Borrower’s or Guarantor’s Information Certificate, and in each case all of such shares have been duly authorized and are fully paid and non-assessable, free and clear of all claims, liens, pledges and encumbrances of any kind, except as may be permitted under the terms of the Financing Agreements.

(d)                                 Each Borrower and Guarantor is Solvent and will continue to be Solvent after the creation of the Obligations, the security interests of Agent and the other transaction contemplated hereunder.

8.13                        Labor Disputes.

(a)                                 Set forth on Schedule 8.13 hereto is a list (including dates of termination) of all collective bargaining or similar agreements between or applicable to any Borrower or Guarantor and any union, labor organization or other bargaining agent in respect of the

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employees of such Borrower or Guarantor on the date hereof.

(b)                                 Except as could not reasonably be expected to have a Material Adverse Effect, there is (i) no unfair labor practice complaint pending against any Borrower or Guarantor or, to the best of such Borrower’s or Guarantor’s knowledge, threatened against it, before the National Labor Relations Board, and no grievance or arbitration proceeding arising out of or under any collective bargaining agreement is pending on the date hereof against such Borrower or Guarantor or, to best of such Borrower’s or Guarantor’s knowledge, threatened against it, and (ii) no strike, labor dispute, slowdown or stoppage is pending against any Borrower or Guarantor or, to the best of such Borrower’s or Guarantor’s knowledge, threatened against such Borrower or Guarantor.

8.14                        Restrictions on Subsidiaries.  Except for restrictions contained in this Agreement, the Transition Services Agreement, or any other agreement with respect to Indebtedness of any Borrower or Guarantor permitted hereunder as in effect on the date hereof (or hereafter in effect pursuant to any refinancing thereof permitted under the terms of this Agreement), there are no contractual or consensual restrictions on any Borrower or Guarantor or any of its Subsidiaries which prohibit or otherwise restrict (a) the transfer of cash or other assets (i) between Borrowers, (ii) between any Borrower or Guarantor and any Subsidiary of a Borrower or Guarantor, or (iii) between any Subsidiaries of any Borrower or Guarantor or (b) the ability of any Borrower or Guarantor or any of its Subsidiaries to incur Indebtedness or grant security interests to Agent or any Lender in the Collateral.

8.15                        Material Contracts. Schedule 8.15 hereto sets forth a list of all Material Contracts to which any Borrower or Guarantor is a party or is bound as of the date hereof.  Each Borrower and Guarantor has delivered true, correct and complete copies of such Material Contracts to Agent on or before the date hereof.  No Borrower or Guarantor is in breach or in default in any material respect of or under any Material Contract and have not received any notice of the intention of any other party thereto to terminate any Material Contract.

8.16                        Credit Card Agreements.

(a)                                 Set forth in Schedule 8.16 hereto is a correct and complete list of all of the Credit Card Agreements as of the date hereof and all other agreements, documents and instruments existing as of the date hereof between or among any Borrower or Guarantor, any of their Affiliates, the Credit Card Issuers, the Credit Card Processors and any of their Affiliates.  The Credit Card Agreements constitute all of such agreements necessary for Borrowers and Guarantors to operate their business as presently conducted with respect to credit cards and debit cards and no Receivables of any Borrower or Guarantor arise from purchases by customers of Inventory with credit cards or debit cards, other than those which are issued by Credit Card Issuers with whom such Borrower or Guarantor has entered into one of the Credit Card Agreements set forth on Schedule 8.16 hereto or with whom such Borrower or Guarantor has entered into a Credit Card Agreement in accordance with Section 9.21 hereof.  Each of the Credit Card Agreements constitutes the legal, valid and binding obligations of the Borrower or Guarantor that is party thereto and to the best of each Borrower and Guarantor’s knowledge, the other parties thereto, enforceable in accordance with their respective terms and is in full force and effect.  Except as could not reasonably (i) be expected to have a Material Adverse Effect or

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(ii) result in the cessation of the transfer of payments under any Credit Card Agreement to the Blocked Accounts as required under this Agreement, no default or event of default, or act, condition or event which after notice or passage of time or both, would constitute a default or an event of default under any of the Credit Card Agreements exists or has occurred.  The applicable Borrower and Guarantors and the other parties thereto have complied with all of the terms and conditions of the Credit Card Agreements to the extent necessary for such Borrower or Guarantor to be entitled to receive all payments thereunder which constitute proceeds of Eligible Credit Card Receivables.  Borrowers and Guarantors have delivered, or caused to be delivered to Agent, true, correct and complete copies of all of the Credit Card Agreements.

(b)                                 Lerner may sell to Nevada Factoring Private Label Credit Card Receivables in accordance with the terms and conditions of the Private Label Credit Agreement so long as the following conditions shall have been satisfied as determined by Agent: (i) the Private Label Credit Card Agreement and a Credit Card Acknowledgement with respect to the Private Label Credit Receivables shall be in full force and effect in accordance with the terms and conditions of this Agreement; (ii) Lerner shall be permitted to act as agent on behalf of Nevada Factoring to submit the charge slips and transactions documents with respect to such Private Credit Card Receivables to WFNNB pursuant to the Private Label Credit Agreement; and (iii) WFNNB shall have been directed by Nevada Receivables and Lerner, and WFNNB shall have agreed in writing, to wire transfer in immediately available funds all proceeds and other amounts payable in respect of Private Label Credit Card Receivables to a Blocked Account.

8.17                        Payable Practices.  Borrowers and Guarantors have not made any material changes in their historical accounts payable practices from those in effect immediately prior to the date hereof.

8.18                        Accuracy and Completeness of Information.  All information furnished by or on behalf of any Borrower or Guarantor in writing to Agent or any Lender in connection with this Agreement or any of the other Financing Agreements or any transaction contemplated hereby or thereby, including all information on the Information Certificates is true and correct in all material respects on the date as of which such information is dated or certified and does not omit any material fact necessary in order to make such information not misleading.  No event or circumstance has occurred which has had or could reasonably be expected to have a Material Adverse Effect, which has not been fully and accurately disclosed to Agent in writing prior to the date hereof.

8.19                        No Defaults.  As of the date hereof, no event has occurred and is continuing that constitutes (a) an Event of Default or Default hereunder, or (b) except as could not reasonably be expected to have a Material Adverse Effect, a default or event of default under the Transition Services Agreement.

8.20                        Transition Services.  As of the date hereof, the only material services being provided to Borrowers and Guarantors under the Transition Services Agreement are logistics or other such Inventory processing and handling services.

8.21                        Patriot Act.  Each Borrower and Guarantor is in compliance, in all material respects, with the (a) Trading with the Enemy Act, as amended, and each of the foreign assets

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control regulations of the United States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) and any other enabling legislation or executive order relating thereto, and (b) the Patriot Act.  No part of the proceeds of the loans made hereunder will be used by any Borrower or Guarantor or any of their Affiliates, directly or indirectly, for any payments to any governmental official or employee, political party, official of a political party, candidate for political office, or anyone else acting in an official capacity, in order to obtain, retain or direct business or obtain any improper advantage, in violation of the United States Foreign Corrupt Practices Act of 1977, as amended.

8.22                        OFAC.  No Borrower or Guarantor nor any of its Subsidiaries is in violation of any of the country or list based economic and trade sanctions administered and enforced by OFAC.  No Borrower or Guarantor nor any of its Subsidiaries (a) is a Sanctioned Person or a Sanctioned Entity, (b) has its assets located in Sanctioned Entities, or (c) derives revenues from investments in, or transactions with Sanctioned Persons or Sanctioned Entities.  No proceeds of any loan made hereunder will be used to fund any operations in, finance any investments or activities in, or make any payments to, a Sanctioned Person or a Sanctioned Entity.

8.23                        Survival of Warranties; Cumulative.  All representations and warranties contained in this Agreement or any of the other Financing Agreements shall survive the execution and delivery of this Agreement and shall be deemed to have been made again to Agent and Lenders on the date of each additional borrowing or other credit accommodation hereunder and shall be conclusively presumed to have been relied on by Agent and Lenders regardless of any investigation made or information possessed by Agent or any Lender.  The representations and warranties set forth herein shall be cumulative and in addition to any other representations or warranties which any Borrower or Guarantor shall now or hereafter give, or cause to be given, to Agent or any Lender.

SECTION 9.        AFFIRMATIVE AND NEGATIVE COVENANTS

9.1                               Maintenance of Existence.

(a)                                 Except as permitted under Section 9.7 hereof, each Borrower and Guarantor shall at all times preserve, renew and keep in full force and effect its corporate existence and material rights and franchises with respect thereto and maintain in full force and effect all material licenses, trademarks, tradenames, approvals, authorizations, leases, contracts and Permits necessary to carry on the business as presently or proposed to be conducted.

(b)                                 No Borrower or Guarantor shall change its name unless each of the following conditions is satisfied: (i) Agent shall have received not less than thirty (30) days prior written notice from such Borrower or Guarantor of such proposed change in its corporate name, which notice shall accurately set forth the new name (other than in the case of Lerner New York, Inc. in connection with certain tax planning transaction of Borrowers and Guarantors, in which case Agent shall have received not less than ten (1) days’ prior written notice of such change; and (ii) Agent shall have received a copy of the amendment to the Certificate of Incorporation of such Borrower or Guarantor providing for the name change certified by the Secretary of State of the jurisdiction of incorporation or organization of such Borrower or Guarantor as soon as it is available.

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(c)                                  No Borrower or Guarantor shall change its chief executive office or its mailing address or organizational identification number (or if it does not have one, shall not acquire one) unless Agent shall have received not less than thirty (30) days’ prior written notice from such Borrower or Guarantor of such proposed change, which notice shall set forth such information with respect thereto as Agent may require and Agent shall have received such agreements as Agent may reasonably require in connection therewith.  Without the prior written consent of Agent, such consent not to be unreasonably withheld, no Borrower or Guarantor shall change its type of organization, jurisdiction of organization or other legal structure.

9.2                               New Collateral Locations.  Any Borrower or Guarantor may open any new location within the continental United States provided such Borrower or Guarantor (a) gives Agent written notice of the opening of any such new location on or before the date such Borrower or Guarantor decides to open such new location and (b) executes and delivers, or causes to be executed and delivered, to Agent such agreements, documents, and instruments as Agent may deem reasonably necessary or desirable to protect its interests in the Collateral at such location.

9.3                               Compliance with Laws, Regulations, Etc.

(a)                                 Except as could not reasonably be expected to cause a Material Adverse Effect, each Borrower and Guarantor shall, and shall cause its respective Subsidiaries to, at all times, comply in all material respects with all laws, rules, regulations, licenses, approvals, orders and other Permits applicable to it and duly observe all requirements of any foreign, Federal, State or local Governmental Authority, the Code, the Occupational Safety and Health Act of 1970, as amended, the Fair Labor Standards Act of 1938, as amended, all Federal, State and local statutes, regulations, rules and orders relating to consumer credit (including, without limitation, as each has been amended, the Truth-in-Lending Act, the Fair Credit Billing Act, the Equal Credit Opportunity Act and the Fair Credit Reporting Act, and regulations, rules and orders promulgated thereunder), all Federal, State and local statutes, regulations, rules and orders pertaining to sales of consumer goods (including, without limitation, the Consumer Products Safety Act of 1972, as amended, and the Federal Trade Commission Act of 1914, as amended, and all regulations, rules and orders promulgated thereunder) and all statutes, rules, regulations, orders, permits and stipulations relating to environmental pollution and employee health and safety, including all of the Environmental Laws.

(b)                                 Each Borrower and Guarantor shall give written notice to Agent promptly upon such Borrower’s or Guarantor’s receipt of any notice of, or such Borrower’s or Guarantor’s otherwise obtaining knowledge of any of the following, except if it could not reasonably be expected to have a Material Adverse Effect, (i) the occurrence of any event involving the unpermitted release, spill or discharge, threatened or actual, of any Hazardous Material by any Borrower or Guarantor or (ii) any investigation, proceeding, complaint, order, directive, claims, citation or notice with respect to: (A) any non-compliance with or violation of any Environmental Law by any Borrower or Guarantor or (B) the release, spill or discharge, threatened or actual, of any Hazardous Material by any Borrower or Guarantor other than in the ordinary course of business and other than as permitted under any applicable Environmental Law.  Copies of all environmental surveys, audits, assessments, feasibility studies and results of remedial investigations shall be promptly furnished, or caused to be furnished, by Borrowers and

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Guarantors to Agent.  Borrowers and Guarantors shall take prompt action to respond to any material non-compliance with any of the Environmental Laws and shall regularly report to Agent on such response.

(c)                                  Without limiting the generality of the foregoing, whenever Agent reasonably determines that there is non-compliance, or any condition which requires any action by or on behalf of any Borrower or Guarantor in order to avoid any non-compliance, with any Environmental Law except with respect to such non-compliance that could not reasonably be expected to have a Material Adverse Effect, Borrowers and Guarantors shall, at Agent’s request and Borrowers’ expense: (i) cause an independent environmental consultant reasonably acceptable to Agent to assess such non-compliance or alleged non-compliance with such Environmental Laws (including sampling and analysis, if necessary) and prepare and deliver to Agent a report as to such non-compliance setting forth the results of any sampling or analysis, a proposed plan for responding to any environmental problems described therein, and an estimate of the costs thereof and (ii) provide to Agent a supplemental report of such consultant whenever the scope of such non-compliance, or any Borrower’s or Guarantor’s response thereto or the estimated costs thereof, shall change in any material respect.

(d)                                 Each Borrower and Guarantor shall indemnify and hold harmless Agent and Lenders and their respective directors, officers, employees, agents, invitees, representatives, successors and assigns, from and against any and all losses, claims, damages, liabilities, costs, and expenses (including reasonable attorneys’ fees and expenses) directly or indirectly arising out of or attributable to the use, generation, manufacture, reproduction, storage, release, threatened release, spill, discharge, disposal or presence of a Hazardous Material, including the costs of any required or necessary repair, cleanup or other remedial work with respect to any property of any Borrower or Guarantor and the preparation and implementation of any closure, remedial or other required plans except to the extent such losses, claims, damages, liabilities, costs, and expenses arise out of or are attributable to the negligence or willful misconduct of Agent or any Lender.  All representations, warranties and indemnifications in this Section 9.3 shall survive the payment of the Obligations and the termination of this Agreement.

9.4                               Payment of Taxes and Claims.  Each Borrower and Guarantor shall, and shall cause its Subsidiaries to, duly pay and discharge all taxes, assessments, contributions and governmental charges upon or against it or its properties or assets, except for taxes (i) the validity of which are being contested in good faith by appropriate proceedings diligently pursued and available to such Borrower or Guarantor or its Subsidiaries, as the case may be, and with respect to which adequate reserves have been set aside on its books or (ii) the non-payment of which could not reasonably be expected to have a Material Adverse Effect.

9.5                               Insurance.  Each Borrower and Guarantor shall, and shall cause its Subsidiaries to, at all times, maintain with financially sound and reputable insurers insurance with respect to the Collateral against loss or damage and all other insurance of the kinds and in the amounts customarily insured against or carried by corporations of established reputation engaged in the same or similar businesses and similarly situated.  Said policies of insurance shall be reasonably satisfactory to Agent as to form, amount and insurer.  Each Borrower and Guarantor shall furnish certificates, policies or endorsements to Agent as Agent shall reasonably require as proof of such insurance, and, if such Borrower or Guarantor fails to do so, Agent is authorized, but not

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required, to obtain such insurance at the expense of Borrowers.  All policies with regard to such insurance shall provide for at least thirty (30) days prior written notice to Agent of any cancellation or reduction of coverage and that Agent may act as attorney for such Borrower or Guarantor in obtaining, and at any time an Event of Default exists or has occurred and is continuing, adjusting, settling, amending and canceling such insurance.  Within ten days after the date hereof, Borrowers and Guarantors shall cause Agent to be named as a loss payee and an additional insured, as its interests may appear (but without any liability for any premiums), under such insurance policies and Borrowers and Guarantors shall obtain non-contributory lender’s loss payable endorsements to all such insurance policies in form and substance satisfactory to Agent.  Such lender’s loss payable endorsements shall specify that the proceeds of such insurance shall be payable to Agent, for itself and the ratable benefit of the Lenders and the Bank Product Providers, as its interests may appear and further specify that Agent and Lenders shall be paid regardless of any act or omission by any Borrower or Guarantor or any of its Affiliates.  Without limiting any other rights of Agent or Lenders, any insurance proceeds received by Agent at any time may be applied to payment of the Obligations, whether or not then due, in accordance with Section 6.4(a) hereof.  Upon application of such proceeds to the Revolving Loans, Revolving Loans may be available subject and pursuant to the terms hereof to be used for the costs of repair or replacement of the Collateral lost or damages resulting in the payment of such insurance proceeds.

9.6                               Financial Statements and Other Information.

(a)                                 Each Borrower and Guarantor shall, and shall cause its Subsidiaries to, keep proper books and records in which true and complete entries shall be made of all dealings or transactions of or in relation to the Collateral and the business of such Borrower or Guarantor and its Subsidiaries in accordance with GAAP.  Borrowers and Guarantors shall promptly furnish to Agent and Lenders all such financial and other information as Agent shall reasonably request relating to the Collateral and the assets, business and operations of Borrowers and Guarantors, and Borrowers and Guarantors shall notify their auditors and accountants that Agent is authorized to obtain such information directly from them.  Without limiting the foregoing, Borrowers and Guarantors shall furnish or cause to be furnished to Agent, the following: (i) within thirty (30) days after the end of each fiscal month, monthly unaudited consolidated financial statements, and unaudited consolidating financial statements (including in each case balance sheets, statements of income and loss, statements of cash flow, and statements of shareholders’ equity), all in reasonable detail, fairly presenting the financial position and the results of the operations of NY&Co and its Subsidiaries as of the end of and through such fiscal month, certified to be correct by either the “chief accounting officer or the  chief financial officer of each Borrower, subject to normal year-end adjustments and accompanied by a compliance certificate substantially in the form of Exhibit C hereto, along with a schedule in a form reasonably satisfactory to Agent of the calculations used in determining, as of the end of such month, whether Borrowers and Guarantors are in compliance with the covenants set forth in Section 9.17 of this Agreement for such month, (ii) during any Cash Dominion Event or Increased Collateral Reporting Event or on the last Business Day of any month therein, Borrowers will deliver to Agent a compliance report, in form and substance reasonably satisfactory to Agent, along with a schedule of the calculations used in determining, as of the end of such month and such other date determined by Borrowers in their sole discretion, whether either or both any Cash Dominion Event or Increased Collateral Reporting Event has ceased to

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exist, and (iii) without duplication within ninety (90) days after each Fiscal Year-End, audited consolidated financial statements and unaudited consolidating financial statements of NY&Co and its Subsidiaries (including in each case balance sheets, statements of income and loss, statements of cash flow, and statements of shareholders’ equity), and the accompanying notes thereto, all in reasonable detail, fairly presenting the financial position and the results of the operations of NY&Co and its Subsidiaries as of the Fiscal Year-End of and for such fiscal year, together with the unqualified opinion of independent certified public accountants with respect to the audited consolidated financial statements, which accountants shall be an independent accounting firm selected by NY&Co and reasonably acceptable to Agent, that such audited consolidated financial statements have been prepared in accordance with GAAP, and present fairly the results of operations and financial condition of NY&Co and its Subsidiaries as of the Fiscal Year-End then ended.

(b)                                 Borrowers and Guarantors shall promptly notify Agent in writing of the details of (i) any loss, damage, investigation, action, suit, proceeding or claim relating to Collateral having a value of more than $1,000,000 or which if adversely determined would result in any material adverse change in any Borrower’s or Guarantor’s business, properties, assets, goodwill or condition, financial or otherwise, (ii) any Material Contract being terminated or amended or any new Material Contract entered into (in which event the applicable Borrower or Guarantor shall provide Agent with a copy of such Material Contract), (iii) any order, judgment or decree in excess of $1,000,000 shall have been entered against any Borrower or Guarantor or any of its properties or assets, (iv) any notification of a material violation of laws or regulations received by any Borrower or Guarantor, (v) any ERISA Event, and (vi) the occurrence of any Event of Default.

(c)                                  Borrowers shall promptly after the sending or filing thereof furnish or cause to be furnished to Agent copies of all reports and registration statements which any Borrower or Guarantor files with the Securities and Exchange Commission, any national securities exchange or the National Association of Securities Dealers, Inc.  Borrowers shall, in addition to the foregoing, promptly after the sending of all material business reports which any Borrower or Guarantor sends to its stockholders generally furnish or cause to be furnished to Agent copies thereof.

(d)                                 As soon as available but in any event by no later than the thirtieth (30th) day after each Fiscal Year-End, Borrowers and Guarantors shall furnish or cause to be furnished to Agent such monthly budgets, forecasts, projections, borrowing availability forecasts and other information respecting the Collateral and the business of Borrowers and Guarantors, as Agent may reasonably request.  Agent is hereby authorized to deliver a copy of any financial statement or any other information relating to the business of Borrowers and Guarantors to any court or other Governmental Authority, or to any Lender or Participant or prospective Lender or Participant, or any financial institution engaged in the same business as Agent.  Each Borrower and Guarantor hereby irrevocably authorizes and directs all accountants or auditors to deliver to Agent, at Borrowers’ expense and without duplication, copies of the financial statements of Borrowers and Guarantors (or any of them) and any reports or management letters prepared by such accountants or auditors on behalf of Borrowers and Guarantors (or any of them) and to disclose to Agent and Lenders such information as they may have regarding the business of any Borrower or Guarantor.  Any documents, schedules, invoices or other papers delivered to Agent

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or any Lender may be destroyed or otherwise disposed of by Agent or such Lender one (1) year after the same are delivered to Agent or such Lender, except as otherwise designated by party to Agent or such Lender in writing.

9.7                               Sale of Assets, Consolidation, Merger, Dissolution, Etc..  No Borrower or Guarantor shall, nor shall it permit any of its Subsidiaries to, directly or indirectly:

(a)                                 merge into or with or consolidate with any other Person or permit any other Person to merge into or with or consolidate with it; provided, however, upon prior written notice to Agent:

(i)                                     a Borrower may merge into or with or consolidate with another Borrower so long as, other than with respect to a merger of Lerner New York, Inc. with and into Lerner New York Outlet, Inc. in connection with certain tax planning transactions of Borrowers and Guarantors, both before and after giving effect thereto no Default, Event of Default or Material Adverse Effect exists or would occur; provided, that, in each of the foregoing cases, the surviving Borrower entity of such merger or consolidation assumes and continues to be responsible for all of the Obligations of the constituent corporations to such merger or consolidation;

(ii)                                  a Guarantor may merge into or with or consolidate with another Guarantor; and

(iii)                               a Guarantor may merge into or with or consolidate with a Borrower so long as (A) such Borrower is the surviving entity with respect thereto and continues to be an organization of the type, domiciled in the state and bearing the same corporate name as existed prior to such merger or consolidation, (B) no Default or Event of Default then exists or would occur, (C) no liens, other than those permitted under the terms of this Agreement with regard to a Borrower, on the assets of such Guarantor then exist, and (D) such Borrower would not, as a result of such transaction, be liable for any Indebtedness or other obligations of such Guarantor, other than Indebtedness or other obligations which are permitted under the terms of this Agreement with regard to a Borrower;

(b)                                 sell, issue, assign, lease, license, transfer, abandon or otherwise dispose of any Capital Stock to any other Person or any of its assets to any other Person, except for

(i)                                     sales of Inventory in the ordinary course of business;

(ii)                                  subleases of real property in the ordinary course of business, as disclosed to Agent pursuant to quarterly reports of such activity,

(iii)                               the abandonment or other disposition of Intellectual Property so long as (A) such Intellectual Property (1) is not material and is no longer used or useful in any material respect in the business of any Borrower or Guarantor, (2) does not appear on is or otherwise not affixed to or incorporated in any Inventory or necessary in connection with the Records and (3) does not have any material value, (B) no Event of Default shall exist or have occurred and be continuing, and (C) Borrowers furnish to Agent a list of such Intellectual Property so abandoned at the end of each fiscal year of Borrowers with the delivery of the

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Compliance Certificate required to be delivered immediately following such Fiscal Year-End of Borrowers;

(iv)                              exclusive of sales or dispositions contemplated by clause (vii) hereof, the sale or other disposition of Equipment (including worn-out or obsolete Equipment or Equipment no longer used or useful in the business of Borrowers) in the ordinary course of business of Borrowers and Guarantors so long as the value of such Equipment sold in any fiscal year is equal to or less than the value of all Equipment acquired in such year, and

(v)                                 the issuance and sale by any Borrower or Guarantor of Capital Stock of such Borrower or Guarantor after the date hereof; provided, that, (A) Agent shall have received not less than ten (10) Business Days’ prior written notice of such issuance and sale by such Borrower or Guarantor, which notice shall specify the parties to whom such shares are to be sold, the terms of such sale, the total amount which it is anticipated will be realized from the issuance and sale of such stock and the net cash proceeds which it is anticipated will be received by such Borrower or Guarantor from such sale, (B) such Borrower or Guarantor shall not be required to pay any cash dividends or repurchase or redeem such Capital Stock or make any other payments in respect thereof, except as otherwise permitted in Section 9.11 hereof, (C) the terms of such Capital Stock, and the terms and conditions of the purchase and sale thereof, shall not include any terms that include any limitation on the right of any Borrower to request or receive Loans or Letter of Credit Accommodations or the right of any Borrower or Guarantor to amend or modify any of the terms and conditions of this Agreement or any of the other Financing Agreements or otherwise in any way relate to or affect the arrangements of Borrowers and Guarantors with Agent and Lenders or are more restrictive or burdensome to Borrowers and Guarantors than the terms of any Capital Stock in effect on the date hereof and (D) if an Event of Default then exists, all of the proceeds of the sale and issuance of such Capital Stock shall be paid to Agent for application to the Obligations in accordance with Section 6.4(a) hereof or at Agent’s option, to be held as cash collateral for the Obligations,

(vi)                              the issuance of Capital Stock of a Borrower or Guarantor consisting of common stock pursuant to an employee stock option or grant or similar equity plan or 401(k) plans of such Borrower or Guarantor for the benefit of its employees, directors and consultants, provided, that, in no event shall such Borrower or Guarantor be required to issue, or shall such Borrower or Guarantor issue, Capital Stock pursuant to such stock plans or 401(k) plans which would result in a Change of Control or other Event of Default,

(vii)                           sales or other dispositions by any Borrower of assets in connection with the closing or sale of a retail store location of such Borrower in the ordinary course of such Borrower’s business which consist of leasehold interests in the premises of such store, the Equipment and fixtures located at such premises and the books and records relating exclusively and directly to the operations of such store; provided, that, as to each and all such sales and closings, on the date of, and after giving effect to, any such closing or sale, (A) the number of retail store locations closed or sold by such Borrower in any fiscal year minus the number of retail stores opened by such Borrower in such fiscal year, shall not exceed the amount equal to fifteen percent (15%) of the number of retail store locations of such Borrower as of the end of the immediately preceding fiscal year, (B) Agent shall have received not less than ten (10) Business Days prior written notice of such sale or closing, which notice shall set forth in reasonable detail

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satisfactory to Agent, the parties to such sale or other disposition, the assets to be sold or otherwise disposed of, the purchase price and the manner of payment thereof and such other information with respect thereto as Agent may request, (C) as of the date of such sale or other disposition and after giving effect thereto, no Default or Event of Default shall exist or have occurred and be continuing, (D) such sale shall be on commercially reasonable prices and terms in a bona fide arm’s length transaction, and (E) any and all proceeds payable or delivered to such Borrower or any Guarantor in respect of such sale or other disposition shall be paid or delivered, or caused to be paid or delivered, to Agent in accordance with the terms of this Agreement (except to the extent such proceeds reflect payment in respect of Indebtedness secured by a properly perfected first priority security interest in the assets sold, in which case, such proceeds shall be applied to such Indebtedness secured thereby),

(viii)                        sales or transfers of assets between Borrowers,

(ix)                              sales or transfers of assets from a Guarantor to a Borrower so long as no Default or Event of Default would occur as a result thereof,

(x)                                 sales or transfers of assets among Guarantors;

(xi)                              the non-exclusive license of any material Intellectual Property by a Borrower or Guarantor to another Person in the ordinary course of business so long as (A) Agent and Term Loan Agent shall have received not less than five (5) Business Days’ prior written notice of the intention of to license such Intellectual Property, (B) such license is nonexclusive and on and pursuant to the reasonable requirements of such Borrower’s or Guarantor’s business (as the case may be) and upon fair market terms, (C) the terms of such license shall provide that such license may be terminated upon sixty (60) days’ prior written notice by Agent and Term Loan Agent at any time on and after a Default or Event of Default exists or has occurred and is continuing, and (D) as of the date of and after giving effect to such license, no Default or Event of Default shall exist or have occurred;

(xii)                           the non-exclusive license of any non-material Intellectual Property by a Borrower or Guarantor to another Person in the ordinary course of business so long as (A) the terms of such license shall provide that such license may be terminated upon sixty (60) days’ prior written notice by Agent at any time on and after a Default or Event of Default exists or has occurred and is continuing, and (B) as of the date of and after giving effect to such license, no Default or Event of Default shall exist or have occurred; and

(xiii)                        the sale by Lerner to Nevada Factoring of the charge slips and credit card transaction documents giving rise to a Private Label Credit Card Receivable in accordance with the terms and conditions of Section 8.16(b) hereof;

(c)                                  except as permitted in clause (a) above, wind up, liquidate or dissolve; or

(d)                                 agree to do any of the foregoing.

9.8                               Encumbrances.  No Borrower or Guarantor shall, nor shall it permit any of its Subsidiaries to, create, incur, assume or suffer to exist any security interest, mortgage, pledge, lien, charge or other encumbrance of any nature whatsoever on any of its assets or properties,

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including the Collateral, or file or permit the filing of, or permit to remain in effect, any financing statement or other similar notice of any security interest or lien with respect to any such assets or properties, except the security interests and liens of Agent, for itself and the ratable benefit of the Lenders and the Bank Product Providers;

(b)                                 liens securing the payment of taxes, assessments or other governmental charges or levies either not yet overdue or the validity of which are being contested in good faith by appropriate proceedings diligently pursued and available to such Borrower or Guarantor or its Subsidiary, as the case may be, and with respect to which adequate reserves have been set aside on its books;

(c)                                  non-consensual statutory liens (other than liens securing the payment of taxes) arising in the ordinary course of such Borrower’s, such Guarantor’s, or such Subsidiary’s, business to the extent: (i) such liens secure Indebtedness which is not overdue or (ii) such liens secure Indebtedness relating to claims or liabilities which are fully insured and being defended at the sole cost and expense and at the sole risk of the insurer or being contested in good faith by appropriate proceedings diligently pursued and available to such Borrower, such Guarantor or such Subsidiary, in each case prior to the commencement of foreclosure or other similar proceedings and with respect to which adequate reserves have been set aside on its books;

(d)                                 zoning restrictions, easements, licenses, covenants and other restrictions affecting the use of Real Property which do not interfere in any material respect with the use of such Real Property or ordinary conduct of the business of such Borrower, such Guarantor or such Subsidiary, as presently conducted thereon or materially impair the value of the Real Property which may be subject thereto;

(e)                                  purchase money security interests in Equipment (including Capital Leases) to secure Indebtedness permitted under Section 9.9(b) hereof;

(f)                                   pledges and deposits of cash by such Borrower or Guarantor after the date hereof in the ordinary course of business in connection with workers’ compensation, unemployment insurance and other types of social security benefits consistent with the practices of such Borrower or Guarantor as of the date hereof;

(g)                                  pledges and deposits of cash by such Borrower or Guarantor after the date hereof to secure the performance of tenders, bids, leases, trade contracts (other than for the repayment of Indebtedness), statutory obligations and other similar obligations in each case in the ordinary course of business consistent with the practices of such Borrower or Guarantor as of the date hereof; provided, that, in connection with any performance bonds issued by a surety or other person, the issuer of such bond shall have waived in writing any rights in or to, or other interest in, any of the Collateral in an agreement, in form and substance satisfactory to Agent;

(h)                                 liens arising from (i) operating leases and the precautionary UCC financing statement filings in respect thereof and (ii) equipment or other materials which are not owned by a Borrower or Guarantor located on the premises of such Borrower or Guarantor (but not in connection with, or as part of, the financing thereof) from time to time in the ordinary course of business and consistent with current practices of such Borrower or Guarantor and the

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precautionary UCC financing statement filings in respect thereof;

(i)                                     liens or rights of setoff or credit balances of such Borrower or Guarantor with Credit Card Issuers, but not liens on or rights of setoff against any other property or assets of such Borrower or Guarantor pursuant to the Credit Card Agreements (as in effect on the date hereof) to secure the obligations of such Borrower or Guarantor to the Credit Card Issuers as a result of fees and chargebacks;

(j)                                    deposits of cash with the owner or lessor of premises leased and operated by such Borrower or Guarantor in the ordinary course of the business of such Borrower or Guarantor to secure the performance by such Borrower or Guarantor of its obligations under the terms of the lease for such premises;

(k)                                 judgments and other similar liens arising in connection with court proceedings that do not constitute an Event of Default, provided, that, (i) such liens are being contested in good faith and by appropriate proceedings diligently pursued, (ii) adequate reserves or other appropriate provision, if any, as are required by GAAP have been made therefor, (iii) a stay of enforcement of any such liens is in effect and (iv) Agent may establish a Reserve with respect thereto; and

(l)                                     licenses of Intellectual Property to the extent permitted by Sections 9.7(b)(xi) and (xii) hereof; and

(m)                             the security interests and liens set forth on the Information Certificates.

9.9                               Indebtedness.  No Borrower or Guarantor shall, nor shall it permit any of its respective Subsidiaries to, incur, create, assume, become or be liable in any manner with respect to, or permit to exist, any Indebtedness, or guarantee, assume, endorse, or otherwise become responsible for (directly or indirectly), the Indebtedness of any other Person, except: the Obligations;

(a)                                 purchase money Indebtedness (including Capital Leases) arising after the date hereof to the extent secured by purchase money security interests in Equipment (including Capital Leases) so long as such security interests do not apply to any property of any Borrower or Guarantor, or any Subsidiary of a Borrower or Guarantor other than the Equipment so acquired, and the Indebtedness secured thereby does not exceed the cost of the Equipment so acquired, as the case may be;

(b)                                 unsecured Indebtedness of a Borrower or Guarantor arising after the date hereof to any third person; provided, that, on and after giving effect to the incurrence of such Indebtedness, (i)  no Default or Event of Default exists or has occurred and is continuing,  (ii) Borrowers have Excess Availability in an amount equal to not less than twenty (20%) percent of the Revolving Loan Limit on and after giving effect to such Indebtedness, and (iii) if such Indebtedness is incurred while an Event of Default has occurred and is continuing, each of the following additional conditions is satisfied as determined by Agent, (A) such Indebtedness shall be on terms and conditions acceptable to Agent and shall be subject and subordinate in right of payment to the right of Agent and Lenders to receive the prior indefeasible payment and satisfaction in full payment of all of the Obligations pursuant to the terms of an intercreditor

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agreement between Agent and such third party, in form and substance satisfactory to Agent, (iv)Agent shall have received not less than ten (10) days prior written notice of the intention of such Borrower or Guarantor to incur such Indebtedness, which notice shall set forth in reasonable detail satisfactory to Agent the amount of such Indebtedness, the person or persons to whom such Indebtedness will be owed, the interest rate, the schedule of repayments and maturity date with respect thereto and such other information as Agent may request with respect thereto,(v) Agent shall have received true, correct and complete copies of all agreements, documents and instruments evidencing or otherwise related to such Indebtedness, (vi) all of the proceeds of the loans or other accommodations giving rise to such Indebtedness shall be paid to Agent for application to the Obligations in such order and manner consistent with Section 6.4(a) hereof, or at Agent’s option, to be held as cash collateral for the Obligations, (vii) such Borrower or Guarantor shall not, directly or indirectly, (A) amend, modify, alter or change the terms of such Indebtedness or any agreement, document or instrument related thereto, except, that, such Borrower or Guarantor may, after prior written notice to Agent, amend, modify, alter or change the terms thereof so as to extend the maturity thereof, or defer the timing of any payments in respect thereof, or to forgive or cancel any portion of such Indebtedness (other than pursuant to payments thereof), or to reduce the interest rate or any fees in connection therewith, or (B)redeem, retire, defease, purchase or otherwise acquire such Indebtedness (except pursuant to regularly scheduled payments permitted herein), or set aside or otherwise deposit or invest any sums for such purpose, and (viii) such Borrower or Guarantor shall furnish to Agent all notices or demands in connection with such Indebtedness either received by such Borrower or Guarantor or on its behalf promptly after the receipt thereof, or sent by such Borrower or Guarantor or on its behalf concurrently with the sending thereof, as the case may be;

(c)                                  [Reserved];

(d)                                 refinancing of the Indebtedness referenced in the subsections (a), (b) or (c) above so long as such Indebtedness continues to comply with all provisions of such subsections (a), (b), or (c) as applicable, and the incurrence of such Indebtedness would not otherwise cause a Default or Event of Default to occur;

(e)                                  unsecured Indebtedness arising under or pursuant to any agreements entered into by a Borrower or Guarantor or a Subsidiary of a Borrower or Guarantor, for non-speculative purposes, that provides for an interest rate, credit, commodity or equity swap, cap, floor, collar, forward foreign exchange transaction, currency swap, cross currency rate swap, currency option, or any combination of, or option with respect to, these or similar transactions, for the purpose of hedging such Person’s exposure to fluctuations in interest or exchange rates, loan, credit exchange, security or currency valuations or commodity prices;

(f)                                   Indebtedness arising in connection with any reasonable deferred compensation plan to officers, employees and directors for services rendered to Borrowers and Guarantors in the ordinary course of business; and

(g)                                  the Indebtedness set forth on Schedule 9.9(h) hereto or other Indebtedness of any Borrower to another Borrower or Guarantor or of any Guarantor to a Borrower or another Guarantor, in each case, so long as (i) such Guarantors are parties to the Intercompany Subordination Agreement, (ii) such Indebtedness is unsecured and (iii) payments made by a

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Borrower with respect to such Indebtedness are made on a non-cash basis by way of a balance sheet adjustment.